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The 4% Factor: How to Get Capital Construction Projects in On Time and Within Budget

Roel Van Doren explains why companies can achieve top quartile performance by reducing costs, simplifying and accepting change
A person’s central nervous systems account for a small percentage of their body weight. Yet, without it, we wouldn’t be able to live or function effectively. Automation is essential for industrial process manufacturing plants.
Automation accounts for approximately 4 percent of new construction project costs. However, automation is not often considered early enough in a project strategy.
According to Project Management Magazine, this could explain why 65 percent of projects exceeding $1 billion and 35 per cent of projects below $500 million are over- or significantly late.
Although not all projects should be considered failures; the gap between Top Quartile and other quartiles in project performance is astounding. According to Project Management Institute, $109 million is lost every $1 billion that companies spend on projects when there is a decrease in the recoverable budget.
Complexity, which can take many forms, is one of the most difficult challenges.
Unprecedented in size and scale are today’s new oil & gas, petrochemical, refining, and other process manufacturing facilities.
Facilities are larger and more technically complex, and are often built in remote areas with limited infrastructure.
These workers often don’t have the experience to operate technical facilities of this size.
These projects are often handled by dozens of contractors and suppliers. This makes a big difference. Although each supplier and contractor has a work scope that is unique to them, there are dependencies among suppliers that can cause frustration and disrupt schedules.
The third problem is the use of obsolete methodologies in project execution. This is combined with missed opportunities for new technologies to reduce or eliminate work.
These inefficiencies and missed value engineering opportunities can lead to significant wasted engineering hours and materials. Every project could save tens of millions, if not hundreds of millions.
What can a C-suite do but stop investing? It is not feasible for any company that wants to be competitive and grow. Top Quartile companies that invest in new infrastructure require the assurance of projects being delivered on time, on budget, and with lower cost and higher risk.
It is all about getting more value for every dollar you spend. It can take many forms. For successful projects to move forward, there are three requirements: cost elimination, complexity reduction, and the ability of accommodating change.
Elimination of redundant and unnecessary work
Automating steps in the engineering process can reduce engineering hours
Standardised technologies are used to reduce customisation, excess material and manpower.
A Top Quartile team invests $22 Million less in spare parts for every $1 billion in capital investment in a new facility than its lower-quartile counterparts.
Top Quartile’s project team follows a control system engineering and design strategy. This allows them to save 70-80 percent on hardware space and find ways to reduce their investment in expensive pipes by 30-50% in the segments surrounding the plant.
The same Top Quartile facility, once in operation, spends an astonishing $40 million annually less on maintenance than its third-quartile counterparts.
Another key factor in Top Quartile project success is reducing complexity. For example, hundreds of thousands of documents are shared among dozens of contractors and suppliers.
This information does not only contain the blueprint of the plant. It also includes complex operating requirements and technical details.

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