Alliance, an excellent solution to meet Project Execution ...€¦ · Joint Ruhr Oel/Fluor Daniel...

RUHR OEL GMBH VEBA OEL VERARBEITUNG

Alliance, an excellent solution to meet Project Execution Challenges

Presentation at

7 November 2002, Zürich

By: H.D. van Wieren Fluor Daniel BV

RUHR OEL GMBH VEBA OEL VERARBEITUNG 1

Story

Project Background

Execution Challenges and Solutions

Alliance

Key Project Objectives

Project Organisation and Execution

Results

Conclusions


Change in German Requirements for Sulfur in Automotive Fuels

In second quarter of 1999: Max. 50 ppm sulfur fuels to be available at the market by 1.11.2001

In August 1999 :Ultra-clean fuels to be available at the market by 1.1.2003

This meant upgraded plants had to be available for maximum 50 ppm sulfur production by 1.8.2001

Due to this short time between the 50 ppm and ultra-clean fuels schedules the facilities shall be upgraded immediately to the highest standard..


Situation at Ruhr Oel Gelsenkirchen Refineries in the second quarter 1999

The refineries in Horst and Scholven were not in a position to produce economically automotive fuels with maximum 50 ppm sulfur

Additional refinery optimisation plans were being considered for simultaneous execution with the desulfurisation project

No final process technology selection had been made for most of the new, or to be revamped facilities

Consequences for utilities and off-sites were not yet determined and available information was fragmented..


Ruhr Oel Objectives for the AOP II project

Last plant ready for operation 1 August 2001

Start EPC work 2 January 2000

Internal decision by mid December 1999

10% Estimates ready by mid November 1999

Construction work to fit the already established turn-around schedules

Cost should be fitting the low refining margins..


Project Execution Challenges

Early discussions with Engineering Contractors and other operating companies indicated to Ruhr Oel that a conventional Lump Sum project execution route would not be successful within the set timeframe

The proven alternative of splitting the project into smaller sub-projects would require much (unavailable) Ruhr Oel management and coordination effort and leave them the total responsibility for the integration of the packages

Crash LS projects tend to be very expensive..


Chosen Solutions

Joint Ruhr Oel/Fluor Daniel project team proposed solution – Fluor Daniel will be the “managing” contractor for the basic phase

– Strong integration of Ruhr Oel and Fluor Daniel project teams during the basic engineering

– Execute the EPC phase in an Alliance format

The solution for the basic engineering phase was quickly accepted; and

Because of the outstanding results of the joint team during the basic engineering phase, Ruhr Oel management agreed to the challenge of the Alliance concept for the EPC phase..


What is an Alliance

It is a group of companies with a common goal

Which are contractually bound

Which have a common interest

Which can only succeed together or fail together..


Alliance Process

Outside consultant engaged

Training of own team

Partner selection

Alliance development

Contract and Consequences..


Alliance Partner selection

Type of partners determined

Selection criteria determined

Long list of possible contractors; reduced after questionnaire evaluation

In depth interviews with all selected contractors

Final selection based on evaluation of both hard and soft criteria by the joint Ruhr Oel / Fluor Daniel team..


Alliance Development Schedule

Potential Partner selection started in September 1999

First shortlisting October

Interviews during November

Final rating of each contractor immediately after interview

Final selection end November

Ruhr Oel decision to go ahead and Alliance Workshop meeting 2 December

Final Risk & Reward meeting 16 December 1999

First Alignment meeting 19 January 2000..


Selected Contract Form

One Alliance contract (36 pages)

Five partners

– Client Ruhr Oel (Germany)

– Engineering contractor Fluor Daniel (The Netherlands)

– Civil contractor (Germany)

– Piping/mechanical contractor (France)

– Electrical/instruments contractor (Belgium) Target price with Sharing of over/under-run

All expenses are being paid at cost

Bonus for timely completion (RFSU)

No claims allowed against other partners..


Consequences of the Alliance contract

Only one project team

The best man was nominated for each key position

Strong cooperation between, and integration of all team members from all companies

As no claims are possible the only way to resolve conflicts is through communication

An Alliance Board was set up as outside independent body to regularly monitor the project and check that all parties involved remain aligned..


