Engineering, Procurement And Construction Projects Research Articles

PetroSahand International Group: the dilemma of outsourcing for EPC activities

Learning outcomes After reading the case and answering the case assignments, students will be able to understand and explain the challenges and opportunities for engineering, procurement and construction (EPC) contractors and their subcontractors; understand and critically analyse the advantages and disadvantages of insourcing and outsourcing of engineering, procurement and construction in EPC projects; determine which situations merit insourcing or outsourcing within each of engineering, procurement and construction in EPC projects; understand and identify the competencies and qualifications that a subcontractor must possess if any EPC activity is outsourced to them; and develop a decision-making framework to determine which EPC activities must be kept in-house or outsourced in EPC projects. Case overview/synopsis In mid-March 2021, PetroSahand International Group, a leading EPC contractor specializing in the oil, gas and petrochemicals industries in Iran, encountered significant challenges with its subcontractors in engineering and construction. These issues resulted in widespread repercussions for the company, including project delays and mounting debts. At the peak of these crises, PetroSahand’s senior management embarked on a thorough examination of whether to insource or outsource various aspects of their operations, such as engineering, procurement and construction. Their objective was twofold: to prevent similar setbacks in future projects and to navigate existing projects with minimal disruption to the company’s reputation. To address this critical dilemma, PetroSahand enlisted the expertise of a consulting team from Sharif University of Technology. Comprising esteemed professors, graduates and students from one of Iran’s most respected institutions, this team undertook an exhaustive analysis of the insourcing versus outsourcing debate across EPC domains. Subsequently, they presented their comprehensive findings, thereby confronting PetroSahand’s senior management with a pivotal choice regarding the optimal approach for each activity. Complexity academic level The audience of this work is undergraduate and graduate students who are enrolled in project management courses, both fundamentals and advanced. In addition, this case helps senior managers of EPC contractors gain a deeper and more comprehensive understanding of insourcing or outsourcing different project activities. Supplementary materials Teaching notes are available for educators only. Subject code CSS 7: Management science.

The Engineering Machine-Learning Automation Platform (EMAP): A Big-Data-Driven AI Tool for Contractors’ Sustainable Management Solutions for Plant Projects

Plant projects, referred to as Engineering Procurement and Construction (EPC), generate massive amounts of data throughout their life cycle, from the planning stages to the operation and maintenance (OM) stages. Many EPC contractors struggle with their projects due to the complexity of the decision-making processes, owing to the vast amount of project data generated during each project stage. In line with the fourth industrial revolution, the demand for engineering project management solutions to apply artificial intelligence (AI) in big data technology is increasing. The purpose of this study was to predict the risk of contractor and support decision-making at each project stage using machine-learning (ML) technology based on data generated in the bidding, engineering, construction, and OM stages of EPC projects. As a result of this study, the Engineering Machine-learning Automation Platform (EMAP), a cloud-based integrated analysis tool applied with big data and AI/ML technology, was developed. EMAP is an intelligent decision support system that consists of five modules: Invitation to Bid (ITB) Analysis, Design Cost Estimation, Design Error Checking, Change Order Forecasting, and Equipment Predictive Maintenance, using advanced AI/ML algorithms. In addition, each module was validated through case studies to assure the performance and accuracy of the module. This study contributes to the strengthening of the risk response for each stage of the EPC project, especially preventing errors by the project managers, and improving their work accuracy. Project risk management using AI/ML breaks away from the existing risk management practices centered on statistical analysis, and further expands the research scalability of related works.

Validation of project management information systems for industrial construction projects

ABSTRACT Project Management Information Systems (PMIS) have been widely used for effective construction project management especially for EPC (Engineering, Procurement, and Construction) projects. It saves a significant amount of time and effort, making project management tasks more effective and efficient. However, most Korean EPC firms develop and use PMIS without validating the system’s compliance with global project management standards. This research presented a methodology to validate the composition and functions of PMIS to ensure it conforms to the global project management standards of project management practice. The researchers defined the core and sub-management processes as well as the required capability level. Proposed global practice, which serves as evaluation criteria, was developed in the form of a work process. Sample PMIS evaluation results confirmed that the core management processes and their functions are compliant with overall global practice. The proposed work processes and evaluation criteria can serve as a global project management requirement for developing PMIS in the future.

