The age old problem of managing the civil works on industrial projects became apparent yet again at the recent PowerGen Europe 2008 exhibition in Milan on June 3-5th, 2008.
The usual comment received from process automation people regarding civil works is that it always goes over budget and causes problems. Civil works seem to be regarded as the necessary evil in industrial power plant projects. The same applies to other industries, such as paper manufacturing industry: Construction of paper mills and pulp mills.
From my experience in being closely involved in industrial projects, not enough regard (read resources and planning) is given to information and cost management of civil works. Better results can be achieved by giving more consideration to increased productivity through efficiency, planning and control.
Because the civil works only plays a relatively small part in the overall cost of the investment of a new plant, and the project is managed by process automation people, the civil works is not considered as an important factor. A good example of this attitude and thinking is a comment I received a few years ago when I was promoting cost control services for civil works to an industrial developer. The reply was that because the civil works only contributes 5% of the total investment we don’t need cost control.
Fine, but consider the following equation:
- The civil works contribute 5-20% of the total project costs on a new industrial plant.
- If the civil works contributes 20% of the total project cost, and the civil works budget is doubled (and I’ve seen this happen), it will have a profound influence on the project as a whole.
- Even if the civil works amounts to 5% of the total project cost, if the total project investment is, say 300 million euro’s, the total value of civil works is 15 million euro’s.
- Even a 10% saving on civil works costs will save 1,5 million euro’s on the above calculation.
- If 300,000 euro’s is spent on cost and construction information management and control to produce a saving of 1,5 million euro’s, I would consider it a good return on investment.
- What if the equation is 20% of a total project cost of 500 million euro’s and the savings produced on civil works is 20% – the saving is 20 million euro’s – you can have quite a number of people looking after information and cost management for that amount of money.
From my experience, I calculate that for every euro spent on good information and cost management of civil works, 5-10 euro’s can be saved. The benefit is five- to ten-fold.
Is this not good value for money? Why not invest in it?
Taking this further, good information management can produce added benefits by also improving time and quality management of civil works.
Filed under: Construction Accounting & Business, Construction Data Technology, Construction Process Improvement, Construction Quantity Surveying, Construction Scheduling, Industrial Construction | Tagged: civil works, cost management, heavy industry, information management, Powergen, return on investment, ROI, savings
Janne Saarikko
Teppo Grén