Engineering Encyclopedia Saudi Aramco DeskTop Standards
Introduction To Project Controls
Note: The source of the technical material in this volume is the Professional Engineering Development Program (PEDP) of Engineering Services. Se rvices.
contained in this document was developed developed for Saudi Warning: The material contained Aramco and is intended for the exclusive use of Saudi Aramco’s employees. Any material contained in this document which is not already in the public domain may not be copied, reproduced, sold, given, or disclosed to third parties, or otherwise used in whole, or in part, without the written written permission of the Vice President, Engineering Services, Saudi Aramco.
Chapter : Project Management File Reference: PMT30101
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Project Management Introduction To Project Controls
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THE PROJECT PROJECT CONTROLS CONTROLS FUNCTION........................................................................... FUNCTION........................................................................... 1 Introducti Introduction on .............................................................................................................. 1 Benefits Benefits of Effecti Effective ve Project Project Controls Controls ....................................................................... 1 Control Control Resources Resources ......................................................................................... 2 Monitor Monitor and Forecast Forecast Performance Performance Parameter Parameterss .............................................. 2 Saudi Aramco Aramco Project Project Life Life Cycle Cycle .............................................................................. 3 Conceptual Conceptual Engine Engineering................................................................................. ering................................................................................. 4 Preliminar Preliminary y Engineering................................................................................ Engineering................................................................................ 8 Detailed Detailed Engineerin Engineering g ..................................................................................... 8 Constructi Construction on .................................................................................................. 8 Project Project Completion Completion and Close-Out Close-Out................................................................. ................................................................. 8 Controllin Controlling g Projec Projectt Objectives Objectives .................................................................................. 8 Identific Identification ation of Project Objective Objectives................................................................ s................................................................ 8 RESPONSIBILITIES OF THE PROJECT ENGINEER IN IMPLEMENTING PROJECT PROJECT CONTROL CONTROLS S ......................................................................................................13 Introducti Introduction on .............................................................................................................13 The Project Engineer Engineer as a Focal Point for Successful Successful Project Controls ............ ...... ............ .........13 ...13 The Cost Influence Influence Curve .............................................................................13 Control Control Of Project Project Scope ..............................................................................13 Control Control Of Project Schedule Schedule .........................................................................13 Control Control Of Project Cost ................................................................................13 SAPMT INTERFACE INTERFACE WITH WITH OTHER ORGANIZATIONS AND PROJECTS PROJECTS ............ ...... ............ .......13 .13 Team Buildi Building ng .........................................................................................................13 Cost vs. vs. Trust Trust ...............................................................................................13 Other Organizatio Organizations ns Inside and Outside Outside Saudi Aramco Aramco ............................................13 The Proponent..........................................................................................................13 Proponent..........................................................................................................13 Other Projects Projects ..........................................................................................................13 The Design Contractor Contractor .............................................................................................13 The Vendor or Manufacture Manufacturerr ....................................................................................13
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Project Management Introduction To Project Controls
Content
Pag e
THE PROJECT PROJECT CONTROLS CONTROLS FUNCTION........................................................................... FUNCTION........................................................................... 1 Introducti Introduction on .............................................................................................................. 1 Benefits Benefits of Effecti Effective ve Project Project Controls Controls ....................................................................... 1 Control Control Resources Resources ......................................................................................... 2 Monitor Monitor and Forecast Forecast Performance Performance Parameter Parameterss .............................................. 2 Saudi Aramco Aramco Project Project Life Life Cycle Cycle .............................................................................. 3 Conceptual Conceptual Engine Engineering................................................................................. ering................................................................................. 4 Preliminar Preliminary y Engineering................................................................................ Engineering................................................................................ 8 Detailed Detailed Engineerin Engineering g ..................................................................................... 8 Constructi Construction on .................................................................................................. 8 Project Project Completion Completion and Close-Out Close-Out................................................................. ................................................................. 8 Controllin Controlling g Projec Projectt Objectives Objectives .................................................................................. 8 Identific Identification ation of Project Objective Objectives................................................................ s................................................................ 8 RESPONSIBILITIES OF THE PROJECT ENGINEER IN IMPLEMENTING PROJECT PROJECT CONTROL CONTROLS S ......................................................................................................13 Introducti Introduction on .............................................................................................................13 The Project Engineer Engineer as a Focal Point for Successful Successful Project Controls ............ ...... ............ .........13 ...13 The Cost Influence Influence Curve .............................................................................13 Control Control Of Project Project Scope ..............................................................................13 Control Control Of Project Schedule Schedule .........................................................................13 Control Control Of Project Cost ................................................................................13 SAPMT INTERFACE INTERFACE WITH WITH OTHER ORGANIZATIONS AND PROJECTS PROJECTS ............ ...... ............ .......13 .13 Team Buildi Building ng .........................................................................................................13 Cost vs. vs. Trust Trust ...............................................................................................13 Other Organizatio Organizations ns Inside and Outside Outside Saudi Aramco Aramco ............................................13 The Proponent..........................................................................................................13 Proponent..........................................................................................................13 Other Projects Projects ..........................................................................................................13 The Design Contractor Contractor .............................................................................................13 The Vendor or Manufacture Manufacturerr ....................................................................................13