Profit Sharing Mechanism of Large EPC Project considering the Behavior of Fairness Concern

A large‐scale engineering procurement and construction (EPC) project is often conducted by a joint venture. Many factors affect the success of cooperation among participating enterprises, such as trust and the degree of effort of both parties. The most important one is a rational profit sharing mechanism. Reasonable profit sharing mechanism concerns whether the advantages of the EPC model can be fully utilized. In this study, the proposed EPC project is undertaken by a joint venture integrating design and construction enterprises. Moreover, the profit sharing problem arises from the project optimization implemented by both parties. The fairness concern behavior of both parties is considered, and the profit sharing model for the EPC project is established on the basis of game theory. The effect of the fairness concern behavior of both parties on the EPC project optimization and its profit sharing is further analyzed by simulation analysis. The research findings show that the project optimization profit and its sharing are related to not only the efforts and cost coefficient but also the fairness concern behavior of both parties. The research results are conducive to the application of the EPC model in the field of construction engineering.

Classification, prioritization, efficiency, and change management of EPC projects in Energy and Petroleum industry field using the TOPSIS method as a multi-criteria group decision-making method

Nowadays, Energy supply is a key factor in defining the strategy of different countries. The Petroleum industry, as a major industry of energy production, has become a specialized field due to its diverse products. In this regard, many countries around the world seriously aim to find the best executive and contractual methods along with careful planning to carry out projects in production, extraction, and development of this field in the Petroleum and Energy industry. One of the low-risk methods for carrying out these projects is the implementation of projects in the field of Energy and Petroleum industry under Engineering, Procurement and Construction (EPC) contracts, which transmits the lowest risk to clients. Scope, time, cost and quality are the main features of project management that affect its efficiency and any project is analyzed and evaluated by these factors. Accordingly, the purpose of this research is to analyze, prioritize, rank, and manage efficiency of EPC executive projects in Energy and Petroleum industry of Iran, using the TOPSIS method as a multi-criteria group decisionmaking method. The results show that engineering is the most important factor influencing project. In addition, the construction phase has more influence on productivity than the procurement phase. The results of this research and analyses obtained from TOPSIS show that 'poor planning and sequencing of modeling, design, plan, and layout preparation', 'weakness in project planning and control during execution', and 'defective product performance made with project specifications' have more impact on the failure of EPC projects in the energy and Petroleum industry of Iran.

Developing a risk based engineering manager competency standard for oil and gas EPC project in Indonesia

One key to a project’s success other than the competence of the Project Manager is the competence of the project team personnel. Many problems occur that affecting the success of the Oil and Gas EPC (Engineering, Procurement, and Construction) project such as project schedule delayed, cost overruns, poor quality project performance to a life-threatening safety problem caused by incompetent personnel. The goal of this paper is to develop competency standard for Engineering Manager as one of the key personnel in the EPC project in the oil and gas industry. The competency standard will be developed based on literature study and data from several project execution plans in Indonesia which are validated by experts. Furthermore, risk analysis will be conducted by survey to get major risk that may be faced by an Engineering Manager which affecting time, cost, quality and safety to the project. As a result, risk based standard competency for engineering manager is expected to be produced.

Risk assessment of construction projects in China under traditional and industrial production modes