Key Project Objectives

1 Schedule; end schedule plus shutdown schedules

2 Budget; under-run the Target Price

3 Quality; of the parts and the total

4 Safety; Meet Fluor Daniel standards

5 Relationships; good relationships and communication

6 Meet statutory requirements; no negative publicity

7 Make the Alliance a success


Project Management

Project Management team - day-to-day operations– Project managers of all partners

– Engineering manager

– Procurement manager

– Construction manager

Alliance Board - Monthly meetings– Senior manager of each company

– Project managers from Ruhr Oel and Fluor Daniel

Steering Committee - ad-hoc meetings– Ruhr Oel Management

– Fluor Daniel Management

Outside Consultant - as and when required


Organisation ChartProject Directors

Engineering Managers Construction Manager Procurement Manager Contracts Engineer

Expediter

Inspector

Manager CSA

Strabag

Manager pip/mech

Ponticelli

Manager E&I

Fabricom

Lead Eng. process

Lead Eng. Mech.

Lead Eng. Piping

Lead Eng. CSA

Lead Eng. E&I

CSA TeamPiping/mechanical

TeamE&I Team

Comm/SU Coordinator

Proj Controls Eng

Authority Coordinator

Site Engineer Const Eng Scholven Warehouse Superv isor

Proj Controls Eng

Contracts Eng


Project Organisation Specifics

Engineering– Close integration between Ruhr Oel and Fluor Daniel

– Strong involvement of the construction partners in their area of competence

Procurement– Done from the Fluor Daniel offices but in an integrated team

effort with Ruhr Oel procurement• For most E & I items and bulks used standard Ruhr Oel agreements

• For other materials and equipment used FD and Ruhr Oel resources

– Inspection and expediting mixed but never double

Construction– One construction team, one office, no double functions..


Project Quality

Fluor Daniel system, founded on TQM, formed the basis

– Operating System Requirements

– Operating System Implementation Plan

– SHE Management System

– Knowledge On-Line

– Project Activity Model

All partners had their own Quality Management system

Project Execution Plan/ Project Procedures Manual..


Project Execution

Alignment meetings used to share information and to get involvement and buy-in by project personnel

Monitoring systems in place for:

– Schedule

– Efficiency

– Cost

– Quality

– Safety

– Relationships

Project Management Meetings to develop and implement corrective actions


Key Project Results

In spite of 25% increase in work due to scope development and added scope during the EPC phase:

1 Project completed on time; shutdowns not delayed

2 Cost 9% under Target Price

3 Plants operating as specified and meeting quality standards

4 No LTI’s; incidence rate 0.65 (limit 0.90)

5 Good relationships prevailed; excellent communication

6 All authority requirements fulfilled and positive publicity

7 The Alliance is considered very successful by all involved


Progress Curves

ENGINEERING PROGRESS AOP II

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN

% C

om

ple

te

CONSTRUCTION PROGRESS AOP II

0

10

20

30

40

50

60

70

80

90

100

MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG

% C

om

ple

te


Results of the Alliance set up

Excellent relations and understanding between the project managers

A very high mutual trust level between the Partners and all individual team members

Hidden agendas could be defused early

The inevitable battles between the various parties were nipped in the bud

High morale of all involved personnel..


Basic Engineering (months)

Bidding and Evaluation EPC (months)

EPC phase

Delays due to changes

Change orders

Contract form

Flexibility

Cooperation between parties

Team satisfaction

Competitive bidding

6

0

19

0

open book

at cost with incentives

high

high

high

very difficult

8 - 10

3

24

2

closed

lump sum

limited

limited

varying

possible

Alliance Normal

What is the difference


Conclusions

The applied Alliance approach of mutual trust and cooperation enabled to us to achieve the desired, very challenging, project targets

But it cannot replace a decent Quality Management System on the project

A very attractive way of working for all people involved

Possible in a multi-cultural environment

Financially attractive for all parties

People are the key element !


We would be happy to share

our gained experience with you!

Alliance, an excellent solution to meet Project Execution ...€¦ · Joint Ruhr Oel/Fluor Daniel...

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