Changing the course of engineering construction

n a recent post, it has been suggested that the barrier to the uptake of Advanced Work Packaging (AWP) is that decision-makers need to be persuaded as to the ROI on AWP. Assuming that they are neither accountants nor newspaper editors, my view is that they are asking the wrong question. Some say the definition of insanity is continuing to do exactly the same thing (badly) but expecting to achieve improved results. It is no secret that reports by well-informed industry practitioners, observers and commentators reveal that the ROI on engineering construction is, in the main, not sufficient for a sustainable industry. Would you invest your own money in engineering construction? I have not and I have no intention of doing so until the engineering construction industry makes fundamental changes to reverse the progressive decline in ROI that has occurred over the last fifty years, compared to other industries that have reinvented themselves in the way they organise and conduct business – one must presume that insanity did not prevail here.

If the decision to adopt AWP turns on the ROI that can be generated by it, that suggests a certain expectation of AWP in the context of improved project performance that single-handedly reverses the decline in the industry ROI and a level of investment that needs to be made in AWP – neither of which appear to be realistic or relevant. AWP is a tool, and as with all tools, the benefit is derived from the way they are applied and used – enter the human element! Some say a fool with a tool is still a fool. Make no mistake, all the indications are that AWP is a very good tool that can contribute considerably to improved project performance provided it is used to its maximum potential, but no tool, no matter how well used, can single-handily reverse the trend in declining engineering construction industry ROI. Reversing that decline requires a fundamental re-think by the industry about how projects are conceived and delivered. This is about mindset and behaviours. There are indications that a re-think is taking place – it’s about time! The benefits of real collaborative working are beginning to surface and hopefully will soon start to hold the middle ground and substantially replace what has become accepted practices that thrive on a concept of winner-takes-all and the race to the bottom in contracting arrangements.

Collaborative working practices are enablers to maximise the benefit that can be achieved from AWP used in conjunction with other existing and developing interventions and tools such as Lean, Last Planner, Digitalisation, Standardisation, BIM, Factory Thinking, Pre-assembly, Digital Twin, etc.

Therefore, in my view, the question that decision-makers in engineering construction need to ask is:

Do we want to enjoy the level of ROI achieved by comparable industries and if so are we prepared to fundamentally change the way engineering construction projects are conceived and delivered?

This is not a question about the cost and benefits of individual improvement initiatives and tools, it is about determining and taking actions needed to assure the long term survival and prosperity of the engineering construction industry, globally. AWP and other initiatives and tools are a positive step in the right direction, but we must go much further and faster as an industry. We are now entering a phase of significant technological change with decarbonisation, energy transition etc, so surely this is time and provides the opportunity to coincide technological developments with the fundamental shift in how engineering construction projects are conceived and delivered. To the decisions makers, I refer them to some well-known sayings,

You can look before you leap if you want to, but ultimately you will have to leap … and remember, he who hesitates is lost.

ECI leads on European Community of Practice on AWP

On 19 March we launched the European Community of Practice on AWP. It is part of a global network of communities run in partnership with Group ASI which aim to increase the uptake of Advanced Work Packaging. Advanced Work Packaging is an approach whereby the entire project lifecycle is divided into manageable packages – the focus is on having the end in mind at the beginning of each package.

The Community aims to support and accelerate the uptake of AWP across Europe. The key principles are a safe, collaborative, technology agnostic, non-commercial environment to explore the key factors impacting the implementation of AWP. An online LinkedIn group has been established to support this https://www.linkedin.com/groups/13864098/.

We will be holding online drop ins every six weeks with the agenda set by participants. The first meeting will take place on Friday 30th April.

Click here to download the presentations.

 

Collaborative Working Mentors – Project Collaboration Toolkit, March 2021

Join in the Constructing Excellence Collaborative Working Mentors joint meeting with Engineering Construction Institute (ECI) on 19 March 2021 @ 10am – 12pm GMT to look at ECITB’s Project Collaboration Toolkit and the associated Project Collaboration Agreement that ECI is developing to support this.

John Fotherby, Kingsfield Consulting and Chair of ECI along with Tony Maplesden of ECITB will present the latest achievements and challenges in the development and implementation process of the Toolkit. This will offer an opportunity to delve into how the Engineering Construction sector is approaching collaboration as a means of delivering better outcomes and the practical tools that are being developed to support this. There will be lots of opportunities for discussion and understanding how the two communities can learn from joint approaches.

REGISTER NOW

Advanced Work Packaging – The European Perspective, March 2021

Join in the ECI & Group ASI meeting on 19 March 2021 @ 3:00 – 4:30 pm to discuss Advanced Work Packaging AWP from a European Perspective and the launch of the European AWP Centre of Excellence.