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Project Project Inspectio Inspection.....................................................................................................13 n.....................................................................................................13 SAPMT REPORTS REPORTS PREPARED FOR MANAGEMENT MANAGEMENT ...................................................13 Benefits Benefits of Effective Effective Reporting Reporting ................................................................................13 The Budget Item Summary Report and Supplement Supplement .................................................13 Monthly Monthly Project Project Update Report................................................................................13 Project Project Proposal Update Update Report ...............................................................................13 Project Project Completion Completion Schedule ...................................................................................13 Proposal Proposal Engineering Engineering Statistics Statistics Report.....................................................................13 Detail Engineering Engineering Statistic Statisticss Report.........................................................................13 The Quarterly Quarterly Project Reviews.................................................................................13 Reviews.................................................................................13 ADDENDUM......................................................................................................................13
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THE PROJECT CONTROLS FUNCTION Introduction
One of the most important challenges facing the Saudi Aramco project management team (SAPMT) today is the prevention of cost and schedule overruns that sometimes impact capital projects. Project management can be made more complicated by the multiple parties involved in a project, the inherent complexities of a project, the pressure of time, the increasing regulatory requirements, and the uncertainties of nature. The Project Controls function acts as a management control mechanism to systematically channel the project activities towards successful completion. Effective Project Controls helps the Project Engineer to manage a project and to meet the objectives of completing the project on schedule and within the budget. Project Controls facilitate decision-making tools to assist the SAPMT. When properly designed, utilized, and implemented, Project Controls provide information as it relates to: •
Project Baselines
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Project Plans/Schedule
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Project Status
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Project Performance
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Project Forecasts
Project Controls are generally performed by all project personnel; however, the Cost Engineer and the Project Scheduler are an integral part of the SAPMT and they act as an information center for everyone involved in the project. The Project Controls function, with the help of the other project team members, should be placed in the project organization in such a way that it can be most effective at determining the most accurate information obtainable for project cost and schedule. Benefits of Effective Project Controls
Project Controls provide the information necessary to plan, monitor, and forecast a project. Without good Project Controls, the SAPMT will not know about the actual project status, performance-to-date, and the course it should take towards successful completion. Project Controls enable the necessary planning steps to be taken to define the project scope, develop a plan of action, execute the project, and monitor the performance during all of the Project Life Cycle phases.
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There are four basic management goals for executing every project: •
Lowest Cost
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Timely Completion
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Highest Quality/Reliability
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Highest Safety Performance
Control Resources
To accomplish these four goals, the project requires qualified resources and effective management tools. By implementing good Project Controls, the Project Engineer can efficiently manage the project resources, which include: •
Money
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Manpower
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Materials
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Equipment
Resources are planned and managed by using two important project controls components namely, scheduling and cost control. All resources, whether they are personnel, materials, equipment, or services, are quantifiable and, therefore, traceable with the proper project controls tools. Monitor and Forecast Performance Parameters
Project Controls achieve the following key objectives in managing and monitoring the performance of a project: •
Establish project work scope.
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Establish project budget and cost baseline.
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Develop logic plans and schedules.
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Define what is to be controlled and by whom.
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Track project cost and schedule performance.
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Provide information for decision making.
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Provide details of final project costs and schedules.
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Establish feedback systems for follow-up.
Saudi Aramco Project Life Cycle
A Saudi Aramco Project has six distinct phases to its Project Life Cycle. They are: 1. Conceptual Engineering 2. Preliminary Engineering 3. Detailed Engineering 4. Material Procurement 5. Construction 6. Project Completion and Close-Out
The Project Life Cycle Phases are shown graphically in Figure 1. ERA
MC
ERC
Conceptual Engineering Preliminary Engineering Detailed Engineering Procurement Construction Completion and close-out
Figure 1. Project Life Cycle
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A clear understanding of these phases permits the Project Engineer to better control Saudi Aramco resources in the achievement of desired project objectives. In order to fully understand the Project Life Cycle, it is important that the Project Engineer understand the activities that are associated with each phase. The following sections give a brief description of each. Conceptual Engineering
The Conceptual Engineering Phase in the Project Life Cycle centers outside of the SAPMT. At this point, the activities are developmental and study oriented. The Budget Item (BI) is taking shape. The Conceptual Engineering Phase of the project life cycle comprises developing the following: •
Conceptual Estimate Scoping Paper
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Planning Brief
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Business Plan
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Capital Program/Budget Item
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Design Basis Scoping Paper
The Saudi Aramco Project Life Cycle begins when corporate management proposes business plans for the period under review to the Supreme Council and Board of Directors. The Supreme Council and the Board of Directors provide endorsement or guidance from which corporate objectives, activities, and strategies are ultimately formulated. Corporate objectives and Business-Line objectives are updated in the Business Plan, which is presented to the Board of Directors every April/May. The Business Plan is a five-year forward plan, which describes goals, levels of activity and operating plans for each Business-Line. The Business Plan includes projected manpower requirements, estimates of annual operating and capital expenditures for the plan period, and projections of the sources and dispositions of funds. The Business Plan also serves as a basis for the five year Capital Plan, and it provides the foundation for the one-year capital budget and operating plan. All plans and budgets are consolidated along Business Lines, such as manufacturing and Exploration and Producing. The proponent of a project is usually one of the Company's operating departments and the eventual facility user. The Proponent sponsors the development of the project. Working in conjunction with the Facilities Planning Department (FPD), the proponent sets basic parameters for the scope of work and develops a Conceptual Estimate Scoping Paper (CESP) or Planning Brief (PB) for the proposed budget. The Facilities Planning Department (FPD) validates the CESP/PB schedules and develops the conceptual/budget estimates for each project that will be included in the proposed budget.
