Project schedule development at the beginning of FEP-2

During the first stage of front-end planning (FEP-1), we developed the overall project Level-1 schedule and cashflow. These two documents together with the estimate go through Gate-1. Of course, there are a lot more documents that show scope overview, execution strategy, and project economics. Stage-Gate-at-FEP2 Now, the project has passed the first gate and approved to start the rest of front-end planning (FEP). At this stage, schedule requirements will be as follows: FEP-2 work will be a detailed Level-3 schedule. FEP-3 work will be scheduled at Level-2. The rest of the project execution will remain at the conceptual Level-1 schedule. This is a good opportunity for defining schedule levels. Both project controls and non-project controls teams have different perspectives on what level of schedule contains. The descriptions of different levels are shown below in order to gain as much alignment as possible on the expectation from these schedule levels. These definitions are guided by the AACE Recommended Practice No. 37R-06. Definition of Schedule LevelsLevel-1 Schedule The purpose of level 1 schedule is to plan what-if scenarios and capture the main project scope to getehr with its constraints and execution strategy. it is useally a simple Gantt chart but allows nultiple scenaios for the purpose of optimization. level 1 schedule also helps in developing and planning cashflow. Major project milestones and constraints. Overall timing of the major project functions. Initial start and finish dates for all stages of the project. Known scope breakdown by area or by piece of major equipment Engineering, procurement and construction activities for every scope breakdown shown as summary. Level 2 Schedule The purpose of level 2 schedule is to communicate the integration of work throughout the life cycle of the project (AACE RP 37R-06). Level 2 schedule provides a high-level interface between key deliverables and project participants (owners, contractors, consultants). The requirements for level 2 schedule are: Cover the full Project Scope of Work. Major project milestones and constraints. Each level 1 scope component will be further broken down. For example, the infrastructure component of the project will be divided into roads, gas, electricity, fiber optics, water, waste water, etc. For each of the similar sub-scope breakdowns, the following activities will be shown on as summary activities: Bid and award sequence for subcontracted work. Major and/or long lead purchasing activities. Construction Contracting strategy, e.g., initial timing at a summary level for foundations contract, general mechanical contract, etc. Level-3 Schedule Expansion of the Level 2 Schedule activities. Activities should be resource loaded and with durations detailed enough to provide critical path calculation and identify the critical path. Combining the literature from different sources (like the government requirements, AACE, CII), a level 3 activity (task) would represent the work planned to consume between 500 and 1000 manhours. Requirements of a Level 3 Schedule are: Schedule reflects the full project scope of work in details. All constraints such as permitting, weather, operation requirements, etc. will be detailed in level 3 schedules. Engineering deliverables are shown at the detailed task level. engineering delivrables may be presented by engineering packges which would contain a set of engineering documents to be used for purchasing or construction. All integration points between design disciplines, procurement and construction are included in the CPM logic Each IFC (Issue for Construction) package, IFB (Issue for Bid) and award cycle for each construction contract will be simulated. Detail design packages are organized by construction breakdown so that physical progress for the work leading to each specific construction contract can be objectively measured. All Contractor reviews, including discipline reviews prior to IFC package quality checks will be included All Owner reviews and approval cycles as applicable Details for all purchasing activities. Detailed construction tasks required to complete interim and final contract completion milestones. Construction is organized by scope breakdown, initially, with specific details for completing work by area Level 3 schedules will also be used to prepare 3-week look ahead schedules.

