Project Management Training Course

Engineering Advancement
Association of JapanPROJECT MANAGEMENT TRAINING
COURSEfor INTERNATIONAL PROJECTEngineering Advancement Association of Japan (ENAA)
November 14 & 15, 2023
Yonezawa Tetsuya, PMR, PMP© ENAA 2023

Engineering Advancement Association of Japan1

Project Management Training Course

Course Objective
This PM Training Course program enable a project engineer
and/or a project related person (team member) who will be a
project manager and/or have career in international engineeringand construction fields to train more practical project
management knowledge and skills through lecture, exercise andworkshop.
 Facilitate to get project management knowledge and skills inyour daily work. (Do things right)
 To know application of project management is more efficientand effective to implement project for the success of the

project.
 Improve the performance continuously among your team andmake your work more enjoyable.
© ENAA 2023

Engineering Advancement Association of Japan2

Project Management Training Course

Course Program Overview











Opening Warm up
Chapter 1 : General - Project Management overview
Chapter 2 : Pre-Contract Activity
Chapter 3 : Contract
Chapter 4 : Planning
Chapter 5 : Project Execution
Chapter 6 : Controlling
Chapter 7 : Closing
Short Exam
Closing© ENAA 2023

Engineering Advancement Association of Japan3

Project Management Training Course

Basis of Lectures
Project Management Training Course Text by ENAA Version 2.0, 2022

“A Guidebook of Program and Project Management for EnterpriseInnovation (P2M)” owned by PMAJ (Project Management Association ofJapan)



PMBOK® Guide 6th Edition by PMI® (Project Management Institute)Skills and Knowledge for Cost Engineering 6th Edition by AACE (The
Association for the Advancement of Cost Engineering)

Recommended Practices by AACE

Knowledge accumulated at ENAA and PMAJ community of practice

Knowledge in combination between Japanese and the westerner’s
practices

Lecturer’s experience in a practicing project management in global
context© ENAA 2023

Engineering Advancement Association of Japan

4

Project Management Training Course

Chapter 1 : General© ENAA 2023

ProjectProject LifecycleProject Management



Stakeholders

Project Objectives

Project Organization

Engineering Advancement Association of Japan

5

Project Management Training Course

Chapter 1 General
Project

Definition of a Project
Project Management Institute (PMI®)

A project is a temporary endeavor undertaken to create a uniqueproduct, service, or result.
PMBOK® Guide

Project Management Association of Japan (PMAJ®)

A Project refers to a value creation undertaking based on a project
mission, which is completed in a given or agreed timeframe and underconstraints, including resources and external circumstances.
P2M

Project value refers to the benefit that a project product renders when theobjectives and requirements embodied in the project mission are fulfilled.
© ENAA 2023

Engineering Advancement Association of Japan

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Project Management Training Course

Chapter 1 General
Project

Project Execution and Daily Routine Works
Project business and the steady-state business

New Facility

New car development

New Steady-state Business

Project

Newly Developed
Value

Steady-state BusinessTime© ENAA 2023

Engineering Advancement Association of Japan

7

Project Management Training Course

Chapter 1 General
Project

A Single Basic Message on Projects and Project Management
Projects = Framework to realize changes

Project Management = Change Guiding Agent
Project Management pursues an optimal combinationof science and art on the foundation of business.
©1997 Hiroshi Tanaka© ENAA 2023

Engineering Advancement Association of Japan

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Project Management Training Course

Chapter 1 General

Mission of a Project
To Owner Organizations
Realize strategic changes with the new value
created by projects

Project

Ref.

To Contractor Organizations
Help owner organizations realize strategic changes
with excellent contracting services and innovative
solutions (Customer Satisfaction)© ENAA 2023

Engineering Advancement Association of Japan

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Project Management Training Course

Chapter 1 General
Project Lifecycle

Life-cycle of Capital Projects
Project Life Cycle
Project Development Phase(Pre-Contract Activity)
Business
Planning(Opportunity
Study)

Project
Execution Phase

Operation Phase

Feasibility
Study

Project
Definition(FEED)

Contract
Preparation(Tender/
Quotation)

Engineering
Procurement
Construction
Commissioning

Production
MaintenanceConceptual Designi.e. Design Basis, Process
DesignBasic
Design-Detailed Design-

FID

Contract

Hand-over(Final Investment Decision)© ENAA 2023

Owner-driven

Contractor-driven

Owner-driven> 2 years

1 - 4 years

30 - 50 years

Engineering Advancement Association of Japan10

Project Management Training Course

Chapter 1 General

Opportunity and Feasibility Study Phase

Project Lifecycle

Owner to identify or confirm :Goals and Objectives of the project
Preliminary Scheme of Plant/Facility
Economics
Stakeholder Participation
Risk Level
Feasibility Study
Strategy for Project Development and Execution© ENAA 2023

Engineering Advancement Association of Japan11

Project Management Training Course

Definition Phase

Chapter 1 General
Project Lifecycle

Owner/Consultant to conduct Front-End Engineering to
produce:
Product Specifications
Production Processes, Utility and Offsite Facilities
Resources
Project Milestones, Key Activities
Budget and Cash Flow Forecast
Project Master Schedule
Contracting Strategy for EPC Phase
Authorize to proceed to the Execution Phase© ENAA 2023

Engineering Advancement Association of Japan

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Project Management Training Course

Chapter 1 General

Project Execution Phase

Project Lifecycle

Contractor to be hired by Owner will conduct:
Follow-up on Project Definition Package (FEED Package)
Planning and Analytical Engineering (Flow Diagrams,
Plot Plan, etc.)
Engineering, Procurement, and Construction

Quality
Cost

Scope

Project
Management

Schedule

Stakeholder Satisfaction© ENAA 2023

Engineering Advancement Association of Japan13

Project Management Training Course

Chapter 1 GeneralCompletion Phase

Project Lifecycle

Hand-overContractor

Owner

Attain objectives

Accept the Plant

Owner and Contractor evaluate the project, anddocument its results
Project Files to be available for future project
Resources to be released© ENAA 2023

Engineering Advancement Association of Japan14

Project Management Training Course

Definition of Project Management

Chapter 1 General
Project Management

Project Management Institute (PMI®)

Project management is the application of knowledge,
skills, tools, and techniques to project activities to meetthe project requirements.
PMBOK® Guide© ENAA 2023

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Project Management Training Course

Definition of Project Management

Chapter 1 General
Project Management

Project Management Association of Japan (PMAJ®)

Project management is to apply to a project the
professional capability to deliver with due diligence, aproject product that fulfills a project mission, byorganizing a dedicated project team with a limited mission
period, effectively combining the most appropriatetechnical and managerial methods and techniques anddevising the most efficient and effective work breakdown
and execution routes.
P2M© ENAA 2023

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Project Management Training Course

Chapter 1 General

Overview of P2M® Components

Project Management

P2M ® = Program and Project Management for Enterprise Innovation

Contents【P2M Main Subjects】

Part 1
Part 2
Part 3

Overview and Features
Program Management
Project Management

Exhibit 1-2-1 P2M Knowledge Tree

【P2M Common Knowledge Platforms】

Part 4
Part 5
Part 6

International Edition

Business Management
Knowledge Management
Human Resources
Management

http://www.pmaj.or.jp/ENG/index.htm
Introduction by Facebook NIN2.P2M
https://www.facebook.com/NIN2.P2M/timeline© ENAA 2023

by Cyber Creative Institute Co. Ltd. Cyber Publishing Center
http://www.cybersoken.com/portfolio/detail/p2m/

Engineering Advancement Association of Japan17

Project Management Training Course

Chapter 1 General

PM Organizations, Standards, andQualifications in USA and Japan

Project Management

Country

USA

Japan

Name

PMI ®

PMAJ®

Standard
Guidebook

PMBOK® Guide

Qualification • PMP® (Project Management Professional)• CAPM® (Certified Associate in ProjectManagement)• PgMP® (Program Management
Professional)• PfMP® (Portfolio Management
Professional)• PMI-SP® (PMI Scheduling Professional)• PMI-RMP® (PMI Risk Management
Professional)• PMI-ACP® (PMI Agile Certified
Practitioner)• PMI-PBA® (PMI Professional in Business
Analysis)© ENAA 2023

P2M®
Guidebook 3rd Edition• PMA (Program Management
Architect) <Unadministrated>• PMR (Program Manager
Registered)• PMS (Project Management
Specialist)• PMC (Project Management
Coordinator)

Engineering Advancement Association of Japan18

Project Management Training Course

Chapter 1 General

Project Management
Project Management Success andProject Success are Two Different Stories(from U.S. and U.K researches 2004~2012)

Project Management Success =Project Success

Project Efficiency (Quality, Delivery
Time, Budget)
Managing Limited Resources – Triple
Constraint

Business
Success
Value forthe Future
Built Now

MANPOWER
MATERIALS
FUND
TOOLS
TECHNOLOGYPROJECT RESOURCESTECHNICAL PERFORMANCE
Scope & Quality© ENAA 2023

Satisfactionof Customer(Client)
Project
Objectives

Note)
The main criterion of success is the project should
be of value to stakeholders, particularly thesponsor, owner and contractors. (“Perspectives on
Projects” (2010) Routledge, P4 )Engineering Advancement Association of Japan© PMAJ

19

Project Management Training Course

Chapter 1 General
Project Management

Project Execution vs. Project Management
Feedback

Plan

ChangeManagement

Project Execution including
Technical Management(EPC Work)

Resource
Planning

Production Engineering

Schedule
Planning

Procurement

Cost
Planning

Act

Front-end Engineering

Construction

Project Support &Administrative

Scope
Definition

Status Monitoring
Trade-Off
Corrective Actions

Commissioning
Quality System
Planning
Risk Response
Planning
Project
Organization© ENAA 2023

Do
Check
DirectingMonitoring
Coordinating
Engineering Advancement Association of Japan20

Project Management Training Course

Chapter 1 General

Stakeholders in the Large
International E&C Project
Subcontractors,
Suppliers

Subcontract
P/O

EPC
Contractor

Off-taker(Oil Company,
Petrochem. Co)

Product Off-takeContract

Technology
LicenseAgreement

Project
Owner

Loan Agreement

ExportCredit Agency© ENAA 2023

Advance Payment
Agreement
Loan Agreement

Commercial
Banks

Licensors

EPC Prime
Contract

Managing
Consultant

Assignment
Agreement

Investment
Company

Stakeholders

PM & Technical AssistanceAgreement
Operation Agreement

Permits

Government
Agencies

Operation
Company
Society,Community

Engineering Advancement Association of Japan21

Project Management Training Course

Chapter 1 General

Project Objectives
Prerequisite forSound Project Execution and Management

Clear owner project objectives and priority
Business planning completed
Project definition package available
Risk assessment performed in fullKey project execution approach established© ENAA 2023

Engineering Advancement Association of Japan22

Project Management Training Course

Basis of Project Management Planning- Owner Objectives & Priority

Chapter 1 General
Project Objectives

Clear delineation of owner’s objectives
Typical objectives to be considered: Safety
 Quality (Operability)
 Cost Schedule
Objectives translated into measurable and attainable goals
Prioritization of objectives© ENAA 2023

Engineering Advancement Association of Japan23

Project Management Training Course

Chapter 1 General
Project Objectives

Sample of Owner’s Basic Project Objectives
1.
2.
3.
4.
5.
6.