Engineering Construction Institute (ECI) is collaborating with Group ASI to deliver an insight into Advanced Work Packaging (AWP) from a European Perspective. This session led by Luigi Anselmi of Tecnimont and Stuart Block of Fluor will consider the opportunities and challenges of implementing AWP in a European context and why the industry should embrace it.

This event will see the launch of The European AWP Centre of Excellence, part of a global network of communities of practice around AWP. We will be kicking off a series of monthly online drop-ins were participants can delve deep into specific aspects of AWP and its implementation.

Advanced Work Packaging is a construction driven process that improves productivity, predictability, safer and lower costs.

Join us for a discussion on Advanced Work Packaging in the engineering construction industry!

REGISTER NOW

The UK Prime Minister Set Out “a 10-point Plan for a Green Industrial Revolution”

The plan involves £12bn of public spending over the coming years in areas from energy generation to building retrofits.

The 10 points

Offshore wind: Quadrupling production capacity to 40GW by 2030, or enough to power every home.

Hydrogen: Up to £500m has been allocated, including for trialling homes using hydrogen for heating and cooking, starting with a Hydrogen Neighbourhood in 2023, moving to a Hydrogen Village by 2025, with an aim for a Hydrogen Town – equivalent to tens of thousands of homes – before the end of the decade. Of this funding, £240m will go into new hydrogen production facilities.

Nuclear: There will be £525m to help develop large and smaller-scale nuclear plants, and research and develop new advanced modular reactors.

Electric vehicles:  The UK will end the sale of new petrol and diesel cars and vans by 2030, 10years earlier than planned. Some £1.3 billion will be spent on accelerating the roll-out of charge-points for electric vehicles. No date has been set yet for phasing out new diesel HGVs but a consultation process is planned.

Public transport, cycling and walking: “Making cycling and walking more attractive ways to travel and investing in zero-emission public transport of the future”.

Jet Zero and greener maritime: Supporting research projects for zero-emission planes and ships.

Homes and public buildings: Improving the energy efficiency of homes, schools and hospitals, with a target to install 600,000 heat pumps every year by 2028.

Carbon capture: An extra £200m of new funding to create two carbon capture clusters by the mid-2020s, with another two set to be created by 2030, with a target to remove 10 million tonnes of carbon dioxide by 2030.

Nature: Planting 30,000 hectares of trees every year.

Innovation and finance: “make the City of London the global centre of green finance”.

Prime Minister Boris Johnson said: “Although this year has taken a very different path to the one we expected, I haven’t lost sight of our ambitious plans to level up across the country. My Ten Point Plan will create, support and protect hundreds of thousands of green jobs, whilst making strides towards net zero by 2050.”

ECI Webinar Towards Net Zero – Event Report

The recent European Construction Institute Webinar on Net Zero was a great chance to discuss the very significant opportunities presented by decarbonisation of the industrial and energy sectors. 

 Jenny Young from ECITB and Prof Mercedes Maroto-Valer from IDRIC the UK Industrial Decarbonisation Research & Innovation Centre provided insight into the work their respective organisations are doing to drive forward this important agenda.  

The discussion was very timely in the context of a recently published the UK Government a 10-point plan for Green Industrial Revolution. One of its key points is to drive carbon capture with an extra £200 million of new funding and target to remove 10 million tonnes of carbon dioxide by 2030. 

The  presentations  considered how new technologies can meet the established environmental targets and bring the UK to the forefront of the global movement against climate change and global warming. 

There was much discussion around: 

  • The necessity to align business, technology, policy and regulatory requirements and environmental models 
  • The importance of the forthcoming carbon budget, which is planned to be announced in December 2020 
  • The significant potential of skills from carbon intensive industries to redeployed in the deliver of low carbon technologies at scale.

2021 will be a crucial year in exploring the role that the Engineering Construction sector can play in developing and deploying new technologies and innovative approaches at scale. As we move towards COP26 (26th UN Climate Change Conference of the Parties ), which will take place in Glasgow, UK in November 2021 there is significant opportunity for ECI and Constructing Excellence members to explore these significant opportunities. 

Download the presentations:  

ECI_Webinar_Energy Transition Skills_ECITB

ECI_Webinar_Industrial_Decarbonisation_IDRIC

Don’t Waste The Silver Lining

Every cloud has a silver lining…or so the saying goes.

Today, Engineering Construction is blanketed by some threatening storm clouds. So, is there a silver lining hidden somewhere amongst these seemingly treacherous conditions? I believe so.