Overall Cashflow at FEP-1 Stage

In a previous article, the overall project schedule has been introduced. It is a simple Level-1 schedule that corresponds to Class 5 estimate. This schedule can be utilized to develop multiple cashflow scenarios for the overall project. Many organizations need to know a funding profile before authorizing front end planning (FEP) There may be some kind of funding constraints for every project in order to optimize the overall business portfolio. In other cases, the project team tries to optimize the schedule for multiple cashflow scenarios. In this article, we will explain how to use the Level-1 conceptual schedule to easily and efficiently produce cashflow scenarios. Budget Allocation Having both the high-level estimate and schedule, we can merge them together to produce the cashflow. The budgeted amount for every line item can be allocated to that corresponding line item in the schedule. Figure 1 below shows how to allocate the project management budget and the contingency allocation to a single WBS-Summary activity. In Primavera P6, the easiest way to allocate the budget at this early stage is to use the “Expense” as shown in the figure. Expense Item, Accrual Type, and Budgeted Cost are required fields for every expense assignment at this early planning stage. More fields like the Expense Category and Cost Account would be needed during future stages for better planning. Expense Item is just a description of budget like the project management and contingency as shown in the figure. The accrual type is somewhat important. There are three types of accruals: Uniform over Activity: this makes equal amount of cost allocated for every work day of the activity duration. In other words, it is a linear distribution of the budget over the activity duration End of Activity: this will allocate the budget on the last day of the activity Start of Activity: this will allocate the budget on the first day of the activity The accrual type is selected based on the activity type and the contract terms with vendors and contractors. The third item is the Budgeted Cost. This amount can be calculated from the estimate. This amount does not need to accurate at this early time. In other words, the planner schedulers do not need to spend a lot of effort to make this value very accurate because they will not reach any kind of accuracy at this early planning stage. The scope itself is not accurate at this time. The size of equipment or the details for structural steel or piping is not defined. The schedule and the allocated cost here are based on the capacity required and they are used for very rough planning and directional guidance for the project team. Budget Allocation as Expense Figure 1: Allocation of Budget to Schedule Activities Cashflow Scenarios Allocating the budget to different high-level activities, produces the cashflow shown in Figure 2 below. Based on this monthly cashflow, the expected spending per year will be as follows: 2023: $10M 2024: $35M 2025: $5M Cashflow 01 for Boiler Project Figure 2: Cashflow based on first version of the schedule This funding strategy may not be the optimum for the owner of the project. They would like to move more fund into 2025 fiscal year. The planner moved all fabrication and construction activities to be as late as possible. The result came as shown in Figure 3. Yearly funding will look as follows: 2023: $10M 2024: $30M 2025: $10M Cashflow 02 for Boiler Project Figure 3: Cashflow after delaying construction activities Project owner would like to move more fund into 2025 fiscal year. The planner moved all procurement activities and construction activities to be as late as possible. The result came as shown in Figure 3. Yearly funding will look as follows: 2023: $10M 2024: $25M 2025: $15M Cashflow 03 for Boiler Project Figure 4: Cashflow after delaying procurement and construction activities It is worth noting that this scenario introduces the risk of schedule overrun because most schedule activities are as late as possible. It is hard to say that activities are critical or they will become critical because there is not enough information about the detailed schedule which will be developed at the FEP-3 stage. Conclusions The cashflow scenarios developed above are just examples. Project team can choose to extend the duration to accommodate for equal annual funding. Another team may choose to accelerate and they would like to understand the impact of acceleration on the cashflow. For the best schedule performance, it is recommended not to add any constrains on the project. Funding constraints proved to have severe impact on schedule performance even if it is planned from the beginning. However, funding constrains are imposed on individual projects in order to optimize for the overall portfolio of the owner. Funding constraints improve the business global optima at the expense of the project local optima. Project controls professional need to accommodate the business owner requirements even if it is not the best for each individual project.