Maximize construction, operations and maintenance safety
Attain a quality, reliable facility with a high service factor
Complete project on schedule
Maintain capital investments within budgeted amount
Minimize operating costs
Enhance business opportunities for local vendors andsubcontractors© ENAA 2023

Engineering Advancement Association of Japan24

Project Management Training Course

Types of Project Organization


Chapter 1 General
Project Organization

Three types of Project Organizations: Functional Organization
 Dedicated Task Force Matrix Organization (Modified Task Force)

Factors to determine the type to choose: Corporate culture and practice Size of a project Project schedule severity
 Contractual confidentiality constraint© ENAA 2023

Engineering Advancement Association of Japan25

Project Management Training Course

Chapter 1 General
Project Organization

Functional Organization
SALES

DESIGNPRODUCTION

Dedicated Task ForceERECTION

PROJECT

MANAGEMENTPROJECT- A

ENGINEERINGPROCUREMENTCONSTRUCTIONPM

PROJECT- A

PROJECT- B

PROJECT- B
PROJECT- C

PROJECT- C

PROJECT
ENGINEERINGMANAGEMENTPROJECT- A

PM

PROCUREMENT CONSTRUCTION

Matrix Organization(Modified Task Force)

PROJECT- B

PROJECT- C© ENAA 2023

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Project Management Training Course

Chapter 1 General
Project Organization

Contractor Project Organization - Home Office
Owner Project Management Team
Project Director

Permanent Departments

Project Team

Project Control
Manager

Project Quality
ManagerBusiness Manager

Project Engineering
Manager
Process Engineering
Manager
Process Engineering
Departments© ENAA 2023

Project Administration
Manager

Project Procurement
Manager

Construction PlanningManager

Procurement
Department
 Purchasing Expediting Traffic
 Materials Control

Construction Department

Project Engineers
Design Engineering Departments
 Civil/Architecture Equipment/Storage
 Machinery Rotating Equipment Piping
 Combustion
 Electrical Instrumentation
 Other Specialty

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Project Management Training Course

Chapter 1 General
Project Organization

Contractor Project Organization - Site Office
Project Manager

Home OfficeSite OfficeSite Manager
Safety & Security Group

Site Project Control Manager
 Scheduling Costs
 Resources

Site Administration& Business Group

Field EngineeringGroup Site Administration
 Subcontract Admin.
 Logistics

Field Engineering
Manager Civil/Building Instrumentation
 Piping Electrical Drafting© ENAA 2023

Construction
Superintendents
 Civil Building/Structure Equipment Erection
 piping
 Instrumentation
 Electrical Insulation
 Painting

Engineering Advancement Association of Japan

Filed Quality
Control Group QC Supervisor
 Welding Civil Instrument
 Electrical Insulation
 Painting

28

Project Management Training Course

Chapter 2 : Pre-Contract Activity
Project Lifecycle

Opportunity Study

Feasibility Study

Project Definition through Front-end Engineering Design

PDRI (Project Definition Rating Index)



Selection of Contractor© ENAA 2023

Engineering Advancement Association of Japan29

Project Management Training Course

Chapter 2 Pre-Contract Activity

Phasing of Project Life Cycle

Project Lifecycle

Project Life Cycle
Project Development Phase(Pre-Contract Activity)
Business
Planning(Opportunity
Study)

Feasibility
Study

Conceptual Designi.e. Design Basis, Process
Design© ENAA 2023

Project
Execution
Phase

Operation
Phase

Project
Definition(FEED)

Contract
Preparation(Tender/
Quotation)

Engineering
Procurement
Construction
Commissioning

Production
Maintenance

Basic Design-

Detailed Design-

Engineering Advancement Association of Japan30

Project Management Training Course

Chapter 2 Pre-Contract Activity
Opportunity Study

Opportunity Study Project Owner Driven process Potentiality of a project in a certain country (technical, economic,
commercial and financial aspects and initial conception)
Regional study Local fundamental features
 Structure of existing industries Status of infrastructuredevelopment
 List of the industries possible

to develop Potential project list
 Demand forecast andrequirements/opportunities ofinvestments to the project

Natural resource basestudy
 Features of the natural
resource
 Industries developed on
the basis of concerned
natural resource Major constraints
 Potential growth ofSpecific project study Possibility for expansion or

integration of the existingproduction line
 Merit of scale National or regional
industrial policy
 Cost of various elements

required for production

demand• Estimate of Investment Cost, annual Sales and Production Cost
• Appraisal of Investment Economy• Loan Scheme and recommended source of funds© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity

Feasibility Study

Feasibility Study Technical, economic, financial and commercial basis for making decision Profitability of the project (Examples of Analytical Methods: Payout Time,
Return on Investment, Discount Cash Flow) Conception of the project
Constitution of the feasibility study Outline and background of the project










Market and demand forecasting
Production planning and plant capacity
Raw material and other input
Site location
Technical studies
Plant organization and manpower
Execution plan
Financial and economic studies© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity
Feasibility Study

Feasibility Study
Owner’s Policy & Philosophy

Studies and Work
Technical Studies

Market Research

Optimization ofProcess Flow Scheme

Other Related
Studies

Utility Facilities
Planning
Cost
Estimating

Offsite Facilities
Planning

Economic & Financial Studies
Financing
SchemeEconomic
Evaluation

Study Deliverables
Feasibility Study Report (Business Case)© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity
Feasibility Study

Profitability Analysis (1/4)(1) Payout Time
Time(End of Year)

ProfitAfter Tax

Depreciation

Net
Cash Flow

Cumulative
Cash Flow

0

-1000

0

-1000

-1000

1

275

200

475

-525

2

200

200

400

-125

3

130

200

330

205

4

70

200

270

475

5

0

200

200

675

Cumulative
Cash Flow

205

-125
2

© ENAA 2023

Engineering Advancement Association of Japan

≒2.4

3

34

Project Management Training Course

Chapter 2 Pre-Contract Activity

Profitability Analysis (2/4)

Feasibility Study(2) Return on Investment
ROI = Average yearly profit / Original fixed investment
Average yearly profit: (275+200+130+70+0)/5 = 135
Original fixed investment : 1000
⇒ ROI : 135/1000 = 13.5%/year© ENAA 2023

Time(End of Year)

ProfitAfter Tax

Depreciation

Net
Cash Flow

Cumulative
Cash Flow

0

-1000

0

-1000

-1000

1

275

200

475

-525

2

200

200

400

-125

3

130

200

330

205

4

70

200

270

475

5

0

200

200

675

Engineering Advancement Association of Japan35

Project Management Training Course

Chapter 2 Pre-Contract Activity

Profitability Analysis (3/4)

Feasibility Study(3) Discount Cash Flow Method
 Net Present Value (NPV)
Present value of benefits - Present value of costs
 Benefit Cost Ratio (BCR)
Present value of benefits / Present value of costs
 Internal Rate of Return (IRR)
Present value of benefits = Present value of costs
DiscountRate(10%)

NPV

Year

Costs

1

20

-20

0.909

-18.2

2

20

-20

0.826

-16.5

3

1

10

9

0.751

6.8

4

2

20

18

0.683

12.3

5

2

20

18

0.621

11.2

Total

45

50

5

© ENAA 2023

Benefits

Benefit- Cost-4.4ex) NPV5 = 18 x 1/(1+0.1) 5= 18 x 1 / 1.6105= 18 X 0.621= 11.2Engineering Advancement Association of Japan36

Project Management Training Course

Chapter 2 Pre-Contract Activity

Profitability Analysis (4/4)

Feasibility Study

Present Value
Given a Future Value, find the Present Value as follows:P/F = 1 / (1 + i )nThis can also be expressed as P = F x (P/F, i, n)
P = Present Value
F = Future Value
Example 1:
F=$10,000, i=6%, and n=5years
i = Interest Rate
P= F x ( 1 / ( 1 + i )n )n = Number of Time Periods
5= $10,000 / ( 1 + 0.06 )= $10,000 / 0.74726 = $7,473

Example 2:
Year
Future Value
Present Value
Factor© ENAA 20230
$ 1,000$ 1,000
1

I = 10%1
2
3$ 1,000$ 1,000$ 1,000
$ 909
$ 826
$ 751
1/1.1
1/1.12=1.21 1/1.13=1.331

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Project Management Training Course

Chapter 2 Pre-Contract Activity

Project Definition through FEED

Project Definition

The deliverables from the FEED (Front End Engineering Design) should
comprise a full design package suitable for the definition of the facilities
Conceptual Design: Development of Design Basis: Development of Process Design

FEED: Development of Basic Design

Detailed Design: Development of Detailed Design

・ Data Collection Study・ Codes and Studies
・ Design parameter and philosophies
・ Surveys and investigates
・ Plant Design
・ Cost Estimate
・ Preliminary Project Master schedule
・ Specialist Studies© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity

Opportunity for Influence
Major
Influence

Project Definition

Low
Influence

Rapidly Decreasing
Influence

Conceptual
Analysisand R&D

Project Expenditures

Level of Influence

Influence

Expenditures
Scope
Definition

Pre-project
Planning(Front-end
Loading)

Basic
Data andScoping

Project
Authorization

Production
Engineering
andProcurement

Construction

Engineering
Complete

Project Life
Cycle
TurnoverandStart-up

Source: CII 2003 Conference proceedings© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity

Front-End Engineering Design (FEED)
Feasibility Study

Project Definition

Project Skeleton
Studies and Work

Site Survey

Design Basis and BasicEngineering Design Data

Evaluation and Selection
Of Process Licensors

Kick-off Meeting

Process Calculations and Design
Process Flow Diagram (PFD)
Equipment
Data Sheets

Instrument
Data Sheets

P&I Diagrams

Plot Plans

Others

Deliverables
Front-End Engineering Design Package© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity

Project Definition Rating Index (PDRI)

PDRI– Developed by Construction Industry Institute (CII in the U.S.A)
 Pre-project planning is an owner-driven processthat must be tied closely to business goals
 Pre-project planning is a complex process thatmust be adapted to the business needs
 Corporate goals and guidelines for both preproject planning and the project execution must
be well-defined a Risk Management Tool
– A comprehensive checklist of 70 scope definition elements(Score 70 – 1,000)– Consist of three main sections–

Predict factors impacting project risk

https://www.construction-institute.org/© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity

Project Definition Rating Index (PDRI)

PDRI

A. Manufacturing Objectives Criteria

PDRI Hierarchy

B. Business Objectives
I. Basis of Project Decision

C. Basic Data Research & Development
D. Project Scope
E. Value Engineering

PDRI

F. Site Information
G. Process / Mechanical
G1. Process Flow Sheets
G2. Heat ＆ Material Balance

II. Front End Definition

H. Equipment Scope
I. Civil, Structural, & Architectural
J. Infrastructure
K. Instrument & ElectricalIII. Execution Approach

L. Procurement Strategy
M. Deliverables
N. Project Control（The Figure is reprinted with the permission of CII）

© ENAA 2023

P. Project Execution PlanEngineering Advancement Association of Japan42

Project Management Training Course

Chapter 2 Pre-Contract Activity

Project Definition Rating Index (PDRI)PDRI Elements should be rated from 0 to 5
1 (complete definition) to 5 (incomplete definition)
Definition Level

CATEGORY
Element

Score

0

1

2

3

4

5

H1.Equipment Status

0

1

4

8

12

16

H2.Equipment Location Drawings

0

1

2

5

7

10

H3.Equipment Utility Requirements

0

1

2

3

5

7

H. Equipment Scope (Maximum Score＝33)

CATEGORY H-TOTAL（The Figure is reprinted with the permission of CII）
Definition Levels
0 = Not Applicable
1 = Complete Definition© ENAA 2023

2 = Minor Deficiencies
3 = Some Deficiencies

4 = Major Deficiencies
5 = Incomplete or Poor Definition

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Project Management Training Course

Chapter 2 Pre-Contract Activity

Project Definition Rating Index (PDRI)

PDRI- correlation between low (good) PDRI scores and high projectsuccess (tested on 32 Project)- Effective early project planning improves project performance interms of both cost and schedule
Performance
Cost
Schedule
ChangeOrdersPDRI Score
＜200

＞200

-5.1%
+0.8%
+2.6%
(N=18)+18.0%+14.0%+7.7%(N=14)

Difference+23.1%+13.2%+5.0%（The Figure is reprinted with the permission of CII）

© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity
Selection of Contractor

Project Delivery Methods
Business
Planning

Feasibility Project
Study
Definition

EPC

Dotted Lines by E&C Contractor

Once-Through (I)Once-Through (II)Roll-over
EPC Turnkey
Phase-to-PhaseE

PC

Or E+C, E only, or E+P with C by Erection Contractor© ENAA 2023

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Project Management Training Course

Chapter 2 Pre-Contract Activity
Selection of Contractor

Selection of Contractor

Once a project is defined by FEED, the Owner select a Contractor through Bidding or
negotiation basis, as the following steps.
PQ (Pre-Qualification)• Project delivery record• Technical capability• Financial status• Key-personnel resume• Company organizationand project organization• Procurement capability• Work load

ProposalCommercial Proposal• Scope of work
• Offered price• Terms of payment• Delivery date
• Guarantee, etc.

