RR130-11 — PEpC: A Breakthrough Project Delivery System That Improves Performance by Reforming Owner, Contractor, Supplier Relationships

Executive Summary:

This document reports on research, undertaken under the guidance of Construction Industry Institute Research Team 130, to develop a new and innovative project delivery system that reduces the time and cost of capital project execution without reducing quality and lifecycle performance. The motivation to undertake the work was based on the belief that the expertise embedded in the design of strategic procurement items and/or systems as well as the expertise needed for successful project integration is frequently lost or underutilized when suppliers are silent partners in the EPC process.

The three research objectives may be summarized as follows:

1. To identify and recommend a step change in the EPC process so that the suppliers of strategic procurement items and/or systems may be brought into an expanded circle of cooperation between owner and contractor.
2. To measure the impacts that this change will have on the EPC process.
3. To provide a means to facilitate implementation.

The first objective was met by following a structured search for innovation, and defining PEpC (Procurement, Engineering, procurement and Construction) as

an innovative project delivery system which makes it possible to utilize supplier expertise in all phases of the project life cycle by developing an advance procurement strategy and reaching agreement with suppliers on strategic procurement items and/or systems prior to the associated project engineering activities.

The second objective was met by measuring the time and cost savings that could realistically be achieved when breakthrough changes brought about by PEpC were implemented. This analysis, based on ten theoretical implementation scenarios and four case studies, showed that savings in time between 10 and 15 percent and savings in total project labor cost between 4 and 8 percent were possible.

The third objective was met by developing a number of tools to assist in each step of a defined PEpC implementation process. Attainment of the objectives led to four principle conclusions. These were:

1. There is a need to bring suppliers of strategic items and/or systems into the circle of cooperation between owner and contractor.
2. A step change to the EPC process that achieves this result can be defined.
3. Implementing PEpC will produce significant savings in the time and cost of the entire project delivery process.
4. Implementing PEpC will require changing many existing procedures.

The research report concludes by recommending that PEpC be implemented on suitable projects, that CII expand and develop its current focus on supplier involvement in the capital project delivery process, and that additional research be carried out to resolve and confirm many issues which fall outside the scope and limitations of this report.

Table of Contents:

List of Tables

List of Figures

1. Introduction

1.1 Problem Statement

1.2 The Challenge

1.3 Outcome

1.4 Purpose of the Report

1.5 Research Objectives

1.6 Scope and Limitations

1.7 Research Methodology

1.8 Outline of the Report

1.9 Companion Documents

2. Literature Review

2.1 Introduction

2.2 Influence of TQM on Supplier Relationships

2.3 Procurement Management Literature

2.4 Construction

2.5 Conclusion

3. Analysis of Mail Questionnaire

3.1 Introduction

3.2 Questionnaire Design

3.3 Questionnaire Distribution and Return

3.4 Data Capture

3.5 Questionnaire Raw Data

3.6 Analysis of Part I – Company Classification

3.7 Analysis of Part II

3.8 Analysis of Part III

3.9 Analysis of Part IV

3.10 Conclusions

4. Interviews by Research Team Members

4.1 Introduction

4.2 Methodology

4.3 Results of Key Issue Questions

4.4 Responses to Four Supplemental Questions

4.5 Conclusion

5. Survey of Associated Industries

5.1 Introduction

5.2 The Automotive Manufacturing Industry

5.3 The Micro-Electronics Construction Industry

5.4 Review

6. Defining PEpC

6.1 Defining PEpC

6.2 Key Concepts

6.3 Principle Tenets

6.4 A Developing Process

6.5 Review

7. Establishing a Baseline

7.1 Quantifying the Benefits of PEpC

7.2 The EPC Model Developed by RT 125

7.3 The Baseline Model

7.4 Comparison of Results

7.5 Scaling

7.6 Templates for Evaluating PEpC

7.7 Conclusion

8. Theoretical Scenarios

8.1 The Challenge

8.2 Scenarios

8.3 Theoretical Implementation Scenarios

8.4 DuPont Model

8.5 Summary of the Results

8.6 Conclusion

9. Field Implementations

8.1 Introduction

9.2 Case Study 1

9.3 Case Study 2

9.4 Case Study 3

9.5 Case Study 4

9.6 Emerson/Fischer-Rosemount Presentation

9.7 ABB Presentation

9.8 Comparison of Field Implementations

9.9 Comparison of Theoretical Scenarios and Field Implementations

9.10 Conclusion

10. PEpC Implementation

10.1 Overview

10.2 Project Delivery Systems

10.3 Technical Considerations

10.4 Organizational Considerations

10.5 Commercial Considerations

10.6 Change and Realignment of Core Competencies

10.7 Summary

11. Review of Core Competencies

11.1 Introduction

11.2 Competencies in the EPC and PEpC Process

11.3 Competencies Needed for PEpC

11.4 Alignment of Competencies for PEpC

11.5 Conclusions

12. Implementation Tools

12.1 Implementation

12.2 Implementation Steps

12.3 Implementation Tools

12.4 Achieving Results

12.5 Summary

13. Conclusions

13.1 A Challenge Met

13.2 Conclusions

13.3 Attainment of Objectives

14. Recommendations

14.1 Implementation

14.2 CII Focus

14.3 Future Research

Appendix A: Mail Questionnaire Sent to CII Member Companies

Appendix B: Example Database Format

Appendix C: Mail Questionnaire Results, All Records

Appendix D: Interview Document Used for Supplier Interviews

Appendix E: EPC Activity List Developed by RT 125

Appendix F: Survey Tool

Appendix G: Changes to the Baseline Model for the DuPont Flow Model

Appendix H: Case Study 1 Changes to the Baseline Model

Appendix I: Case Study 2 Changes to the Baseline Model

Appendix J: Case Study 3 Changes to the Baseline Model

Appendix K: Case Study 4 Changes to the Baseline Model

Appendix L: RT 111 Project Competencies and Definitions

References