Overall Project Schedule at FEP-1 Stage

As mentioned in the article of Rolling-Wave Planning, the cost estimate at this stage will be a class 5 estimate as defined by the AACE Recommended Practice 104R-19. This estimate usually has an accuracy range of minus 50% to plus 100%. The schedule duration calculated for the project will follow the same steps. The definition of the project duration at this stage is based most of the time on benchmarking. However, unlike the cost estimate, it is not the best way to calculate the total cycle time or the execution duration of the project. Project drivers, execution constraints, and project risks are better in making a duration prediction. The planner/schedule will put these factors together on a simple one-page Gantt chart to study their impact on each other and develop a Level-1 schedule that corresponds to Class 5 estimate. These factors will be covered in the following paragraphs then examples of Level 1 schedules will be shown. Project Drivers Project drivers are those factors that motivate and guide the development of a project during its lifetime. They can be internal, such as financial constraints, deadlines, customer and supplier expectations, or external, like market trends, legal and regulatory requirements, labor and materials costs etc. These drivers are combined to define the scope of the project. Industrial projects have many drivers mainly defined by the market, the maintainability of the plant, and the protection of the environment. The latter is mostly defined by governmental regulations or the desire of the owner company to contribute positively to the quality of the environment. High-level scope-breakdown (WBS) A Work Breakdown Structure (WBS) is an approach used to divide an industrial project into smaller, more manageable components. It is typically hierarchical in nature, showing the overall project at the top level, with subsequent levels representing further divisions of the project. The WBS helps identify all of the individual components and tasks that need to be completed for the successful completion of the project. When reaching to the smallest manageable component, it is possible to start adding tasks that reflect the execution strategy of those components. Each component is assigned a unique identifier to aid in planning tasks and resources, and to ensure that all tasks have been considered in the planning phase. A WBS is also used to assign responsibility and accountability, plan project duration and schedule, and to estimate project costs. During the early planning phase, namely the first stage of front end planning (FEP-1), the high level WBS only is needed. Below, there is an example for high level WBS for an industrial boiler used for power generation. The Conceptual Schedule The plan or the schedule will be built as follows: The total duration of the project will be calculated in a similar manner like the estimate based on benchmarking the project to completed projects with similar production capacity. The execution duration will be also calculated the same way. The schedule of the FEP-1 Phase which is usually a few procedural steps to complete FEP-1 will be a detailed Level 3 schedule. This schedule usually fits in one or two pages. The schedule for FEP-2 will be a top-down Level 2 schedule to show some details of the work to be performed during the FEP-2 Phase. The schedule for FEP-3, Execution, and Startup Phases will be a Level 1 schedules to show the main milestones, key scope breakdown areas, Project constraints can be shown in a separate section or made clear in their subsequent area. Examples of project constraints are the permits, availability of resources, equipment tie-ins, very long lead items, etc. This schedule is not a detailed critical path schedule. It should be treated as a planning tool to indicate the initial criticality of major construction areas, the impact of potential risks that might happen during the project execution, and how to react to project constraints. The figure below shows the one-pager schedule for the boiler project. The schedule is grouped by the WBS mentioned above. The general area contains milestones, FEP-2, FEP-3, and the clearly defined constrains. The rest of the schedule is displaying the engineering, procurement, and fabrication (or construction) of each of the scope areas. Looking at this schedule, it can be found that the "Environmental Permit" is not the only constraint. Yes, it represents a constrain on the startup of the boiler especially with the unknowns associated with it. However, the "Furnaces" area requires longer engineering and longer construction than other areas. Also, the "Control Room" procurement is very long with risks of delivery on time. This very long lead item represents another constraint on the project. The project management team (PMT) should work on understanding the factors impacting the date of boiler startup and work on minimizing the risk of overruns. For example, the "Control Room" procurement can be placed and awarded to the selected vendor during the FEP-3 stage. Another example is accelerating the engineering required to order the "Environmental Permit". For the "Furnace" area, it needs to have a very high priority by the engineering and fabrication teams. Engineering and construction can be carefully overlapped for this area to minimize the risks of extending its duration which would impact the mechanical completion date. In conclusion, the initial or conceptual schedule needs to describe the: Scope Constraints Execution Strategy The benefit of the conceptual schedule is to plan the timing and priorities for the execution phase. It is not a real critical path schedule. It is a planning tool that reflects the reality of the project. The promise date produced by this conceptual schedule is more realistic than a date driven by benchmarking only. This approach incapsulates the reality of the project, its drivers, and constraints into the calculation of the promise date. Benchmarking is needed to start but it is not enough to conclude a completion date of a project.

Scheduling for FEP-1

The first stage of front end planning (FEP-1) is moving the project from an idea to a project starting point. It is taking the idea and building the project charter and studying the feasibility and economics of the proposed project. FEP-1 stage takes the project from an idea to the next gate to get management approvals on funding for the next stage. Usually, the funding is not a large amount and, in most cases, it is part of the project expenses not the capital funding. Expense funding authorized by the end of FEP-1 would be enough for running the project team through FEP-2. There are some exceptions, of course, if the project has a very tight schedule. In this case, the funding might include the placement of major well-identified long lead equipment. FEP-1 is very specific to owner companies and it is hard to find a corresponding stage for EPC, engineering service, or contractor companies. If one of these companies is initiating their own improvement project or their own internal expansion, the FEP-1 would apply to them. The scheduler has two roles in this stage: To develop a schedule for the FEP-1 stage to take the project from an idea to the next gate to get management approvals on funding the next stage. To develop overall project schedule scenarios and what-if analysis. This is not a typical scheduling job. It is more of a planning job that might be supported by scheduling knowledge and tools. FEP-1 Schedule This is a very straight forward schedule that lists all the steps needed to perform the FEP-1 stage which again is taking the project from idea to the next gate. Steps here might as follows: Clearly identify project objectives Develop a preliminary scope definition Develop Class 5 estimate Define project durations Develop project economics Write the project charter Identify project management team (PMT) This is not a comprehensive list of steps for performing FEP-1. This is just an example and each company will have its own list of steps that fulfil this stage. The figure below shows an example of an FEP-1 schedule in Primavera P6©. As shown in the figure, it is more of a check list but assigned start and finish date for the purpose of tracking the progress of each of the tasks. Project Schedule at FEP-1 Stage As mentioned in the article of Rolling-Wave Planning, the cost estimate at this stage will be a class 5 estimate as defined by the AACE Recommended Practice 104R-19. This estimate usually has an accuracy range of minus 50% to plus 100%. The schedule duration calculated for the project will follow the same steps. The definition of the project duration at this stage is based most of the time on benchmarking. However, unlike the cost estimate, it is not the best way to calculate the total cycle time or the execution duration of the project. Project drivers, execution constraints, and project risks are better in making a duration prediction. The planner/schedule will put these factors together on a simple one-page Gantt chart to study their impact on each other and develop a Level-1 schedule that corresponds to Class 5 estimate. These factors will be covered in the following paragraphs then examples of Level 1 schedules will be shown. The next article will be devoted to the schedule at FEP-1 stage including an explanation of project drivers and constraints.