Technical Proposal• Project execution plan
• Solutions of technicalissues• Project schedule• Project organization• Mobilization plan
• Project management
procedures• Technical specification

Bid• One Envelop Bid• Two Envelop Bid• Two Stage Bid© ENAA 2023

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Project Management Training Course

Chapter 3 : ContractGeneral

EPC Contract by Pricing Mechanism

EPC Contract by Project Scope

EPC Contract by Formation



Major Contract Terms and Conditions© ENAA 2023

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Project Management Training Course

What is a Contract?

Chapter 3 Contract
GeneralWhen a contract is established?
Offer and Acceptance ⇒ Contract Offer ： The first representation of intention for an agreement
between both parties
 Acceptance ：The following representation of intention in
response to “offer” to establish an agreement
It is necessary to accept “offer” without condition.

 A promise protected by law and regulation(= nation ) If all concerned parties agreed, any contract should be effective.
 If a contract should violate public order and standards of decency, acontract should be invalid.

© ENAA 2023

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Project Management Training Course

Chapter 3 Contract

Typical EPC Project Scheme

GeneralOwner
EPC Agreement

Consortium or JV Agreement

Contractor

Consortium or
JV Partner

Subcontract Agreement
Purchase Order

Subcontractor© ENAA 2023

VendorEngineering Advancement Association of Japan

License Agreement

Contractor’s
Licensor

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Types of EPC Contract
Relation to Owner

Chapter 3 Contract
General Prime Contract (Main Contract) Subcontract

Contract Price Lump-Sum Contract
 Cost Plus Contract (Reimbursable Contract)
 Unit Price Contract
 Time and Material Contract
 EPC Turnkey Contract

Scope of Work Engineering Contract
 Purchase Order( Contract ) FOB Supply & Erection Supervision Contract
Resource of Income Tax

 Onshore Contract Offshore Contract© ENAA 2023

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Chapter 3 Contract

Variations of Contract Types
Fixed Price Contract(= Lump-Sum)

Pricing Mechanism

 Firm-Fixed Price Contract
 Fixed-Price
Adjustment

Contractwith

EconomicPrice Fixed-Price Incentive Contract
 Fixed-Price Contract with Prospective Price Redetermination
 Fixed-Ceiling Price Contract with Retroactive
Price Re-determination
 Firm-Fixed-Price, Level-of-Effort Term Contract
Cost-Reimbursement
Contract(= Cost Reimbursable,
Reimbursable Cost,
Cost plus Fee, or
Cost plus)© ENAA 2023

 Cost Contract
 Cost-Sharing Contract
 Cost-Plus-Incentive-Fee Contract
 Cost-Plus-Award-Fee Contract
 Cost-Plus-Fixed-Fee Contract
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Chapter 3 Contract
Pricing Mechanism

Lump-Sum Contract and Cost-plus Contract
Fixed Price/Lump-Sum

Cost-Plus Need for clear definition of scopeof works
 Effective competition inContractor’s market
 Several months for bidding andappraisal
 Minimum scope changes
 Use value engineering earlier inbudgeting process Owner tracks actual costs against
estimates
 Minimal reporting to Owner
 Contract completion date is
mandatory Need for relationship of trust
between Owner and Contractor
 Close quality supervision anddirection by Owner Detail definition of scope ofworks, payment terms and allinclusive rates
 Use of alternates and/or
substitutions to meet budget Owner tracks quality andschedule
 Need for more detailed reportingto Owner Time commitment subject toContractor’s professional duties© ENAA 2023

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Chapter 3 Contract

Risk Balance on Various Contracts
Contract Type
Fixed Price

Pricing Mechanism

Share of Risk

Fixed price without escalation
Contractor’s
risk

Fixed price with escalation
Cost
Reimbursable

Cost plus fixed fee with guaranteedmaximum price
Cost plus fixed fee with incentive

High

Low

Low

Cost plus fixed fee with profit sharingHigh

Cost plus fixed fee
Cost plus sliding fee (percentage)© ENAA 2023

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Owner’srisk

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Chapter 3 Contract

Prime Contract Format Variations
In terms of Compensation
Lump Sum (LS)
•
•
•
•
•

Well defined scope
Fixed price
Risk on contractor yet
incentive to increase fee
Project execution strategy
decided primarily by contractor
Natural incentive for shorter
project schedule
Scope less defined
Cost plus fee
Low risk to contractor
Key decision-making by owner
Owner needs seasoned PM
team
Applied to engineering only or
construction only contracts© ENAA 2023••

EPC one-throughStarts from either FEED or
detailed design

EP or EP+CM•

C by local contractor

E only••P by client, C by local
contractor
Total integration hard

P (partial) + C•

Unit Price•

In terms of Scope
Turnkey

Reimbursable Cost (RC)
•
•
•
•
•

Scope of WorkLess attractive to international
E&C contractor

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Chapter 3 Contract

Joint Venture (JV) and Consortium© ENAA 2023

Owner

Owner

Joint Venture(A) (B) (C)Consortium(A) (B) (C)Joint Venture( JV )Consortium

Engineering Advancement Association of Japan

Formation

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Chapter 3 Contract

Work Demarcation of ＪＶ Operation

Formation

Unit
Process

Utility

OffsiteScope

Engineering

Procurement

A＋B＋C

Construction© ENAA 2023

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Chapter 3 Contract
Formation

Scope

Work Demarcation of Consortium Operation
Scope-wise

Unit-wise

Mixed Type

Process
OffsiteUtility

Process
OffsiteUtility

Process
OffsiteUtilityEngineering

A

A

A

A

B

C

A

B

A

Procurement

B

B

B

A

B

C

B

B

C

Construction

C

C

C

A

B

C

C

C

C

© ENAA 2023

Schedule delay and/or
fault of Member-A
result in additional costof other members.

Less relationship ofproject works
among members

It is difficult to define
each member’s
responsibility.
( share of additional
cost)

Less possibility oftrouble about eachmember’s
responsibility

Engineering Advancement Association of Japan

It is very difficult
to define eachpartner’s internal
responsibility.

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Project Management Training Course

Chapter 3 Contract
Terms and Conditions

Major Terms and Conditions of EPC Contract
Contract Documents

Major Terminologies



Agreement（1） Schedule GuaranteeSpecial Terms and Conditions（2） Performance Guarantee

General Terms and Conditions（3） Mechanical GuaranteePrice Breakdown and Unit Rates（4） Site Conditions



Payment Terms and Conditions（5） Verification

Time Schedule（6） Force Majeure

Scope of Work

（7） Consequential LossTechnical Documents（8） Delay in Payment

Attachments, if any (e.g.:
minutes of meeting, e-mail, etc.)（9） Losses and Damages to Plant© ENAA 2023

（10）Law Change

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Chapter 4 : Planning








© ENAA 2023

Project Planning
Scope Planning
Schedule Planning
Cost Planning
Risk Response Planning
Communication Management
PMIS (Project Management Information System)

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Chapter 4 Planning

Objectives of Project Planning

Project Planning Project Planning is the most basic function of project
management, determining a course of action.
 One of the key objectives of project planning is to completely
define all work required so that each participatingorganization will be able to identify the work required of them.
 This is necessity in a project environment because:• If the task is well understood prior to its performance, much of thework can be preplanned.
• If the task is not understood, then during the actual task execution
the performer will receive some surprises, which in turn, leads tochanges in resource allocations, schedules and priorities.

© ENAA 2023

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Objectives of Project Planning

Chapter 4 Planning
Project Planning

The key reasons for performing project planning are to: Assure good communication among members of the project organization.
 Define all work required so that each organization will know the work required.
 Eliminate or reduce uncertainty/risk.
 Improve efficiency of performing tasks.
 Gain a better understanding of the project objectives.
 Provide a basis for monitoring and controlling the work.
 Provide a basis for performance measurement.
 Make available the level of documentation and information needed tosuccessfully control the project.
 Establish responsibilities and lines of authority.
 Define the work interface between the project organization and the functionalorganization.
© ENAA 2023

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Chapter 4 Planning

Steps of Project execution Planning
1
ReviewPre-contract
Documents
2
Establish
Communication
Channel with
ClientProject Planning3

10

Establish
Project
Organization

Establish Project
Numbering System

11

Develop Project
Coordination Procedure

12

Develop Project Control
Procedure

13

Develop Engineering
Execution Plan

14

Develop Procurement
Execution Plan

15

Develop Construction
Execution Plan

4

6

Hold Kick-off
Meeting with
Owner

Establish
Project
Execution
Strategy

5

7

Establish
Project WBS

Establish
Project
Cost Budget

9
Hold Project
Kick-off
Meeting

8
Develop
Project
Schedules

16
Develop Project IT Plan
17

Note: ①～⑰ indicate Step Numbers which are
explained in the following slides.

© ENAA 2023

Engineering Advancement Association of Japan

Develop QA/QC Plan

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

1st Step : Review Pre-Contract Documents
To ensure continuity and a smooth project commencement, the contractor
will have to attempt to involve the nominated PM (Project Manager) andthe key members of the proposed project team in the proposal activities
and pre-contract discussions• The PM carefully checks through all of the proposal documentation and manage
a complete file of all the proposal documents, letters, e-mails, telephones, andmeeting minutes.
• The PM thus has had a complete record of what was requested, what wasoffered, and what was accepted in the contract award.
• Following this, the PM will hold a meeting with the sales manager to review the
proposal documents and discuss any additional points mentioned during themeeting with client.
• The PM will particularly need to be informed of any client concerns, preferences
or priorities.
© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

2nd Step : Establish Communication Channel with Client

All future communications are channeled through the PM (Project Manager)so that the PM is able to maintain oversight.

•The PM should establish with the client that the PM is the official
communication channel between the contractor and the client.
•The PM should recommend to the client that a similar arrangement befollowed in the client’s organization.
•A Client PM should be appointed through whom all major communication
will be channeled.

© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

3rd Step : Establish Project Organization
Once a project has been awarded, the project management function takes
the lead role in the execution of the project, liaising directly with the client.

The project team will vary to suit the needs of a specific project, but in general, thefirst members assigned to the project for the project initiation are:
• Project Manager• Project Engineering Manager• Project Procurement Manager• Project Construction Manager• Project Control Manager• Lead Project Engineer• Project Schedule Controller• Project Cost Controller
These key members will participate and assist in the development of the detailed
project execution plan.
© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

4th Step : Hold Kick-off Meeting with Client
As soon as after contract award, the PM should have to hold a kick-off
meeting with client and go through a checklist to make sure that there istotal agreement between the contractor and the client with regard to theproject requirements

Normally, the meeting agenda should cover the following:• Scope of work and services• Project organization and staffing• Basic engineering design data
• Overall project schedule• Administrative procedure(documents approvals, reports, documents transmitting, etc.)© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

5th Step : Establish Project WBS
Project WBS (Work Breakdown Structure) makes it possible to organize
and control a project in a systematic manner using the WBS codes to
identify and reference technical, planning, reporting, accounting, andadministrative documents produced throughout engineering, procurement,
and construction.

