By Ron Beck
The bidding process for projects continues to remain competitive, which has led to owner-operators being extremely concerned with costly overruns and schedule slips for large projects. As a result, there is enormous pressure on the engineering and construction companies (E&Cs) to be accurate and efficient throughout the project lifecycle.
Many E&Cs still use traditional processes and tools to bid on projects, but this has proven to be time consuming and labor intensive. The opportunity for estimators today is to embrace specialized economic evaluation software, which helps to achieve significant increases in estimating efficiencies and produce faster and accurate costs. Project leaders and business decision-makers can determine how to build a project, assess the potential risk levels to a contract and quickly determine whether to bid on a fixed price or cost reimbursable basis at the early stages.
The Importance of Alignment
With many contracts today, misalignment between E&Cs and owner-operators can have serious repercussions on communication, project workflow and costs. Greater pressures are placed on E&Cs to take more risk and quickly bid more on fixed price projects. A typical issue that often occurs in the industry is that the objectives of the project change even during the bid process. It is vital to achieve clearer dialogue and better alignment between both parties during the entire bidding phase and also throughout the front end engineering design (FEED) stages of a project.
For an owner-operator, many examples have occurred where there has not been sufficient emphasis on detailing a job during the early front-end loading process, which results in the hand-off to E&Cs containing incomplete information.
The good news is there are solutions currently available that can help remedy this situation. For example, an integrated single, unified platform of engineering solutions that contains a basic engineering collaboration system can help with the front-end loading process and enhances communication of the project scope and the process flow diagram (PFD) between the owner-operator and the E&C. In addition, with advanced model-based estimating systems, organizations can achieve greater transparency between all parties in terms of the scope and what is being bid. These advanced technologies provide engineers with the tools required to maximize value throughout the project lifespan.
Many E&Cs use a variety of traditional spreadsheets to conduct estimating combined with a variety of calculations and historical cost data embedded with these tools. These E&Cs typically use a factored- based approach, which is based upon scaling historical data and producing calculation from this source. This can cause a number of challenges because the process is extremely labor intensive and involves a lot of manual transfer of information. When something changes during a bid or late stage during a project, it is difficult to reconfigure a family of spreadsheets quickly and effectively. For many E&Cs, this is an unsatisfactory method of working, especially in an environment where change occurs more frequently in today’s market.
With advanced model-based estimating systems, estimators can provide a comprehensive and accurate answer on such a change quickly within a matter of hours in contrast to a spreadsheet approach that might take several weeks of estimating work to make the same change. With this tool, E&C estimators have experienced up to ten times productivity on an estimate in comparison to a traditional system.
The adoption of scalable, intelligent ‘engineering-in-the-box’ estimating and FEED software captures knowledge during each phase of the project lifecycle. Advanced model-based estimating systems offer a complete knowledge base engineering design tool that produces cost based on first principles. It is an opportunity to design a plant using the application and this can be benchmarked against the process engineer’s design to ensure accuracy and consistency. Additionally, this tool contains powerful and intelligent engineering models for all the engineering discipline from civil to structural, instrumentation to electrical through to process engineering.
While there is a general shortage in the world of estimators, estimating remains one of the most important and high profile jobs in the capital project environment. If a mistake is made on a large estimate it can put the E&C at commercial risk and, in turn, also cause a lot of capital problems for the owner-operator. By implementing an advanced model-based estimating system, less experienced estimators will be empowered to achieve the required estimate very quickly, as these tools are embedded with extensive engineering knowledge that helps the estimator to engineer design, cost and validate information provided by engineering disciplines. Another advantage with the system is that it allows estimators to communicate with process engineering teams to participate at a more highly value added level rather than simply filling in information and enumerating quantities.
Overall, it is the E&Cs who are breaking down institutional barriers that are the most successful. Adopting new methodologies and implementing intelligent integrated economic evaluation software adds greater value to owner-operator projects. Engineers need to embrace specialist intelligent tools, work in a more interactive, disciplined and team-based way to remain competitive. By being more nimble, E&Cs will achieve better designs that deliver accurate and predictable profitability.
Ron Beck is director of industry marketing for engineering and Construction at AspenTech. He has more than 20 years of experience in providing software solutions to the process industries and 10 years of experience in chemical engineering technology commercialization. Beck has authored papers on key industry topics and presented at several public industry events. Beck is a graduate of Princeton University in New Jersey. For more information, visit www.aspentech.com.