Front-End Loading for Life Cycle Success (2001)

Abstract The front-end loading plays an important role in achieving project cost, schedule, and performance targets. A complete life cycle cost analysis takes into account the costs of operation, maintenance, and disposal or replacement of the facility to realize optimum project cost. The front-end planning offers the greatest opportunity to lower life cycle cost with the application of value improvement work processes. Introduction The front-end loading (FEL) phase is important in defining a capital project. The construction industry research indicates a relationship between project success, pre-planning efforts, and well-defined project scope developed during the FEL. The FEL phase covers basic and conceptual engineering done for the project prior to commencing the detailed project execution. The objective of the FEL phase is to provide the detailed design disciplines with a well-defined front-end engineering package to minimize changes and rework during the project execution. An owner's ability to influence the outcome of a project during the early stages is higher when expenditures are minimal than it is to affect the outcome during the later stages of the project. The greatest potential for life cycle cost reduction occurs when a methodical, well-organized approach to value improvement process is applied early in the design of a project. This paper will identify methodologies for proper life cycle cost (LCC) analysis during the front-end planning. What is FEL? The FEL phase covers basic and preliminary engineering done prior to commencing the detailed engineering, procurement, construction, and startup/commissioning (EPCC) phases of the project. The goal of the FEL phase is to provide the detailed design disciplines with a well-defined front-end engineering package to ensure that progress is smooth and expeditious with minimal changes and rework during the execution of the detailed engineering. Industry Findings on the Importance of the Frontend Planning The business community is concerned about capital project cost overruns in recent years3. Industry findings indicate that poor scope definition at the project funding stage and loss of control of project scope rank as the major contributing factors to cost overruns and schedule delays. The construction industry points to a lack of scope definition as the most serious problem on construction projects. This paper describes how an organized approach to FEL with LCC analysis can result in a successful project. The findings are based on industrialprojects mostly in oil, gas, and petrochemical industries. Construction Industry Institute (CII) research indicates that the FEL and early project planning can reduce project cost as much as 20 percent on average in comparison to poorly planned projects. In addition, the facility can be delivered in an optimum time with minimum rework and delays while enhancing net present value (NPV) with early studies on life cycle cost. Benefits of FEL An owner has a greater ability to influence the outcome of a project during the early stages, when expenditures are minimal, than during later stages. The impact of the decisions made in the early stages has the greatest influence on the final cost of a project.