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While the FPD works on the CESP and the PBs, it also maintains the master scheduling system, which contains all ongoing and proposed BIs, which then proceeds to the Planning Advisory Committee (PAC), first in a preliminary overview and later in a final presentation. Recommendations generated by PAC reviews are incorporated into the program, which is then presented to the Management Committee (MC). The recommendations produced by the MC review are incorporated into the program. The first year of the Project Life Cycle concludes with the presentation of the program to the Board of Directors for endorsement at their annual meeting in November. The Design Basis Scoping Paper (DBSP) for the BI is prepared jointly by the proponent and FPD following approval of the Capital Budget by the Board of Directors. Once the DBSP has been reviewed, approved, and issued, preliminary engineering commences under the direction of the SAPMT. Preliminary Engineering
Preliminary Engineering is defined as the engineering activities that lead up to Expenditure Request Approval (ERA). These activities, generally, include: •
Directing and monitoring the preliminary engineering contractor
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Performing the initial, confirmatory studies
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Preparing the initial draft of the Project Execution Plan (PEP)
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Preparing the Project Proposal
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Producing the detailed Expenditure Request (ER) estimate
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Preparing the contract for detailed engineering and procurement assistance. (In the case of a Lump Sum Turn Key [LSTK] contract construction will also be included.)
The Preliminary Engineering phase begins with the issuance of a DBSP, which supports the BI by clearly defining the project work scope and schedule requirements. The Preliminary Engineering phase is probably the most challenging to the Project Engineer because the definition of the project is in the process of being developed, both from the technical and the managerial point-of-view. The Project Engineer must maintain the focus of the project and he must manage input from all involved departments, which try to get the project to include their specific interests. The Project Engineer must diligently control the project scope, both as proposed and as actually incorporated in the project scope.
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Detailed Engineering
The scope of work for Detailed Engineering is the work product of the Preliminary Engineering Phase. An efficient and speedy start of Detailed Engineering is assured by a thorough completion of the ER estimate, approval of the Project Proposal, and preparation of the detailed engineering contract. The Project Engineer must always look for ways to save time and money when he executes the project. The Project Engineer should select the best contractor available for the detailed engineering phase in order to minimize deviations in construction due to drawing errors and materials problems. Major activities performed during the Detailed Engineering Phase are as follows: •
Preparation of Design Drawings
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Preparation of Material Procurement/Saudi Aramco Material System Specification (SAMSS) and Direct Charge (DC)
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Preparation of Construction Bid Packages
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Providing Technical Support to Construction
Construction
The Construction Phase of the project life cycle usually represents the largest percentage of the monetary value of the project. If Preliminary Engineering, Detailed Engineering and Material Procurement have been executed on schedule, then construction should progress with all materials available when required at the site. The early decisions and thorough planning by the Project Engineer during the Engineering Phases allow the Construction Phase to progress more smoothly. Major activities performed during the Construction Phase are as follows: •
Tie-ins to Existing Facilities
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Progress Control & Measurement
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Physical Installation of Facilities
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Functionality Checks
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Mechanical Completion
Project Completion and Close-Out
During project completion, the Project Engineer is responsible for securing agreements from all parties that mechanical completion has been achieved. After approval of the Mechanical Completion Certificate (MCC), the commissioning process begins, the levels of staffing for both the SAPMT and contractor diminish, and the Project Engineer prepares to turn the project over to the operating proponent and financially "close out" the BI.
