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How to accurately bid a large downstream project (Project Management)

Estimating costs and benefits of large scale projects is notoriously difficult due to many issues that are mentioned in this article. The suggested solutions are also sound. But there is one major way in which project owners can use to evaluate the vendors – their reputations. Project owners should not be blinded by glitzy brochures, Powerpoints, or even brand names. They should look at the vendor’s history and success rate and come up with the its metrics of success. Then ask the vendor three simple but though question: 1) What % of your projects are successful? 2) What are the metrics that you use to support its success? 3) Compare your success metrics and what’s reported and focus on the metrics that are not mentioned. This way, the vendors are forced into a discussion on the ultimate measure of success.

(Te Wu’s Comments on the Houston Business Journal article below)

Brad Thompson and Tanner Neidhardt for the Houston Business Journal write:   Inaccurate forecasting in large-scale infrastructure construction projects leads to underestimated costs and overestimated benefits. However, knowing the causes of these inaccuracies can be the difference between success and failure.

Construction of new downstream oil and gas operations, as well as capacity upgrades, in Texas and along the U.S. Gulf Coast face a number of such forecasting challenges. Refiners are expected to add more than 500 million barrels per day of new domestic refining capacity in the next five years; and a large portion of this new capacity is expected to occur in the U.S. Gulf Coast region, which already hosts the five largest U.S. refineries. With significant downstream projects in the planning and the construction phases in this region, accurately forecasting the costs and benefits of these projects has never been more important.

Unfortunately, misinformation in forecasting large projects is the norm, according to Bent Flyvbjerg, an Oxford University professor and expert in the problems and causes of megaprojects. For those considering downstream infrastructure projects, Flyvbjerg’s aptly titled, “What You Should Know About Megaprojects and Why: An Overview” in the April/May 2014 Project Management Journal, delivers an unpleasant analysis of megaprojects: “over budget, over time, over and over again.”   SNIP, the article continues @ Houston Business Journal, click here to continue reading…

PMO Advisory: PMO Advisory is a management consulting firm specializing in strategic business execution - helping organizations bring ideas to life. We specialize in project, program, and portfolio management, PMOs, business transformation, process improvement and sustainable business innovation.