Large Capital Projects Research Articles

The Green Value Engineering Methodology: A Sustainability-Driven Project Management Tool for Capital Projects in Process Industry

Process industry renovation is mostly driven by business objectives like productivity enhancement and cost reduction, which hinder the “shift towards a sustainable manufacturing” called by political and academic institutions. In this paper, the project management methodology of Value Engineering, used for cost reduction in large capital projects, is extended to improve not only economic figures, but also environmental sustainability indicators. The methods can guide project design to reduce the consumption of natural resources and the generation of waste, closing a gap between sustainability targets and production needs. Sustainability metrics derived from a simplified life cycle assessment approach are used to achieve quick but reliable estimates of the environmental impact reductions against a base scenario. The project governance is thus supported when assessing potential trade-offs between environmental and economic advantage, encouraging shared and de-risked decisions. Even though limited by the project boundaries of time and budget and by the simplified impact assessment approach, the method promotes a lean and incremental implementation of sustainable manufacturing practices, applicable also to routinary interventions. The methodology is illustrated through application examples from a real case study, an EUR 100 M chemical plant expansion project for a pharmaceutical company in Italy.

Towards 2030: transforming asset emissions in Australian production operations

Operators are building roadmaps to reduce emissions at an increasing rate because of initiatives such as the Australian Government’s Safeguard Mechanism and global draft proposals to make emissions from plants auditable. There are three main levers for integrated gas operators: (1) Optimising existing operations to improve efficiency. (2) Designing sustainable developments and modifications. (3) Rebalancing portfolios to lower carbon equivalent intensity assets. Large capital projects are typically proposed as responses to the second lever – such as carbon capture and electrification. However, operating assets hold pressing challenges to reduce ~10–20% of emissions and need to develop viable roadmaps. Through our work in Australian integrated gas industry, we found that the majority of CO2-e operational emissions reduction opportunities can be addressed by discrete improvement programmes on rotating reliability, process optimisation and methane leak reduction. We discuss how asset operators can drive their Operations, Energy Transition and Digital Functions to realise these significant CO2-e benefits on a scale of months by: (1) Developing a value-driven decarbonisation strategy for operations, identifying benefits in production, cost and emissions, front-loaded with high impact, rapid 20–30% reduction initiatives that can be realised in the next 1–2 years. (2) Implementing effective and auditable real-time monitoring of plant emissions direct from existing control systems, sensors and imaging techniques. (3) Deriving a programme of tech-enabled optimisation levers and bringing this into new designs for carbon capture, utilisation and storage (CCUS), hydrogen and electrification projects for maximum benefits.

Neglecting complex network structures underestimates delays in a large-capital project

Completing large-scale projects on time is a daunting challenge, partly due to the intricate network of dependencies between a project’s activities. To support this challenge, existing theory focuses on predicting whether a delay in completing a single activity is likely to spread and impact downstream activities. Using fine-grained information from 68 546 activities and 84 934 pairs, associated with the delivery of a $1.86Bn infrastructure project, we show that the core mechanism that underpins existing theory underestimates delay propagation. To elucidate the mechanisms that drive delay, we generated null models that destroyed the structural and temporal correlations of the original project activity network. By doing so, we argue that this underestimation is the result of neglecting endogenous structural features within the project’s activity network. Formulating a new mechanism that utilizes both temporal and structural features may help improve our capacity to predict how delays spread within projects.

Functions of Project Steering Committees in Large Capital Projects

Large Capital Projects (LCPs) have a significant impact on the growth and development of local and international economies. Their failure stagnates progress, is not sustainable and cripples the economy and society in which they exist. This research study investigated the effective functioning of a Project Steering Committee (PSC) as a pivotal component to project management. Based on the findings of the literature review, the research model consists of four PSC function categories: (i) configuration, (ii) competency, (iii) decision authority, and (iv) communication. A 5-point Likert scale survey was used, and the results from 46 respondents within the South African industry was analyzed.The results concurred with previous studies that PSCs’ knowledge of Structured Corporate and Project Governance is essential for the efficient functioning of a steering committee. Contrary to the expectations of experienced project practitioners, Communication Management ranked relatively low in importance. Whilst there was consensus on the ratings of the PSC competencies, the variance noted can be attributed to factors such as the project experience of participants, the type and location of the project, and the PSC construct in different organizations. This can indicate that there is no single PSC attribute, but a combination of technical and interpersonal skills, necessary for effective PSC functioning.Based on the results, it is recommended that the roles and responsibilities of the PSC are confirmed and understood by project stakeholders early in a project to ensure clear guidance and authority.

PROJECT PRODUCTION MANAGEMENT: The Key to Delivering Large Capital Construction Projects on Time and Under Budget

Many people view managing projects and managing production systems as completely distinct. Mark L. Spearman, H. James Choo, and Todd R. Zabelle describe how large capital construction projects include production operations and how to apply operations science to make these activities more effective. The result is that these important and challenging projects yield far better schedule and budget performance.

Unpacking Institutional Complexity: A Configuration Approach of Organizational Success

This study investigates the conditions that influence organizational success in protecting the legiti-macy of large capital investment projects in plural and complex institutional contexts. Following a bottom-up approach, we distinguish and measure the different components that characterize plural and complex institutional contexts. Then, we investigate under which context-specific conditions are different organizational responses linked to low organizational success? Our results show that contexts of volatile complexity lead to low success irrespective of the type of organizational re-sponse. Additionally, we find that incompatibility alone, a key feature of complex institutional con-texts according to prior research, does not seriously compromise organizational success. Our da-taset is comprised of the hearing transcripts of the regulatory review processes of 35 oil pipeline project proposals in Canada (1993 – 2018). Our research design combines topic modeling and fuzzy set Qualitative Comparative Analysis (fsQCA).

Impact of Inter‐Utility Agreements on Cooperative Regional Water Infrastructure Investment and Management Pathways

AbstractUrban water utilities, facing rising demands and limited supply expansion options, increasingly partner with neighboring utilities to develop and operate shared infrastructure. Inter‐utility agreements can reduce costs via economies of scale and help limit environmental impacts, as substitutes for independent investments in large capital projects. However, unexpected shifts in demand growth or water availability, deviating from projections underpinning cooperative agreements, can introduce both supply and financial risk to utility partners. Risks may also be compounded by asymmetric growth in demand across partners or inflexibility of the agreement structure itself to adapt to changing conditions of supply and demand. This work explores the viability of both fixed and adjustable capacity inter‐utility cooperative agreements to mitigate regional water supply and financial risk for utilities that vary in size, growth expectations, and independent infrastructure expansion options. Agreements formalized for a shared regional water treatment plant are found to significantly improve regional supply reliability and financial outcomes, despite highly correlated weather and climate across neighboring supply systems (e.g., concurrent drought events). Regional improvements in performance, however, mask tradeoffs among individual agreement partners. Adjustable treatment capacity allocations add flexibility to inter‐utility agreements but can compound financial risk to each utility as a function of the decision‐making of the other partners. Often the sensitivity to partners' decision‐making under an adjustable agreement degrades financial performance, relative to agreements with fixed capacities allocated to each partner. Our results demonstrate the significant benefits cooperative agreements offer, providing a template to aid decision‐makers in the development of water supply partnerships.

The politics of dispossession and compensation in the eastern Indian coal belt.

Ethnographic studies in sites of land dispossession for large capital projects have revealed the diversity of local political responses to this process, from fierce resistance to compliance. The theoretical challenge, in this context, is to trace the particular factors that affect this politics, and the conditions under which different reactions to dispossession unfold. Drawing on fieldwork in an Adivasi (tribal) village adjacent to an opencast coal mine in Jharkhand, India, this article seeks to contribute to this inquiry. It illustrates how, in a predominantly precarious labour environment, the possibility of formal employment as compensation for expropriated land, and the ways in which such employment enables class mobility, can play a salient role in shaping local political dynamics around dispossession. The analysis shows how, in the community studied, compensatory jobs for dispossession gave rise to new class differentiation and shifts in political relations that have acted to curb potentialities of resistance – precisely in a context in which opposition to dispossession could have otherwise been considered likelier to emerge.

Risk assessment in Iranian oil and gas construction industry: a process approach

PurposeSuccessful risk management is influential in different phases of construction projects. It can play a critical role in reducing the possibility of claims as well as related disputes. The risk management knowledge area in large capital projects such as oil and gas is considered a questionable problem in the construction industry. The present study makes an effort to identify the importance of process groups in improving risk management performance.Design/methodology/approachThis study is selected and ranked 36 factors leading to the claim in Iran's oil and gas industry through the Delphi method and a questionnaire. Factors categorized into a risk breakdown structure (RBS) include eight groups. Factors are linked to one of the process groups by a Delphi method. Finally, the relationship between RBS and the five process groups is analyzed using partial least squares structural equation modeling (PLS-SEM).FindingsFindings showed that the planning process group had more confirmed factors than others. Most of the supported communications belonged to the contractor and the owner parties. Also, the cause of delay in the implementation phase due to the contractor performance had a higher relative importance index.Originality/valueThis article, from a project life-cycle perspective, considers the new structure between the risks leading to claims and the key parties to the project. It can be a good criterion for identifying risks and a timelier response to them before the risks turn into disagreements.

Building information modeling to support facilities management of large capital projects: a critical review

PurposeThis paper aims to present a review of research developments relating to the application of building information modeling (BIM) to facilities management (FM). It sheds light on major technical and organizational issues with the view of identifying how existing BIM for FM knowledge applies to large capital projects.Design/methodology/approachThe study adopted a literature search approach to retrieve relevant articles which were subjected to keyword analysis to enable categorization of extant BIM for FM research into appropriate sub-domains. A qualitative analysis of 94 BIM for FM-related literature was carried out in addition to a review of 9 capital project-related articles, leading to the establishment of research trends, gaps and future directions.FindingsThe review found that research in the BIM-FM integration field is predominantly technology and process-oriented, with less attention paid to people or organizational aspects. Therefore, there is a need for expanding the knowledge base in this direction. Several future research directions were identified to lay the foundations for research on BIM application to FM in large capital projects and other application areas for interested researchers. These future directions were categorized under the identified sub-domains of the field and mapped onto two generic activities, i.e. technical integration and business integration, involved in technology adoption by organizations.Originality/valueThe main contribution of this study is the categorization of existing research on BIM for FM, leading to the identification of research gaps concerning the initiation and implementation of BIM for FM in large capital projects. As a secondary benefit, this study has validated some sub-domains of the BIM for the FM research field identified in previous review papers using an empirical approach. This validation of defined sub-domains is useful for an emerging research field as it provides a common understanding of trends and specific application areas.

Flexible and innovative learning spaces: An exploration of parental perspectives on change, consultation and participation

The role played by innovative educational environments to support learning for the 21st century has attracted the interest of the Organisation for Economic Cooperation and Development at the global governance level and at the national policy level internationally. This article draws on global, European and Australasian research and data from a qualitative study of consultation and participation in the development of innovative and flexible learning spaces in the New Zealand context. It focuses specifically on the role of parents, drawing data from relevant policies and documents, a parent questionnaire and interviews of parents, architects and Ministry of Education Delivery Managers, responsible for delivering large capital works projects. While the architect participants believe their bold designs are inspirational and promote new pedagogical styles, and positive relationships, some parents view these open-plan learning areas (and associated pedagogies) as needlessly experimental, placing the needs and education of their children at risk. Delivery Managers are focussed on seeing the projects to conclusion, on time and on budget. The critical analysis considers the findings in relation to the research question and reflects on the dual themes of innovation and risk. Further questions for research are suggested.

Guidelines for integrating process safety into engineering projects

AbstractThis article describes a new guideline book that the Center for Chemical Process Safety has published on integrating process safety into engineering projects. Engineering projects in the process industry are temporary endeavors generally undertaken to create a new or modified facility and vary widely in scope and size ranging from large capital projects to small management of change works. The main focus of the guidelines is on proactively implementing process safety activities at the optimum timeframe, while also reactively conducting “cold eyes” reviews to provide assurance that nothing significant has been missed. This approach ensures that if the right process safety activities are conducted at the right time, project leadership will have the right (process safety) information in order to be able to make the right risk management decisions regarding safety. Process safety in engineering projects involves leadership, managers, engineers, operating and maintenance personnel, contractors, vendors, suppliers, and support staff. Therefore, these guidelines were prepared for a wide audience.

Território, ditadura e desenvolvimento: perspectivas históricas sobre os programas de regionalização no Brasil

O artigo pretende agregar contribuições para os estudos sobre regionalização no Brasil com a apresentação de um panorama da institucionalização do programa nacional de desenvolvimento regional, no quadro delimitado pela ditadura civil-militar (1964-85). Para isso, são pormenorizados órgãos e instituições especializadas, publicações de experts, entre outras fontes documentais primárias inéditas. Como principal inferência, assume-se que o projeto nacional-desenvolvimentista, associado ao autoritarismo, encontrou nos projetos de regionalização o seu território de materialização por excelência. Esse traço pode ser observado na caracterização de regiões baseada unicamente em critérios econômicos, nos privilégios legislativos concedidos à instalação de fábricas fora das grandes capitais, em planos e projetos de remoção de bairros residenciais em prol de indústrias e, finalmente, na associação da ideia do conceito de regionalização ao de desenvolvimento

Capital and the Cathedral: Robert H. Schuller's Continual Fundraising for Church Growth

ABSTRACTRobert H. Schuller's Crystal Cathedral in Garden Grove, California, appeared to be the model of growth and stability among megachurches—until it imploded. Drawing on archival material and interviews, this article demonstrates how the seeming success of Schuller's church growth philosophy was built on a precarious structure that demanded the continual management of flows of capital. In Schuller's vision, a church's capacity must always exceed a leader's projected plan for growth. Large capital projects stimulate revenue, yet borrowed funds are required to accommodate growth in membership that will produce income to pay off loans later. As new members join, however, structures expand, placing increased strain on mobilizing the loyalty of a wider constituency to uphold the charisma-bearing enterprise. Ensuring the credibility of pastoral charisma requires ever expanding infrastructure, which, in turn, demands increased funding for programs, staff, and buildings—a vicious spiral, exacting enormous strains for sustaining the entire ministry.

The “projectness” of MOC

The safety community, bolstered by the PSM regulations, has emphasized the importance of proper management of change, “MOC,” to ensure safe, reliable and economic operation of chemical plants, refineries and increasingly, on‐ and off‐shore pipelines, and installations.The majority of MOCs involve physical changes to facilities—a much smaller fraction of MOCs addresses procedure‐only changes, document‐only changes or organizational changes. Physical changes to facilities are implemented in different contexts such as maintenance work orders, project work orders, small capital projects, and large capital projects. Each of these contexts has its own notion of a “work process,” and the larger ones are very project‐centric.Changes to facilities always involve BOTH an MOC and a “work process.” Some sites emphasize the work process aspects, driven by the existence of Enterprise Resources Planning systems, and handle the MOC essential elements poorly. Other sites burden the MOC process with many capital‐projects aspects and create a very complex change management environment. Surely there must be a happy medium?This article analyzes data from case studies from actual implementation projects, identifies gaps and makes recommendations on the best practice for conjoining MOC and other work processes. © 2018 American Institute of Chemical Engineers Process Process Saf Prog 38:e12021, 2019

Five things you should know about cost overrun

This paper gives an overview of good and bad practice for understanding and curbing cost overrun in large capital investment projects, with a critique of Love and Ahiaga-Dagbui (2018) as point of departure. Good practice entails: (a) Consistent definition and measurement of overrun; in contrast to mixing inconsistent baselines, price levels, etc. (b) Data collection that includes all valid and reliable data; as opposed to including idiosyncratically sampled data, data with removed outliers, non-valid data from consultancies, etc. (c) Recognition that cost overrun is systemically fat-tailed; in contrast to understanding overrun in terms of error and randomness. (d) Acknowledgment that the root cause of cost overrun is behavioral bias; in contrast to explanations in terms of scope changes, complexity, etc. (e) De-biasing cost estimates with reference class forecasting or similar methods based in behavioral science; as opposed to conventional methods of estimation, with their century-long track record of inaccuracy and systemic bias. Bad practice is characterized by violating at least one of these five points. Love and Ahiaga-Dagbui violate all five. In so doing, they produce an exceptionally useful and comprehensive catalog of the many pitfalls that exist, and must be avoided, for properly understanding and curbing cost overrun.

Challenges and Prospects for Integrating the Assessment of Health Impacts in the Licensing Process of Large Capital Project in Brazil.

Brazil was one of the first countries in Latin America to institutionalize a National Environmental Policy in 1981, including the environmental impact assessment (EIA) process of economic activities with anticipated impacts on the environment. Today, EIA practice in Brazil comes with a number of limitations: it is constrained by its environmental advocacy role; application is strongly oriented towards large capital projects; and social responsibility considerations are only partially included. Consequently, EIA studies mainly address issues connected to localised and direct environmental impacts, largely ignoring any socio-economic and health impacts. This perspective paper highlights limitations of current EIA practice in Brazil with a focus on health considerations in impact assessment. While recognizing the positive impact to municipalities where large capital projects are being developed and operated, adverse impacts on health are a reality with measurable evidence in Brazil. Therefore, we argue that specificities on how to systematically assess and monitor potential health impacts cannot remain invisible in the Brazilian legislation, as currently seen in the reformulation of the licensing process in the country. The process of better integrating the assessment of health impacts in the licensing process of large capital project in Brazil must, however, not be based on the imposition of an external model but should be promoted by internal stakeholders from the environmental and health sector, incorporating the experiences gained in various case studies from all over the country.

