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Perspectives

Implementing Pre-Construction Best Practices in Asian Power Projects

Implementing Pre-Construction Best Practices in Asian Power Projects

Pre-construction best practices should be implemented from the earliest stages of a power project, even when putting together financial packages. In fact, an owner’s or developer’s most important decision in the entire process may rest with the selection of the EPC (engineering, procurement and construction) contractor. Experienced owner’s and lenders’ engineers can guide developers in Asia through the financing and bidding process.

“What is critical is that risks are assessed, communicated and managed prior to the EPC award,” said Suqing Wang, Director of Power Generation Services, Northeast Asia, Black & Veatch. This can occur when a holistic constructability program is implemented at large infrastructure projects.

As the owner’s engineer to PT Lestari Banten Energi (LBE) from Malaysia, Black & Veatch helped overcome a major perceived shortcoming while garnering investor confidence. LBE is an operating division of Malaysia’s Genting Group and was planning to build a 670-megawatt coal-fired supercritical power plant in Banten, West Java, Indonesia. The project is being delivered through Harbin Electric International Company Limited, a Chinese EPC contractor.

“Before financing was secured, the project addressed construction issues surrounding the perceived underperformance of Chinese contractors and equipment suppliers,” Wang said. “We communicated closely with banks and other relevant parties to explain the technical parameters of the project, as well as the management controls and processes to be used.”

Financial close was achieved on-schedule in 2013. The project is the first example of an Indonesian independent power producer (IPP) development with global financing that did not require an Indonesian government guarantee. It also picked up the 2013 Asia Pacific Power Deal of the Year by Project Finance International.

Since the first concrete-pouring at the end of 2013, the project continues to perform to expectations and construction remains on schedule for completion in 2017.

Planning for Commissioning

Best practices for pre-construction call for a robust constructability plan. This holistic planning includes all aspects of a major construction project, and it includes planning for the startup and commissioning of a power project long before the first construction equipment arrives at the site, and ideally before detailed design commences.

The startup and commissioning process is the most critical and riskiest, yet often overlooked segment of the project. “Commissioning is the most critical period of power plant development for both the owner and the EPC contractor. It is the first time that the engineering and design is fully tested on a functional basis,” said Mark McDermott, Project Director, Black & Veatch. “Given the challenges and complexity of the process, early planning that is fully integrated as part of the constructability program is essential for a successful project.”

“The reason commissioning is the riskiest part of a project is because there is little time to recover,” added Jim Schnieders, Managing Director of Black & Veatch’s EPC power business in Asia. “During the course of a project, early on or midway, if a piece of material is found to be defective or equipment requires modification, there is still time to reorder and fix it. However, during the startup phase, there is less time to remedy issues prior to the plant going commercial.”

In essence, any problem encountered during startup has a higher chance of postponing the start of power production and delaying revenue cash flow.

Using Constructability Practices for Vendors

Another award-winning facility, the Tanjung Jati B Units 3 & 4 Electric Generating Station expansion project in Indonesia, implemented early vendor constructability meetings. The balance of plant equipment supplied by Black & Veatch for this 2 x 660 MW coal-fired project was primarily provided by high-quality Chinese suppliers. Already for a number of years, Black & Veatch had been screening and prequalifying Chinese equipment suppliers, identifying the best companies that could meet project quality, cost, schedule and performance objectives.  

As well as ensuring all equipment arrived at the right time, and fabricated with high quality in accordance with the design requirements to support construction, the early constructability meetings resulted in down-the-line efficiencies.

“We worked to ensure that lines of communication were clear, key construction challenges addressed, that interfaces were fully identified and that scope splits were re-reviewed in detail,” said Greg Bahora Operations Director, Construction & Procurement for Black & Veatch in Asia Pacific. “Key challenges were identified early, and quality engineering and construction drawings were provided to support the Indonesia-based erection contractors in the field.”

In fact, Black & Veatch reviewed and processed over 17,000 engineering documents from equipment suppliers. A large percentage of these drawings were commented on and returned for revision several times before achieving the needed level of quality required to ensure a smooth delivery process and constructability on site. The pulverized coal-fired plant, which is located near Jepara, about 150 kilometers east of Semarang on the northern coast of Central Java in Indonesia, was delivered safely with each unit commissioned ahead of schedule.

Integration, Planning and Resources are Key

To increase the likelihood of meeting increasingly aggressive project timelines, overall project execution must be based on planned team integration.  It is vital to integrate all engineering, procurement , construction, and commissioning professionals – breaking down the walls between those groups that traditionally exist at other companies across the industry.

“The more integrated the teams are, the more effective they are,” Bahora said. “This results in a safer and better executed project.”

Startup and commissioning professionals must be integrated at the early stages of a project to assure proper planning and foster a ‘begin-with-the-end-in-mind’ mindset. Their involvement is required during the EPC proposal stage and they should remain active team members throughout the design phase. Well before commissioning of a plant, startup professionals must be out checking all of the systems and equipment within those systems. This approach ensures that these experts are assimilated into the entire project, which often can last for two to four years.

Detailed schedules, execution and work plans, scope split documents and clear change-management procedures will govern a positive trajectory for the project and help actively manage delivery risk from Day One. EPC contractors that staff their projects with little-to-no oversight of their subcontractors in the field are bound to suffer accordingly.

Breaking Through Cultural Barriers

EPC projects  – and by extension – developers are at risk when there is an inadequate assessment of local manpower, especially skilled workers and specialists, and are exposed when social and cultural understanding is lacking. This hinders the ability to keep workers productive and resolve potential disputes.

Overlooking cultural differences can also run deeper, Wang said. Beyond straightforward language differences, a major blind spot in internationally led EPC projects are the differences between global and local engineering codes and standards (e.g. China’s Guobiao, or GB, standards).

“This means many projects in the region must plan for and assemble teams of multi-lingual and multi-cultural engineers qualified and knowledgeable in multiple codes and standards,” Wang said. “This ensures compliance is maintained, supporting a smooth construction and commissioning effort down the line.”

Such a model was critical on the success of the Tanjung Jati B Units 3 & 4 project, as well as many other major projects executed by Black & Veatch around the world.

Today, projects are becoming more complex, according to Mitesh Patel, Managing Director of Black & Veatch’s management consulting business in Southeast Asia, India and the Middle East. They are executed in an increasingly competitive global economy featuring tighter schedules and less experienced EPC contractors and suppliers, as well as together with often vying multinational and local interests. All these factors come into play on any given power project.

“With so many challenges to overcome, owners, developers and financiers can turn to holistic constructability programs for answers,” Patel said. “Thankfully, there is a means to maximize predictability, stability and success on projects.”

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