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In order to assure that the facility has been produced per the Project Proposal, the operating proponent will review the approved Project Proposal and associated minutes of the meeting, which were prepared during the Preliminary Engineering Phase. It is important that the Project Engineer prepare the minutes comprehensively and definitively to assure a mutual understanding by all parties at the completion of the project two to three years later. Major activities performed during the project completion and close-out are: •
Site Acceptance Testing
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Hand over of Spare Parts
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Completion of Punch List Items
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Financial Close-Out –
Final Release of All Contractors
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Resolving All Outstanding Costs with Vendors
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Closing All Internal Cost Codes
Controlling Project Objectives
Identification of the project objectives requires coordination of the input from many departments within Saudi Aramco. In order to guide the development of the project effectively, it is extremely important to understand the objectives of the project. During coordination of the objectives, it may be important for the Project Engineer to address differences between some organizations in selecting the proper project objectives. The Project Engineer must continually refer back to the basic project documents such as the DBSP, Project Proposal, and the Project Execution Plan to assure himself that the project is still on track. Identification of Project Objectives
Project objectives can generally be divided into two groups: •
Business Objectives
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Performance Objectives
Business objectives are the non-engineering objectives. In determining the business objectives of the project, the following list may be considered:
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Project intent/purpose objective
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Schedule objective
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Cost objective
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Economic objective (Rate of return)
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Risk Analysis/Factors
Performance Objectives are the Technical objectives. In determining the performance objectives of the project, the following list may be considered:
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Basic project performance objective
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Design standards
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Operating factor
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Materials utilization and interchangeability
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Establishing spares objective
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Computerization and automation
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Provisions for future expansion
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Constructability objectives
Some objectives may compromise other factors, which creates differences of opinion between departments. For instance, in order to minimize construction labor and schedule, the Project Engineer may want to use as much modular skids as practical; however, the proponent may not want the skids because they tend to be more crowded than conventional construction. In an example concerning the pursuit of the maximum operating factor, engineered equipment items are specified with long life seals and bearing or extra life electronics, which costs more than the standard supply. This scenario conflicts with the objective of minimizing costs. The Project Engineer is responsible for assuring that the project objectives comply and compliment the company's business objectives. Some company objectives that should be kept in consideration include: •
Effective utilization and training of Saudi personnel
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Maximized utilization of surplus and excess materials
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Effective utilization of capital
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Conservation of the environment
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Industrial Security
The control of the project scope of work at the early stage of its life is extremely important. It is the Project Engineer's responsibility to conscientiously manage the project, to constantly reassure the direction of the project, and to remain firmly focused on the activities to come.
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RESPONSIBILITIES OF THE PROJECT ENGINEER IN IMPLEMENTING PROJECT CONTROLS Introduction
The success of a project depends upon the SAPMT's understanding and appreciation of the Project Controls function and their commitment to it's implementation through all phases of a Saudi Aramco project. The Project Manager and the Project Engineer should fully understand the purpose, benefits, and mechanics of effective Project Controls. Although the Project Controls requirements are dictated by the project management p rocedures, the degree of their effectiveness is directly proportionate to the leadership role of the Project Manager and the Project Engineer. The Project Engineer as a Focal Point for Successful Project Controls
The Project Engineer plays a key role in ensuring successful implementation of Project Controls. The Project Engineer uses the project planning and progress status information to report to the Executive Management. In overseeing the implementation of Project Controls, the Project Engineer performs two major tasks: 1. Monitor the contractor's performance 2. Report the project performance to Saudi Aramco Executive Management To ensure effective Project Controls implementation, the Project Engineer is supported by his experience in planning and scheduling and by the cost control staff, who performs the associated detailed tasks. The Project Engineer is ultimately responsible for project performance. He provides the necessary support to his staff to ensure meaningful controls are implemented on a project. Some of the Project Controls activities for which the Project Engineer is responsible are as follows: •
Implementation of a Project Execution Plan
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Development of Project Milestone Schedule
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Appraisal of the contractor's cost and schedule control systems
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Monitoring the contractor's project performance
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Reporting the project status to Saudi Aramco Executive Management
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The Cost Influence Curve
As the project progresses through its life cycle, there is a decrease in the ability to incorporate project scope changes without significant cost consequences. In other words, as each phase of the project is completed and more of the finished product exists, the harder it is to change without significantly affecting the cost of the project. These costs usually take the form of reengineered systems designs and specifications, redrafting completed drawings, changing specifications to materials that are already being manufactured, or identifying and ordering new materials. The importance of this cost influence relationship is to recognize and reinforce how extremely critical it is for the Project Engineer to plan thoroughly and anticipate areas of disagreement as early as possible in the project life cycle. The Project Engineer must identify, analyze, and resolve vague areas of the project scope during the Preliminary Engineering Phase or as early as these areas are identified. If the Project Engineer ignores these vague areas, they will become an issue later in the project life when incorporation of change may be extremely costly or where it impacts the project schedule and ERC. Figure 2 graphically illustrates the relationship of the timeliness of decision-making on the ability to affect costs.
Figure 2. Cost Influence vs. Time
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There are several SAPMT members who are involved in the development and implementation of Project Controls on a Saudi Aramco project. To implement effective Project Controls, it is imperative that all participants do their share in generating and developing quality Project Controls information. The Project Controls will not be effective if either the contractor or the SAPMT is weak and lacks proper expertise. To ensure effective implementation of Project Controls, the SAPMT must ensure that: •
the SAPMT has the right expertise and that it is committed to the Project Controls concepts.
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Project Controls procedures and guidelines are established for the SAPMT and the contractors.