Project Controls for Industrial Projects – Rolling-Wave Planning

Graph The Project Management Institute (PMI®) defines progressive elaboration as “Progressive elaboration involves continuously improving and detailing a plan as more detailed and specific information and more accurate estimates become available. Progressive elaboration allows a project management team to define work and manage it to a greater level of detail as the project evolves.” This concept and definition of progressive elaboration applies to the development and execution of industrial projects. It is mentioned in the previous post that industrial projects follow the five phases shown in the picture. Scope definition starts with a product requirement at the beginning FEP-1 phase. Then the scope definition progresses with more and more details over succeeding phases. While the scope gets more defined over the lifecycle of the project, the execution plan also gets more defined. This is also called the rolling-wave planning philosophy.  It is also mentioned in the previous post that a project controls manager (PCM) needs to participate in the project management team during all phases of the project start from the beginning of FEP-1. The PCM with help from an estimator and a scheduler, will be the main team member leading the rolling-wave planning philosophy. The rolling-wave planning could run as described below. Beginning of FEP-1: The estimate will be a class 5 estimate as defined by the AACE Recommended Practice 104R-19. This is a rough order of magnitude estimate that is usually based on benchmarking previous projects of the same production capacity. The benchmarking at this phase does not include any details about the quantities that contribute to the scope or how they will be installed. This estimate usually has an accuracy range of minus 50% to plus 100%.  The schedule will be as follows: The total duration of the project will be calculated in a similar manner to the estimate based on benchmarking the project to completed projects that produce similar capacity. The execution duration will also be calculated the same way. The schedule of the FEP-1 Phase which is usually a few procedural steps to complete FEP-1 will be a detailed Level 3 schedule. This schedule usually fits in one or two pages. The schedule for FEP-2 will be a top-down Level 2 schedule to show some details of the work to be performed during the FEP-2 Phase. The schedule for FEP-3, Execution, and Startup Phases will be a Level 1 schedule to show the main milestones, key scope breakdown areas, and the project constraints such as the permits, availability of resources, equipment tie-ins, very long lead items, etc. This schedule is not a detailed critical path schedule. It should be treated as a planning tool to indicate the initial criticality of major construction areas, the impact of potential risks that might happen during the project execution, and how to react to project constraints. End of FEP-1: The estimate will be a class 4 estimate as defined by the AACE Recommended Practice 104R-19. This is an equipment factored or parametric estimate that is usually based on previous projects with different production capacities. This estimate usually has an accuracy range of minus 30% to plus 50%.  The schedule will be as follows: The total duration of the project will be calculated in a similar manner to the estimate based on parametric model analysis that gets input from completed projects. The execution duration will also be calculated the same way. The schedule of the FEP-2 Phase which is usually a few procedural steps to complete technology selection and economic feasibility analysis will be a detailed Level 3 schedule. This schedule usually fits in two or three pages. The schedule for FEP-3 will be a top-down Level 2 schedule to show some details of the work to be performed during the FEP-2 Phase. The schedule for Execution and Startup Phases will be a Level 1 schedule to show the main milestones, key scope breakdown areas, and the project constraints as mentioned above. End of FEP-2: The estimate will be a class 3 estimate as defined by the AACE Recommended Practice 104R-19. This is a semi-detailed unit costs with assembly level line items estimate that is usually based on published unit costs and productivity levels. This estimate usually has an accuracy range of minus 10% to plus 30%. This estimate typically used for preliminary authorization and for awarding the contracts for long lead items.  The schedule will be as follows: The total duration of the project (FEP-3, Execution, and Startup) will be calculated based on the execution strategy and sequencing main high-level activities and milestones.  The schedule of the FEP-3 Phase which is usually usually focused on process and performance engineering will be a detailed Level 3 schedule. This is the first critical path method schedule that can produce the critical path and floats for different activities. The schedule for Engineering Design and Procurement will be a top-down Level 2 schedule to show some details of the work to be performed during once FEP-3 Phase is complete. The schedule for Construction and Startup Phases will be a Level 1 schedule to show the main milestones, key scope breakdown areas, and the construction and operations constraints as mentioned above. End of FEP-3: The estimate will be a class 2 estimate as defined by the AACE Recommended Practice 104R-19. This is a detailed unit costs with forced detailed take-off estimate that is usually based on published unit costs and productivity levels. This estimate usually has an accuracy range of minus 5% to plus 20%. This estimate is typically used for final funding authorization.  The schedule will be as follows: The total remaining duration of the project (Construction and Startup) will be calculated based on the execution strategy and sequencing main activities and milestones.  The schedule of engineering design and procurement will be a detailed Level 3 schedule. This is critical path method schedule that can produce the critical path and floats for different activities. This schedule will be used for tracking and reporting the progress of engineering and procurement. The schedule for construction and startup will be a top-down Level 2 schedule to show some details of the work to be performed during once during these two steps. Mid-Engineering and Constructibility Review: No change to the estimate at this time. The cost engineers would be tracking any changes from the original estimate and providing monthly forecast. At this time a change log would be part of the project documents and  The schedule will be as follows: The schedule for engineering design and procurement will be tracked and updated to re-forecast the beginning of construction.  The schedule of construction and startup will be a detailed Level 3 schedule. This is critical path method schedule that can produce the critical path and floats for different activities. This schedule will be used for tracking and reporting the progress of construction and startup. The input to this schedule would be the detailed schedules from different construction contractors.

