By Andrew Hobbs
PRESIDENT of Bechtel’s Oil, Gas and Chemicals business Jack Futcher said some projects continue to get off track and struggle to completion despite processes established to ensure project outcomes.
Mr Futcher told attendees at the 18th international conference and exhibition on liquefied natural gas that many of the critical factors that influence project outcomes were basic, but the key to success was doing them well.
“We have tried to identify a few red flags.
As an owner if you are sitting in meetings and you are having a project teed up, if you hear the terms ‘fast tracked, schedule driven and concurring EPC’ … you ought to be concerned,” he said.
“You also need to look for a mismatch between the risk allocation and the contract type and also stretched targets and cost reimbursable contracting formats that actually end up as the cost basis in the estimate.”
For owners, knowing what services they wanted from contractors and understanding the trade-offs between different options for cost risk were important, as was selecting the right contractor.
“Obviously you want to pick a contractor that has a comparable and relevant experience to the type of project that you are going to be executing,” he said.
“We like to view the selection process of our subcontractors as more than just a procurement process, and we think owners should view it the same way – much deeper than just procurement.”
How the leaders assigned to a project integrated with contractor teams had a major bearing on the outcome, Mr Futcher said.
“In our experience the best owner leaders are those that behave as a participant in the outcome of a project – they don’t take an approach that really focuses on the assurance of compliance to contact terms,” he said.
Disagreements, when they occurred, needed to be solved early, he added, saying that delaying the resolution of tough problems would never make them get better and would distract project teams over time.
“We believe in a rule of thumb – that 80 per cent of a project outcome is going to be determined in the first 20% of a project performance,” he said.
Developing a plan for solving problems and disagreements along the way also added value to the project, Mr Futcher said.
For contractors in the engineering, procurement and construction industry, Mr Futcher said there were basic considerations that any contractor would view as factors that would influence their willingness to take on a project.
“At Bechtel what is most important to us is having terms that balance risk and reward and assuring our customer that we’re involved in a project where we feel the competencies and skills that we bring are actually going to deliver ultimate value to the end user,” he said.
Development of a project execution plan was critical, he said, adding that it needed to be updated as things changed on the project.
“Our experience is the structural considerations in execution planning are often the most important and the least well developed, so it is a specific area where we try to focus and get it right,” he said.
It was important that expectations on cost and schedule were achievable and that the owner and contractors were aligned on what that meant, he said.
Appointing project executive sponsors, who looked at tough issues that could not be solved by the dedicated project team, was becoming best practice, he added.
Development of a field plan was also important, but could also be challenging – and was not a panacea to cure all ills, he said.
“In our company what we try to do is plan for the small in order to achieve the big. We plan for the small on a weekly and really a daily level – and that drives good performance,” he said.