Practical Risk Management for EPC / Design-Build Projects. Walter A. Salmon
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needs to conserve time. The steady march of time steals meaningful progress from the Contractor in many areas of Project work, and its damage is very often added to by the Contractor's Team being too complacent or too slow to react to time being stolen. Consider, for example, the following non-exhaustive list of issues where time is more usually lost on Projects, many of whose causes (although not all) could be prevented with foresight:
1 late submission of Engineering Deliverables for review purposes by the Contractor's Engineering Team,
2 late review of Engineering Deliverables by the Employer's Team,
3 late receipt of Engineering Deliverables for Procurement and Construction purposes,
4 late placement of Purchase Orders,
5 late handing over of the Site,
6 late delivery of materials, goods, and equipment,
7 late instructions for changes arising from the Employer's side,
8 late mobilisation of construction equipment and manpower resources,
9 slow clearance of Punch Items, and
10 dealing with too much reworking, often at a late stage.
3.7 Maintaining the Project Schedule
Insisting on adherence to a Project Schedule (and updating it regularly to show actual progress) has nothing at all to do with being able to blame people if certain activities are delayed. It has everything to do with ensuring that the Contractor will have the necessary backup information and data available to be able to claim an appropriate extension of time if delays occur because of the Employer's action or inaction. The importance of keeping to the Project Schedule and avoiding loss of time cannot be stressed enough. This is a particularly valid observation if the Contract includes a provision for the Employer to terminate the Contract in the event that the Project is already so late against the Project Schedule that it appears that the Liquidated Damages will be fully consumed. Time cannot and never will be the Contractor's friend (and, as indicated earlier, very often time is the Contractor's worst enemy). If, therefore, the Contractor fails to develop a worthwhile Project Schedule or fails to take all steps necessary to adhere faithfully to such Schedule, then time will be given a great opportunity to destroy all the Contractor's other efforts to complete the Project successfully. Of course, saving time can be a double-edged sword, and every care must be taken to ensure that catch-up plans and acceleration arrangements do not jeopardise worker safety or health.
Still on the importance of not losing time, there is a classic error made by many Contractors in the situation where the Employer has indicated that a major change is being considered. That is to slow down, halt or re-sequence the contractual work scope, without first having received authority or formal advice from the Employer to do so. The best way for the Contractor to proceed in all such cases is to ignore the potential change and carry on as usual until such time as the Employer issues a formally signed instruction to do otherwise. I have lost count of the number of situations I have personal knowledge of where Contractors had, in all good faith, ignored the advice to continue without letting up. Instead, they delayed the work progress, only to later find that they had been held entirely responsible for the resultant delay to the contractually required completion date. All is fair in love and war, and there is rarely (if ever) a lot of love existing between the Employer and the Contractor when it comes to delayed Project completion. It should therefore come as no surprise that even the most reputable of Employers may resort to unfairly using the threat of Liquidated Damages against the Contractor in order to extract greater benefit (or action) from the Contractor than is otherwise merited.
3.8 Departmental Interface Issues
A key point to bear in mind is that the individual Departments responsible for the EPC activities are most definitely not independent of each other, even if their respective Managers believe differently. There are probably more Managers who believe that their Departments are independent, and that their Departments are their own personal fiefdoms, than you might think possible. On the contrary, there is a lot of interaction required between those Departments, and it is often at the interfaces between them where the work processes break down. The below set of items provides just a few examples of where things can go wrong at the Departmental interfaces.
3.8.1 Rework
A great deal of the loss experienced on EPC Projects is caused by the need to redo work, and much of that reworking is caused by the lack of integrated working between the various Discipline Engineers within the Project's Engineering Team (such as Electrical Engineers, Mechanical Engineers, Civil Engineers, etc.). This can often lead to such problems as:
1 delays in the Engineering work due to the need to redo drawings, plus associated extra costs,
2 purchasing of wrong materials, goods, and equipment,
3 late ordering of the correct materials, goods, and equipment,
4 taking down and disposal of wrongly installed components (and, sometimes, demolition of work already completed), and
5 consequent loss of time on the Project's Critical Path.
All too often, this situation arises because there is no effective way for information (documents, drawings, and data) sharing between the various Engineering Disciplines, each operating with different specialised systems that do not readily ‘talk’ to each other.9 This is supported in the statement contained in the document titled ‘An Introduction to ISO 15926’: ‘Any who have worked in an engineering environment will know that there is more than one CAD application in common use, and that on a large project all business partners do not always use the same one’.10 This lack of system integration inevitably leads to Engineering delays that then impact horribly on both Procurement and Construction activities. As the need to reduce costs and improve efficiency in the construction industry increases, it will become increasingly important for Engineering Departments to sharpen up and ensure that lack of inter-disciplinary dialogue and communication does not contribute to the occurrence of unnecessary rework.
This will inevitably require a Contractor to invest in a good quality enterprise-wide Electronic Document Management System (EDMS) that is capable of allowing documents and drawings to be shared between all Departments in real time, so that every Project participant can be well-informed at all times. However, this can prove to be a problem for those many Contractors who do not have their own internal Engineering design capability and, instead, sublet the Engineering design work to third parties. The resultant communication gap does not allow the Contractor to obtain enough real-time knowledge at any point to have confidence about the timely delivery of the Engineering outputs. Under such circumstances, it is not surprising to find that the Engineering mistakes are very often not discovered until as late as the commissioning stage, when the problem becomes an embarrassment, as well as being more costly and time consuming to rectify.
3.8.2 Delayed Technical Bid Evaluations
If the Engineering Department does not conduct the Technical Bid Evaluations (TBEs) in a timely manner, then there is a risk that the deadline for the placement of a critical Purchase Order may be missed. It would be best if the Procurement Department's personnel continually followed up on the status of all TBEs but, since most Contractors nowadays operate with minimal staffing, it is very possible that the non-arrival of an important TBE will not be spotted until it has become a highly critical issue. The Engineering Department's staff will also be under pressure to complete the engineering design work and, sometimes, the TBEs are seen as a distraction to the design activities. In addition to that, not all Engineers understand the necessity for adherence to agreed activity time-frames and, therefore, constantly need to be chased in order to get their outputs delivered on time.
3.8.3 Late Mobilisation