Buying a engineering project is different from buying an equipment or machinery. Generally, an engineering project is a fixed infrastructure having various kinds of interdisciplinary systems and works integrated in to one well defined system engineered and built at a specified location different from a pre-existing manufacturing facility. Engineering projects may or may not contain assemblies of various kinds of pre-fabricated equipment and manufactured machinery integrated with various kinds of constructions and erections in situ (on site). On the other hand, an equipment or machinery may be entirely manufactured by the supplier at his own manufacturing facility and supplied at the specified location of the purchaser either as a fully working and tested item or in parts to be assembled and tested at the purchaser's specified location.
Equipment and machinery involving complex engineering and projects involving engineering may both cost millions of rupees and may take a few months to a couple of years for completion after placement of order or signing of contract.
In the case of high cost manufactured machinery, such as airplanes, locomotives, ships, switch gears, hospital equipment, etc the purchaser has to take decisions based on the design features and cost data as available from the manufacturers. In this case, the manufacturers are presumed to be more knowledgeable in the design and other technological details of the equipment and the purchasers are to take the decisions of procuring based on the usefulness, serviceability, initial cost and recurring costs, etc.In this case, the purchaser also has the options to know about the performance of similar machines elsewhere and also about the reputation of the manufacturer in meeting with the commitments.
1. Formulation of the Project which is Feasible: This has to be undertaken by the investor either by himself or by a team of engineers on his behalf, generally called the Client's Consultants. The job involves the feasibility studies and putting the relevant information in the form of a report called the Techno-Economic Feasibility Report (TEFR). This phase is one of the most vital stages of any engineering project. A project proceeded without carrying out a proper feasibility study is likely to meet with failure during the course of implementation. Here, project failure means project not getting implemented in the pre-specified time or within the pre-determined cost or when the project does not yield the pre-determined benefits in totality. It is better to go a bit slow during the project formulation stage because hurries to get the project report made by the formulation engineers or to put pressure on them to get the report made quickly would make the feasibility report with many assumptions, some widely differing from actual realities. A well experienced team of experts could study the feasibility of a project and prepare the report in about 3-6 months provided they have access and facilities to gather all the relevant information in time. For certain kind of projects, the project formulation time period could be even longer. If a project is found techno-economically feasible, the facts have to be spelled out in the report in detail so that the project could be audited for success or failure later. THe TEFR forms the bench mark for project audit when money is spend for the project implementation. The role of the purchaser's engineering consultants is very vital at this stage. Any inexperience or lack of expertise on their part would pave a way for possible project failure.
2. Decisions for Making Investment in the Project : This has to be done by the investor or his authorized representative who is empowered to make capital investment decisions. It is presumed that the purchaser has made all efforts to understand the TEFR and all the salient points made by the project formulation engineers as reported in the TEFR. The TEFR also gives the purchaser the inputs to assess the confidence of the formulation engineers in the success of the project. Hence, it would be a good idea to have a detailed interaction with the formulation team before the project is proceeded with.
3. Preparation of the Tender Specifications for the Project: It is a good idea to specify the number of contract packages for a project in the TEFR with their assessed costs. It is also a good idea to discuss the overall scheme of the project with a few experts in responsible positions in a few such companies who have the requisite expertise in undertaking similar kind of projects with more or less similar engineering or technology. These interactions should positively be commanded by the engineering group leader from the purchaser's side who is well versed with all aspects of the purchaser's requirements and limitations. These interactions should provide the purchaser's side the key inputs with regard to the present market situation with regard to availability of key equipment, project mobilization issues, cost issues, logistics, lead time for manufacture of materials and equipment, etc. This would also help the purchaser's side to frame up the best contract packages so that the purchaser gets the best competitive prices and the best execution strategies. A time period of three to four months would be needed to complete this for a medium scale project involving a few hundred million rupees. The tender documents should preferably contain the eligibility criteria (EC) for the bidders who are desirous to participate in the tender for doing the work as the contractor for any specified package. This is required when the purchaser is a public authority responsible for public funds in any way. EC has to be made after a thorough preliminary evaluation of the available vendors and should be made in such a way that the best ones are qualified and those without the essential capabilities to organize, manage and execute the contract are not qualified. How to get the good EPC contractor and how to weed out the bad ones depends much on the manner in which EC is defined by the purchaser.