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the Contractor's Project Controls capabilities are evaluated prior to awarding contract.
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Project Controls documents are developed on time and they are evaluated for their accuracy.
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Project Controls data is used constantly to enhance project performance.
The Project Engineer must concentrate on three areas of control; Project Scope, Project Schedule, and Project Costs. Almost all aspects of the project can be categorized into one of these categories. Control Of Project Scope
To the Project Engineer it often seems like there are more people trying to change the project scope than there are people trying to maintain the project scope. It is the responsibility of the Project Engineer to maintain the integrity of the project scope. The Project Engineer is entrusted by management and the Board of Directors to perform the work they have approved. Consequently, only the Board of Directors has the authority to change the scope. The project scope is first identified in the Design Basis Scoping Paper (DBSP). The DBSP is issued by Facilities Planning Department after it has been approved as part of the Capital Plan. Although the DBSP does not include all the details of the project scope, it does identify the purpose of the project. The Project Engineer uses the purpose of the project to develop the Project Proposal and the Project Execution Plan (PEP). Of course the process of controlling the project scope continues after the ER is approved. The Project Engineer must try to maintain the original project scope when he is approached by other organizations that want to add their special considerations to the scope. It is very important to have the proponent’s accept the project objectives to help control the scope.
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Control Of Project Schedule
At the time the Project Engineer finalizes the PEP and the ER is approved, he has prepared the first official project schedule, the Project Completion Schedule. The Project Completion Schedule identifies the major milestones for the project. The schedule identifies each major activity within the overall project time-frame and is directly related to it by control points on the CPM schedule or GANT chart. The PCS (Addendum 5) establishes the schedule baseline for all project phases in detail engineering, material procurement, and construction. The SAPMT submits the initial PCS (Revision 0) with the first MPU. The PCS also identifies the following major schedule milestones which are closely tracked to monitor the schedule performance: ERA DE-CA LSTK-BPC PB-BPC PB-CA LSTK-CA CONST-BPC CONST-CA CS MC OS
– – – – – – – – – – –
Expenditure Request Approval Design Engineering-Contract Award Lump Sum Turnkey-Bid Package Complete Procure Build-Bid Package Complete Procure Build-Contract Award Lump Sum Turnkey-Contract Award Construction Bid Package Complete Construction Contract Award Construction Start Mechanical Completion On stream
Control Of Project Cost
It is the responsibility of the Project Engineer to control project costs on his assigned projects. The Project Engineer is often tempted to allow the Cost Engineer to control project costs with little input from the Project Engineer; however, this would be a mistake primarily because the cost engineer does not know the details of the project as well as project Engineer. The Cost Engineer does not know of potential problems, which affect the cost of the project. This knowledge is with the Project Engineer and he must be involved in order to relay this information and the extent of its impact to the Cost Engineer. Effective Cost Control increases the probability that the project will be completed within the budget and any deviations from the baseline are identified early enough to implement corrective actions.
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Cost Control should not be confused with the cost accounting function. Some people mistakenly believe that cost control is the record keeping of cost expenditures related to materials, labor, and other project expenses. This type of cost data is historical and it makes a partial contribution to Cost Control. The SAPMT cannot control the project’s cost performance solely by concentrating on what has already happened. Cost Control is a more dynamic function, which is not only concerned with historical data. Cost Control analyzes the actual performance to-date to identify any deviations from baselines, develops corrective solutions, and forecasts final project costs. There are three elements of an effective Cost Control function, namely: 1. Establishing a Cost Baseline 2. Monitoring Cost Performance 3. Forecasting the Final ER Cost Establishing a cost baseline consists of casting the project budgets and estimates into a definite commitment and expenditure plan based on the Project Execution Plans. Based on the project's Work Breakdown Structure (WBS), the project cost plans are broken down into project phases (e.g., engineering), procurement and construction, and project disciplines (e.g., civil, structural, piping, etc.). The project’s cash flow curves are developed to show expenditure plans. This is an important task because this information will be used throughout the life of a project to track the performance against the cost baseline. Monitoring Cost Performance - Once the cost baselines are established, the Cost Control function concentrates on monitoring actual cost and comparing it against the cost baseline. Just as the development of realistic and accurate estimates is vital to the evaluation of a project's actual costs, so is the timely status of a project's actual cost. The cost reporting and cost performance evaluation are essential to identify any deviations from the baselines. Forecasting the Final ER Cost - In monitoring the actual cost, the Project Engineer also identifies the causes of deviations from the project baseline. Once these causes of deviations are determined, corrective solutions can be developed so that the SAPMT has options for their decision-making. Cost Control also continuously strives to find ways to improve the cost performance by eliminating waste and implementing cost savings ideas. The Project Engineer establishes mechanisms to manage all of the project changes beyond the base work scope. These management mechanisms are essential for the SAPMT to achieve accurate cost reporting. Based on the available cost data and analysis, the Cost Control can forecast the final cost at project completion.
