actvities affecting estimate insight do not necessarily follow processes and feed back to systems

(1)

Achieving Synergy through Cost Management

Business Case Opportunity Statement

Aligning work management process to support processes is imperative for efficient and effective project management.

Robust cost management is one of the lynchpins allowing us to manage our business more effectively and thus achieve our targets in the following areas:

- Cost reduction - Operational excellence - Contract management

This project will bring together EPE best practices and the latest advances in cost engineering allowing us to provide the business with a robust Cost Management process that is fit for purpose and aligns with WMP across EPE.

Our ability to estimate cost at the scoping phase of an engineering activity is quite well versed. What is lacking is an auditable trail of changes in estimates during the life of the project, and their cause, be it change in scope, norms or other factors. As a result of this we have no clarity on the reasons for variation between estimated and actual costs. To make things worse, these deviations are in many cases only to be discovered in late stages of execution, or even after completion if ever.

This precludes us from:

- Ensuring that estimates are up to date with regard to scoping, budgets, planning, contract

compliance, achievable norms, rates and materials.

- The ability to initiate continued improvement processes within contracts for all above mentioned elements

- Realisation of cost savings implementing opportunities when identified - Effective implementation of incentives within ISC's.

- Being able to update our budget during the life of a project and thus manage our spending effectively

- Scope growth control

- Clear alignment within EPE for this critical business process

- Delegated cost management is not straightforward without this clarity

Project Scope Goal Statement

IN: All activities that relate to cost management as initiated by a PIR and finalised by comparing the as-built data with the original estimate.

Project will focus on cost management activities relating to minor modifications in the selected Asset. Interfacing to processes mentioned as outside this charter are included, guiding notes how this project aligns with other processes are included in the deliverable, a generic cost engineering process interface and interaction to the work management process.

OUT:

Technical directorate processes

Scoping process Finance process Cost estimating methods

Data analysis and maintenance Project planning

Best practice cost management defined and targeting gaps for implementation within a single ISC.

Proposals to broaden in EPE. The design of a solid process that is best suited for project management and cost engineering purposes and is generic across all functions. This system should fit in between existing cost engineering and project management systems and methods and deliver insight in every phase of contract execution. Based on current workflows, after clearing weaknesses and improvements, the new process has to ensure the deliverance and fulfilment of reliable estimates and continuously provide insight in actual costs.

At key milestones all EPE key stakeholders will have an opportunity to comment to allow for future engagement.

Interfaces Benefit statement

Improving the cost management system will prevent from budget overruns and gain more insight in actual norms and ratios enabling improvements in the cost estimating data to be made continuously. A higher level of control will be achieved, leading to both financial and handling efficiencies and enabling hands-on project management.

For pilot project area, on an annual E&M modifications turnover of € xxM it should be possible ultimately to save 20% of this via ideal cost management. Realistically this project will achieve a proportion of this so a business benefit of 5% is proposed, or € xxM and the timescale for achieving this and any further benefits will be defined together with the team by end May 2006.

Project schedule Project Team/Resources

Project Champion:

Project Owner:

Project Leader:

Team members:

(2)

Scope control (1)

..delaying WBS availability…

Delays and cost balancing decisions (e.g. raise Change Request?) …

SAP P3e

actvities affecting estimate insight do not necessarily follow processes and feed back to systems

In / Out decisions…

Instability, scope change and poor

scope definition delays L3 delivery…

…leading to deficiencies in budget for new scope and rework

…disturbing processes

P I R

Initiation Feasibility study

Conceptual design

Detailed design

Construction Commisioning Close out

Budget Plan LE

Scope Change

Activities affecting expected costs

…prevents LE’s being timely and accurately

reflected in systems

…losing hands-on control and feedback

…causing misbooking in

SAP

(3)

Multiple systems and interfaces (2)

SAP CATS

tim enet

offshore tim e ne t

Procurement Engineering Construction

multiple systems and manual interfaces in use to provide local control

Weak offshore progress input…

Outdated inaccurate cost report…

…not in use for local project control

P I R

Conceptual design

Detailed design

P3e

PRINCE Procurement

Actuals

Progress LE

Cost Report

Several interfaces in use for local project

control…

…leading to inefficiency, time delays and data

incompatibility …preventing accurate

LE delivery and feedback

(4)

Data composition mismatch (3)

cost data structures in systems do not match

L3 Estimate Calculation

element content rate

Feasibility study #/€

Conceptual Design #/€

Detail Design #/€

Follow On Engineering #/€

Sub-contract #/€

IDC 4%

Supervision 10%

As built & Close-out 10%

Materials and Equipment €

Construction Pre-Fabrication #/€

Non-productive hours prefab 2%

Construction #/€ comp

Sub-contract # & € -

Scaffolding 24% Contruction Supervision 10%

Plant&Equipment 20% Non-productive site hrs 35%

Mob/Demob # mobs € 119

P3e

Conceptual Design Detailed Design

Fabrication Procurement Follow On

Offshore Construction Close-out

SAP WBS

Design & Engineering Conceptual Design Detailed Design Construction Long Lead Materials Fabrication Fieldwork

P I R

Conceptual design

Detailed design

CTCE SAP WBS

P3e planning system

Actuals Transferring data to

different structures…

…leading to reinterpretation, losing transparency

…disabling backward connection and

feedback loop

These different structures lead to spreading of

costs