Purpose High risk is one of the most prominent characteristics of the Chinese construction industry, and it poses a significant threat to construction projects. Owing to initiatives aimed at achieving high efficiency, low carbon emissions, etc., industrialization of the construction industry has become an inevitable trend in China. However, it remains to be discussed whether industrialization of construction can reduce the risks entailed in construction projects compared with traditional construction. The paper aims to discuss these issues. Design/methodology/approach Based on the theory of risk life cycle, this paper proposes a practical risk assessment technique to assess the risk life cycle, including the risk occurrence time and potential financial losses. This technique is then applied to assess the differences between the risks involved in an engineering, procurement and construction (EPC) project executed via traditional and industrial production modes. Findings The results show that the total duration of risks in the industrial construction project is half of that in the traditional project. In addition, the expected financial loss entailed in the industrial construction project is 29 percent lower than that in the traditional construction project. Therefore, industrial construction has the potential to optimize risk performance. Originality/value There is no significant difference between the traditional and industrial construction models in terms of probability of risk. The maximum total loss might occur in the procurement stage in the case of industrial production, and in the construction stage in the case of traditional production. Moreover, the total expected loss from risk in the EPC project in the industrial production mode is only half of that in the traditional production route. This study is expected to provide a new risk evaluation technique and promote an understanding of the life cycle of risk management in the construction industry.

Onshore Oil and Gas Design Schedule Management Process Through Time-Impact Simulations Analyses

Korean oil and gas contractors have recently incurred significant losses due to improper engineering performance on EPC (engineering procurement and construction) projects in overseas markets. Several previous studies have verified the significant impact engineering has on EPC construction cost and project lifecycle. However, no literature has studied the time impact engineering has on EPC projects, representing a gap in the existing body of knowledge. To fill this gap, a Monte Carlo simulation was performed with the Pertmaster, Primavera risk analysis software for three sample onshore oil and gas projects. From said simulation of all major EPC critical activities, the authors found that the engineering phase is up to 10 times as impactful as the procurement and construction phases on the overall schedule duration. In assessing the engineering activities, the authors found the piping design activities to have the greatest impact on the overall schedule performance. Using these findings, the authors present a design schedule management process which minimizes the delays of project completion in EPC projects. Said process includes the following six steps: (1) Milestone management, (2) drawing status management, (3) productivity management of engineering, (4) interface management, (5) management of major vendor documents, and (6) work front management. The findings of this paper add to the body of knowledge by confirming the design phase to be the most impactful on the overall project schedule success. Furthermore, the presented design schedule management will aid industry with successfully executing the design phase in a timely manner, including examples from case study projects for a greater understanding.

A Forecast and Mitigation Model of Construction Performance by Assessing Detailed Engineering Maturity at Key Milestones for Offshore EPC Mega-Projects

The main subject of this research is to develop a forecast and mitigation model of schedule and cost performance during a detailed engineering stage of offshore engineering, procurement and construction (EPC) projects. The weight factors of major elements in detailed engineering completion rating index system (DECRIS) were measured using a fuzzy inference system (FIS) and an analytic hierarchy process (AHP). At five key engineering milestones, from an EPC contract being awarded to the start of construction, detailed engineering maturities were assessed in fourteen historical offshore EPC projects using the DECRIS model. DECRIS cutoff scores for successful project execution were defined at the key engineering milestones. A schedule and cost performance was forecasted and validated through comparison of DECRIS and other models using statistical confidence of a fuzzy set qualitative comparative analysis (fsQCA) and a regression analysis. As a mitigation method for engineering risks to EPC contractors, engineering resource enhancement is recommended for trade-off optimization of cost overrun using a Monte Carlo simulation. The main contribution of this research is that EPC contractors could continuously forecast construction costs and schedule performance utilizing the DECRIS model, and could review the adequacy of engineering resources, assessing the trade-off between said resources and cost/schedule risk mitigation.

Human resource related factors and engineering, procurement, and construction (EPC) project success

PurposeThis paper aims to assess the impact of human resource-related factors, including human resource development (HRD) and human resource competency (HRC), on engineering, procurement and construction (EPC) project success (PS), and explore the interrelationship among these factors.Design/methodology/approachStructural equation modeling with the application of SPSS and AMOS software is used to test three hypotheses in the conceptual framework and analyze interrelationships among HRD, HRC and PS. A survey of 800 participants involved in EPC projects throughout Vietnam was conducted.FindingsResults showed that HRD affects PS directly. HRC has a direct impact on PS; HRD has a direct impact on HRC, and thus, HRD also affects PS indirectly through HRC.Originality/valueThe study indicates that the development of a competent human resource for EPC project implementation plays a considerable role in EPC PS. The findings also give project professionals tools for improving HRD and HRC to increase the possibility of EPC PS.

