Paul’s hands trembled and his face was white. He had to be helped from the meeting with the corporate accountants who just had audited his multi-million-dollar expansion. It exceeded budget by more than $1 million. Upper management, which had pushed him to meet an impossible deadline despite the cost, had abandoned him. He met deadline — thanks to his and others’ efforts the company would have a future, even if he didn’t.
So, where did Paul go wrong?[pullquote]
The first thing to remember when starting a new project is that planning never ends. If you’re taking over a project, here’re eight essentials for ensuring everything is ready to successfully launch it: 1) a vendor list; 2) specification standards for piping, instruments and equipment; 3) a cumulative cost spreadsheet; 4) a quality assurance procedure for purchases and engineering; 5) a phone tree and resource list; 6) current drawings; 7) commissioning and startup procedures; and 8) a sensitivity analysis of cost items. Lack of any of this information could signal that project work was inadequate.
For any project to succeed, standards for equipment must answer basic questions such as: will a magnetic flow meter work better for an application than a target meter? Is the ultimate customer, perhaps a cranky superintendent, happy with this selection? This can be a real problem if you must explore options. Is equipment coming from a vendor you can rely upon?
Start a cumulative cost spreadsheet as soon as a project is approved. With a little work it should be possible to develop a predictive trend that can be used to show if the budget is drifting into the red.
A phone tree and resource list should include all people available for the project. Ideally, it also should cite suitable alternatives. For example, if John Smith is assigned to another project, then Peter Van Dorn can fill in.
Without a check-in procedure, equipment delivered to your dock and signed in may be hard to return. Likewise, sending out unreviewed specifications will leave you scrambling.
Thanks to ISO-9001 standards, commissioning often is fairly straightforward. However, startup procedures may be inadequate if not thoroughly reviewed by operators and plant management. This means another meeting with that cranky superintendent.
Now, we come to one of most difficult aspects of monitoring and completing a process change: the sensitivity analysis. Throughout the journey from project conception to hand-over, measure viability against fixed standards. Viability consists of several vectors: financial, technical, environmental and safety. Hopefully, the last two items ruled out unsafe processes during scope development early in the project’s history. Financial and technical feasibility can change drastically during this journey.
My engineering firm in Michigan was hired to design and build a process for extracting bromine from wells. The plant was mothballed during construction after bromine’s market price dropped.
At another firm, I helped develop a patent for solvent extraction of chromium from stainless-steel pickle waste. Although we reduced operating cost drastically, we couldn’t avoid safety and environmental issues. The process quickly became embroiled in environmental problems; the firm wasn’t familiar with chlorine, which was used in a preparation step before the extraction. In addition, in a deviation from the contract, the company supplying the feedstock couldn’t provide sufficient chromium to make the process profitable. Other, in-situ means existed for oxidizing chromium without environmental issues, but these mattered little without a profit to be made.
Sometimes financial pressures, due to factors such as inflation, can reduce the rate of return below a reasonable value (say, 15%–20%). The 1970s saw many chemical plants mothballed because of inflation and other financial woes.
When funding is tight, it may pay to consider expansion, not contraction. Once when I couldn’t win additional money for a flagging project, I broadened its scope, redesigning the process to reduce energy costs. As a result, it offered a much better rate of return — the budget grew by one-quarter to cover the additional expansion.
What can you do if feasibility comes into question? Sparks’ principle of project management says three things define a project: scope, budget and schedule — and all three are related. For instance, an increase in scope affects the budget and schedule.
The schedule doesn’t get the respect it deserves. It may be possible to reduce costs by speeding up a schedule or by reshuffling it. One of my favorite tricks is to slow down a project when things are moving too fast — otherwise you can waste a lot of money.
If a project becomes technically infeasible, look for ways to salvage at least some of it. Also, recoup some money by returning equipment to the vendor or selling it as used. On one unsuccessful project, we set aside centrifuge parts for a future expansion. Before considering such drastic steps look into changes and workarounds that won’t significantly affect budget.
Dirk Willard is a Chemical Processing Contributing Editor. You can e-mail him at [email protected].