November 3, 2021 by SOLUTION EMPLOYED Capital Projects SERVICE EMPLOYED Advanced Benchmarking Methodology (ABM) BENEFITS ACHIEVED Achieved cost savings of $5 million USDMitigated turnaround execution risk and labor productivity riskValidated key components of the funding estimate Challenge A team was tasked with delivering a $100 million refinery modification project requiring turnaround execution. The project team was preparing for gate review, but lacked reliable benchmarks for assessing cost and schedule risk. Traditional benchmarking techniques, such as cost ratio analysis, were not appropriate for the project. Without reliable tools to assess the estimate, the project team did not know how their targets compared to Industry competitors, or whether their current estimate presented cost risks. Approach The team turned to AP-Networks’ Advanced Benchmarking Methodology (ABM) for a comprehensive, granular analysis of the project estimate. ABM is especially reliable and insightful for benchmarking “brownfield” modification projects. AP-Networks’ associates collected project data and detailed cost estimate data, and used this data to benchmark: Capital project costs, such as:EngineeringProject managementDirect Field LaborConstruction managementConstruction equipmentOther construction IindirectsOverall Direct Field Labor (DFL) hoursDFL hours for key disciplines:PipingConcreteSteelElectricalInstrumentationIndirect hoursDetailed design hoursConstruction management hoursProject management hoursAnd more These benchmarks provided insight into the project estimate, including an understanding of how labor hour targets influenced cost benchmarks. AP-Networks’ associates worked with the project team to translate these benchmarks into practical actions to achieve cost and schedule savings. Results $5 Million USD in Cost Savings The ABM analysis found that the project team’s labor hour estimate was very conservative, and that the blended engineering wage rate was comparable to Industry average. The project team worked with AP-Networks to determine that many of the hours were associated with a scope of work that could be turned into a lump sum engineering and procurement contract at a lower cost. The team awarded the work to a highly qualified bidder for $5 million USD less than estimated. Mitigated Turnaround Execution Cost Risk The ABM analysis found that the project team had an overly aggressive target for the turnaround overheads. AP-Networks’ recommendations helped the team develop a detailed agreement for the turnaround overheads by working with the turnaround team. Implementing the recommendations ensured that the project team was aligned with the turnaround team on shared turnaround and project costs, and mitigated the chance of a project cost overrun. Mitigated Labor Productivity Risk The ABM analysis accounted for turnaround labor productivity. It found that the piping hours were reasonable outside of turnaround execution, but that the piping hours within turnaround execution were aggressive. AP-Networks’ associates helped the project team set an aggressive target for the turnaround piping hours, as well as set aside a “contingency” to be allocated or released with the final turnaround estimate.