Independent Project Analysis (IPA), Inc. celebrated its 30th anniversary in November 2017. Since its founding in 1987, IPA has been the organization hundreds of companies have turned to for data-driven insights into how to deliver better returns on capital projects. Recognized by the world’s leading industrial processing and upstream companies as the preeminent capital projects industry consultancy, IPA has proven time and again that when capital project systems are organized, staffed, and led properly—and have the right work and governance processes in place—organizations can safely deliver cost and schedule-advantaged projects.
IPA turns 30 years old at time when many sectors of the capital projects industry are heating up again. “We’re busy everywhere in the world right now,” IPA President Edward Merrow told staff gathered to celebrate the company’s anniversary in Ashburn, Virginia, home to IPA’s corporate headquarters and North America regional office.
Merrow observed that IPA’s commitment to its clients, to promote capital project and project system effectiveness, has remained unchanged since the company’s beginning. IPA helps companies become better stewards of the capital they spend, so they can build more effective plants, assets, and infrastructure, Merrow said. “We possess a deep expertise in capital project research and evaluation. Our unique competence comes out of our research base.” IPA’s success as a company is a direct reflection of its commitment to serving its clients’ best interests, Merrow added. “Trust is essential to making it work.”
A synopsis of IPA’s history follows, along with a selection of notable company developments and accomplishments.
Industry Recognition Gained Fast
Encouraged by his earlier research at the RAND Corporation into the performance of pioneer process plants and chemical process facilities, Ed Merrow saw untapped potential for organizations to improve capital project outcomes. IPA was started with the belief that empirical assessments of projects and systems and research-driven products would enable companies to deliver more successful capital projects. Early business success resulted in IPA moving out of Merrow’s home, where it began, to an office in Reston, Virginia, in 1990. The 1990s brought expansion with new offices in the Netherlands and Australia and, in the mid-2000s, IPA opened offices in Singapore, the United Kingdom, Brazil, and China.
IPA established its reputation for delivering quality assessments and research early on, and it found success in fostering a shared sense of industry-wide commitment to capital effectiveness and leadership. Since 1992, IPA has directed the Industry Benchmarking Consortium (IBC), a group of companies committed to continued capital project system improvement. A short while later, IPA formed the Upstream IBC (UIBC). Both the IBC and UIBC sanction their own respective cost engineering committees, the CEC and UCEC, with the intent of strengthening cost engineering practices and the project controls functions.
As IPA built on its accomplishments, such as establishing the standard for capital project definition measurement (the Front-End Loading [FEL] Index), it also created specialized internal directorates to spearhead new initiatives. A projects research group, now called the Projects Research Division (PRD), was created in the late 1990s to focus exclusively on capital projects research apart from individual project and system evaluations. The IPA Institute was established in 2002 to share knowledge from IPA’s research.
30 Years of Data-Driven Perspective on Capital Projects
Having conducted thousands of data collections and project team interviews in three decades, IPA has built unparalleled capital project databases to measure the effectiveness of project outcomes, validate cost and schedule estimates, and conduct research. IPA’s databases contain detailed information on 20,000 individual capital projects located globally. The projects range in size from several thousand-dollar site-based and sustaining capital projects to multibillion dollar megaprojects. These projects are collectively representative of all capital-intensive industrial sectors, including the chemicals, petrochemicals, mining, biotech, pharmaceuticals, consumer products, power, infrastructure, and exploration and production (E&P) industries. Notably, and to the envy of many, several thousand descriptive variables are available to assess and understand each capital project in IPA’s database.
All of IPA’s project evaluations, research services, and products and tools are underpinned by quantitative methods of measuring and assessing project performance. The Project Evaluation System (PES®) is IPA’s core product suite, encompassing risk evaluation relevant to the various stages of project development. The original PES® analysis included an execution risk and benchmarking assessment typically completed prior to and in support of project sanction. Today the PES® suite encompasses the full project life cycle, starting with an assessment of the robustness of business case and asset optimization through scoping and competitive target setting, execution risk assessment, construction readiness, production readiness, and closeout and lessons learned evaluations of individual projects.
The IPA Project System Evaluation has also evolved from just a baseline measure of project system performance to a deep and comprehensive forensic analysis of a company’s project delivery system. A full system evaluation examines project performance, organizational structure and staffing, work processes, and governance as well as the relationship among these key parameters of a capital system. IPA’s data-based approach provides quantitative measures of performance and, therefore, measurable key performance indicators. The findings identify opportunities to add value to the capital program and establish a plan for meaningful change.
IPA has completed hundreds of well-received industry research studies in the last decade, including specific studies like Mining Sustaining Capital, Performance of Global LNG Projects, and Contracting for Engineering and Construction. IPA has also completed several regional studies, including an in-depth look at “hot market” periods affecting the supply chain in the U.S. Gulf Coast and several country risk studies for companies seeking to invest in frontier locations. In addition, IPA has released powerful tools that leverage IPA’s projects databases, most notably the web-based FEL Toolbox. In the E&P sector, IPA has developed the web-based Oil and Gas Asset Economics Simulator (AES) and Opportunity Assessment Toolkit (OAT) to help oil and gas companies manage their project portfolios.
IPA senior leaders have books published by John Wiley and Sons, Inc., that have been well received across the entire industry: Industrial Megaprojects: Concepts, Strategies, and Practices for Success (Wiley, 2012), by Ed Merrow, and Capital Projects: What Every Executive Needs to Know to Avoid Costly Mistakes and Make Major Investments Pay Off (Wiley, 2016) by IPA Capital Solutions Director Paul Barshop. A third book, Leading Complex Projects: A Data-Driven Approach to Mastering the Human Side of Project Management (Wiley), by Merrow and IPA E&P Business Director Neeraj Nandurdikar, is due out in 2018.
IPA President Ed Merrow has received some of the industry’s highest honors for his leadership in improving project cost management and engineering, including the Construction Industry Institute Carroll H. Dunn Award of Excellence (1998) and AACEI’s Award of Merit (2012). IPA received AACEI’s highest corporate honor for cost management services, the Industrial Appreciation Award, in 2016.
The Importance of Organizations and Teams
In the last few years, IPA has endeavored to blaze new trails in areas it recognizes as being vital to developing capital projects more effectively. One of those areas is concentrated on correctly structuring organizations and teams. IPA has developed services to assist companies in strengthening project teams, supporting talent management, and optimizing their entire project organization. Also, in 2016, IPA launched its Capital Solutions directorate. The Capital Solutions service portfolio spans all aspects of capital project performance to deliver uniquely crafted system solutions for individual company needs.