IPA Terms and Metrics Defined
What is Front-End Loading (FEL)? What are Value Improving Practices (VIPs)? High-level definitions for frequently used IPA terms, capital project driver and outcome metrics, and IPA membership consortia are included here.
A Business and Engineering Alignment Meeting (BEAM) is a structured and repeatable process, usually done as a workshop, that brings together the business sponsor and core project team members to align on the project parameters. Projects that employ this core practice have better clarity of business objectives and clear trade-offs among cost, schedule, and functionality, which result in better capital efficiency. Project organizations that routinely employ BEAM create more value for the project sponsors.
The Carbon and Capital Effectiveness (CCE) metric empowers project teams to present the business with an optimal balance between cost and carbon competitiveness for a development concept. Teams use it to understand the tradeoffs between carbon intensity and facility cost values. They can also weigh how individual low-carbon opportunities compare with other opportunities in their company’s portfolio and other similar opportunities in the industry.
Cost contingency is the estimated cost of known unknowns included as a line items in a project cost estimate. IPA’s Contingency Allowance is a statistical prediction of the contingency required to achieve various levels of confidence of a cost overrun or underrun. Contingency predictions, or benchmarks, are based on analysis of past projects that includes important project drivers and key project characteristics.
This project outcome metric is a measure of the difference between a project’s final capital cost and the estimated capital cost at authorization, controlled for escalation and currency exchange rates.
This project outcome metric is a quantitative measure of a project’s total cost relative to industry projects with similar characteristics. A high cost index (greater than 1.00) indicates overspending; a low cost index (less than 1.00) indicates cost competitiveness.
A sub-committee of the Industry Benchmarking Consortium (IBC), the Cost Engineering Committee (CEC) focuses on advancing the owner cost engineering and project controls capabilities of the world’s leading industrial companies in capital-intensive sectors, such as Hydrocarbon Processing & Transportation; Chemicals & Petrochemicals; Life Sciences; Mining, Minerals & Metals; Food & Consumer Products; Pulp & Paper; and Power & Infrastructure.
Front-End Loading (FEL) is a process by which a company translates its business and technology opportunities into capital projects. The objective of FEL is to gain a detailed understanding of the project to minimize the number of changes during later project execution phases. FEL proceeds until the “right” project is selected and is not finished until a full design basis package has been completed. The quality of FEL is a key indicator of project outcomes.
The FEL Index is IPA’s quantitative measure of the quality of project definition calculated at any project stage from conceptual design through the completion of front-end deliverables and prior to project authorization. The FEL Index measures the risk a project faces of meeting the planned project outcomes and is highly predictive of project outcomes
The Industry Benchmarking Consortium (IBC) is a voluntary association of owner firms in the chemicals, pharmaceutical, consumer products, petroleum, and minerals processing industries that use IPA’s quantitative benchmarking approach. The members exchange data, information, and metrics to improve the effectiveness of their project systems.
This team turnover metric measures if and when turnover of the project manager, lead engineering manager, and/or construction manager occurred during project development and execution. IPA’s analysis shows the measurable detrimental effect of key team member turnover on project performance, particularly during project execution.
This metric is defined as any deviation from the project’s planned configuration, objectives, or desired functionality that takes place after authorization and has a significant effect on the project cost or schedule. The more late change on a project, the worse the project outcomes.
This project outcome metric is a measurement of the early operational performance, calculated based on the average production rate, key project characteristics, and project’s early operational performance.
Project benchmarking can be defined as the ongoing search for Best Practices that produce superior performance when adapted and implemented in one’s organization. The ultimate goal of benchmarking is continuous improvement of capital project systems, individual projects, and targeted functional activities.
The Project Control Index (PCI) measures the set of practices by which a project team manages (or plans to manage) cost and schedule performance during FEL and project execution. A better Project Control Index is statistically linked with better project outcomes.
This project outcome metric is a standardized safety calculation used to compare the safety performance of companies within Industry, which is calculated using both recordable and DART incidents.
This project outcome metric is the measure of the difference between a project’s authorized and actual execution (engineering and construction) durations.
This project outcome metric is a quantitative measure of how fast and efficient a project’s schedule is compared to Industry. Industry benchmarks are provided for the following project phases: Project Definition (FEL), Detailed Engineering, Construction, and Execution (the start of detailed engineering through mechanical completion). Industry durations are based on known project characteristics. A high schedule index (greater than 1.00) indicates a project is slow; a low schedule index (less than 1.00) indicates a project is fast relative to industry norms.
Effective teams produce better projects. IPA’s Team Development Index (TDI) measures the processes that enhance team performance, improve project definition, and drive project outcomes. The TDI takes into consideration the team’s functional composition and clarity of roles and responsibilities.
A team’s confidence in the success of the project is highly predictive of the project’s eventual outcomes. IPA’s Team Functionality Assessment (TFA) quantifies project team members’ perceptions on fundamental project elements, indicating the team’s alignment on project objectives and confidence in the targeted outcomes. The TFA measurement during FEL statistically correlates with cost, schedule, and operational performance.
A sub-committee of the Upstream Industry Benchmarking Consortium (UIBC), the Upstream Cost Engineering Committee (UCEC) focuses on advancing the owner cost engineering and project controls capabilities of its member companies in the exploration & production industry. Companies belonging to the UCEC range from super majors and national owner companies (including those with partial state ownership) to majors and independents.
IPA formed the Upstream Industry Benchmarking Consortium (UIBC) to meet the specific needs of owner firms in the oil & gas exploration & production (E&P) industry. UIBC member companies enjoy all of the same benefits that the IBC provides (exclusive research, performance metrics, knowledge sharing, annual meeting, competency-focused subcommittees, communities of practice, periodic webinars, and more), but with a focus squarely on the E&P industry. Membership consists of super majors and national owner companies (including those with partial state ownership), as well as majors and independents.
Value Improving Practices (VIPs) are tools and techniques identified by companies in the Industry Benchmarking Consortium (IBC) and verified through IPA research as disciplined practices that improve the value of capital projects.
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