Project Controls for Industrial Projects — Definitions

Refinery The 1986 UNIDO Manual for evaluation of industrial projects defines an industrial project as: "An industrial project is the proposal for an investment to create, expand and/ or develop certain facilities in order to increase the production of goods and/ or services in a community during a certain period of time. Furthermore, for evaluation purposes, a project is a unit of investment which can be distinguished technically, commercially and economically from other investments." This is a comprehensive definition that covers the purpose, value, and economic aspects of an industrial project. For project controls we like to have a definition that addresses "what" the final product is and "how" we will build it. In other words, we are looking for a definition that covers the scope of the industrial project and the execution strategy to build it. Looking at different fields that use industrial projects such as the oil and gas, chemical, pharmaceutical, power generation, and food industries, we found that the scope of their projects has six categories of scope: Foundation Steel Structures Piping Equipment Electric Cables Instrumentation We find these six categories in any industrial project regardless of the application. For example, pipes might be used to transport gas, oil, steam, or a component of the food mix. The equipment may be a compressor, a boiler, a cracker, or a catalyst. The same applies to other categories. These projects usually start with an "idea" to solve a certain need as defined in the first paragraph. Majority of the time the idea does not specify the six categories mentioned above. In most cases, the person or team who come up with the idea or the solution to the problem does not know even what it takes to build the industrial project. They know for sure that once the project is built it will increase the capacity of production of goods or it will create new goods. The idea team interfaces with the project teams to start defining the specifics about the new facility and how it will be built. In most industries, this is called front end planning (FEP) or project development phases. A project controls manager is a key member of the project development team. FEP usually has three phases: FEP-1: Opportunity studies and idea deliberation FEP-2: Technology selection and initial feasibility studies FEP-3: Final: a. Scope definition b. Feasibility study c. Development of execution strategy In step 3.a, the team defines and hopefully freezes the scope of the project completely. This includes defining the quantities of each of the six categories mentioned above. For example, the team will define in details the sizing of steel, pipes, cables, and selection of equipment and instruments. In step 3.b the team looks at the economics of the facility to be built. All economic considerations besides the market share and brand names are considered to determine if the project will be feasible in serving the long-term goals of the owner organization. If the project passes the gate at the end of FEP-3, it moves to execution which include four phases: Engineering and design Procurement Construction Commissioning and startup Another definition of these projects is called EPC (engineering, procurement, construction). From a contractor side, the EPC definition might be enough. From an owner side, the project is not just an EPC. It has other phases before getting to execution and s. Based on the execution strategy defined by the owner in step 3.c, the owner might award the whole execution to an EPC contractor or self-execute the project and then award certain parts of the project to multiple contractors. The execution strategy also provides more details about core project team, contracting strategy, vendor management, sequence of work, schedule of execution, etc. In the option of awarding the project to an EPC contractor, we find that we have two project teams that need to aligned and integrated. In the option of self-execution, there will be one core project team to take the project from start to end. A project controls manager (PCM) is key member of these teams regardless of the strategy. It is always recommended to have the same project controls manager for both project development and execution. It is the policy of many owner organizations to have different PCMs for the two phases. This is also acceptable provided that the PCM will not change during the course of either development or execution phases.