Integrated Project Teams

1. Introduction Integrated Project Teams

The ways in which industrial projects are managed today have changed. Many companies have cut their manpower during the last years. Management concepts like “Added Value” and “Back to Core Business” were introduced into European business. Profit margins are under pressure and need to be improved by concentrating on core business tasks. Tasks that do not have a direct contribution to the primary production process are no longer carried out by own personnel but are outsourced to service companies. A few examples are given below: Integrated Project Teams

1. Outsourcing of security
2. Outsourcing of catering.
3. Outsourcing of computer network services
4.  Etc.

At present this trend has also reached technical service departments. A number of companies have cut the manpower of central engineering departments or even completely closed down these departments. Key personnel with specific knowledge of the company’s production processes are transferred directly to the production staff.

It is obvious that this change in the company’s organisation affects the way in which engineering companies have to perform. This document wants to give an impression of a new way of doing projects in industry.

2. The Classical Project Model Integrated Project Teams

The classical project approach starts with the preparation of a Basic Design Package (BDP) by the companies’ engineering department. This package contains the following information:

1. Design basis of the project
2. Scope description
3. Project procedures
4. Main engineering documents like process schemes, equipment specifications etc.
5. Engineering standards and procedures

On the basis of the BDP the engineering contractor is invited to give a turn-key price or a price for EPCM (Engineering Procurement and Construction Management) services. The image that fits well with this project approach is shown in the following cartoon:

 

The major advantages and disadvantages of turn-key and EPCM service contracts are summarized below:

Turn-key (EPC) contract

Advantages for the principal

• After contract award most of the work is transferred to the engineering contractor.
• There is a fixed project budget.
• Technical and financial risks are transferred to the engineering contractor.

Disadvantages for the principal

• A precise scope definition is needed which requires a big effort before contract award.
• The principal does not have any profit from discounts obtained by the contractor on the purchase of equipment and materials.
• The principal pays a surcharge on risks that is enclosed in the turn-key price.
• The principal has only limited influence on the technical choices made by the contractor if not explicitly asked for in the BDP.
• Disputes between the principal and the client are handled through claim management.
• Scope changes are difficult to make or will be very expensive.
• Simple technical disputes can easily escalate into legal disputes.

EPCM contract

Advantages for the principal

• Discounts on purchases are kept by the principal.
• There is more influence of the principal on purchase strategy.
• It is easier to maintain the own quality standards of the principal.
• Parties can agree on common objectives for the control of the project budget, time schedule and quality. E.g. by introducing a bonus system.

Disadvantages for the principal

• More coordination activities for the principal.
• The principal needs a bigger project team of his own during the whole project.
• Scope changes can be made but can still be expensive.
• Disputes are also handled through claim management.

Summary of the characteristics of the classical project approach

1. There is a clear Scope definition prepared by the principal
2. It is a game of mainly two players: the principal and the engineering contractor.
3. Responsibilities are clearly divided between the two parties.
4. There are two complete engineering teams: one team from the principal and one team from the contractor. Hence a lot of work is carried out twice.
5. Both parties want to maximise their own profit which may lead to undesired conflicts.

          (2.1)  Integrated Project Teams

Because of changes in the way companies are organised, in their search for “Added Value” with a strong focus on the “Core Business”, a new type of project organisation has emerged: The Integrated Project Team (IPT)

In this type of project organisation the principal and the engineering contractor join forces in one integrated project team.

This team may be expanded, at a later stage, with external partners in case additional value is needed for the project.

The IPT aims at an optimisation of the total investment cost and other agreed project goals by joining the best forces of the principal and the engineering contractor based on mutual understanding and trust. The picture below illustrates what we mean by working together in an integrated project team.

          (2.2) Team Building

The most important aspect of this new way of working together is the building of a project team/task force in which personnel from the principal and the engineering contractor take place. The members of this team are selected based on the engineering skills that are needed for the project. Therefore the selection of the team members is highly determined by the task they have to perform. The leader of this team may be an employee of the principal but could as well be put forward by the engineering contractor. In particular cases third party members can also be considered to be participate in the team. The project team will perform at its best under the following conditions:

1. All team members are equal and respected for the value they add to the project.
2. There is mutual trust between the team members.
3. The team gathers and works together to achieve a common goal that is set out at the very beginning of the project
4. All technical issues and budget problems are discussed in an open atmosphere with the only intent to reach the project goal(s) set out in the beginning of the project.
5. Key team members may not be changed during the duration of the project.
6. All parties in the team should feel that a Win-Win situation has been created.

          (2.3) Tasks of the Project Team

The project team will do the following tasks:

1. Define the Scope of Work of the project.
2. Define a common goal, the factors that make the project a success, that is approved by all parties.
3. Prepare a common Basis of Design for each discipline.
4. Prepare a Concept Design Package.
5. Prepare a preliminary Total Ownership Cost (TOC) project budget.
6. Optimise the concept design (Value Engineering).
7. Prepare a Basic Design Package.
8. Prepare a detailed TOC estimate to ask approval for project execution.
9. Prepare and control the time schedule of the project.
10. Controls the project budget.
11. Selection of suppliers of equipment and bulk materials.
12. Selection of civil, mechanical and E& I contractors.
13. Purchase of all equipment an bulk materials.
14. Purchase of all services needed for the project.
15. Supervision of all activities at the construction site.
16. Assistance during commissioning.

The formation of a IPT at an early stage of the project brings a lot of advantages for the principal. A good mixture of expertise from the principal and the engineering contractor will assure that a good and functional design will be put on the table. In the very beginning of the project important discussions take place in the team about what is functional (Really needed) and what brings little added value to the project (Nice to have but at a considerable cost)

          (2.4) Project Organisation of an Integrated Project Team

The picture below illustrates the IPT project organisation:

The principal, which is the end user of the project, assigns the responsibility for the project to the project team. The team leader is the contact point between the principal and the project team. The following tasks are assigned to the team leader:

• Coordination of all activities of the project team
• Reports the progress of the project
• Quality control of the project

The role of the project manager/team leader in the IPT organisation is very important. To give him the support and authority that is needed to lead the team a steering committee will be formed. Members of the steering committee are senior managers of the principals’ company and the engineering contractor. At regular intervals the IPT project manager will have a meeting with the steering committee. In this meeting the progress of the project will be reported and relevant technical and financial issues will be discussed. If needed the steering committee can support the project team to solve bottlenecks with respect to man power, budget and time schedule.

3. Summary of the Characteristics of the Integrated Project Team

To summarise we see the following characteristics:

1. Team members are selected on the basis of the value they add to the project to avoid double work.
2. There are no sharp boundaries between the tasks of the team members. The team works together on the basis of a practical approach.
3. The project organisation is lean
4. There is a good and open cooperation and communication based on mutual respect.
5. There is no claim culture.
6. The team works towards common goals
7. A Win-Win situation for all team member is created
8. More attention for the Front End Loading phase of the project
9. This project approach can be used for small and big projects
10. No changes of key personnel during the project to keep valuable know how in the team
11. Flexibility in the way goods and services can be purchased on the market