What Site & Sustaining Capital Project Leaders Are Worried About

Phyllis Kulkarni

In March 2015, the IPA Institute delivered our Best Practices for Small Projects course in Las Vegas to attendees from 10 different companies, representing a mix of owner and contractor personnel working in the refining, transportation, fertilizer, chemical, pulp and paper, and pharmaceutical industries.

The 3-day course material, a mix of presentations, case studies, and discussion topics, was delivered by two seasoned IPA analysts that have benchmarked dozens of site and sustaining capital project systems. As always, there was ample input from the course attendees, whose questions and insights steered the discussion to some of the most pressing issues facing their sites in 2015. Among the key topics were:

Growing Interest in Lump-sum Contracting

The US-based participants noted that with the recent decline in oil prices and softening of project markets, their companies are looking to revert to lump-sum contracts, rather than reimbursable (time and materials) for their upcoming small projects. IPA research shows that lump-sum contracting can be effective for small projects, but only in “thick” markets (e.g., where there is ample supply and demand for project services), and when projects are well defined before they are handed over to the contractor. One of the contractors in the audience agreed that when contractors receive a “half-baked” project from the owner (one with key gaps in basic definition), usually no one ends up happy!

Little Clarity in FEL 1 (Business Planning / Idea phase)

The need for better portfolio development for small project systems is usually a hot topic in these courses. This time, the attendees noted that there is often inadequate vetting of whether a proposed idea is really going to make a good project or not. IPA was able to share our recent research on portfolio management, which shows how the involvement of the right stakeholders and, together with a robust “framing” of the idea, lead to smoother results and less churn in the portfolio.

Higher Rates of Turnover

Many attendees have seen significant turnover from the top to the bottom of their site organizations. That has brought a slew of challenges, including a lack of familiarity with and adherence to their work processes. Unfortunately, many systems have been slow to recognize the detrimental effects of turnover and are just starting the process of getting their training program up to speed.

Are these topics on the forefront of your mind as well? As one of the IPA Institute’s most popular public courses, there are usually several dates/locations to choose from throughout the year.

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