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SAPMT INTERFACE WITH OTHER ORGANIZATIONS AND PROJECTS Team Building
It is the responsibility of the Project Manager and the Project Engineer to put together the required resources to perform the work that is identified by the Budget Item. The most effective way to do this is with a project team. Forming individuals into groups by putting their names on organizational charts does not assure the Project Engineer that he will have a team. The team concept is what makes the group work together. The earlier and more the Project Engineer can accomplish the “together” the better the opportunity of success. The effective project team is a group who shares a common reason for working together, is interdependent in achieving shared objectives, is committed to work together to accomplish a specific project or projects, and is accountable for their performance to their management. Characteristics which are common among effective project teams are as follows: •
Trust
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Shared Project objectives
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Interdependence
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Shared sense of accountability
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Pride in team members
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Open communications
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Recognition
In many companies, the team building process is a formalized process, which is usually lead by a skilled, outside consultant who also has no involvement in the project. The purpose of the meeting(s) between the group is the early identification of the common ground on which to build the above characteristics. In order to maximize the effectiveness of the “team,” the Project Engineer should include as many organizations as he can in the team who have some, or all, of the above characteristics. For example, the design and construction contractors and the proponent share many of these characteristics.
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Trust is defined as the confidence and reliance one party has in the professional competence and integrity of the other party to successfully execute a project in the spirit of open communications and fairness. A trusting relationship is based on a mutual understanding of each other’s capabilities and limitations. It is also based on the personal and corporate integrity of both parities. Trust is a basic ingredient in effective team building, timely decision making, and in building long term relationships. Trust in the professional competence and integrity of the parties can be summarized in the following perceptions: •
•
A belief that both parties will do what they have said they will do. A willingness for both parties to risk being vulnerable to the other, supported by the belief that neither party will take advantage of the situation.
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Sensitivity and active dedication to each other’s needs.
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Candid communications about how each sees the relationship.
Cost vs. Trust
The Construction Industry Institute has researched the relationship between cost and trust on a project and determined that a trusting relationship between the parties is instrumental to the successful execution of projects. The relationship between trust and project cost can be conceptualized by the curve in Figure 2. As trust increases the cost of the project decreases. The optimum point, or least project cost point, on the curve is defined as rational trust. Rational trust represents the highest level of mutually verifiable trust between the parties. Beyond the point of rational trust, the relationship enters in the blind trust area.
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Figure 3. Cost vs. Trust Curve
In the construction industry, the nature of competitive contracting practices often promotes short term (project driven) adversarial relationships. These types of relationships are unstable, which adds to project uncertainty. Under these circumstances, the industry relies upon the contract document (complemented by control systems and legal personnel) to control project uncertainty. A cooperative relationship between the parties is considered instrumental in reducing project uncertainty and increasing the chances for the project’s success. The development of an effective cooperative relationship is based on mutual trust. Trust is a salient factor in determining the effectiveness of many relationships. It facilitates interpersonal acceptance and openness of expression. A trusting relationship between the parties is based on a mutual understanding of each other’s capabilities and limitations. It is also based on the personal and corporate integrity of both parties. Trust can be seen as the lubricant that makes it possible for organizations to work. The same could be said for inter group relations. Trust plays a critical role both within organizations and in inter-group relationships. The term trust can be used to refer to many facets of a relationship, such as: •
How much confidence you have in the other party’s competence and ability to do what is being asked of them
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Whether you believe the other party’s judgment is sound
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How much you believe the other party is willing to help you
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How certain you are that the other party does not desire to harm you
Other Organizations Inside and Outside Saudi Aramco
The Project Engineer has the sole responsibility to coordinate input from the organizations that are inside and outside of the Company. The success of the project may be determined on how well the Project Engineer performs this function, particularly when the technical nature of the project is outside the area of experience of the Project Engineer. In the early phases of the project the Project Engineer must coordinate the input from many organizations while preparing the Project Proposal. These organizations include: •
The Proponent
•
Other Saudi Aramco Organizations including -
Receiving or Supplying operational organizations if not the Proponent
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Facilities Planning Department
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Material Supply Organization
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Fixed Assets and Work In Progress Accounting
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Project Inspection
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The Design Contractor
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Other Projects with an Interface
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Major Equipment Vendors
The Proponent
When the Proponent truly believes that the SAPMT is working for the project’s and his best interest, the relationship between the Proponent and the Project Engineer will be much better. Trust and shared objectives are valuable to this relationship. The Project Engineer cannot ignore the Proponent or any of the Saudi Aramco organizations without resulting in a problem at some point in the project life cycle.