4. Tendering and Tender Evaluation: In project contracts involving multidisciplinary engineering and technology, it would not be possible to evaluate the techno-commercial aspects of the bids made by the bidders easily. If the technical specifications are made perfectly with enough technical guidance to the bidders and with little chances of much deviations after award of the work, there is not much necessity for having detailed interactions with the bidder at this stage. The bidders have to confirm the techno-commercial conditions of the purchaser as defined in the tender documents to be deemed as at par, provided the qualify the EC. In such a scenario, the tender can be finalized on the lowest price bid. However, in many cases, this does not happen this way. Most often, the tender documents as made by the purchaser give a chance for the bidders to rake up techno-commercial issues for much debate. If this happens, the finalization of the bids could become a lengthy process involving many months. It can also make substantial changes in the scope of the tender and the costs. Hence, this should be avoided by seeing that the tender documents and specifications are prepared with confidence and without gross technical errors or scope for better alternatives. A project tender after tendering should be finalized and contract awarded within the shortest period not exceeding about three months. If this cannot be done, there is all likelihood that the project may linger during execution proceeding towards failure.
5. Award of Contract : Normally, signing of the contract for the packages of a project in reality enforces the real commitment from the sides of the investor and the contractor both towards the implementation of the project as planned. The date of signing of the project contract is to be reckoned as the the zero date for actual implementation of a project. Once the contract agreement is legally signed, one can presume the project to commence activities towards completion. However, for poorly planned projects, this may not be so. In India, project completion as per contract agreement rarely happens in the public domain due to poor planning and formulation making ample opportunities for litigation and arbitration at a later stage. Bagging of contracts by bidders who are not actually eligible to undertake the work also makes things complicated as far as the project progress and quality are concerned.
6. Design and Engineering Stage: The details of the project actually getting implemented are reflected in the design and engineering drawings and documents prepared by the contractors tailored for the the specific project after the award of contract. The contractors could have their own concepts about the scope of the works involved because that was what helped them in negotiating the case during the tender stage. However, normally no work could actually be implemented at site unless the contractors get their design and engineering drawings of the project checked and approved by the purchaser or his engineering experts ( generally the purchaser's engineering consultants). At this stage, two engineering groups, one from the contractors' side and another from the purchaser's side are fully involved. While the contractor's side tries to create the project designs and its minutest details according to the overall goal of the project as per the contract agreement, the purchaser's side checks them for engineering soundness, conformity to scope as agreed, conformity to engineering standards and safety, etc. This stage is the real test of skills and expertize of engineers from both sides. When both sides are skillful and competent there is all likelihood that the project as built would be sound and fit and would give satisfaction to both the the purchaser, the users and the contractors. Unfortunately, in India the importance of the engineering groups at the side of the EPC (engineering, procurement, construction) contractor and the purchaser (purchaser's engineering consultants) is not well understood by the decision makers at the top levels at both sides. Many so called EPC contractors do not have any competent engineering groups at their side and they try to manage the design and engineering by outsourcing the work to free lancers and other such groups who are ill prepared or incompetent do undertake such works. This in turn makes the work of the purchaser's consultants difficult and thankless making the latter blamed for the delays in getting the contractor's drawings approved. Incompetent engineers doing this work for the purchaser also makes things much complicated. While an EPC contractor with a competent design engineering group could get his drawings approved at the initial submission itself, one depending on outsourcing the same to splinter groups could cause inordinate delays and also incur unnecessary costs due to excessive factors of engineering safety due to ignorance. The process of design and engineering is so complex that even many top technocrats do not understand it well unless they had previous experience in this line of engineering work. Incidentally, the best technocrats would be those who had a chance to get some years of experience in this kind of engineering work involving project formulation and project design and engineering ! Unfortunately, this breed of engineers are on a declining trend in India and migration from this field to other fields of engineering seldom takes place due to the ignorance of human resource planners in this field. Design and engineering can take as much as 25-40 % time of a project's overall time schedule. Almost all decisions involving the project features and quality aspects take place during design and engineering stage.