The basic areas to which project WBS are applied are:
• Project cost breakdown• Schedule activities• Numbering of technical documents,
material requisitions, purchaseorders, etc.
• Estimating of equipment, materials
and services© ENAA 2023

• Person-hour recording on timesheets
in Home Office and in construction
sites• Recording project scope changes• Project accounting and invoicing• Progress reporting• Project Document Control

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

6th Step : Establish Project Execution Strategy
The PM (Project Manager) should prepare Project execution Strategy,
defining the project objectives, priorities, and philosophies.

 The PM is required to take the time to assess the project needs at an earlystage and present the intended strategy for execution
 The project strategy will normally include the followings:
 Scope of work and services, split of work with others Basis of contract (liabilities, guaranties)
 Regulations and other governmental restrictions
 Specific project needs and highlights
 Project design philosophies
 Project schedule criticalities
 Project cost constraints
 Project risks and uncertainty© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

7th Step : Develop Project Cost Budget
The defined estimate provides the firm basis for cost control for theongoing project execution.

• When the process design is approved, the project cost controller prepares thefirst control estimate.
• This estimate provides a firm budget for equipment and home office costs withfactored estimates for bulk materials, construction labor and field expenses.
• Each estimate on completion should be formally reviewed, a contingency,
sensitivity and risk analysis performed and an appropriate contingency included
as an integral part of the estimate.
• Items to be considered are escalation, import duties, taxes, freight, insurance,changes in foreign currency exchange rates.
© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

8th Step : Develop Project Schedules
A preliminary project master schedule should be issued to:•Establish desired milestones and target dates•Perform preliminary planning and budgeting•Identify and establish schedule dates for critical project activities•Identify critical equipment and material items• The PM should review the preliminary project master schedule to ensure that any
milestones or time delays, such as funding approvals, regulatory approvals, site
access limitations, manpower availability problems, weather problems have taken
into account.
• Manpower loading curves should also be prepared to check that the plannedschedule does not create unrealistic manpower peaks.
• To ensure that the project proceeds without delays, a front-end schedule should
be issued along with the project master schedule.
© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

9th Step : Hold Project Kick-off Meeting
within Contractor’s Organization
When the project scope has been properly defined, the PM will call a kickoff meeting.

• All persons concerned will attend the meeting, including the corporate
management, the sales manager, the department managers, and key staff
selected for the project team.
• The PM will review the project plan, re-capitulate the project objectives,priorities, and philosophies, and establishes the team spirit necessary for the
successful execution of the project.

© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

10th Step : Establish Project Numbering System
The project numbering system/procedure is prepared by the projectcontroller as early as possible in the initiation phase of the project.

The following numbering should be defined:• Engineering documents numbering• Procurement documents numbering• Materials numbering• Schedule activity code
• Cost control code
• Person-hour control code
Each numbering system should be referred to in the project WBS code.
© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

11th Step : Develop Project Coordination Procedure
The project coordination procedure is prepared by the project
administration manager as early as possible in the project and submitted
to and approved by the client.

The following typical subject are covered:• Project titles and job codes• Contract condition• Scope of work
• Duties of clients• Correspondence, contact persons and addresses• Approval work flow
• Engineering, Procurement, Construction, Commissioning and Start-up• Accounting• Project controls, change handling and reports• Project closeout© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

12th Step : Develop Project Control Procedure
The project control procedure is prepared by the project controller tofacilitate smooth control of the project execution and it should besubmitted to and approved by the client.

The following procedures should be prepared:• Project progress measurement procedure• Schedule control procedure• Cost control procedure• Change control procedure• Project status reporting procedure• Documents control procedure• Materials control procedure• Data communication network procedure© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

13th Step : Develop Engineering Execution Plan
The project engineering manager should prepare the engineering execution
plan.

The following items should be covered in the plan.
• Engineering work scope• Design basis for engineering• Maintainability, reliability, and flexibility needs• Material selection criteria• Engineering economics and design philosophy• Applicable codes and standards• Equipment layout and plan arrangement• Use of 3D models• HAZOP studies© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

14th Step : Develop Procurement Execution Plan
The first task of the project procurement manager is to prepare theprocurement execution plan amplifying the procurement aspects of the
project plan.

The procurement execution plan establishes the procurement philosophy covering:• Identify critical items of equipment and materials• List those items which will be provided “sole source” from a specified
supplier• Establish quality and cost philosophies• The number of competitive bids required• Whether or not the policy is to purchase locally, nationally or worldwide© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

15th Step : Develop Construction Execution Plan
The construction manager should prepare the construction execution plan
during the project initiation phase.
The following points should be included in the plan.
• Construction site and local area survey• Site preparation, site access and weather restrictions• Temporary facilities• Heavy duty rigging study• Construction equipment requirements• Construction priorities and path of construction• Construction methods and procedures• Material receiving requirements• Site fabrication shops vs. field fabrication• Construction organization and staffing• Field safety procedure• Construction subcontract arrangement• Local codes and regulations© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

16th Step : Develop Project IT Plan
Project management systems, engineering tools and computer networking
shall be set as early as possible in the initiation phase of the project.
Since those are the platform of project execution, Owner’s and the Project
Partners’ acceptance prior to set must be required.
•Engineering Tools•Document Control System•Procurement Management System•Construction Management System•Communication System•Computer Networking© ENAA 2023

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Chapter 4 Planning

Steps of Project Execution Planning

Project Planning

17th Step : Develop QA/QC Plan
QA/QC is one of the critical factor in executing the project, in view of the
responsibility to various stakeholders, including governmental organizations
and general public.

The steps toward completing the QA/QC Plan are as follows.
• Nominate the Project Quality Manager, who often takes the role of QA
Manager as well.
• Finalize Quality System with consideration of the partners in case of Joint
Venture operation.
• Nominate QC Manager.
• QC manager will develop basic QC Plan in line with the approved project QA
Plan and the contractual requirements, as well as from thetechnical/executional aspects.

© ENAA 2023

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Chapter 4 Planning
Scope Planning

Scope Planning• Scope planning involves to define the project and product scope to satisfy
Owner’s requirements stipulated in the Contract.
• Scope planning also involves to develop the description of the project
scope, major deliverables, assumptions and constraints.
• The purpose of scope planning is to create WBS (Work Breakdown
Structure) which subdivide project deliverables and project work into
smaller, more manageable components.
• WBS provides a structured vision of what has to be delivered.
Sample WBS for EPC Project

Project© ENAA 2023

Engineering

Process
・・・

Process Flow Diagrams
・・・

Procurement

Mechanical・・・

Compressors
・・・Construction

Civil
・・
・

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Work Breakdown Structure (WBS)

Chapter 4 Planning
Scope PlanningProject Work Breakdown Structure is more than just element of the
project planning, it is the heart of the project planning effort.



WBS provides the framework for development and maintenance of
cost/schedule planning, budgeting, data collection, and performance
evaluation.



WBS is a technique for breaking down a total project into its component
level by level into subprojects and finally into tasks.

As the level become lower, the scope, complexity, and cost of each
subproject become smaller, until tasks which are completely capable ofaccomplishment are reached.



These smallest tasks, called Work Packages, must be identified as
manageable units which can be planned, budgeted, scheduled, andcontrolled.



The WBS defines the overall structure of how the project resources willbe estimated, budgeted and expended.

© ENAA 2023

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Chapter 4 Planning
Scope Planning

What is WBS?

 In order to achieve the goals of the project, WBS represents all work to
be performed systematically organized hierarchically based on thedeliverables or the phase of the project.
 WBS is not only of scope management, but also basic data for time andcost management, It will be more detailed become lower level.
Level 1
37.0
ＸＸＸ

Level 237.1 ＸＸＸ

37.2 ＸＸＸ

Tree Type© ENAA 2023

Level 3

Level 437.1.1
ＸＸＸ

37.1.1.1 ＸＸＸ

37.1.2
ＸＸＸ

37.1.2.1 ＸＸＸ

37.2.1
ＸＸＸ

37.2.1.1 ＸＸＸ

37.2.2
ＸＸＸ

37.2.2.1 ＸＸＸ

37.1.1.2 ＸＸＸ

37.1.2.2 ＸＸＸ

37.2.1.2 ＸＸＸ

37.2.2.2 ＸＸＸ

Indent TypeEngineering Advancement Association of Japan82

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Chapter 4 Planning
Scope Planning

Creating WBS

WBS

45.0

For each element ofWBS, put identification
number as WBS Code
(Account Code)

45.4

45.4.145.4.3The lowest level of WBS iscalled Work Package(WP) .
WP is further decomposed
Tasks

Project schedule is createdfrom WBS and its tasks(activities)

45.4.3.3

Work Package (WP)The upper element of work package
will be set as control points for
Earned Value Management. This
point is called as Control Account© ENAA 2023

Schedule Baseline

Task

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Chapter 4 Planning
Scope Planning

Sample WBS (1/3)© ENAA 2023

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Chapter 4 Planning
Scope Planning

Sample WBS (2/3)© ENAA 2023

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Chapter 4 Planning
Scope Planning

Sample WBS (3/3)© ENAA 2023

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Chapter 4 Planning

Matrix-Form WBS

Scope Planning Functional WBS : What is to bedone ?
 Area WBS : Where is the work to
be done?

© ENAA 2023

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Chapter 4 Planning

Project Schedule Planning

Schedule Planning

Objectives
Establish and maintain a Project Master Schedule highlighting the key
project milestones and schedule parameters necessary to attain theoverall project schedule objective.

Ensure that the Project Master Schedule and other schedules are
effectively communicated throughout Contractor’s organization in atimely fashion.



Identify and predict adverse schedule situations as far in advance of
their occurrence as possible, to allow corrective actions to be taken.

Provide a basis for sound project management decisions that will enable
timely execution of the project.



Maintain the necessary communications with the cost control function
to ensure that the most cost effective schedules and corrective actions
are provided to project management.

© ENAA 2023

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Project Schedule Planning

Chapter 4 Planning
Schedule Planning

Basic Philosophy

Schedule planning is developed in steps that are in parallelwith the development of the project scope definition.



During the project-planning phase, lines of communication
are opened between the key personnel in the engineering,procurement and construction areas throughout theContractor’s organization.

All available project data will be utilized to develop
schedules.

© ENAA 2023

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Chapter 4 Planning

Schedule Planning
Sequence of Schedule Planning- Overall Planning  The objectives is to establish an overall time schedule which
establishes the project completion milestones and theintermediate milestones.
 Schedule documents to be developed in this phase.
 Project Master Schedule (PMS) Front End Schedule (FES) Engineering Summary Schedule (ESS) Path of Construction© ENAA 2023

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Chapter 4 Planning

Schedule Planning
Sequence of Schedule Planning- Detailed Planning  The objectives is to develop a detailed work plan forcontrolling and tracking the progress.
 Matching the release of drawing and delivery of materials to
the required or desired path of construction
 Schedule documents to be developed in this phase.
 Project Control Schedule (PCS) Selective Control Schedule Construction Required Date (CRD) Index Detailed Work Schedule (DWS)© ENAA 2023

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Chapter 4 Planning
Schedule Planning

Preparation Flow of Project Master Schedule
Step 1 : Collection of Information
Step 2 Determine Controlling Factors
Study Contract
List Project Key
Requirements
Milestones

List Activity
Breakdown

Step 3 Schedule Preparation and Analysis
Schedule
Construction
ProgramSchedule
Procurement
ProgramAnalyze Engineering andConstruction Manpower

Schedule Engineering to
Meet Procurement andConstruction
Analyze Required
Engineering Schedule andAdjust if Necessary

Step 4 Review and Issue
Operations
Management Review© ENAA 2023

Project Management
ReviewEngineering Advancement Association of Japan

Finalize andIssue the PMS
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Chapter 4 Planning

Flow of Schedule Planning Operation
Overall Planning
Proposed
Project
Schedule(PPS)

Detailed Planning

Schedule Planning

Monitoring, Reporting & Control
Narrative
StatusReportPath ofConstruction
Project
MasterSchedule(PMS)

Project
Control
Schedule(PCS)

Front End
Schedule(FES)

Detailed
Work
Schedule
Selective
Control
Schedule

Schedule
StatusMonitoring

Monthly
Progress
ReportingStatus
Review
MeetingEngineering
Summary
Schedule(ESS)
Execution Work(Engineering / Procurement / Construction)© ENAA 2023

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Chapter 4 Planning
Schedule Planning

Sequence of Schedule Planning- Development of Project Progress Measurement Baseline The Objectives of project progress measurement are as follows• To provide a reliable estimate of the progress for each project task to
be able to relate actual progress to planned progress• To provide a basis for calculating earned person-hours to be used inperformance analysis.
Work Sequence for Setting the Measurement Baseline
Engineering

Procurement

Construction

Define measurement
documents

Define measurement equipment
and materials

Define measurement workand units of measurement

Establish weighted values
for each set of documents

Establish weighted values foreach category

Establish weighted values

Establish percent completioncalculation basis

Determine individual materials
procurement schedule

Distribute estimatedquantities

Develop progress baseline

Develop progress baseline© ENAA 2023

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Chapter 4 Planning
Schedule Planning

Preparation Guideline of Network Schedule Gantt Chart (Bar Chart)

 Bar charts primarily control the timing of activities.
 It shows the activities that make up a project and their scheduledstart and finish dates.
 It does not show the interrelationships and/or interdependencies
between the activities that actually control the overall project
duration.

