Risk Factor

Steven Kratsis looks at how to manage your risk factor across the lifecycle of a project

With increased globalisation, engineering and construction (E&C) firms must deliver project proposals faster while also adding design value and offering differentiated services. While contractors must manage change by leveraging skills and adaptable technology in order to be trusted partners to their oil and gas clients. Managing risk and project changes is an essential part of running a business. Coping with unforeseen events and minimising the impact on costs, resources, and materials is critical for adding value when large oil and gas companies require E&Cs to mitigate costly delays or production issues. Adopting best practises results in better bids and improved economics across the lifecycle of capital projects, which improves decision-making.

Bidders and Buyers

The relationship between buyers and bidders is critical to the success of the construction industry. On the one hand, it is a ‘buyer’s market’ for owner-operators, with the insistence on greater support from their construction service providers and the desire for the lowest price bid on contracts. Bidding, on the other hand, should not always be about low cost, but rather about quality design-to-build bids. Too many contractors fail to estimate the true cost of a project. Working more efficiently and effectively can be accomplished by integrating all stages of the profit cycle. E&Cs can be more flexible, dependable, and efficient throughout the project lifecycle with greater precision and predictability built into the job.

Achieving best practice

Being a preferred E&C supplier gives companies an advantage in the battle to win contracts. Establishing the disciplines of commercial differentiation allows an enBeing a preferred E&C supplier gives businesses an advantage when competing for contracts. Establishing commercial differentiation disciplines enables an engineering firm to gain a competitive advantage and build stronger, long-term relationships with owner-operators. An integrated workflow approach involving all engineering disciplines in the conceptual design phase is critical for E&Cs in order to make the best economic decisions. Furthermore, the right software tools will provide the flexibility needed to meet commercial challenges. Key characteristics of best practise for achieving superior cost results include:

  • When the owner-operator and E&C use the same software, especially when using a transparent software system, the scope and resource requirements are clearly communicated between the owner-operator and E&C. This is used by the owner to evaluate bids on a “like for like” basis and to ensure that all requested scope is included.
  • Use an estimating system that is compatible with the process modelling environment and FEED deliverables software. This allows for rapid re-evaluation of the estimate based on conceptual engineering changes, ensuring consistency in project change management.
  • From pre-feasibility to detailed estimating, use the same estimating platform. This can increase the estimator’s productivity by up to 80%.

E&C firms that use integrated project modelling techniques and incorporate flexibility into their risk management or project changes typically provide more effective support for large-scale projects. When an E&C firm significantly reduces the cycle time of an oil and gas well development project, it can help clients deliver faster results.

Economic analysis software

One of the industry’s most difficult challenges is that process engineers must accomplish more than traditional process modelling and calculations. Obtaining an optimised design in relation to a number of design objectives raises issues, such as changes during the conceptual design and basic engineering processes. Contracts from the government and private ventures are available to E&Cs.

The challenge is to manage regulation, procurement strategies, and market trends in a productive manner. We are also witnessing a “knowledge gap” as a result of inadequate investment in quality training and talent development. Companies that invest in skill development, think strategically, and execute efficiently will thrive. Consistent, effective training improves both process and profitability and should be viewed as an investment rather than an expense.

Engineers and project managers can use integrated engineering software to make trade-offs between process yields, reliability, energy use, capital, and operating costs without sacrificing quality or incurring unnecessary costs. Advanced software technology is critical in providing integrated engineering tools that result in safe, accurate, and efficient designs. Such tools provide easy-to-use, enhanced capability, and embedded knowledge, facilitating collaboration and empowering the next generation of engineers to quickly add value to projects while adhering to standards.

Decision-making that works

The E&C industry is evolving at a rapid pace. Customer demands are increasing, so adapting strategy and providing engineering expertise with cutting-edge economic evaluation software platforms throughout the engineering cycle will assist in capitalising on project opportunities. By equipping cost estimators and project managers with the right tools, project uncertainty and risk can be reduced, and capability for effective decision-making to control capital costs can be enhanced.

Last Updated on December 28, 2021


Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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