7. Civil Engineering : Most engineering projects involve many works of civil engineering. These are site surveys, site preparations, earth works, Reinforced Cement Concrete (RCC) works, piping and sewer works, construction of buildings, equipment foundations, roads, tanks, etc. These works are to be as per the approved civil engineering drawings of the project. Civil engineering also involves debris clearance, painting, and many other such works. Services of experienced civil construction engineers, supervisors and workmen are all required in making the civil works proceed in a sound manner. In India, now-a-days, there is acute shortage of well trained man power in this area in many regions causing uneven quality of civil works from place to place.
8. Procurement of Equipment and Machinery: Many engineering projects involve procurement of tailor-made equipment and machinery from various manufacturers. These could be process machinery such as pumps, valves, fans, compressors, blowers, motors, conveyors, crushers, filters, dust catchers, etc or equipment such as tanks, vessels, bins, pipelines, boilers, etc or electrical equipment such as switch gears, motor controls, cables, etc or instrumentation and automation equipment or any other such specialized equipment or machinery. These are to be procured to suit the specific purpose of the project scheme from specialized industrial equipment suppliers based on detailed specifications finalized during the design and engineering stage. Experienced engineers well versed in inspection, testing, erection and commissioning of these specialized equipment would determine the success of these machinery. Many times it would be necessary to organize training of the purchaser's personnel who are required to operate and maintain these equipment and machinery after the project is commissioned.
9. Erection of Equipment : Many activities at site go concurrently. Erection of equipment may go concurrently with the construction of the building or electrical cabling works or piping works. However, these have to be micro planned in such a way that no one activity is counter productive to another. Modern project management tools help the project managers and the site engineers in this regard. Now-a-days many software tools that make the Project Engineering Review Techniques (PERT) and Critical Path Methods (CPM) easier are available for those involved in engineering project implementation. However, in India, due to various reasons such professional tools are not fully utilized for taking real benefits in projects in the public domain.
10. Testing and Commissioning : A well planned project would not be difficult to be tested and commissioned smoothly. However, most often much complications do take place at this stage which include fatal accidents too. This reflects poor project management with regard to quality of work. Often many equipment get to damaged conditions due to poor handling at site calling for emergency repairs even before the equipment gets into action. Proper sequencing of work is very important to ensure a trouble free testing and commissioning. Experienced testing and commissioning engineers also make much difference in this.
11. Performance Guarantee Tests and Handing Over : This is the stage at which the project is inspected finally for its overall fulfilment of agreed objectives and performances. The purchaser and contractor make documents recording the formal handing over and taking over of the new assets as created in the project. In a well managed project this is a happy occasion while those mismanaged projects it may not happen and lead to future litigation between the two sides.
12. Post Completion Audits : This exercise is not normally done by many. However, it is a good practice to do it and observe the projects performance, quality and such other objectives with what was speculated initially during the formulation stage. If the project is observed as fulfilling the feasibility stage objectives with regard to its functions, costs, quality, time of completion, etc then the engineering project could be considered as a success. This stage is the last of the Project Life Cycle. The purchaser should also ensure archiving all records relating to the project from formulation stage to completion audit stage for the future references.
The above is the general activity sequence of any engineering project from concept to commissioning. However, depending on the actual scope and technical content this could have some differences. Again, each project life cycle stages would involve much more detailed activities involving several groups and individuals making a large scale engineering project much complex.
Engineering projects involve large scale transactions of money and have much bigger stakes for both the purchasers and the contractors. Engineering projects involve multidisciplinary skills and expertise. Project execution sites are like war zones which might cause fatalities if proceeded without ensuring proper care and safety norms. But in today's world, no development is possible without successful implementation of various kinds of projects involving multidisciplinary engineering.
