At the annual Construction Users Roundtable national conference held in Arizona earlier this year, Ed Merrow, president of Independent Project Analysis, spoke frankly about what he sees as a serious dilemma facing the industrial construction sector.
“We are facing a profound crisis in engineering that is making it very difficult to do these complex, engineering-intensive projects successfully,” he said, according to a report in Engineering News-Record. The engineering error rate, including “Chemical Engineering 101-type errors,” has doubled since 2006, he said.
As highlighted in the current issue of 10/12 Industry Report, out of more than 3,700 industrial projects studied by IPA, more than a third of those worth less than $750 million suffered serious problems such as significant schedule delays, major cost overruns and post-construction operational problems. Almost two-thirds of larger projects were said to have similar issues.
“We, as owners, are a big chunk of the problem,” John Pemberton, vice president of Intel’s technology and manufacturing group, said at the Construction Users Roundtable conference. “We write the contracts, we set up how the game is going to get played, and we often set up adversarial relationships with many of the people who are trying to do good work on our behalf.”
Andras Marton, hydrocarbon processing and transportation manager with Independent Project Analysis, wasn’t as blunt as Merrow when interviewed by 10/12 Industry Report. But he agreed that many of the problems are caused by the owner’s front-end engineering work.
“I think most of the industry sees this as a field productivity loss,” he says; that is, “our laborers are not doing work as efficiently as they used to.”
“But in reality, all that can be tracked back to how we did the planning,” Marton adds.
Of course, both owners and contractors often are eager to get started so they can create cash flow, please customers or serve corporate goals. But with chemical plants and refineries, excessive capital spending generally is a much greater threat to profitability than falling behind schedule, he says. Since the planning phase usually only represents 4%-6% of total cost, smart companies aren’t afraid to spend an extra month or two in that phase.
“If you want to go fast, spend time in the beginning to plan how you want to go fast,” Marton says.
Read the full feature. Send your comments to editor@1012industryreport.com. And be sure to check out more stories from the current issue of 10/12 Industry Report, including the cover story in which the magazine sits down with each of the four leading candidates for governor to discuss their plans for addressing industrial issues if elected.