 CPM (Critical Path Method) The CPM was developed from Bar Charts, which are time-oriented.
 Linking the activities on a Bar Chart together in the order that theymust be performed.
 The CPM identifies the critical path through the network and predicts
the project duration.
 The CPM is widely used in the process industries© ENAA 2023

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Chapter 4 Planning
Schedule Planning

Preparation Guideline of Network Schedule

Start

A

C

B

FinishD

E© ENAA 2023

F

G

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Chapter 4 Planning
Schedule Planning

Basis of Schedule Calculation
ForwardCalculations

ES

Activity Code

Early Finish =Early Start + Period

Early Start =Early Finish ofPredecessor Activity

8

6

1.1.1

Start

1.1.2

5

0

3

0

1

5

6

8

Float =
Early Finish – Late Finish(Total) float: amount of time an activity can bedelayed without affecting the schedule ofthe project
Backward Calculations© ENAA 2023

13

9Duration

Float

LS

LF

2.1

5

1

EF

5
12

Legend

3
16
16

9

17
1.2

0

9

16

Late Finish =Late Start of Successor
ActivityEngineering Advancement Association of Japan

Finish

4

0

17

20

2.2
8

20

Total Project
PeriodLate Start =Late Finish Duration

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Functions of Project Schedule
CPM, Critical Path and Float

Chapter 4 Planning
Schedule Planning

CPM

A network analysis technique used to predict project duration by
analyzing which sequence of activities (path) has the least amount ofscheduling flexibility (float)

CriticalPath• A series of activities that determines the duration of the project.
• Usually defined as those activities with float less than or equal to a
specified value, often zero.
• Longest path through the project

Float© ENAA 2023

• The total amount of time that a schedule activity may be delayed
from its early start date without delaying the project finish date, or
violating a schedule constraint.
• Calculated using the critical path method technique and determining
the difference between the early finish dates and late finish dates.

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Chapter 4 Planning
Schedule Planning

Preparation Flow of Network Schedule
Step 1 : Collection of Information

Step 2 Determine Controlling Factors
Determine Parameters
Determine Control
Review Path offrom the PMS
BlocksConstruction
List Activity
Breakdown
Step 3 Network Development and Analysis
Develop Network
Logic

Determine Activity
Duration

Adjust Network Logic if Necessary

Time analysis
Resource Analysis

Step 4 Review and Issue
Operations
Management Review© ENAA 2023

Project Management
ReviewEngineering Advancement Association of Japan

Finalize and
Issue
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Cost Planning

Chapter 4 Planning
Cost Planning Cost Planning It provides the following.
 Cost Estimating
 Cost Budgeting Guidance and Direction for :© ENAA 2023•

Actual Cost Monitoring•

Cost Controlling

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Chapter 4 Planning

Cost/Costing and Price/Pricing
 CostCost Planning Price

Cost can be defined as the amountmeasured in money, cash expended or
liability incurred, in consideration of
goods and/or services received.

 Costing The amount of money asked or given for a
product (e.g., exchange value).
 The chief function of price is rationing theexisting supply among prospective buyers.

 Pricing

Cost estimating activity thattranslates quantified scope
information into expressions of thecost and resources required.

and other interests (e.g., profit, marketing,etc.) in addition to inherent costs.

Cost
Cost

 The price may be greater or less than thecost depending on the business or otherobjectives.

Quantity
Quantity

Unit
Unit Cost
Cost

 In estimating practice, after costing an itemor activity, the determination of the amountof money asked in exchange for the item,
activity, or project.
 Pricing determination considers business

Productivity
Productivity

Three Independent Elements© ENAA 2023

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Chapter 4 Planning

Cost Element

Cost Planning

Cost Element is a classification of expenditures according to thenature of expense such as salaries, supplies and services, etc.

Cost Structure
Direct Cost

Cost of installed equipment, material and labor directly
involved in the physical construction of the permanent
facility.

In-direct Cost

All costs which do not become a final part of theinstallation, but which are required for the orderly
completion of the installation.
e.g. field administration, direct supervision, capital tools,
startup costs, contractor’s fee, insurance, taxes

Other Cost
© ENAA 2023

Not categorized in both direct and in-direct costs
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Chapter 4 Planning

What is Cost Estimate?

Cost Planning

A Cost Estimate is a forecast of the cost of a project undera given set of conditions.
A prediction of quantities, cost , and/or price of resources
required by the scope of an asset investment option, activity,or project.

As a prediction, an estimate must address risks anduncertainties.
Costs estimates are determined using experience andcalculating and forecasting the future cost of resources,
methods, and management within a scheduled time frame.

© ENAA 2023

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Uses of Cost Estimate1.

Establishing the project budget

Contractor’s Bidding

4.

Determining the economic feasibility of a project.
Evaluating between project alternatives

Owner’s Budgeting3.

Cost Planning

Feasibility Study

2.

Chapter 4 Planning

Preparing bid/tender price

Project ControlProviding a basis for project cost and schedule control
Change Order Estimate
Estimating the final project cost (Check Estimate)© ENAA 2023

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Chapter 4 Planning
Cost Planning

Cost Estimate Summary (Indicative)
MAJOR ELEMENTPRIMARY ELEMENTAMOUT (Million$)

Direct Costs
Material
Labor
Specialty Subcontracts

60
35
5
100

Engineering/Management
Field Labor Overheads
Fee
Miscellaneous Indirect Costs

15
15
5
5
40

Indirect Costs

Escalation

10

Total Prime
Contract Cost (TPC)

150

Consultant Charges

5

Owner's Costs

10

Contingency

20

Total Erected Cost185

© ENAA 2023

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Chapter 4 Planning

Cost Estimating Workflow

Cost Planning

Resource
Estimating
SystemResource
Estimating

DesignBulk Materials
BM/BQ
Take-off

Cost
Estimating

DesignSystems

Quantity
Estimating
SystemEstimating
Systems

Equipment
List

Estimating
Modules/Factors/
CurvesCost
Summarization

Cost
Evaluation

Pricingfor Bid

Risk
Evaluation
Database

Equipment Cost
Database© ENAA 2023

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Chapter 4 Planning

Estimate Accuracy and Estimate Class

Cost Planning

Cost Estimate Accuracy

Accuracy =Final Cost
Estimated Cost

-1

X 100 (%)

Factors affecting Estimate Accuracy
Reliability, or degree of perfection, of estimating methods used
Reliability of data built-in in estimating methods
Firmness degree of source information and data

Levels of cost estimating experience at project executingorganizations© ENAA 2023

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Cost Estimate Classification System

Chapter 4 Planning
Cost Planning

AACEI Recommended Practice No. 18R-97
Cost Estimate Classification System – as applied in Engineering, Procurement,
and Construction for the Process Industries© ENAA 2023

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Chapter 4 Planning
Cost Planning

AACEI Recommended Practice No. 18R-97© ENAA 2023

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Chapter 4 Planning
Cost Planning

AACEI Recommended Practice No. 18R-97© ENAA 2023

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AACEI Recommended Practice No. 18R-97

Chapter 4 Planning
Cost Planning

S: Started
P: Preliminary
C: Completed© ENAA 2023

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Chapter 4 Planning

Cost Estimating Methodologies

Cost Planning

Cost Estimating Methodologies

Conceptual

Deterministic (Detailed)
End-Product Units Method
Physical Dimensions Method
Capacity Factored Method
Ratio or Factor Method
Parametric Method© ENAA 2023

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Chapter 4 Planning

End-Product Units Method

Cost Planning

Plant Cost = @ x Cap.
@ : Unit Cost
Cap. : Plant Capacity
This method is used when the estimator has enoughhistorical data available from similar projects.
Example150 MW power plant construction cost is calculated
as follows, provided the unit cost is 600 USD/kW.
 600 (USD/kW) x 150,000 (kW) = 90 MM USD© ENAA 2023

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Chapter 4 Planning

Physical Dimensions Method

Cost Planning

Cost = @ x PD
@ : Unit Cost
PD : Physical Dimension
This method uses the physical dimensions (length, area,
volume, etc.) of the item being estimated as the driving
factor.
(Similar to the end-products units method)
Example3,600 m2 warehouse construction cost is calculated as follows,
provided the unit cost is 200 USD/m2.
 200 (USD/m2) x 3,600 (m2) = 720,000 USD© ENAA 2023

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Chapter 4 Planning

Capacity Factor Method

Cost Planning$B / $A = (Cap. B / Cap. A) e
$B
: Cost of the facility being estimated$A: Known cost of a similar facility
Cap. B : Capacity of the facility being estimatedCap. A : Known capacity of the similar facilitye: Exponent of proration factor (0.5 – 0.85)

The cost of new facility is derived from the cost of asimilar facility of a known capacity.
Example600,000 MTA Ethylene plant construction cost is calculated as follows,
provided the 800,000 MTA Ethylene plant is 900 MM USD and capacity
factor is 0.7.
 900 (MM USD) x (600,000 / 800,000 ) 0.7 = 736 MM USD© ENAA 2023

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Chapter 4 Planning
Cost Planning

Ratio or Factor Method
Plant Cost = Equipment Cost x Equipment Factor

This method is used in situations where the total cost of
an item of facility can be reliably estimated from thecost of a primary component.
Lang Factors

Type of Plant
Solid Process Plant
Solid-Fluid Process Plant
Fluid Process Plant

Factor
3.10
3.63
4.74

ExampleTotal cost of fluid process plant is calculated as follows, provided thetotal equipment cost is 1.0 MM USD
 1.0 (MM USD) x 4.74 = 4.74 MM USD© ENAA 2023

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Chapter 4 Planning

Parametric Method

Cost Planning

Linear Relationship : $ = a + bV1 + cV2 + . . .
Nonlinear Relationship : $ = a + bV1x + cV2 y + . . .
V1, V2 : Input variables
a, b, c : Constant derived from regression
x, y : Exponents derived from regression

 A parametric cost model is an extremely useful tool
for preparing early conceptual estimates when there
is little technical data or engineering deliverables toprovide a basis for using more detailed estimating
methods.
ExampleThe following cost estimating algorithm was developed for CoolingTower.
Cost = 86,000 + 84,500 (Cooling Range in Deg.F)0.65 – 68,600(Approach in Deg.F) + 76,700 (Flow Rate in 1000 GPM)0.7© ENAA 2023

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Chapter 4 Planning

Deterministic (Detailed) Estimating Method

Cost Planning Each component of a project scope definition isquantitatively surveyed and priced using the most
realistic unit prices available.
 Detailed estimates are typically prepared for:
 Final budget authorization
 Contract bid tenders
 Cost control during project execution
 Change orders© ENAA 2023

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Allowances and Contingency

Chapter 4 Planning
Cost Planning

Allowance
An additional resources included in estimation to cover the cost of
known but undefined requirements for an individual activity or work
item.

