Paul Donnelly is AspenTech’s Engineering & Construction Industry marketing director. Donnelly’s background includes senior industry and product management/marketing and corporate marketing roles at Autodesk, Viewlocity and AMR Research, now part of Gartner.
Q: What is the "new normal" for Engineering & Construction Procurement (EPC) firms?
Donnelly: A great deal has changed for EPCs since 2014, when inefficiencies in our engineering processes were covered up by high oil prices. At that time, when problems arose on a project, we could throw more money and people at them and keep going. But there was a storm coming.
The sudden change in the price of oil resulted in a systemic shock. As oil reached $50 per barrel, it exposed outdated work processes that were inefficient, sequential and disconnected. The increased price of oil exposed siloed data that was fragmented, out of date and transferred manually.
EPCs responded to the change in the business environment by laying off staff, seeking new revenue streams and consolidating with other firms to broaden the scope and reach of their
services while reducing costs. There are signals that the EPC market may have hit bottom, with backlogs stabilizing and a slight uptick in capital spending by some owner-operators. Layoff announcements have slowed or ceased and management at several EPC firms has signaled that the worst is behind them.
As the industry begins what’s expected to be a slow recovery, many EPCs are asking themselves what they need to do differently to bid and win more jobs and execute project work more efficiently. The business slowdown has inspired a level of cost and operational reviews that don’t happen during boom times. This reset, coupled with management’s desire to drive down costs, presents an uncommon opportunity for the industry to explore different approaches to improve their work processes and productivity. Essentially, they are asking themselves, "How can we do more with less?" And, "How can we win more work while managing risk?"
I think there is a clear and compelling case for new approaches that produce better outcomes for customers while helping EPCs manage their risk and better respond to the inevitable project changes.
At AspenTech, we refer to this approach as "Concurrent Process Engineering":
"A collaborative, data-centric design and engineering process, where different disciplines work together, simultaneously, to deliver better, more tightly integrated plant designs that are produced faster and are better optimized for cost, ease of construction and operability."
This approach is enabled by a single, integrated design and engineering platform, where each engineering discipline has its own specialty tools for doing its job. Yet those tools are all connected by a common set of data about the project. This allows the design and engineering team to come together earlier around a common view of the project, when key decisions are made that have a greater, long-term impact on the project outcome. It also allows for preservation of project knowledge as the design evolves across disciplines and project phases, avoiding error-prone manual data transfers. And, since most EPCs have reduced staffing levels and need to complete projects with smaller teams, the concurrent process engineering approach and platform also helps enable load balancing across geographical locations so that these leaner firms can more effectively share work and expertise across offices.
Q: What are some of the benefits of Concurrent Process Engineering?
Donnelly: A concurrent process engineering approach shortens cycle times and allows for easier incorporation of project revisions. The result: consideration of more design alternatives; more accurate and reliable cost estimates for economic evaluation and bidding; and the ability to more easily accommodate the inevitable project changes.
It is a "one team, one model" method that facilitates movement from sequential to simultaneous engineering processes. It brings together process engineers, mechanical engineers, safety engineers, estimators and other project stakeholders around a consistent set of engineering data for the purpose of enhanced project design and collaboration. The goal is to drive consistency between the various models required from conceptual design through FEED (Front End Engineering Design). This supports better, earlier decision-making where long-term impacts are greatest, as well as the combined team’s ability to deal with any changes that arise.
It’s not just AspenTech who’s thinking along these lines. Industry experts at the ARC Advisory Group summed up their thinking on this topic in a November 2017 report, "ARC Process Simulation and Optimization Global Market Research Study, 2017":
"Projects that allow more agile collaboration across engineering disciplines have the highest chance to optimize the design. Most projects use a rigid set of engineering processes and follow a standard waterfall approach to project design. The problem with this approach is — each discipline adds a certain degree of cautiousness and safety margin into the design. Often, by the time project teams realize sub-optimal designs, it is too late to make changes without a significant financial or schedule penalty.
The most significant opportunity to positively influence the process design is in the early conceptual stages of the project."
Here are three ways that EPCs are using concurrent process engineering to increase project win rates while reducing risk:
- Conceptual Engineering: Process engineer develops the process and cost; energy use and equipment feasibility guidance is automatically generated for quick concept evaluation.
- Model-based estimating from concept to FEED: Estimates are based on design models and can be updated when there are changes. The estimate is consistent across parties and departments.
- Basic Engineering: Use of a single, connected source of consistent engineering data for team collaboration, revision management and generation of data sheets.
We’ve seen some of our customers achieve a 50 percent reduction in man-hours required to produce conceptual estimates as a result of employing a concurrent process engineering methodology.
Q: What does the future look like for EPCs?
Donnelly: In many ways, it is a matter of "disrupt yourself before you are disrupted." As EPC firms reinvent themselves, survivors of the downturn will be leaner and will have implemented modern technologies and ways of working, such as concurrent
process engineering. They will leverage these enhancements to increase engineering productivity and reduce risk in an increasingly "lump sum, turnkey" environment.
Successful EPCs will also develop strategies for diversification of their revenue sources. From expanding into new process verticals and new geographies to offering services that add value to the operations and maintenance phases of the asset life cycle, many EPCs will look a lot different coming out of this recent cycle than they did going in. We’re trying to stay one step ahead at AspenTech, developing the tools and technologies to support these new opportunities and ways of working.