Project Practitioners > Project Delivery Systems

Project Delivery Systems

By Morley Selver, P.Eng IPMA B

Over the next few newsletters I will be talking about the different project delivery systems available to you. Owners  will have numerous projects and the execution of the projects will follow a project delivery system that the Owner determines suits the situation.  As you know, the Owners, designers, and contractors make the decisions, provide the services, and perform the work to deliver constructed projects. These activities are known collectively as project delivery. The generic term “project delivery system” describes how these participants are organized to interact, transforming the Owner's project goals and objectives into a finished project. The project delivery system is basically organizing all the participants to work within a system. The Owner will set up or choose the system so their project goals and objectives are met.

There are different project delivery systems available to the Owner to develop projects and we will look at the following different types:

- Owner Provided Delivery (OPD) - which you may have been involved with. 

- Design-Bid-Build (DBB) - is the most common for projects and you are probably most familiar with this method. 

- Construction Management (CM) - is a variation on the Design-Bid-Build. 

- Design-Build (DB) - where there is a single point of responsibility.

- EPC - which is a variation of Design-Build. 

Owner Provided Delivery or OPD.

This would be small projects where the in-house engineer can do engineering design and manage construction. Project quality is important to the Owner and since he is controlling the engineering design he can build in the level of project quality he desires. The designers have access to operations and maintenance personnel who will assist in determining what is required. The disadvantage is the cost can get out of control as there is a tendency to give operators and maintenance  what they want. 

When I started out in industry my first job was working in a remote facility. There, we did all of our own design work and construction management. Nowadays, you will find OPD being used for small maintenance projects.  I used to work for an Owners  Central Engineering  where we did the design and construction management for larger projects. We had our own design group and construction staff. Here, we also had control of the project quality. The Central Engineering was formed as there was no confidence in the  consulting engineering companies. This changed back to consulting engineers around the early 90's, so there are not many Central Engineering's around any more that can do the design and construction functions. Now we have consultants doing the engineering / procurement functions with the Owner providing project management and construction management. Owner involvement is required because of the safety issues. 

Design Bid Build (DBB)

July Figure 1

DBB has three phases of Design, Bid and Award, and Construction as shown in Figure 1. Each phase  has to be complete before you can move to the next phase. This is typically how you carry out your projects and you are most familiar with this approach to project delivery. The design needs to be completed before you can go out for bid and award. Once contracts are awarded, then you can start construction. This process takes time, however the Owners are willing to use this project delivery method. This approach is used for more complex projects as the Owners do not have the design expertise for the work to be done. These projects require greater effort than what the Owner is ready to provide. With DBB the Owners prefer a lump sum or one price for all the work. Since the Owner is passing risk on to the contractor, the price usually comes back at a value 

greater than anticipated. In facilities, the Owner tends to use alliance contractors. This DBB process still applies, however, instead of a lump sum contract you could use a time and material contract as a control estimate for the work.

Org Of Construction July 2014 Article
Figure 2

With DBB, the Owner follows the Project Life Cycle from start to finish. Figure 2 shows the project life cycle and the DBB process.  The top boxes are the different Project Life Cycle Phases. The DBB project organization is shown on the bottom and is colour coded to match the organization activities with the life cycle phases. In Figure 2 the middle boxes show who is responsible for the phase work.

Possible projects are identified by the Owner and conceptual estimates prepared. These projects are submitted to management for inclusion in the Capital Budget. At some point the project gets approved by management for further investigation to see if it is viable. This is the point where the project gets assigned to a Project Engineer / Project Manager. From this point the process follows the project life cycle where the basic organization is as follows:

In the Evaluate Phase, the Owner will hire consultants or use in-house personnel to do a feasibility study and determine a Rough Order of Magnitude (ROM) estimate. This goes to management for approval to proceed further. 

If the project proves feasible and can get funding the Owner will hire an engineer to proceed with the design of the project. This could be the same engineer as the one who did the feasibility study. As the project proceeds down the life cycle through the Select, Define, and Execute phases, more engineering work is done. For the Execute Phase, the final funding is approved and the design completed. From the completed design, contract documents are prepared and sent out for bid, a construction contract is awarded, and the project constructed. Even if the facility is working with alliance contractors, the same organization applies. 

Owners always like to feel they are in control of projects with quality being a big issue. This is why they used to have Central Engineering Departments. Central Engineering Departments were a big expense paid for by the facilities and eventually died out with the work being handed over to consultants. With DBB the Owner still has a say in the quality of the project, but a lot depends on the experience of the consultant. Owners like to manage the procurement and construction processes and are usually set up to handle these. With procurement they typically have alliance agreements with vendors and get preferred pricing. They have construction contracts developed to suit their situation and construction management set up to work with the contractors.  The decision of who to hire for the contractor is up to the Owner. Every facility is different and contracts and construction management has to reflect this.

 Since the bid documents were prepared by the engineer, they will get involved in the bid analysis. Also, the engineer is familiar with the design so should provide assistance to the Owner during the construction, commissioning, and startup phases.  The contractor builds the project with assistance from the engineer. Once the project is accepted by the Owner it is turned over to Operations to produce product. 

To review DBB process:

  • DBB is the most familiar approach. The majority of your projects follow this.
  • The Owner selects and hires the Engineer to design the project. Owners will use alliance contractors in a lot of instances.
  • After documents / drawings  are 100% complete, or as much possible, lump sum prices from Contractors are requested through the bidding process. The Owner receives the bids, bids analyzed by the engineer, and a recommendation made. The Owner is not obligated to use the recommended contractor.
  • The Contractor is selected. Depending on your organization the selection could be on the lowest price or on who the Owner feels can do the work. On public projects the lowest price usually gets the contract. With private firms, the Owner can choose who they want to work with.  
  • WithDBB the Designers are required to keep an arms length relationship with contractors & material suppliers. This is due to ethical concerns.
  • ForLump Sum Contracts, you need the drawings 100% complete. The Owner can still have control of the component quality by having the quality built into the design drawings. Quality of design is another issue the Owner has to deal with. Past experience with various engineering contractors will usually guide this decision.  
  • The bid process forces the Contractor to select subs, equipment, and material on lowest price. The Owner can reject any of these.
  • Thereis little opportunity for the contractor to offer the Owner alternative designs. They can offer alternatives if the option is written in the contract, but generally no. If there is contractor input into the design, the alternative design option may not be required.

I will continue with this discussion next month. 

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Fundamentals of Project Management

Before you know it, the August 2014 Calgary 'Fundamentals of Project Management' workshop will be here. Now is the time to start thinking about what your work calendar will look like and sign up for your Project Management Survival Skills. 

 If you are not able to make this one, we will also be in:

Calgary AB August 26 - 28, 2014 

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For information and to register go to: 

http://www.peice.com/eventdetails.aspx?event=109336&rfi=605878 

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 New On-line Course Coming Soon!

Are you a project manager looking for a career in the booming Oil & Gas Industry? Nervous about making the change from your current field to oil & gas as you are not sure how they manage their projects? Well, for you, we have developed an on-line short course outlining how projects are managed in the Oil & Gas Industry.  We want to help you alleviate your fears about making the change to Oil & Gas. 

 Stay tuned for additional information.  

 


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