For more than 25 years there has been a growing need for change to the way in which Engineering Construction projects are conceived, procured and delivered – a great deal has been written on the subject. In the same period, Engineering Construction productivity has stagnated or declined compared with other industries competing for investment – again, much has been written on the subject.

While market demand for, and the price of, oil have fluctuated over this period, both have been sufficiently stable to mask the deficiencies in Engineering Construction contracting arrangements and the corresponding wastage inherent in declining productivity.
Although there have been several productivity and performance enhancing initiatives over the period, these have not been widely adopted. The potential benefits of previous “silver linings” (such as the 2014 / 2015 oil price collapse) to change the approach to projects and improve productivity and performance were sacrificed in preference of preserving the status quo. But, with few exceptions, Engineering Construction productivity, performance and project out-turn results continued on their relentless decline.

Today, we are in a different world of:

1. Economics
Plant investment costs and delivery times are typically, respectively, too high and too long and there is considerable uncertainty regarding the forecasts of the final position on both. Conversely, supply chain margins are generally unsustainable, thereby restricting the investment necessary to upgrade competences, expertise and capability. Taken “in-the-round”, Engineering Construction is not an attractive investment prospect.

2. Oil Price
Following a reasonable recovery after falling to less than USD 20 per barrel at the global onset of COVID-19, the price of oil has regressed today to around USD 40 per barrel as demand continues to remain depressed and production is relatively high. The corresponding negative impact on Oil Majors’ share prices has been reported widely.

3. Competing Providers
What was a burgeoning renewables industry 25 years ago, especially wind and solar, has now become a major energy sector player and a serious competitor to fossil-fuels. However, with the development of new energy sources, there was not, despite the opportunity, any new thinking about the way these projects are conceived, procured and delivered – most follow the conventional system and we can observe the results.

4. Covid-19
While the pandemic will eventually be overcome, there is no certainty at the present time when this is likely to happen. The full effect on the world economy has not yet been determined but it may be expected that this has some long-lasting effects, not least for Engineering Construction globally.

So where is the “silver lining”? I suggest it resides in a combination of:

• Identifying and learning from missed opportunities for change in the past, e.g. industry has not made the most of collaborative working practices that have existed for the last 20 years or more
• Accepting that the “traditional contacting arrangements” – the race to the bottom in terms of price, risk and conditions – are no longer fit-for-purpose
• Recognising that emerging new energies (e.g. “green hydrogen” etc.), like renewables before them, provide an opportunity to conceive, procure and deliver projects completely differently and far better
• Knowing of, recognising and understanding the positive results already obtained from innovative working practices and adopting and progressively developing these, e.g. Advanced Work Packing and associated interventions
• Building on the “benefits” of COVID-19 such as remote working, effective communication, less travel etc. and being aware of and providing against the downsides
• Embracing fully, digitalisation and transparent data and making the most of artificial intelligence
• Driving standardisation in Components and Sub-Systems across common Industries, e.g. JIP33 in Oil & Gas driven by IOGP
• Recognising that, notwithstanding technological advancements, it is people who deliver projects and will be so for the foreseeable future – driving improvement in “people performance” and reinforcing underlying competence and experience is fundamental to delivering projects successfully.
• Recasting the workforce capacity in terms of quality and quantity and making Engineering Construction an industry attractive to the younger generation through latest technologies
• Removing unnecessary bureaucracy and keeping processes lean for faster and more reliable controls and reporting

For those who say “we have been here before and nothing changed, so what makes you think it’s different this time?”, I have two things to say:

1. We are confronted with a combination of factors that are unprecedented – there is no benchmark against which to measure or assess, nor any formal reference point or guide
2. There is, especially in Europe, political will, particularly to invoke action to eliminate carbon emissions, that is already and will continue to fundamentally affect Engineering Construction.

The imperative for Engineering Construction is to become an attractive investment proposition by reducing investment costs and delivery times substantially so that plants are competitive & affordable while simultaneously enabling the supply chain to achieve reasonable & sustainable margins, and improving the reliability of forecasted project out-turn results.

The key is to eliminate waste and thereby improve productivity significantly. In this context I believe there are three interdependent pillars of sustainable change that need to work in unison as illustrated below:

 

 

 

 

 

 

 

 

Case Studies indicate that Collaborative Working in conformity with the ECITB Project Collaboration Toolkit can reduce wastage and improve productivity, resulting in reduced cost and delivery times.

Reports from industry applying AWP also indicate signification reductions in wastage and improvement in productivity to produce considerable cost and schedule savings.

