This document discusses best practices for creating realistic shutdown budgets that gain internal approval. It emphasizes developing budgets that fit strategic plans, break costs into clear categories, and learn from past shutdown experiences. Budgets should consider perspectives of management, coordinators, and operations to address routine, non-routine, opportunity, and indirect costs. Contingency planning and clear responsibilities help create budgets that match business goals.

1. SHUTDOWN
SUPERCONFERENCE
2004
Buying into the Budget
How to get Internal Stakeholders to
Turn Budgets from Fantasy into
Reality

2. Definition
Budget
– “ an itemized list of probable expenditures
and income for a given period”.
3. “ The sum of money allocated for a
particular purpose or time period”.

3. Management Perspective
• Fit to the business plan and annual budgets
• Total cost to the organization
• Business interruption
• Cash flow

4. Business Goals
Strategic Plan
Business
Shutdown Plan
Plan
Department
Plans

5. Estimate / Budgeting Cycle
Business Plan
Shutdown Estimate
+/- 25% Frozen Worklist
June 2004 December 2004
Shutdown
September 2005
Business Plan Final A/R
Approval +/- 10%
September 2004 January 2005

6. Shutdown Coordinator Perspective
• Need to have the costs identified
and tracked into areas that make
sense for future reference.
• Work Breakdown Structure
• Benchmarking

7. Realistic Estimating
• Costs broken into areas that make the most
sense.
– Direct
– Indirect
– Routine Maintenance
– Non Routine
– Opportunity Work
– Operational Costs

8. Direct Vs Indirect
• Direct costs include all activities,
routine and non-routine, that are
directly related to the task and can
only be completed when the facility
is shut down.
– Man-hours, Materials, Equipment,
Rentals
• Indirect costs include all activities,
routine and non-routine, that are not
directly related to the task.
– Supervision, Scheduling, Time Sheets,
Payroll

9. Routine Vs Non- Routine
• Routine
– Maintenance jobs that are executed on a
consistent cycle (e.g. pressure equipment
inspections, equipment service plans etc…)
• Non Routine
– Maintenance work that are typically 1 of’s that
present themselves in the period between
scheduled shutdowns (e.g. equipment failures)

10. Opportunity Work
• Work that makes business sense to execute
during the shutdown.
– Catalyst change outs that can be done on line,
scheduled for the same year, but require
significant costs to prepare (e.g. purging,
equipment isolation costs).

11. Operational Costs
• All operational costs associated with Shutting
Down and Starting Up the plant.
– Utilities
• Nitrogen
• Natural Gas
• Hydrogen
• Water
• Chemicals
– Operator and Maintenance Overtime?
– Lost Production?

12. Contingency
• Contingency is the amount of money which must
be added to a base estimate to provide for
uncertainties.
– The amount of contingency added is directly related to
the risk of overrun.
• Contingency is not:
– A slush fund or catch all for predictable items such as
escalation.
– Provision for added or extra work
– Provision for unforeseeable circumstances (process
issues / storms)
– A substitute for good Shutdown management

13. AEF Example
Contingency was calculated based on assessing the risk
value and weight associated with each Risk Factor for the
shutdown. Scope Changes and Productivity (Cold
Weather) were identified as having the biggest impact to
the success of this shutdown. The following table
represents the Risk Factors and their contribution to the
overall contingency:

14. Risk Factor Input Risk Value Input Risk Weight Contribution to Overall Risk
Design Variations
New Technology 3 5.00 6%
Scope Changes 3.5 20.00 27%
Execution Variations
Contract Plan 1 5.00 2%
Performance 2 15.00 12%
Economic Variations
Market Activity 2 5.00 4%
Labor Conditions 2 5.00 4%
Estimating Variations
Material Quantities 2 10.00 8%
Pricing 2 15.00 12%
Escalation 1.5 5.00 3%
Productivity 4 15.00 23%
Total Weighted Project Risk Factor
2.58 100%
Overall Contingency 25%
Estimate Accuracy +/-
23%

15. 50/50 Estimate

16. Daily Costs
Estimate vs Actual
$7,500,000
$6,676,067.94
$7,000,000
$6,500,000
$6,000,000 $6,300,000.00 $6,500,000.00
$5,500,000
$5,000,000
$4,500,000 Estimate
$4,000,000
Actual
$3,500,000
$3,000,000 Forecast
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
10 15 20 25 30 4 9 14 26 2 7 12 17 22 27 1 6 11 16
Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Mar Mar Apr Apr Apr Apr

17. Capital and Expense
• Expense
– All routine and non-routine work
– Opportunity Work
– Operational Costs
• Capital
– Project work
– Significant replacement in terms of cost
– Major component
– Over 50% of the replacement value

18. Estimate Example
Expense Capital
Routine & Non 5,000,000 500,000
Routine Shutdown
Work
Opportunity 1,000,000
Shutdown Work
Shutdown Indirects 2,000,000
Operations Shutdown 1,250,000
Costs
Totals 9,250,000 500,000

19. Building From the Past
• Establish a baseline or benchmark
• Identify the “Heavy Hitters” as areas for
improvement.
• Allow time to adjust work plans and
estimates based on actual values post
shutdown.

20. Responsibilities
• Shutdown Coordinator
– Overall Budget
– Indirects and Contingency
• Shutdown Planners
– Direct Routine and Non Routine work
– Opportunity work
• Operations Coordinator
– Operations shutdown and start up costs
• Engineering
– Capital project costs

21. Summary
• Different levels of the organization
have different needs
– Owners
– Managers
– Shutdown Coordinator
• Must fit into Companies Business
Plans and Objectives
• Everyone needs to talk the same
language
• Should be Realistic not Optimistic