Albert Jurgens
Commercial Director
Insights
How to cost-effectively implement conversion and life extension projects
The risk that conversion and life extension projects of naval vessels or offshore ships will end up costing (much) more than intended is great. How do you ensure that these projects are carried out cost-effectively, within the set planning? How do you manage all risks? And which 7 fatal mistakes should you really avoid? Nevesbu gives practical advice from a technical perspective for the cost-effective execution of future projects.
Good preparation is half the work and within 5% of the total value
Thorough preparation and a phased approach are crucial to the success of a project. A thorough Front-End-Engineering (FEED) study before the start of each project is not a luxury, but a necessity. Formal go/no go moments at the end of each project phase help to manage risks in every phase of the project. Only when all steps have been completed satisfactorily and the business case criteria is met, can the next phase be started. Adequate execution of the first three project phases (feasibility study, preliminary design and basic design) is directly related to the risk of exceeding the project planning and budget. Since the total cost of the first three phases is generally within 5% of the total value of the project, this is a small price to pay to mitigate the risk.
During planning, the interdependencies between the various aspects in a project, such as engineering, procurement, licencing, obtaining approvals, fabrication and decision processes should be considered. Apply a realistic and integrated plan during project definition and update this regularly; avoid ‘wish’ planning. Organise collaboration between all involved parties, defining clearly the project parties and their responsibilities, integration of procurement and engineering (with due consideration for special engineered components), and proportional shared risks. And always remember: ‘In theory, theory and practice are the same. In practice, they are not’.
Avoid the 7 sorry mistakes described by Merrow in his book Industrial Megaprojects
1. I want to keep it all!
2. I want it NOW!
3. Don’t worry; we’ll work out the details of the deal later.
4. Why do we have to invest so much up-front?
5. We need to shave at least 20% off the costs!
6. The contractors should carry that risk; they’re doing the project!
7. Firing the project manager when timely delivery is not fulfilled!
Be aware of the risks and try to limit them as much as possible when straying from the above.
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