Contingency
An amount added to an estimate to allow for items, conditions, or
events for which the state, occurrence, and/or effect is uncertain andthat experience shows will likely result, in aggregate, in additional costs.

© ENAA 2023

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Reference

Chapter 4 Planning

Cost Trending / Cost Forecasting

Cost Planning Cost Trending
Cost trends are established from historical cost accounting information.

COST INDEX Nelson-Farrar Refinery Cost Index
 JMC (Japan Machinery Center for Trade and Investment)
 MEPS Steel Price Index

 Cost Forecasting Forecast are much like estimates.
 Forecasts are predictions of the cost at completion for cost elements
in progress, whereas an estimate is always for future activities
 Cost Forecasting includes Escalation and Exchange Risks.

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Escalation and Exchange Risk

Chapter 4 Planning
Cost Planning• Escalation is the provision in actual or estimated costs for an
increase in the cost of equipment, material, labor, etc., overthat specified in the purchase order or contract due tocontinuing price level changes over time.
• Escalation and currency exchange risk may be a kind ofcontingency, however, usually these are specifically identified
and estimated separately from the contingency.

© ENAA 2023

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Chapter 4 Planning

Budgeting•

Cost Planning

Cost Baseline : A time-phased budget used to measure and monitor cost
performance. It is developed by summing estimated costs by period and isusually displayed in the form of an S-curve.

© ENAA 2023

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Budgeting – Cash Flow

Chapter 4 Planning
Cost Planning• Cash flow is the inflow and outflow of funds within a project.
A time-based record of income and expenditures, often
presented graphically.
• Cash flow management is the planning of project
expenditures relative to income or authorized funding, tominimize the carrying cost of the financing for the project or
keep within the constraints of a time-phased budget.
• This may be achieved by accelerating or delaying some
activities, but at the risk of ineffective performance, latecompletion and consequent increased cost.

© ENAA 2023

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Chapter 4 Planning
Risk Response Planning

What is a Risk & Risk Management?

Risk Uncertain Events
 If a risk occurs, it may have a positive or negative impact tothe project Most projects have to deal with uncertainty
Risk = f (Probability, Impact)

Risk Management
 To manage project risks to decrease the probability and impact
of negative events that could be adverse to the project Important part of project planning but needs to implement
throughout the project.
© ENAA 2023

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Chapter 4 Planning

Risk Management Process

Risk Response Planning

Risk Management Planning
Repeat throughout project

Risk Identification
Risk Assessment and Analysis

Qualitative
Analysis

Qualitative Analysis
Quantitative Analysis

Quantitative
Analysis

Risk Response Planning
Risk Monitoring© ENAA 2023

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Risk Management Planning

Chapter 4 Planning
Risk Response Planning

Risk Management Plan Purpose and scope of risk management
 Definition of terms to be used in the risk management
 Risk Management Process and Work Flow
 Risk Identification Criteria
 Risk assessment and Analysis Methodology
 Risk Response Planning© ENAA 2023

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Risk Identification

Chapter 4 Planning
Risk Response Planning

Documents Review(Commercial / Technical Contract Documents)
 Check List
(from historical data) Brainstorming Interview
© ENAA 2023

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Chapter 4 Planning
Risk Response Planning

Example of a Risk Breakdown Structure (RBS)

Project

Technical

Requirements
Technology
Quality

External

VendorSubcontractor
Local Authority

Project Management

Planning
Controlling© ENAA 2023

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Project Risk Samples

Chapter 4 Planning
Risk Response Planning

New technology, prototype equipment
 Complex process control system
 Severe site conditions or difficult access Substandard subcontractor, equipment, and supplier performance Inferior labor quality or insufficient availability
 Strikes, work stoppages and other adverse labor activity
 Unforeseen economic factors (economic over-heating, etc.)
 Other global and logistics problems
 Unusually severe weather
 Slow obtaining of government permits© ENAA 2023

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Risk Assessment and Analysis
Qualitative Risk Assessment and Analysis
 PI (Probability and Impact) MatrixQuantitative Risk Assessment and Analysis
 EMV (Expected Monetary Value) Monte Carlo Simulation© ENAA 2023

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Risk Response Planning

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Chapter 4 Planning

Risk Assessment and Analysis

Risk Response Planning Qualitative Risk Assessment and Analysis

PI （Probability and Impact）Matrix
Probability

Impact of Threats

Very High

0.90

0.05

0.09

0.18

0.36

0.72

High

0.70

0.04

0.07

0.14

0.28

0.56

Medium

0.50

0.03

0.05

0.10

0.20

0.04

Low

0.30

0.02

0.03

0.06

0.12

0.24

Very Low

0.10

0.01

0.01

0.02

0.04

0.08

0.05

0.10

0.20

0.40

0.80

Very Low

Low

ModerateHigh

Very High© ENAA 2023

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Chapter 4 Planning

Risk Assessment and Analysis

Risk Response Planning

Quantitative Risk Assessment and Analysis
EMV (Expected Monetary Value)
Risk Event

Probability

Possible Outcome

A30%

USD 1,000

USD 300

B

50%

USD 1,500

USD 750

C20%

USD 2,000

USD 400

Total© ENAA 2023

EMV

USD 1,450

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Chapter 4 Planning

Monte Carlo Simulation
DirectCost

Most Likely(1000$)

Optimistic(1000$)

Pessimistic(1000$)

2,400

2,160

2,760

Triangle

Piping

520

468

598

Triangle

Electrical

360

324

414

Triangle

Instrument

560

504

644

Triangle

Civil

200

180

230

Triangle

2,150

1,935

2,473

Triangle

Project Expenses

230

207

265

Triangle

Transportation

140

126

161

Triangle

Insurance

20

18

23

Triangle

Field Expenses

120

108

138

Triangle

Camp Operation

90

81

104

Triangle

Construction Aid

20

18

23

Triangle

Temporary Facility

40

36

46

Triangle

2,050

1,845

2,358

Triangle

General Admin.

800

720

920

Triangle

Others

300

270

345

Triangle

10,0009,000

11,500Equipment /Materials

Equipment

Construction
Indirect

Home Office

Field Office

OthersRisk Response Planning

Design / Engineering

TOTAL© ENAA 2023

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Probability
Distribution

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Chapter 4 Planning
Risk Response Planning

Monte Carlo Simulation
Cumulative Distribution

Most
LikelyOptimistic

Pessimistic

Contingency?

random number

Frequency Distribution© ENAA 2023

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Risk Response Planning

Chapter 4 Planning
Risk Response Planning

Identification of project risk items
 Quantification of risk (possibility of risk item turning into
actual hazard x impact of risk)
 Work out measures to cope with risk
 Avoid risk sources Mitigate probability or risk impact through work-around Transfer risk by contractual arrangements, insurance, etc.
 In case no good way, accept but take contingency
© ENAA 2023

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Chapter 4 Planning

Risk Response Planning
AcceptanceNo action to identify suitable risk
response with/without
contingency reserve

Risk Response Planning

Mitigation
Reducing probability and/or
impact of a risk event to an
acceptable threshold

Avoidance

Transfer

Structuring the project so that therisk is avoided (cancellation,
restructuring)Transferring the risk to anorganization that is morecompetent or willing to assume it© ENAA 2023

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Chapter 4 Planning
Risk Response Planning

Risk Register
Identified Risk

Qualitative Analysis

Risk Category

Risk Events

Ref. No.

Procurement
Risk

Owner may not approve
proposed Vendors

ITB Section
1.2.3

Quantitative Analysis
Probability
50%

Probability

ImpactPxIPriority

0.5

0.8

0.4

Very
Important

Risk Response

Impact

EMV

Response

Description

1,000,000 JPY

500,000 JPY

Avoidance

To specify the deviation
clearly in the Proposal

Revised EMV
0

Important Points in Risk Management
1. Carry out throughout project.
2. From identification to risk response plan development by all project team members
3. Responsibility for the countermeasure should be on the assigned person or the team.
© ENAA 2023

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Communication Management

Chapter 4 Planning
Communication

1. Fundamental Principles– What is Communication ?
– What is the purpose of Communication ?
– How to Communicate and Compose a Message ?

2. Intercultural Business Communication– Favorable Messages

3. Communication Management in Project– Project Communication Management– Communication Management Plan
– Communication Guidelines© ENAA 2023

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Chapter 4 Planning

Fundamental Principles (1/4)

Communication• What is Communication?
Information: One way

SenderMessage

ReceiverCommunication: Two ways

SenderMessage

ReceiverFeedback© ENAA 2023

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Chapter 4 Planning

Fundamental Principles (2/4)

Communication• What is the purpose of Communication?
Generally:-

A means of mutual understanding
A means of sharing information
To make oneself understandSpecifically:-

To get attention
To impress
To motivate
To energize
To invigorate

SenderMessage

ReceiverActionFeedback

Primary Purpose
To induce receiver to act as sender would like receiver to act
To make receiver act as sender would like receiver to act© ENAA 2023

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Fundamental Principles (3/4)

Chapter 4 Planning
Communication• How to communicate and compose a message? (1/2)
A) Communication Environment
Communicability / Linguistic Capability / Physical Environment /Psycho-sociological Environment / Situation / Audience / CultureB) Distance between Sender and ReceiverSocial Distance / Level of Trust / Level of Intimacy /Shared Values / Physical DistanceC) Establish Credibility
Authority (given) / Power (gained) / Personality / Attitude /Appearance / Delivery / Value, Goal

© ENAA 2023

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Fundamental Principles (4/4)

Chapter 4 Planning
Communication• How to communicate and compose a message? (2/2)
D) Approach Method
Intimacy Building up / Gaining Trust / Encouraging /Information Giving / OrderingE) Communication Method
Face to Face / MediaF) Verbal and Non-Verbal Communication
Verbal Communication : Attention-Getting, Language Intensity /Rhetoric in Communication / Delivery and Voice Production
Non-Verbal Communication : Physical Appearance /Spatial Relationships / Body Actions and Body Languages /Eye-Contact© ENAA 2023

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Chapter 4 Planning

Intercultural Business Communication
Message and its delivery
method comes from
his/her value concept.

Communication

Value
Concept

CultureThe value
concept are
influenced by __Context

Society
Surrounding
Environment

Favorable Messages
•
•
•
•
•
•

© ENAA 2023

Attention-getting
Goal oriented
DirectPragmatic
Definitive
Specific

•
•
•
•
•
•

Creative
Constructive
LogicalAction oriented
Visualize
Quantify

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Chapter 4 Planning
Communication

Communication Management in Projects (1/3)• Project Communication Management

Project Communication Management includes the processes
necessary to ensure that the information needs of the
project and its stakeholders are met through developmentof artifacts and implementation of activities designed toachieve effective information exchange.
Project Communication Management consists of two parts
 Developing a strategy to ensure communication iseffective for stakeholders.
 Carrying out the activities necessary to implement thecommunication strategy(PMBOK® Guide – 6th Edition)© ENAA 2023

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Chapter 4 Planning
Communication

Communication Management in Projects (2/3)• Develop the Communication Management Plan

1. Gather Planning Inputs
2. Identify Stakeholders and Needs
3. Prepare Communication Matrix
4. Draft Communication Management Plan
5. Distribute the Communication Management Plan - Draft
6. Finalize the Communication Management Plan

© ENAA 2023

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Chapter 4 Planning
Communication

Communication Management in Projects (3/3)• Communication Guideline Based on Stakeholder Needs and Feedback
 Ensure Timely Communication
Bad New First ! Avoid Surprise !
 Create Environment:
Open, Honest, Face to face, Two-way
Constructively Challenge Behavior
 Assess Communication Plan and Process Involve Senior Management, when appropriate© ENAA 2023

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Chapter 4 Planning

Project Management Information System (PMIS)© ENAA 2023

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Chapter 5 : Project Execution







© ENAA 2023

Major Role of Project Manager
Engineering
Procurement
Construction
Commissioning
Training

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Chapter 5 Project Execution

Major Role of Project Manager-

Project Manager

Communication Channel to the Owner
Setting Goals and Execution Policy
Organizing the Project teamAssigning Subordinate Managers
Establishing Overall Execution Plan
Establishing Overall Control Plan
Facilitating Subordinate Managers
Solving Conflict Issues
Decision Making
Archiving Data, Lessons Learned , etc.