Countries like India with high population and population growth, demand for more and more infrastructural facilities including production facilities keep growing and therefore there would be great demand for people who are well versed in all aspects of project formulation and implementation. It may not be in the interest of India to depend on foreign know-how and skills always in this context. [You may see this blog also in this context]
In the case of high cost manufactured machinery, such as airplanes, locomotives, ships, switch gears, hospital equipment, etc the purchaser has to take decisions based on the design features and cost data as available from the manufacturers. In this case, the manufacturers are presumed to be more knowledgeable in the design and other technological details of the equipment and the purchasers are to take the decisions of procuring based on the usefulness, serviceability, initial cost and recurring costs, etc.In this case, the purchaser also has the options to know about the performance of similar machines elsewhere and also about the reputation of the manufacturer in meeting with the commitments.
However, in the case of engineering projects, this scenario is entirely different. For implementation of a project the following stages, called the Project Life Cycle (PLC), are involved:
1. Formulation of the Project which is Feasible: This has to be undertaken by the investor either by himself or by a team of engineers on his behalf, generally called the Client's Consultants. The job involves the feasibility studies and putting the relevant information in the form of a report called the Techno-Economic Feasibility Report (TEFR). This phase is one of the most vital stages of any engineering project. A project proceeded without carrying out a proper feasibility study is likely to meet with failure during the course of implementation. Here, project failure means project not getting implemented in the pre-specified time or within the pre-determined cost or when the project does not yield the pre-determined benefits in totality. It is better to go a bit slow during the project formulation stage because hurries to get the project report made by the formulation engineers or to put pressure on them to get the report made quickly would make the feasibility report with many assumptions, some widely differing from actual realities. A well experienced team of experts could study the feasibility of a project and prepare the report in about 3-6 months provided they have access and facilities to gather all the relevant information in time. For certain kind of projects, the project formulation time period could be even longer. If a project is found techno-economically feasible, the facts have to be spelled out in the report in detail so that the project could be audited for success or failure later. THe TEFR forms the bench mark for project audit when money is spend for the project implementation. The role of the purchaser's engineering consultants is very vital at this stage. Any inexperience or lack of expertise on their part would pave a way for possible project failure.
2. Decisions for Making Investment in the Project : This has to be done by the investor or his authorized representative who is empowered to make capital investment decisions. It is presumed that the purchaser has made all efforts to understand the TEFR and all the salient points made by the project formulation engineers as reported in the TEFR. The TEFR also gives the purchaser the inputs to assess the confidence of the formulation engineers in the success of the project. Hence, it would be a good idea to have a detailed interaction with the formulation team before the project is proceeded with.
3. Preparation of the Tender Specifications for the Project: It is a good idea to specify the number of contract packages for a project in the TEFR with their assessed costs. It is also a good idea to discuss the overall scheme of the project with a few experts in responsible positions in a few such companies who have the requisite expertise in undertaking similar kind of projects with more or less similar engineering or technology. These interactions should positively be commanded by the engineering group leader from the purchaser's side who is well versed with all aspects of the purchaser's requirements and limitations. These interactions should provide the purchaser's side the key inputs with regard to the present market situation with regard to availability of key equipment, project mobilization issues, cost issues, logistics, lead time for manufacture of materials and equipment, etc. This would also help the purchaser's side to frame up the best contract packages so that the purchaser gets the best competitive prices and the best execution strategies. A time period of three to four months would be needed to complete this for a medium scale project involving a few hundred million rupees. The tender documents should preferably contain the eligibility criteria (EC) for the bidders who are desirous to participate in the tender for doing the work as the contractor for any specified package. This is required when the purchaser is a public authority responsible for public funds in any way. EC has to be made after a thorough preliminary evaluation of the available vendors and should be made in such a way that the best ones are qualified and those without the essential capabilities to organize, manage and execute the contract are not qualified. How to get the good EPC contractor and how to weed out the bad ones depends much on the manner in which EC is defined by the purchaser.
