We are in the media: Bilfinger Tebodin expert on risk minimization in industrial facility construction
Any construction project involves a number of risks. Mistakes made at the planning stage can delay work deadlines and induce budget increase. Ivan Koval, Director of Engineering Segment of Bilfinger Tebodin in Ukraine, comes out with some ways to prevent it in the edition of the Russian media RBK.
'When you start a project, it is crucial to stick to the plan of technical assignment preparation, since every subsequent step depends on the successful completion of the previous one, and timely risk detection and prevention at the concept design stage forms solid basis for the future facility. Let’s review basic types of such risks and actions required to prevent them.
Longer project implementation period
This risk can be caused by failure of suppliers and contractors to meet their obligations, or by unintended replacement of key project participants.
We had an occasion in our practice, when a customer in the food industry was forced to change the general contractor, as the latter was regularly delaying construction and installation works. It increased required time.
Special attention should also be paid to suppliers of unique equipment, since they are very few in the market. Generally, they are often overloaded with orders, and supply of required equipment shall be planned in advance, at the stage of suppliers bidding.
Incorrect financing scheme, late obtainment of specifications for connection to gas or other utilities, low quality of works performed by the general contractor, other force majeure circumstance may all cause delays of project implementation. E. g., our company can face problems with obtaining a permission for connection to a number of utilities (gas, electricity, water). It is a rather long procedure involving significant costs of launch of the facility built. To minimize that risk, pay special attention when signing a contract. It should describe work scopes, key stages, input data in detail. Indicate sanctions for possible deadline violations in advance as well.
Increased project cost
This can happen for several causes:
- late amendment of a finished design basis by the customer;
- incorrect construction cost calculation based on misdefined data;
- unreasonably high requirements of the customer to material quality;
- increase of prices, taxes, duties and other contractual obligations not provisioned before.
We witnessed a real situation when a customer would often change process and layout solutions as late as at the stage of design or detailed design documentation development. It resulted in reduction of budget provided for risk management.
One should note that unexpected budget increase occurs much more rare than delays in the project implementation. To avoid it, project financing should be defined correctly from the beginning. Divide the costs into as much categories as possible, and don’t forget to provide budget for contingencies related to construction and installation works in adverse weather conditions, 24 hours operation of construction companies, or uprise of other needs: changes in national currency exchange rate, unexpected complications by the result of surveys, etc.
Increased operational expenses
Operational expenses are the costs borne by a company to maintain operability of an industrial facility. Correct communication with prospective maintenance organization and selection of efficient and convenient locations for facility equipment are necessary to prevent a boost of such expenses. Operation risks can also arise from unreasonably high requirements to design solutions and lack of due attention to warranty liabilities for materials and works. So you should consider it in advance as well.
Programs for future facility expansion should also be considered in advance:
- at the initial stages, provide for trapdoors and easily detachable structures for entrance of new equipment into the building without dismantling;
- elaborate the design of external networks in the areas reserved for future expansion;
- take account of process equipment installation.
Increased scope of design works
Design work deadlines are often violated due to factors depending directly on the designer or customer:
- late data input from process equipment suppliers, or late submission of specifications for connection to utilities;
- complicated geological conditions unidentified before;
- tedious approval of project-specific specifications or sanitary protection zone project.
- To avoid longer design work period, one shall discuss work scope and input detail level with the customer in advance, and make sure the land plot allocated for construction is duly registered.
Perform a technical evaluation at an early project stage and check for possibilities of connection to power networks. It is also important to select a potential supplier of process line in advance.
Increased cost of design works
Design budget is generally caused by delays in submission of input data for design by the customer or process equipment suppliers. It is difficult to calculate project development budget correctly if the data are not provided in full scope.
Change of equipment or layouts, or low qualification of specialists, insufficient for decision-making at the design stage, affect the cost of works as well, as it does not allow for calculation of the full budget. By selecting an unreliable design services provider, costs can grow twice higher.'