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Other Projects
Most of the time the Project Engineer can identify any interfaces with other projects because he is in contact with the other SAPMTs. Sometimes the projects that he interfaces with are not Saudi Aramco projects. The only way that he realizes their existence is through conversations with the operating proponent and actually seeing the work in progress. The Project Engineer should encourage his SAPMT to notice other work in the areas and to discuss the potential for interference with the SAPMT. To avoid interference, someone in the team should check on the other project. The Design Contractor
The design contractor also shares many of the objectives with the SAPMT. It is important for the Project Engineer to select the best contractor for the work. Not only should the selected contractor be the best technically, but he should be interested in performing the work. There are several ways the Project Engineer can determine if the contractor is interested in the work, including the quality of his proposal, the quality of the personnel he proposes for the work, and the quality of his execution plan. The Project Engineer should be confident that the selected contractor is fully capable before entering into a working relationship. The Vendor or Manufacturer
For large or unique equipment which is sometimes purchased on Saudi Aramco projects the equipment vendors can be very important to the success of the project. It may be smart to include these important vendors in the “team” as early as they are identified. It may be necessary to modify the project to accommodate unique features of the equipment or for the equipment manufacturer to modify his equipment to fit the particular situation. It is important to have a close and trusting relationship with the manufacturer for him to modify his equipment within the project schedule. Project Inspection During the construction phase, the Project Inspection group can be the most valuable organization in Saudi Aramco to the Project Engineer. Project Inspection is the organization, which at the end of each day, has to certify that the facility is built in accordance with the design drawings and the Saudi Aramco Engineering Standards. It is important for the Project Engineer to assure the inspection early in the construction phase that he is fully supports them and that he sincerely wants their input. The Project Inspection personnel cannot be viewed as hindering the progress of the work. The Project Engineer is responsible for ensuring that Saudi Aramco’s money is not wasted; therefore, Project Inspection is one of the best tools available to him to achieve this goal.
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SAPMT REPORTS PREPARED FOR MANAGEMENT Benefits of Effective Reporting
The requirement that the Project Engineer reports to management offers several advantages. The added emphasis associated with the reporting requirement causes the Project Engineer to do a more thorough job of understanding the project status. When the Project Engineer understands the project thoroughly, he enjoys discussing the project with and reporting to management, which encourages good communications. Better reporting also improves communications within the SAPMT. As other team members see this added emphasis, they too want to stay informed and improve their knowledge level about the project. Team members that are more knowledgeable have a positive impact on the project and result in timely and accurate information about the project status being available at all levels of the organization. The more time the Project Engineer spends on understanding the project, the better he will understand each area and the better he will be able to define the responsibilities of the other project team members. As a result, potential problems are identified earlier. Some of the reports that the Project Engineer prepares for management include the following: •
Budget Item Summary Report and Supplement (BISR)
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Monthly Project Update (MPU) report
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Project Planning Update (PPU) report
•
Project Completion Schedule (PCS)
•
PES/DES
•
Quarterly Review
The Budget Item Summary Report and Supplement
The SAPMT is responsible for keeping Saudi Aramco Executive Management informed about the project status and performance. The BISR (Addendum 1) is generated monthly for active projects of at least $50MM and for other projects under specific conditions. The report provides the following project status information: •
Progress Percent Completion Status
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Status on Major Project milestones
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Cost Status
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Project Completion Forecast
To enhance the BISR reporting, the SAPMT is required to include a Supplement Report, which highlights performance measures and provides greater visibility into project activity. The additional information is reported to the Management Committee. The five major categories of additional reporting requirements are: 1. Performance measures 2. Cost analysis 3. Major milestones accomplished 4. Major issues and concerns 5. Contingency management The BISR Supplement (Addendum 2) provides the Management Committee with project performance information in a summary format. Performance indices have been developed in the following project reporting categories: •
Cost
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Project Completion
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Expenditure Forecast Performance - Full Year
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Program Management Costs
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Project Management Cost
In each of the above categories, the BISR Supplement compares the current plan to the plan index. The variance is shown and reasons for the variances are explained along with the actions taken to correct the problems. Monthly Project Update Report
The SAPMT prepares an Monthly Project Update (MPU) for all projects under the control of Engineering & Project Management that have received Prior Approval Expenditure Request (PAER) or Expenditure Request (ER) funding. All of the Job Orders (JOs) within a Budget Item that are under the responsibility of a single Project Manager constitute the Scope of Work covered by one MPU. The SAPMT submits the MPU by the third SAO work day of each month. The first MPU is submitted for the month following ER funding approval. MPU reporting is discontinued when financial closure of TC-60 funds occur. The last report must state "This is the last report." in the Comments section.
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The MPU report includes the project status information as it relates to: •
Progress percent completion
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Cost status –
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Capital vs. expense
Schedule status –
Schedule milestones
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Procurement status
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Forecast for project cost and completion
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SAPMT concerns
Project Proposal Update Report
A Project Proposal Update (PPU) report is prepared on the form Saudi Aramco 7057 (Addendum 3). The basic purpose of a PPU is to communicate project status information from SAPMT for all Engineering & Project Management Budget Items (BIs) in a preliminary engineering phase. That includes all project-proposal work, preparation of an Expenditure Request (ER) estimate, bid-package development, and other engineering activities accomplished under TC-68 funds. The first report is submitted for the month following TC-68 funding approval. The report is prepared monthly, with the original due by the third work day of each month. The final report is submitted for the month in which any ER funding is approved. After approval of the ER funding, the PPU report is discontinued and is replaced by the MPU report(Addendum 4). The PPU report includes the project status information as it relates to: •
Preliminary Engineering Progress
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Schedule Milestones
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Cost Status –
Approved TC-68 Funds
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Expended TC-68 Funds
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Estimated project cost as stated in the most recent approved Budget Brief
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Latest total cost estimate for the project's current scope including
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Expenditure forecast by quarter for the total Budget Item
The PPU report shows the actual project status as compared to the project baselines established by the TC-68 funds and original/latest schedules to complete the preliminary engineering phase. Project Completion Schedule
The Project Completion Schedule (PCS) report is prepared by the SAPMT for all of the projects under the control of Project Management which have approved ER funding. The PCS was discussed earlier in this module. Proposal Engineering Statistics Report
The Proposal Engineering Statistics (PES) report was established to accommodate design progress reporting from the start of the project proposal through full funding. After ERA funding the report becomes a Design Engineering Statistics (DES) report. The PES is prepared jointly by the contractor and SAPMT prior to each management review meeting. The PES is jointly approved and signed by the contractor project manager and the Saudi Aramco project or design manager. Distribution within Saudi Aramco is then made by the Project Manager, as required, also under confidential cover. The PES provides project data which is essential to evaluate the engineering productivity and the performance of the Preliminary Engineering contractor. During this phase the engineering categories, or breakdowns, differ a little from the DES report format, but the information and report format are similar. Detail Engineering Statistics Report
The DES report is used for presentation of the performance of the detailed engineering contractor during the Quarterly Review meetings and at the project close-out. The DES serves as a standard means of: •
Monitoring engineering-office functions
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Collecting engineering-work quantities
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Reporting unit manhours and relative cost.
The DES Report shows the contractor's performance as it relates to the detailed engineering and procurement effort. By analyzing the DES report the SAPMT can determine engineering productivity on the project. The data provided by a contractor is proprietary and, therefore, all Saudi Aramco p ersonnel exposed to that information must regard the data as confidential.
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The Quarterly Project Reviews
A quarterly review meeting provides Saudi Aramco Executive Management with the current status of the project and a forum for open discussion of project matters among Executive Management, the SAPMT, the PMC (if involved), and the engineering and construction contractors. The quarterly review meetings are planned to provide the Saudi Aramco Executive Management pertinent project status information, such as: •
Cost Performance against the Expenditure Request (ER) estimate
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Schedule Status as compared to Expenditure Request Completion (ERC) date
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Overall performance of contractor(s)
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Problem areas that may impede project performance
The quarterly review meetings provide an opportunity for all the major project participants to present their performance and express concerns which need the Saudi Aramco’s Executive Management's attention. During the quarterly reviews the presentations are made by: •
Saudi Aramco Project Management Team
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Project Management Contractor
•
Engineering and/or Construction Contractors
The Saudi Aramco Executive Management evaluates the overall performance and in case of performance lapses, directs the appropriate participants to implement corrective actions within the specified time frames. After the quarterly review meeting the SAPMT follows up to ensure that the corrective measures are implemented to remedy the problem areas.
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GLOSSARY BI
Budget Item
BISR
Budget Item Summary Report
CESP
Conceptual Engineering Scoping Paper
CONST-BPC
Construction Bid Package Complete
CONST-CA
Construction Contract Award
CPM
Critical Path Method
DBSP
Design Basis Scoping Paper
DC
Direct Charge
DE-CA
Design Engineering-Contract Award
DES
Detail Engineering Statistics Report
ER
Expenditure Request
ERA
Expenditure Request Approval
ERC
Expenditure Request Completion
FPD
Facilities Planning Department
JOs
Job Orders
LSTK
Lump Sum Turn Key
MC
Management Committee
MCC
Mechanical Completion Certificate
MPU
Monthly Project Update Report
PAC
Planning Advisory Committee
PAER
Prior Approval Expenditure Request
PB
Planning Brief
PCS
Project Completion Schedule
PEP
Project Execution Plan
PES
Proposal Engineering Statistics Report
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PM
Project Manager
PPU
Project Proposal Update Report
SAPMT
Saudi Aramco Project Management Team
WBS
Work Breakdown Structure
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ADDENDUM
1.
Budget Item Summary Report (BISR)
2.
Budget Item Summary Report Supplement
3.
Project Planning Update Report (PPU)
4.
Monthly Project Update Report (MPU)
5.
Project Completion Schedule (PCS)
6.
Proposal Engineering Statistics Report (PES)
7.
Detail Engineering Statistics Report (DES)
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ADDENDUM 1: Budget Item Summary Report (BISR)
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ADDENDUM 2: Budget Item Summary Report Supplement
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ADDENDUM 2: Budget Item Summary Report Supplement
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Addendum 3: Project Planning Update Report (PPU)
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Addendum 4: Monthly Project Update Report (MPU)
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Addendum 5: Project Completion Schedule (PCS)
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Addendum 6: Proposal Engineering Statistics Report
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