4. Tendering and Tender Evaluation: In project contracts involving multidisciplinary engineering and technology, it would not be possible to evaluate the techno-commercial aspects of the bids made by the bidders easily. If the technical specifications are made perfectly with enough technical guidance to the bidders and with little chances of much deviations after award of the work, there is not much necessity for having detailed interactions with the bidder at this stage. The bidders have to confirm the techno-commercial conditions of the purchaser as defined in the tender documents to be deemed as at par, provided the qualify the EC. In such a scenario, the tender can be finalized on the lowest price bid. However, in many cases, this does not happen this way. Most often, the tender documents as made by the purchaser give a chance for the bidders to rake up techno-commercial issues for much debate. If this happens, the finalization of the bids could become a lengthy process involving many months. It can also make substantial changes in the scope of the tender and the costs. Hence, this should be avoided by seeing that the tender documents and specifications are prepared with confidence and without gross technical errors or scope for better alternatives. A project tender after tendering should be finalized and contract awarded within the shortest period not exceeding about three months. If this cannot be done, there is all likelihood that the project may linger during execution proceeding towards failure.
5. Award of Contract : Normally, signing of the contract for the packages of a project in reality enforces the real commitment from the sides of the investor and the contractor both towards the implementation of the project as planned. The date of signing of the project contract is to be reckoned as the the zero date for actual implementation of a project. Once the contract agreement is legally signed, one can presume the project to commence activities towards completion. However, for poorly planned projects, this may not be so. In India, project completion as per contract agreement rarely happens in the public domain due to poor planning and formulation making ample opportunities for litigation and arbitration at a later stage. Bagging of contracts by bidders who are not actually eligible to undertake the work also makes things complicated as far as the project progress and quality are concerned.
6. Design and Engineering Stage: The details of the project actually getting implemented are reflected in the design and engineering drawings and documents prepared by the contractors tailored for the the specific project after the award of contract. The contractors could have their own concepts about the scope of the works involved because that was what helped them in negotiating the case during the tender stage. However, normally no work could actually be implemented at site unless the contractors get their design and engineering drawings of the project checked and approved by the purchaser or his engineering experts ( generally the purchaser's engineering consultants). At this stage, two engineering groups, one from the contractors' side and another from the purchaser's side are fully involved. While the contractor's side tries to create the project designs and its minutest details according to the overall goal of the project as per the contract agreement, the purchaser's side checks them for engineering soundness, conformity to scope as agreed, conformity to engineering standards and safety, etc. This stage is the real test of skills and expertize of engineers from both sides. When both sides are skillful and competent there is all likelihood that the project as built would be sound and fit and would give satisfaction to both the the purchaser, the users and the contractors. Unfortunately, in India the importance of the engineering groups at the side of the EPC (engineering, procurement, construction) contractor and the purchaser (purchaser's engineering consultants) is not well understood by the decision makers at the top levels at both sides. Many so called EPC contractors do not have any competent engineering groups at their side and they try to manage the design and engineering by outsourcing the work to free lancers and other such groups who are ill prepared or incompetent do undertake such works. This in turn makes the work of the purchaser's consultants difficult and thankless making the latter blamed for the delays in getting the contractor's drawings approved. Incompetent engineers doing this work for the purchaser also makes things much complicated. While an EPC contractor with a competent design engineering group could get his drawings approved at the initial submission itself, one depending on outsourcing the same to splinter groups could cause inordinate delays and also incur unnecessary costs due to excessive factors of engineering safety due to ignorance. The process of design and engineering is so complex that even many top technocrats do not understand it well unless they had previous experience in this line of engineering work. Incidentally, the best technocrats would be those who had a chance to get some years of experience in this kind of engineering work involving project formulation and project design and engineering ! Unfortunately, this breed of engineers are on a declining trend in India and migration from this field to other fields of engineering seldom takes place due to the ignorance of human resource planners in this field. Design and engineering can take as much as 25-40 % time of a project's overall time schedule. Almost all decisions involving the project features and quality aspects take place during design and engineering stage.