Neural network method for control valve cost estimation on the EPC project bidding

Cost estimation on the bidding phase is a crucial stage that determines the success of the Engineering, Procurement and Construction (EPC) project. If the cost offered to the client is too high then it could not compete with the other bidder, but if the cost offered are too low it can reduce profit margins and result in losses for the EPC companies. This paper describe the use of Back Propagation Neural Network method to help determine cost estimation. This method is applied specifically to determine control valve cost estimation on the bidding phase so that the retrieved costs will be accurate. When there is no technical and price quotation from vendors as well as the narrowness of the bidding processing time, this method can be an alternative choice to determine the price based on previous vendor quotation. In the future, this method could be developed and applied for other instrumentation equipment such as transmitter, switch, analyzer, control system and others to achieve total cost estimation of instrumentation equipment in EPC bidding proposal.

Análise da influência das práticas de gestão do conhecimento no sucesso de projetos do tipo EPC

Os projetos de grandes obras no segmento infraestrutura, construção, plantas industriais, papel e celulose, energia, mineração e em petróleo e gás são denominados por Engineering, Procurement and Construction (EPC), que representam uma modalidade contratual crescente no mercado. Por se tratar de grandes projetos, as empresas EPCistas precisam periodicamente buscar novos métodos e conhecimentos em gerenciamento de projetos, para obter sucesso na entrega de seus empreendimentos. Neste viés, este artigo tem como objetivo compreender a influência de práticas de conhecimento (PGCs) na obtenção de sucesso de projetos EPC em empresas brasileiras de engenharia. Por tanto, foi realizada uma survey com 94 profissionais da área de gerenciamento de projetos. Estes analisaram 37 PGCs pré definidas neste estudo, associando-as com a dimensão de aprendizagem organizacional de sucesso do modelo teórico também proposto neste trabalho. Os resultados da regressão logística determinaram que 5 PGCs possuem relevante significância para cada uma das dimensões, e 3 contribuem para o sucesso deste tipo de projeto. Assim, do ponto de vista científico, os resultados obtidos ampliam a compreensão sobre o tema estudado e oferecem do ponto de vista profissional, a oportunidade de se aplicar melhorias por meio das PGCs identificadas, apoiando assim, a tomada de decisão por parte de gerentes de projetos EPC.

Impacts of human resource development on engineering, procurement, and construction project success

PurposeThe purpose of this paper is to identify the impact of human resource development (HRD) on engineering, procurement and construction (EPC) project success (PS), human resource competency (HRC), job performance (JP), and the interrelationship among them. This paper also investigates the impact of EPC project factors (PF) on PS, the factors affecting HRD, including internal factors (IF) and external factors (EF) during EPC project implementation.Design/methodology/approachStructural equation modeling (SEM), SPSS, and AMOS software were used to test nine proposed hypotheses. The respondents comprised 800 participants involved in EPC projects throughout Vietnam.FindingsThe results show that HRD positively affects HRC, JP, and PS. HRD is influenced by IF but not influenced by EF. HRC positively impacts on JP and PS, while PF directly impacts on PS.Originality/valueThe study indicates that the development of competent human resources for EPC project implementation plays a considerable role in EPC PS. The findings also give project professionals a tool for improving HRD, and HRC to increase the likelihood of PS.

The role of procurement in performance deviation recovery in large EPC projects

Within engineering, procurement and construction (EPC) companies operating large engineering projects by means of their supply chains, procurement plays a key role in project execution. During project execution, deviations from desired performance in terms of time, cost and quality take place. Procurement can contribute considerably to such deviations as well as to reduce or possibly eliminate them. By means of a multiple case study of three best-in-class EPC companies, the article shows that companies use different ways, namely strategy modifications, process modifications and combined modifications, to deal with project deviations.

