Course: Economic & Technical Evaluations in Engineering & Maintenance

Project Initiation and Development

• Overview 
  • Definitions of terms used in project development, analysis, and management
  • Project types and sizes –
    • Capital projects – Evergreen, expansions/additions, revamps
    • Maintenance projects – Shutdowns; repairs; alterations; replacements and improvements
  • Project definition, scope and drivers
    • Project mission and drivers
    • Phase 1: Concept generation – potential ways of achieving project mission
    • Phase 2: Project definition - one option is selected and developed
    • Phase 3: Project implementation – continues through construction to the hand-over of the completed project
  • Project Management Process
    • Project Planning
    • Project Scheduling
    • Feasibility study - Is the project feasible? How feasible are the alternatives under consideration; feasibility report
    • Cost, timing, performance, effect of organization
  • Key issues in project analysis

• Models of Project Development 
  • Project evolution and life cycle
  • Basic seven phases of a project
  • Common three main phases of a project
    • Front End Loading -FEL (or Front End Definition - FEED) which includes development of the entire detailed plan and project approvals
    • Execution Phase - Detailed engineering; procurement, construction
    • Commissioning, Handover and Start-up phase
  • Project definition
    • Design Basis Document (DBD) – Development guidelines
    • Implementation strategy – owner involvement
    • Procurement policies, procedures and practices
    • Spare parts policies, procedures and practices
    • Detailed (definitive) cost estimate
  • Project development
    • Project Development Plan (PDP) – Preparation Guidelines
    • Conceptual design alternatives
    • Preliminary cost estimates for alternatives
    • Responsibility charting for stakeholders
    • Selection guidelines for final design alternative
    • Preliminary feasibility analysis – technical and economic feasibility
    • Preliminary schedule
  • Project execution and control
    • Project Execution Plan (PEP) – How to develop an effective execution plan
    • Coordination and Control Procedures
    • Detailed Schedule
    • Detailed Engineering
    • Safety Process Hazard Analysis
    • Construction - Logistics, work Permits, Safety
    • Quality Control / Quality Assurance
    • Project Change management System
    • Progress Monitoring and reporting
    • Project Management Tools
  • Workshop 1 - Key principles and guidelines for successful projects
    • Best practices for project success
    • Common causes of project failures
    • Case study – Anatomy of a project
    • Capturing key learnings

Technical Evaluation Analysis

• Project Risk and Contingency Analysis 
  • Key issues in project analysis
    • Market analysis – Supply and demand
    • Technical analysis – Technical viability; sensible choices
    • Financial analysis – financial viability; return on investment; risk
    • Economic analysis – social cost-benefit
    • Environmental analysis – likely ecological damage; restoration measures/costs
    • Risk analysis – Levels of risk associated with the project
  • Analysis of project technical and engineering aspects
    • Purpose of technical analysis
    • Technical viability
      • Design basis
      • Existing and proven technologies
      • New and developmental technologies
      • Regulatory approvals – lead time, resources
      • Risk considerations – obsolescence, continuous technical support,
    • Sensible choices
      • Location
      • Process, equipment, methods, procedures
      • Size - optimal scale of operation
      • Constructability, operability and maintainability
      • Availability of human resources, power, and other inputs
      • Realistic work schedule
  • Applicable regulations, codes, standards - design and construction, HSE
  • Mechanical integrity, management of change

• Environmental Analysis 
  • Consideration on environmental aspects
    • What is the likely damage caused by the project to the environment?
    • What is the cost of restoration measures required to ensure that the damage in the environment is contained within acceptable limits?
  • Applicable regulations and specifications
  • Due diligence

• Project Risk Considerations 
  • Types of Risks Associated with Projects
    • Market risk
    • Human resource
    • Financial resources
    • Technology risk
    • Management risk
    • Timing
    • Intellectual property right issues
    • Regulation risks
  • Risk assessment methods and recommended practices
  • Risk Management and Contingency
    • Level of uncertainty in project life cycle
    • Risk analysis and mitigation measures
    • Contingency

• Workshop 2 – Technical Evaluation of Projects 
  • Case study – Technical evaluation of a capital project

Economic Evaluation Analysis

• Objectives of Economic Evaluation Analysis 
  • Definitions and overview
  • Typical categories of engineering economic decisions
    • New Product and Product Expansion
    • Equipment and Process Selection
    • Equipment Replacement
    • Cost Reduction
    • Service Improvement

• Economic (Financial) Evaluation 
  • Introduction
  • Basic concepts of economic evaluation
  • Economic evaluation methods – static and dynamic
    • Simple payback
    • Benefit-cost ratio (BCR)
    • Net Present Value (NPV)
    • Internal rate of return (IRR)
  • Capital equivalent of energy and maintenance savings

• Principles of Time Value of Money and the Discount Rate 
  • Discounted cash flow (DCF) calculation - Definitions and premises
  • Project Cash Flow Components
  • Discounting and time-value considerations
  • Distinguishing cash flow and other measures of profitability
  • Cost of capital and inflation issues
  • Capital budgeting techniques and best practices
  • Methods of computing time-value of money
    • The algebraic (or formula) method
    • The financial table method
    • The financial calculator method

• Methods of Ranking Investment Proposals 
  • Non-Discounted Cash Flow Methods
    • Payback method (or Payback Period)
    • Accounting rate of return (ARR)
  • Discounted Cash Flow Methods
    • Net Present Value Method (NPV)
    • Internal rate of return (IRR)
  • Profitability index (PI)

• Workshop 3 – Economic Evaluation of Projects 
  • Case study – Economic evaluation of a capital project

Business Focused Facilities

• Business-Focused Facilities (BFF) 
  • Economic interpretation of engineering work
  • Fundamental BFF principles
    • Total cost (full cycle) perspective
    • Common and clear goals
    • Adaptive process and change management
    • Teamwork
    • Continuous improvement

• Life-Cycle (Total) Cost Analysis 
  • Basics of life cycle cost (LCC) analysis
  • LCC Models - SAE model
  • Life-cycle management (value management)
    • Renewal/replacement intervals,
    • Servicing costs,
    • Failure consequences,
    • Asset redundancy,
    • Maintenance strategies,
    • Energy efficiency,
    • Design life service factor

• Effective Life-Cycle Management Tools 
  • Engineering economics
  • Remaining life estimates
  • Statistical analysis,
  • Opportunity costing
  • LCC Calculation Procedures

• Project Cost Estimating 
  • Types of estimates, accuracy
  • Estimating methods
  • Cost indices and economic indicators
  • Direct and indirect costs
  • Computer based estimating

• Equipment Sizing and Costs 
  • Power Sizing Model
  • Rough estimates
  • Semi-detailed estimates
  • Detailed estimates

• Workshop 4 – Cost Estimating 
  • Case studies – Project cost estimates using different methods

Evaluation of Maintenance Projects

• Types of Maintenance Projects  
  • Complete turnarounds – extent, frequency
  • Opportunistic minor turnarounds
  • Specialized repair methods
  • Replacement in kind and improvement opportunities
  • Specialized Inspection projects – Application and frequency

• Concept of Component Life 
  • Introduction
  • Physical life
  • Economic life
  • Technical life – technical obsolescence

• Technical Evaluation of Maintenance Projects 
  • Key project characteristics and special requirements
    • Significance of schedule and maintainability – optimum cost or least downtime
    • Availability of human resources
    • Constructability considerations
  • Fitness-for-service assessments (FFS
    • Basics of FFS
    • Run/repair/replace decisions
  • Alternative repair strategies and methods
    • Temporary repairs
    • Permanent repairs
    • Alternate repair technologies and procedures
  • Management of change
    • Basics of management of change
    • Impact of maintenance projects on mechanical integrity and reliability
    • Regulatory, codes and standards requirements

• Workshop 5 – Evaluation of Maintenance Projects