7. Civil Engineering : Most engineering projects involve many works of civil engineering. These are site surveys, site preparations, earth works, Reinforced Cement Concrete (RCC) works, piping and sewer works, construction of buildings, equipment foundations, roads, tanks, etc. These works are to be as per the approved civil engineering drawings of the project. Civil engineering also involves debris clearance, painting, and many other such works. Services of experienced civil construction engineers, supervisors and workmen are all required in making the civil works proceed in a sound manner. In India, now-a-days, there is acute shortage of well trained man power in this area in many regions causing uneven quality of civil works from place to place.
8. Procurement of Equipment and Machinery: Many engineering projects involve procurement of tailor-made equipment and machinery from various manufacturers. These could be process machinery such as pumps, valves, fans, compressors, blowers, motors, conveyors, crushers, filters, dust catchers, etc or equipment such as tanks, vessels, bins, pipelines, boilers, etc or electrical equipment such as switch gears, motor controls, cables, etc or instrumentation and automation equipment or any other such specialized equipment or machinery. These are to be procured to suit the specific purpose of the project scheme from specialized industrial equipment suppliers based on detailed specifications finalized during the design and engineering stage. Experienced engineers well versed in inspection, testing, erection and commissioning of these specialized equipment would determine the success of these machinery. Many times it would be necessary to organize training of the purchaser's personnel who are required to operate and maintain these equipment and machinery after the project is commissioned.
9. Erection of Equipment : Many activities at site go concurrently. Erection of equipment may go concurrently with the construction of the building or electrical cabling works or piping works. However, these have to be micro planned in such a way that no one activity is counter productive to another. Modern project management tools help the project managers and the site engineers in this regard. Now-a-days many software tools that make the Project Engineering Review Techniques (PERT) and Critical Path Methods (CPM) easier are available for those involved in engineering project implementation. However, in India, due to various reasons such professional tools are not fully utilized for taking real benefits in projects in the public domain.
10. Testing and Commissioning : A well planned project would not be difficult to be tested and commissioned smoothly. However, most often much complications do take place at this stage which include fatal accidents too. This reflects poor project management with regard to quality of work. Often many equipment get to damaged conditions due to poor handling at site calling for emergency repairs even before the equipment gets into action. Proper sequencing of work is very important to ensure a trouble free testing and commissioning. Experienced testing and commissioning engineers also make much difference in this.
11. Performance Guarantee Tests and Handing Over : This is the stage at which the project is inspected finally for its overall fulfilment of agreed objectives and performances. The purchaser and contractor make documents recording the formal handing over and taking over of the new assets as created in the project. In a well managed project this is a happy occasion while those mismanaged projects it may not happen and lead to future litigation between the two sides.
12. Post Completion Audits : This exercise is not normally done by many. However, it is a good practice to do it and observe the projects performance, quality and such other objectives with what was speculated initially during the formulation stage. If the project is observed as fulfilling the feasibility stage objectives with regard to its functions, costs, quality, time of completion, etc then the engineering project could be considered as a success. This stage is the last of the Project Life Cycle. The purchaser should also ensure archiving all records relating to the project from formulation stage to completion audit stage for the future references.
The above is the general activity sequence of any engineering project from concept to commissioning. However, depending on the actual scope and technical content this could have some differences. Again, each project life cycle stages would involve much more detailed activities involving several groups and individuals making a large scale engineering project much complex.
Engineering projects involve large scale transactions of money and have much bigger stakes for both the purchasers and the contractors. Engineering projects involve multidisciplinary skills and expertise. Project execution sites are like war zones which might cause fatalities if proceeded without ensuring proper care and safety norms. But in today's world, no development is possible without successful implementation of various kinds of projects involving multidisciplinary engineering.
Countries like India with high population and population growth, demand for more and more infrastructural facilities including production facilities keep growing and therefore there would be great demand for people who are well versed in all aspects of project formulation and implementation. It may not be in the interest of India to depend on foreign know-how and skills always in this context. [You may see this blog also in this context]
Great blog and great postings! Readers might also enjoy Steve Mackay’s engineering blog at http://www.idc-online.com/Engineering-Blog and the free technical resources available there.
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Regards,
saleem@xsgroup.in
8593866871