The Impact of Contractual Governance and Trust on EPC projects in Construction Supply Chain Performance

This paper theoretically refines and empirically extends the debate on the type of interplay between formal and informal governance in an under-researched area: Engineering, Procurement and Construction (EPC) Projects in construction supply chain. Taking contractual governance as the core element of formal governance, and trust as the core element of informal governance, this paper seeks to address their impact on cooperation and EPC projects in construction supply chain performance by structural equation model with 288 valid data. The result shows that contractual governance has a positive effect on EPC projects in construction supply chain performance, but the effect on cooperative behavior is not significant; trust shows some influence both on cooperation and performance; cooperation has a positive significant effect on the performance; different dimension of trust has different effects on cooperation and performance: system-based trust has a positive significant effect on cooperation and performance; the effect of cognition-based trust on performance is not significant, and it only has a positive effect on cooperation; affect-based trust has no effect on collaboration and performance. DOI: http://dx.doi.org/10.5755/j01.ee.26.4.9843

Schedule delays in engineering, procurement, and construction petrochemical projects in Vietnam

Purpose – Petrochemical projects play a very important role in the economic development of Vietnam. For the past ten years, many large-scale petrochemical plants have been developed using the engineering, procurement and construction (EPC) project delivery system for completing the project faster. However, many projects have suffered from schedule delays. In order to solve the delay problem, a clear understanding of the EPC business model and its delays problems are studied in this research. A qualitative research method by using case study on selected EPC projects was adopted. This paper aims to define the current business models used in the Vietnamese petrochemical industry and explores the root cause of delays. Design/methodology/approach – The research methodology used in this study is multiple case studies by purposive sampling on EPC projects. This is chosen due to the limited number of EPC projects in petrochemical in Vietnam and to obtain schedule delay factors from both delayed and on-time projects. In this purposive sampling, the researcher decided on what needs to know and sets out to find the people who can and are willing to share their information. From each project, project manager and project engineer were interviewed to understand the delay factors in their EPC projects. Data from the interview were analyzed by using “pattern coding” described by Miles and Huberman. Then, cross-case analysis was used to identify the common and unique factors occurring in each case. By comparing the three cases, the authors can identify the delay factors in EPC petrochemical in Vietnam. Findings – By interviewing the management level officers in three cases and performing exploratory work on the secondary data, it was observed that the local and foreign contractors of EPC projects in Vietnam have generally similar business process. Then, the codes were grounded based on the EPC business process, and subjected to the cross-case analysis. The root cause of problems in each phase was provided. Originality/value – The paper fulfills an identified root cause of EPC projects in Vietnam.

Hierarchy probability cost analysis model incorporate MAIMS principle for EPC project cost estimation

Two new types of hierarchy probability cost analysis (HPCA) model incorporating money allocated is money spent (MAIMS) principle based on definite work breakdown structure (WBS) level for EPC (engineering, procurement and construction) projects are presented. The proposed models have skillfully solved dilemma to appropriate cost elements and maximize the efficiency of information for cost risk analysis. Macroscopic and microscopic risk analysis of the project cost elements are introduced for meaningful model input. The illustration of an actual bidding EPC project substantiates that proposed integrating HPCA-hierarchy MAIMS models have demonstrated effective and viable for EPC projects.

Time-to-market vs. time-to-delivery: Managing speed in Engineering, Procurement and Construction projects

The time-to-market in NPD projects is a key factor in the competition between innovative firms. Research on concurrent engineering has shown that time can be managed as well as a delay and as a speed. Our concern in this paper is to study the time factor in the case of Engineering, Procurement and Construction (EPC) projects, where a customer initially contracts for a project from a contractor on the basis of specifications, budget and delay. Is time-to-delivery a key factor? Does its reduction represent a competitive advantage for the client and/or for the contractor in EPC projects? Is project speed a key variable to be managed, or does it result from other project parameters? We first define an analytical model to characterize a speed profile in EPC projects. We implement this model for six major construction projects developed by a large, international firm. A variety of speed profiles result. We conclude by showing the relevance of NPD project speed management in EPC projects.