AWP (Advanced Work Packaging) utilises or can also encapsulate several other Innovative Working Practices such as Workface Planning (or Last Planner), 4/5/6-D Planning, Lean Construction, Factory-Thinking and Modularisation, Standardization and use of off-the-shelf components and Building Information Modelling (BIM).

There is indication that the combination of Collaborative Working and AWP has the
potential to drive down plant investment costs and delivery times significantly as well as improving safety and quality and also afford the opportunity to generate better supply chain margins. The full benefits of AWP can only be realised by adopting Collaborative Working practices.

As with Collaborative Working, the implementation of AWP and associated innovative work practices primarily require a mind-set change to the way in which work is planned, organised and executed. AWP also benefits significantly from the adoption of digitalisation and standardised data models. However, operating digitalised systems effectively also requires Collaborative Working.

Therefore, as an industry, we need common data standards that underpin our typically generic activities, in order that we can, as eco-system partners, effectively collaborate in a transparent and productive manner using a ‘common language’. In this context, AWP can drive a fully integrated solution by steering digitalised engineering through standardising the data requirements from document metadata, project schedules, model attributes, material management systems, turnover systems etc.

The Case Studies exhibited in the ECITB’s Project Collaboration Toolkit and the
projects applying AWP practice, typically operate on existing forms of contract. It is evident that the change in project execution practice brought about by these innovative interventions could be reinforced and accelerated into wider common use by a contracting arrangement specifically geared to the principles of collaborative working set out in the ECITB Project Collaboration Toolkit. In this context, the European Construction Institute intends to launch the preliminary draft of its Collaborative Working Agreement (the contract for collaborative working) for industry peer review in the coming weeks.

The need to change the way in which Engineering Construction conceives, procures and delivers projects is real and present, the tools and systems to implement that change are available and developing, and the benefits of change are evident. Engineering Construction ought not to waste the opportunity to change. However, change can only, realistically, be owner / investor driven and building cross-industry momentum and support is key to effecting this change.

So, as an industry, let’s not waste the silver lining!

John Fotherby
Chair
European Construction Institute

Advanced Work Packaging Webinar Recording

The recording from the webinar on Advanced Work Packaging held on 25 June is now available to view at GoToWebinar.

You can also download a copy of the slides that Stuart Block from Fluor used to introduce the topic. If you are interested in finding out more about Advanced Work Packaging and the work that ECI doing on it, this work is being led by Stuart Block from Fluor and Luigi Anselmi from Tecnimont.

Advanced Work Packaging – What is it?

Advanced Work Packaging (AWP) is all about improving project productivity.

As well as better productivity it also brings greater predictability, increased safety and lower project costs

  • Construction-driven process
  • Supports the path of construction
  • Align the different elements of a project for improvement
  • Provide a disciplined and rigorous process for detailed construction planning
  • Ensures work is executed in a safe, organized, sustained, and effective manner
  • Assure Construction as its customer allowing the field to receive drawings & material in correct sequence thus allow for a more efficient build, commission and start-up/handover

COAA Construction Owners Association of Alberta

Journey / Path of AWP

2005 – Construction Owners Association of Alberta (COAA) recognized it as a best practice. The purpose of the development of WorkFace Planning (WFP) was to overcome the challenges facing in executing and construction its Oil Sands projects. Those challenges are manifesting in cost overruns including in front end planning, design, procurement, organization processes, construction, etc.

2009 – Construction Industry Institute (CII), an American non-profit consortium of more than 100 leading owner, engineering, contractor and supplier firms, initiated a Research Team (RT) aiming to develop an executable model of enhanced work packaging based not only on WorkFace Planning but also on other industry work packaging practices. Following a review of industry and trade literature and in conjunction with the development of case studies, the team developed a lifecycle execution model for work packaging with an emphasis on field implementation.

2011 – CII Research project RT272 Phase 1 Released – focusing on the development of an execution model for the project life cycle with an emphasis on field implementation along with a set of industry case studies and collection of benefits evidence.

2013 – Joint CII / COAA Research project RT272 Phase 2 Released – Extending the execution model of Advanced Work Packaging with consideration of implementation challenges documented through surveys and expert interviews in North America and globally.

2019 – 1st London AWP Conference

Benefits

Potientally 10% more tool time is nearly 25% improvement in productivity. Labor is typically 40% of TIC = AWP Provides Up to 10% Reduction in TIC.

Costs

Typically a project must dedicate 1-2% of project costs to increase planning by having cross-functional engagement, training and developement and dedicated construction personnel.

Next steps

Gain further knowledge about AWP / WFP

Stuart Block from Fluor is leading on ECI’s involvement in Advanced Work Packaging.  Get in touch to find out more.