Need to guide or direct the Way to Go!
© ENAA 2023

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Setting Goals and Policy

Chapter 5 Project Execution
Project Manager

Awareness:- Satisfy Contractual Requirement- Satisfy Owner- Execute Effectively and Safely
Profit:Quality:
Schedule:
Cost:
Risk:
Trade off:
Resource:
Subcontract:
Design:Engineering:
Procurement:
Construction:© ENAA 2023

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Chapter 5 Project Execution
Project Manager

Expected Outcome by setting Goals/Policy-

Reduce Control
 Number of checkpoints
 Frequency of checks
 Giving direction and advice-

Expand Magnitude of Authority Transfer-

Expand Range of Decision Making-

Increase Motivation/Morale•-

Sense of Responsibility and Participation

Cultivate Talents of Project Members, etc.

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Chapter 5 Project Execution

Execution of Engineering Design-

Design Basis-

Process Design-

Basic Design, FEED-

Detail Engineering Design-

Field Engineering-

Construction Planning, Operability, maintainability,
Constructability Study-Engineering Design Review© ENAA 2023

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Chapter 5 Project Execution

Constructability StudyEngineering

For Practical, Safe and Economic Construction- Accessibility, Constructability, Operability, Maintainability- Construction Sequence- Extent of Pre-Assembly, Prefabrication

Reflect the Results to Engineering Design
Important for:
Modification, Tie-in, Relocation, Installationin pre-existing operating facility© ENAA 2023

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Design Review

Chapter 5 Project Execution
Engineering

Routine check
Design Review Meeting
Organized by Engineering Manager
Licensor, Owner, Discipline Engineers
Recorded and Tracked to Resolution-

PFD, PID Study
3D Model Review
HAZOP, HAZID, SIL, ESD Review
ALARP Review
Ergonomics Review
HAZOP : Hazardous Operability Study
HAZID : Hazardous Identification Study
SIL : Safety Integrity Level
ESD : Emergency Shutdown
ALARP : As low as reasonable practical© ENAA 2023

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Chapter 5 Project Execution

Procurement

Procurement

Major Procurement Work
Major Procurement Work Purchasing

BPO(Before Place an Order)

 Expediting Inspection
 Transportation

APO(After Place an Order)

Procurement Execution Plan : By Procurement Manager- Organization, Split of Work, Coordination- Market- Vendor / Manufacturer Qualification- Bid Evaluation, Vendor Selection- Expediting, Inspection© ENAA 2023

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Chapter 5 Project Execution
Procurement

Procurement (Overall)• Buyer/Customer/Client
Make or Buy

Procurement
Plan

Inquiry
Plan

Inquiry

Vendor
Selection

Contract
Fulfillment
management

Contract
Completion

Contract
Procurement Plan
RFP

Proposal/Estimate

Inspection/P
Completion
ayment• Seller/Contractor/Vendor
Pre-sales
Activities© ENAA 2023

Bid approval
decision

Proposal
Preparation

Contract
Negotiation

Engineering Advancement Association of Japan

Contract
fulfillment
management

Contract
Completion

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Chapter 5 Project Execution

Oversea Procurement and Plant Engineering
Main Activity

Procurement◆ Procurement and Engineering

Basic/Detail Design
Issuing of Req.

Dimension of
Equipment
Loading data for
civil design

Quote Vendor Estimate

Bid Evaluation
Nego / P/O / KOM
Vendor Print Checking
Pre Inspection Meeting

Manufacturing

3 ～ 4 Months

Final Inspection
Packing / Ex Work
Customs Clearance・FOB

Ocean Transportation
Customs Clearance
Inland Transportation

ＢＰＯ control
ＡＰＯ control

Receiving Inspection・Installation© ENAA 2023

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Chapter 5 Project Execution

Expediting

Procurement

Purpose:To Monitor and Expedite Vendor Performance
To Deliver Equipment and Materials without Slippage

Expediting
From Project Office, or by Shop Visit

Expediting Plan
Level
A
B
C

Effect of Delay
Serious
May give some effectNot serious effect© ENAA 2023

Type of Expediting

Frequency

By shop visit

Every 8 weeks

From the project officeEvery 4 weeks

By shop visit

Every 16 weeks

From the project officeEvery 4 weeks

From the project officeEvery 4 weeks

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Chapter 5 Project Execution

InspectionLevel 4: Final Inspection by record review

Level 3: Level 4 + Final witnessLevel 2: Level 3 + In-process witnessLevel 1: Level 2 + multi

Procurement

Criteria• Design Factor• Manufacturing Complexity• Manufacturer Factor• Financial Impact• Schedule Impact© ENAA 2023

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Transportation

Chapter 5 Project Execution
Procurement

 Subcontract actual transportation work
 EPC ContractorSurvey for transportation

Establish transportation planMarine insuranceSpecification, execution procedureMonthly shipping list

List of heavy, large volume cargo© ENAA 2023

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Chapter 5 Project Execution

Construction

ConstructionA) Home Office Activities
B) Construction PlanningC) Mobilization of Advance TeamD) Field Construction OperationsE) Field AdministrationF) Field Security ControlG) Field Engineering© ENAA 2023

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A) Home Office Activity

Chapter 5 Project Execution
Construction

 Site survey
 Proposal phase Execution phase Construction planning (include Safety)
 Subcontracting Home office backup© ENAA 2023

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Chapter 5 Project ExecutionB) Construction Planning

Developing construction budget

Field organization and staffing

Mobilization planPreliminary construction schedule

Temporary facility and lay-down areaStudies of heavy rigging



Unloading and local transportation



Field execution procedurePlanning local procurement

Subcontracting© ENAA 2023

Engineering Advancement Association of Japan

Construction

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Chapter 5 Project ExecutionC) Mobilization of Advance Team

Construction

 Arrange the following Permit, certificate, taxpayer’s Number Offices, accommodations, canteen
 Transportation need
 Communication need
 Fence, gate, security guard Temporary facilities, lay-down area,
warehouse, field shop, first aid
 Open bank accounts

 Demobilization is also important© ENAA 2023

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Chapter 5 Project ExecutionD) Field Construction Operations

Construction

 Field HSE control
 Actual field construction activity + Field administration
 Field security control
 Field project control
 Subcontractor administration
 Field engineering Construction supervision© ENAA 2023

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Chapter 5 Project ExecutionE) Field Administration
Business : Public Relations, Insurance, etc.



Legal



Financial : Accounting, Taxation etc.

Personnel : Recruitment, payroll etc.

GeneralConstruction: Settlement of disputes etc.

: Security, sanitation, housing, welfare etc.

 Familiarize staff with local laws, regulations, customs, habits etc.
 Keep contact with governmental offices
 Maintain good relations with local inhabitants© ENAA 2023

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Chapter 5 Project ExecutionF) Field Security Control

Construction

A typical security program includes:Working days, hours and area

Gate control for personnel, vehicle

Safety orientation

Routine patrol and safety patrolFire prevention, fire drill and emergency programs

Restrict access to confidential information© ENAA 2023

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Project Management Training CourseG) Field Engineering

Chapter 5 Project Execution
Construction

 Follow-up of engineering work Explain and reply to engineering queries
 Update bill of quantities
 Check the work from the engineer’s viewpoint Prepare punch lists
 Prepare as-built drawings
 Verify facilities for conformity with design
 Prepare requisition for local procurement
 Review and approve field shop drawings developed by construction
subcontractors
 Obtain owner’s approval for minor modification.
 Plan pre-commissioning© ENAA 2023

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Commissioning

Chapter 5 Project Execution
Commissioning Completion of Erection
 Pre-Commissioning
 Mechanical Completion
 Commissioning Performance Test and Provisional Acceptance© ENAA 2023

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Chapter 5 Project Execution

Commissioning
Example of Workflow
from Construction through Commercial Operation© ENAA 2023

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Chapter 5 Project Execution
Commissioning

Commercial Operation© ENAA 2023

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Chapter 5 Project Execution

Training

Training

 Qualification Requirements for Trainees
 Technical degree in a related field Language literacy
 Experience as operator, maintenance staff, laboratory
staff etc.
 Physically fit for training Record / Assessment for Trainees© ENAA 2023

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Chapter 5 Project Execution
Training

Summary of Training Service Program (1/2)© ENAA 2023

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Chapter 5 Project Execution
Training

Summary of Training Service Program (2/2)© ENAA 2023

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Chapter 6 Controlling

Chapter 6 : Controlling






© ENAA 2023

Project Control
Schedule Control
Cost Control
Change Management
Risk Monitoring and Control

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Chapter 6 Controlling

Project Control

Project Control

What is Project Control ?
Monitor progress
Identify variances between plans and actual performance
Manage the variances
Take corrective actions, if necessary

Project Control includes : Cost control
 Schedule control
 Material control

 Change control
 Risk control
 Quality control, etc.

Project Manager is required to :
 Judge, if the variance is acceptable Take appropriate corrective action or preventive action© ENAA 2023

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Chapter 6 Controlling

Project Control

Project Control

Level of Project Control

Project
Management
Level

Project Control
Level
Resource Control Level• Overall Project Objectives• Project Scope• Project Schedule• Cost (Budget)• Quality• Professional Man-hours• Labor Man-hours• Materials• Documents• Construction Equipment

All team member should make effort to control project!
© ENAA 2023

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Chapter 6 Controlling

Project Control

Project Control

Steps of Project Control
Plan• Control Procedure• Work Package• Plan (resource, cost, schedule)• Baseline• Acceptable level of variance

Monitoring

Estimate atCompletion
Corrective/
Preventive
ActionAcceptable?

ImpactEvaluation

Continue Works© ENAA 2023

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Project Control

Chapter 6 Controlling
Project Control

Project Manager’s Role in Project Control
Assign necessary resources
Establish an acceptable range of variances
Obtain actual performance information
Examine variances
For Corrective Actions, Judge the necessity of corrective actions
 Propose and select suitable corrective actions
 Take corrective actions
 Take preventive actions
 Ensure that an appropriate project control procedure is followed






© ENAA 2023

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Project Schedule Control

Chapter 6 Controlling
Schedule Control

What is Schedule Control ?
 Schedule control is a process to control schedule variance.
 One of the most important project control processes
 Schedules may be used as a basis for payment applications
supporting work completed.
Schedule Control focuses on :
 Identifying that the schedule has changed.
 Managing the actual variances when they occur.

© ENAA 2023

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Chapter 6 Controlling

Project Schedule Control

Schedule Control

Cause of Variances Poor performance Labor shortage
 Labor strikes
 Legal disputes
 Resource availability Accidents

 Weather and climate conditions
 Design changes
 Additional work scope Late approval by owners andgovernment agencies

Updating Schedule To reflect current project status
 To keep the schedule as an effective management tool To document to serve as support for performance
 To re-schedule and support delay analysis© ENAA 2023

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Chapter 6 Controlling

Schedule Control

Schedule Control

Steps of Schedule Control
Plan• Baseline Schedule• Acceptable level of variance

Monitoring

Estimate atCompletion
Corrective/
Preventive
ActionAcceptable?

ImpactEvaluation

Continue Works© ENAA 2023

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Chapter 6 Controlling

Progress Measurement

Schedule Control

Several common methods for reporting the progress on each task are
as follows.
1. Percent Complete
Applicable to tasks that involve repeated production of easily
measured pieces or work.
For example, 10,000 linear meters (LM) of wire is to be pulled, and 4,000
LM have been pulled, the percent complete is 40 %.

2. Weighted Milestone
Applicable to any control accountthat includes subtasks that must be
handled in sequence.
For example, installing a major
vessel includes the sequential tasks
as per the table.
© ENAA 2023

Rules of Credit for Drums and Tanks
Incremental
Progress
Received/Inspected
15%
Setting complete
20%
Alignment complete
15%
Internals installed
25%
Testing complete
15%
Accepted by Owner
10%

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Chapter 6 Controlling

Progress Measurement

Schedule Control

3. Fixed Formula
Applicable to the following tasks
 No definable intermediate milestones
 Effort/time required is very difficult to estimate.
START

For example

FINISH0 - 100 %20 - 100 %50 - 100 %30 - 70 - 90 - 100 %© ENAA 2023

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Progress Measurement

Chapter 6 Controlling
Schedule Control

4. Level of Effort
Applicable to the following tasks
 A long period of time Continuous during the life of a project
For example,• project management• quality assurance• contract administration• project control

Actual Cost or Workhours to date
Percent Complete = ------------------------------------------------Forecast at Completion© ENAA 2023

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Chapter 6 Controlling

Cost Control

Cost Control

What is Cost Control ?
 Cost control is the application of procedures to monitor expenditures andperformance against the progress of projects

Cost Control vs. Financial Control Financial control is concerned with receipts and expenditures(Cash Flow)

Cost Control Process








Cost control is concerned with actual costs against budget
Develop project operation budget
Develop cost baseline
Monitor and track current status
Analyze variances of planned cost and actual cost, and their performance
Forecast estimate to completion or estimate at completion
Develop corrective action© ENAA 2023

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Chapter 6 Controlling
Cost Control

Cost Control
Earned Value (EV)
Cumulative
Cost(Estimate at
EAC Completion)

VAC

Plan (PV)(Variance atCompletion)

BAC(Budget atCompletion)

Actual Cost (AC)ETC

ACWP (AC)BCWS (PV)CV
SV

BCWP (EV)

Earned Value (EV)© ENAA 2023

(Estimate toCompletion)(Cost Variance)(Schedule Variance)

Data Date

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Time
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Chapter 6 Controlling

Cost Control

Cost Control

Earned Value (EV)
Data Date BCWS (Budgeted Cost of Work Scheduled)= PV (Planned Value) BCWP (Budgeted Cost of Work Performed)= EV (Earned Value) ACWP (Actual Cost of Work Performed)= AC (Actual Cost)
 Cost Variance Schedule Variance Cost Performance Index
 Schedule Performance Index© ENAA 2023

CV = BCWP (EV) – ACWP (AC)SV = BCWP (EV) – BCWS (PV)
CPI = BCWP (EV) / ACWP (AC)SPI = BCWP (EV) / BCWS (PV)Engineering Advancement Association of Japan

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Chapter 6 Controlling
Cost Control

Cost Control
Earned Value (EV)At Completion

BAC (Budget at Completion)
ETC (Estimate to Completion)
EAC (Estimate at Completion)
VAC (Variance at Completion)
EAC
 EAC = BAC / CPI
Actual to date plus remaining project budget modified by CPI
 EAC = ACWP + (BAC – BCWP)
AC + (BAC – EV)
Actual to date plus remaining budget
 EAC = ACWP + ETC
AC + ETC
Actual to date plus new estimate for remaining work
 ETC







1) ETC = (BAC - EV)
2) ETC = (BAC - EV) / CPI
3) ETC = (BAC - EV) / (CPI x SPI)

optimisticfrequent
pessimistic

 VAC = BAC - EAC© ENAA 2023

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Chapter 6 Controlling

Cost Control

Cost Control

Analysis, Trending, and Forecasting
Bulk Quantity Curves© ENAA 2023

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Change Management

Chapter 6 Controlling
Change Management

What is Change Management ?
Change management is the process of the following to the project
documents and deliverables.
 reviewing all change notices and/or requests,
 approving changes, and controlling changes

Change Management includes:
 Change requests to the Owner
 Changes within the Contractor’s internal structure Change requests from the Vendors/Subcontractors© ENAA 2023

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Change Management

Chapter 6 Controlling
Change Management

Change Control Flow

© ENAA 2023

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Risk Monitoring and Control

Chapter 6 Controlling
Risk Control

What is Risk Monitoring and Control ?
Risk monitoring and control is the process of the following, throughout the
project:
 Implementing a risk response plan, Tracking identified risks,
 Monitoring residual risks, Identifying new risks, and Evaluating risk process effectiveness Determining if the assumptions are still valid Determining if contingency amount are adequate

Historical Database Risk management, particularly risk assessment and analysis activities, isdata intensive.
 A reliable data source is essential.
© ENAA 2023

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Chapter 7 : Closing
© ENAA 2023

Contract Closure
Post Project Evaluation

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Chapter 7 Closing
Contract Closure

Contract Closure• The plant completion is of keen interest to the Owner.
• Technical and commercial requirements of the Owner toaccept the plant are included in the Contract.
• Generally, there are two steps to close the Contract.
– Provisional Acceptance– Final AcceptanceHand-over toOwnerContract

Provisional
Acceptance

Final
AcceptanceCommercial Operation
Warranty
Period© ENAA 2023

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Contract Closure

Chapter 7 Closing
Contract Closure

Contract closure with Subcontractors and Vendors is also
important.
Administration works at construction site.
 Demolish, restore, clear and clean the site
 Termination of local employment
 Local taxes, levies, duties, etc.
 Project account Demobilization of project team members© ENAA 2023

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Post Project Evaluation

Chapter 7 Closing
Post Project Evaluation

Following information to be collected for the evaluation:
 To what extent did the project meet the goals ?
 Which actions of project management led to favorable
results ?
 Which actions of project management need
improvement ?
 Was there any unexpected change during the course of
the project ?
 Are there any successful practices that are transferable
to future project ?

© ENAA 2023

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List of References




















Project Management for Capital Project by Dr. Hiroshi Tanaka, President of Project Management Association ofJapan
P2M Standard Guidebook, planned by Project Management Association of JapanPMBOK® Guide – 4th / 5th Edition, Project Management Institute
Recommended Practice No. 10S-90, AACE International
Construction Industry Institute (CII in the U.S.A) Project Definition Rating Index
ENAA Engineering Seminar, Project Management, The Union of Myanmar
CII Special Publication 39-2 Pre-project planning Handbook
Project Management for Capital Project by Dr. Hiroshi Tanaka, President of Project Management Association ofJapan
P2M Standard Guidebook, planned by Project Management Association of Japan
Recommended Practice No. 10S-90, AACE International
ENAA 平成10年度 プロジェクトマネジメント技術啓蒙・普及のための調査研究報告書
ENAA平成10年度調査研究報告書 「ﾌﾟﾛｼﾞｪｸﾄの計画期に内在するﾘｽｸの分析とその回避手法の研究」
ENAA 平成１８年度プロジェクト・マネジメント講習会（第40回基礎コース） 「プロジェクト契約」テキスト
ENAA 平成１９年度 海外プラント実務者のためのENAAモデルフォーム セミナーテキスト
ENAA MODEL FORM INTERNATIONAL CONTRACT for Process Plant Construction Vol.1 Agreement & General
Conditions( with process license)
ENAA MODEL FORM INTERNATIONAL CONTRACT for Process Plant Construction Vol.2 Samples of Appendices
ENAA モデルフォーム プロセス・プラント国際標準契約書 Vol.3 手引書
国際プロジェクト契約ハンドブック（オンデマンド版）（高柳 一男編、有斐閣）
海外工事請負契約論（大隈 一武著、（社）商事法務研究会、平成３年初版発行）© ENAA 2023

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Thank you very muchfor your kind attention!!

© ENAA 2023

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Reference
Cost Index and Location Factor© ENAA 2023

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Cost Index
 Chemical Engineering PCI
 JMC Plant Cost Index
 ENN-PCI© ENAA 2023

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Chemical Engineering PCI© ENAA 2023

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JMC PCI (Plant Cost Index)(JMC: Japan Machinery Center for Trade and Investment)

Index (Year 2000 = 100)

PCI
Equipment
Construction
In-direct CostYear
© ENAA 2023

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ENN-PCI (ENN Plant Cost Index)
ENN-PCI(Cost and Demand Factor)

ENN-PCI(Cost Factor)
2007/08 Subprime Issue

PCI (Year 2000 = 100)

2008/09 Lehman Shock
Indication of Bubble
Indication of Bubble
130% over from the Bottom

2011/03 Earthquake

Turning Point
2012/12
Abe-Cabinet

Worldwide Bubble Economy
Turning Point
Mid-term Economic Cycle (Construction, Investment)

Year / Quarter© ENAA 2023

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Location Factor
 JMC Location Factors© ENAA 2023

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JMC Location Factors (1/2)
Country / Area

Local
Currency

2015

2016

2017

2015

2016

2017

Japan

JPY

121.05108.80111.90

100.0

100.0

100.0

Saudi Arabia

Riyal

3.75

3.75

3.75

106.4

99.0

98.5

Singapore

S$

1.37

1.38

1.39

106.5

97.7

96.7

Korea

Won

1,130

1,160

1,130

91.1

82.2

82.8

Taiwan

NT$

31.70

32.20

32.25

88.4

82.5

84.0

Malaysia

Ringgit

3.90

4.14

4.30

88.1

78.6

76.1

Indonesia

Rupiah13,30013,30013,210

81.5

76.1

76.5

Thailand

Baht

34.20

35.20

34.10

85.9

78.7

78.9

Philippine

Peso

46.60

47.10

49.70

81.9

75.7

74.8

India (coast area)

Rupee

63.70

66.80

63.80

77.0

71.6

72.2

China (coast area)

Yuan

6.30

6.65

6.82

88.7

81.3

80.4

VietnamDong

21,85022,37022,750

75.8

70.5

70.4

USA

US$

1,000

1,000

1,000

99.0

94.3

95.6

© ENAA 2023

Currency Rate (LC/USD)

Location Factor

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JMC Location Factors (2/2)
Country /Area

Equipment & Materials

Construction

In-direct Expenses

2015

2016

2017

2015

2016

2017

2015

2016

2017

Japan

58.4

56.6

57.5

22.9

24.6

24.3

9.0

9.0

9.0

Saudi Arabia

51.2

47.2

48.0

28.5

26.6

25.7

9.6

8.9

8.9

Singapore

52.0

47.9

48.7

28.2

25.1

24.0

9.6

8.8

8.7

Korea

51.2

46.3

47.1

17.8

15.4

15.6

8.2

7.4

7.5

Taiwan

51.2

47.1

48.1

14.6

13.7

14.3

8.0

7.4

7.6

Malaysia

50.5

47.3

46.8

14.2

11.0

9.3

7.9

7.1

6.9

Indonesia

49.7

45.9

46.7

8.8

8.0

7.7

7.3

6.9

6.9

Thailand

50.7

46.6

47.5

11.4

9.9

9.7

7.7

7.1

7.1

Philippine

51.2

47.1

47.8

8.0

7.2

6.4

7.4

6.8

6.7

India

49.5

45.8

46.6

6.6

6.0

6.1

6.9

6.4

6.5

China

50.6

46.4

47.0

13.1

11.5

10.9

8.0

7.3

7.2

Vietnam

49.4

45.5

46.4

5.0

4.5

4.2

6.8

6.3

6.3

USA

57.4

54.3

55.4

21.2

20.4

20.5

8.9

8.5

8.6

© ENAA 2023

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Thank you very muchfor your kind attention!!

© ENAA 2023

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208