Five Things You Should Know about Cost Overrun

This paper gives an overview of good and bad practice for understanding and curbing cost overrun in large capital investment projects, with a critique of Love and Ahiaga-Dagbui (2018) as point of departure. Good practice entails: (a) Consistent definition and measurement of overrun; in contrast to mixing inconsistent baselines, price levels, etc. (b) Data collection that includes all valid and reliable data; as opposed to including idiosyncratically sampled data, data with removed outliers, non-valid data from consultancies, etc. (c) Recognition that cost overrun is systemically fat-tailed; in contrast to understanding overrun in terms of error and randomness. (d) Acknowledgment that the root cause of cost overrun is behavioral bias; in contrast to explanations in terms of scope changes, complexity, etc. (e) De-biasing cost estimates with reference class forecasting or similar methods based in behavioral science; as opposed to conventional methods of estimation, with their century-long track record of inaccuracy and systemic bias. Bad practice is characterized by violating at least one of these five points. Love and Ahiaga-Dagbui violate all five. In so doing, they produce an exceptionally useful and comprehensive catalog of the many pitfalls that exist, and must be avoided, for properly understanding and curbing cost overrun.

Empowering Australia in the global oil and gas standardisation initiative

The World Economic Forum has identified the oil and gas industry’s poor productivity performance as a significant barrier to the sanction of large capital projects. 75% of large exploration and production projects between 2010 and 2014 exceeded their budget by 50% on average and 50% of these projects exceeded schedule by almost 40%. A major cause of these poor productivity outcomes is the lack of standardisation. In Australia, the Productivity Commission raised similar concerns about Australian projects. In 2015, the government launched its competitiveness agenda that saw the formation of six industry growth centres, including National Energy Resources Australia (NERA) for oil and gas, coal and uranium. In 2017, NERA, as part of the global standardisation initiative being pursued through the International Oil and Gas Producers Association, successfully delivered a project to elevate Australia to full participating member status of the International Standards Organisation’s Technical Committee for oil and gas, petrochemicals and energy. Australia’s participation is coordinated through Standards Australia’s committee, ME-092, that also oversees several working groups progressing specific initiatives to enhance Australia’s competitiveness. This paper describes Australia’s position within the global oil and gas standardisation initiative, highlights the strategy being pursued to maximise productivity through the adoption of international standards and discusses areas being led by Australian initiatives as part of the international program. Information will be provided on how opportunities can be realised through this initiative and on the role of professionals in supporting Australia’s drive to build a regional oil and gas hub that will attract capital investment for decades to come.

Risk and Reward: Mitigating Risks To Improve Project Results

President's column I am honored to serve the Society of Petroleum Engineers as president this year. Each president chooses a theme, and for me, my theme was obvious: risk and reward. Ours is a risky business, and that is what makes it fun and challenging. Risk also drives the big rewards when what we do pays off. Mitigating risk is the very core of what we do on a daily basis: drilling risk, subsurface risk, cost/schedule risk, performance risk, safety risk, geopolitical risk, and price risk. Projects are a constant juggle to find the sweet spot where we produce oil and gas safely, responsibly, and profitably. But as an industry, we make decisions to eliminate risk through analysis rather than manage the risk that will always be there. The petroleum industry is fundamentally a commodity business. Commodity prices change, but combine that with a capital-intensive business with big upfront investments and long payouts, and commodity price swings hit us hard. Engineers are paid to predict the future, especially production, reserves, cost, and schedule. We cannot control price risk, but we can improve performance. I have always been interested in the intersection of engineering and risk evaluation with oil and gas economics. I wrote my master’s thesis on what we would now call “decision analysis.” I was intrigued by deterministic project and economic evaluation and how data are interpreted within the bands of possibility to get a project over economic hurdles. Even with today’s sophisticated probabilistic economic analysis, results still fall short of expectations and promises to stakeholders. Too Many Projects Fail The stakes are incredibly high. Independent analysis of large capital projects has shown that as an industry, we are not very good at delivering on our promises. In its spotlight article on oil and gas megaprojects, Ernst & Young estimates that 64% of major capital projects overrun on cost, and 74% face schedule delays. Cost and schedules are overrun in every region of the world. Independent Project Analysis (IPA) comes to very similar conclusions in its subscription benchmarking service, estimating that 60% of projects overrun costs by more than 20% while only 18% of projects meet both cost and schedule targets. IPA also estimates that projects deliver 35% less of their planned overall net present value from financial investment decision to lookback. Some estimate that more than 75% of projects deliver more than 25% less value than promised. On the production and reserves side, the story is not any better. Ernst & Young’s 2015 US Oil and Gas Reserves study shows that integrated companies failed to replace US production for 2010–2014, despite more than USD 2 billion in capital investment. Independents fared much better at production and reserve replacement during this time period due to high activity in the US shale plays, but shale production will decline rapidly with diminished development programs.