Collaboration – The Sensible Way Forward

Since the outbreak of COVID-19 and its effects on global Engineering Construction projects, I have held the view that the only sensible way for project stakeholders to address and resolve the challenges confronting them as a result of this pandemic is by collaborating together to find solutions that provide the most effective, productive and economic means that are fair and work for all concerned. In this context, there are two key areas that must be addressed;

  • Re-commencing or continuing projects. Re-baselining in terms of project organisation, completion dates, time schedules, execution plans, material & equipment deliveries and resource loading, based upon what is needed, is realistically and reliably available and becoming available. Availability of cash will be fundamental.
  • Additional costs. Realistic assessments of the additional costs involved in continuing and completing projects together with a viable apportionment of such costs based upon those stakeholders most able to bear them taking the greater amount of the burden. It is unrealistic to consider that, in the current circumstances, a single stakeholder on any project bears all the additional costs or that others will avoid bearing any.

Allowing the project challenges to escalate into disputes is unthinkable. In the UK, the Construction Leadership Council (CLC) has expressed concern “…that the construction industry will become embroiled in costly and long-running disputes over the effects of the pandemic on projects if it does not look to engage in collaborative discussions to resolve these issues…”. In this context CLC co-Chair, Andy Mitchell CBE, said: “…it is vital that we all work together to minimise potential disputes in order to secure the industry for the long-term…” – follow this link 

The CLC COVID-19 Task Force has published practical guidance on how to minimise potential disputes. These were endorsed by the UK Government on 7 May 2020 to which the CLC said “…We welcome the endorsement of our approach from the UK Government in its Guidance on responsible contractual behaviour in the performance and enhancement of contracts impacted by the Covid-19 emergency…” and “…We anticipate that all businesses will understand the unprecedented situation we find ourselves in and work collaboratively…”.

While the foregoing relates to the UK construction industry, the underlying principles of avoiding disputes and litigation by finding collaboratively driven solutions, applies equally to projects undertaken by the global Engineering Construction Industry.

Collaboration is not an easy option, but it is the one most likely to achieve satisfactory and lasting resolution of the challenges currently confronting project stakeholders. For those interested in a taking a collaborative approach to resolving commercial / contractual issues on their current projects without getting into dispute, as recommended by CLC, and are unsure how to approach collaboration, then the Engineering Construction Industry Training Board (ECITB) Project Collaboration Toolkit (PCT) which embraces, amongst others, ISO 44001 and the Engineering Construction Institute’s Active Principles, could provide some useful guidance, particularly regarding the behaviours that need to be practiced in finding solutions to the challenges on projects collaboratively – follow this link

While the PCT provides the means for the collaborative procurement and running projects in replacement of traditional methods, and was not intended as a dispute avoidance process, the principles which it embraces could well be applied to finding solutions to the challenges now confronting global Engineering Construction.

However, COVID-19 is not the only crisis currently confronting the Industry. The recent collapse of the oil price has added to the burdens created by COVID-19. Investments in new projects are likely to decline significantly unless measures are taken quickly to bring down costs, reduce schedule durations and assure delivery in line with the commitments made so that realistic business cases can be established, endorsed and implemented. The traditional procurement methods that have been in use for decades will not enable these objectives to be achieved – these methods are broken beyond repair and are ineffective for addressing the challenges confronting the Industry today.

On 6 May 2020 the Engineering Construction Institute and Constructing Excellence joint Webinar: Major Projects – Driving Long Term Value Through Collaborative Procurement, addressed the actual benefits experienced by Industry of collaborative working practices over “traditional” procurement methods – significant cost reductions, shorter delivery times and dispute avoidance. In this context there are many current initiatives that are geared to the elimination of wastage, improved efficiency and greater productivity (eg. AWP, BIM, Artificial intelligence, Digitalisation, Factory Thinking, Digital Twin etc). In order to obtain maximum benefit from these initiatives collectively or individually, collaborative working is essential.

The current crisis confronting global Engineering Construction – the combined effect of COVID-19 and the Oil Price Collapse, provides the opportunity for the Industry to fundamentally change the way it undertakes projects. That change can be started immediately by stakeholders finding collaborative solutions for the re-commencement and completion of current projects – enlightened owners are taking this approach already. The learning from this experience can then be applied to new project investments to be undertaken utilising collaborative procurement and for which there is now growing support.

We only need consider how other industries, (eg, automotive, aerospace, shipbuilding etc.) embraced radical change, driven by crises and that created transactional solutions to existential challenges. The global Engineering Construction Industry would be wise not to waste the opportunity for change that is now presented with.

John Fotherby

Chair

European Construction Institute

Download the slides from the session: