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EY_STAGE_GATE_PROCESS_500905023.pptx
- 1. EY’S FOCUS ISON ENABLING CLIENTS TO “MAKE THE RIGHT PROMISE, AND DELIVER ON THE PROMISE MADE” Identify opportunities in line with Company strategy. Select the best alternative to implement the project. Finalize project scope, cost and plan and obtain approval of funds. Execute the project, considering the scope, cost and plan. Operate and assess ensuring performance and maximum return for the company. Identification Selection Definition Execution Operation and Control Is the opportunity aligned with Company strategy? Is it the best alternative to implement the project? Should the Project proceed? Can operations start? Stage-Gate Objectives G4 G1 G2 G3 Select Best project Describe Best Project Implement Best Project Benefits of Stage-Gate Governance • Alignment of resource commitment (e.g. financial, organizational) to project definition, leading to investment optimization and cost savings • Optimized effort in project development, by addressing critical success factors defined for each stage-gate; investment in early-stage planning (or Front End Loading) • Effective mitigation of risks through effective stakeholder engagement, by ensuring dependencies/ unknowns are analyzed progressively, stakeholder inputs are duly considered and carry-over of risk is minimized to subsequent stages Pre-Feasibility Concept Feasibility
- 2. KEY IMPERATIVES BEFORERRPL FEL 1 Concept FEL 2 Pre-Feasibility FEL 3 Feasibility FEL 4 Execute FEL 5 Operate G4 G1 G2 G3 Eliminate Options & Select Best project Define Best Project Execute Best Project ► Have options (e.g. capacity/ location/ technology) been identified for the opportunity under consideration? ► Has technology assessment been completed for listed options? ► Has site evaluation been initiated? ► Have conceptual layouts and conceptual engineering definition been completed? ► Have major risks associated with the opportunity, along with critical success factors for the project been identified? ► Has the Class 5 Cost Estimate (-50% to +100%) been prepared? ► Have major milestones for the opportunity/ project been identified? ► Has Conceptual Procurement Plan been prepared? ► Has Long Lead strategy worked out? ► Have we evaluated and finalized the technology option for further definition? ► Have we evaluated and finalized the site for the project? ► Have the Lessons Learnt from similar projects been reviewed and incorporated? ► Has the preliminary Project Execution Plan been prepared? ► Has the preparation of Environmental Impact Assessment been initiated? ► Have project sustainability objectives been frozen? ► Has initial Geo-Technical study been initiated? Have preliminary plot plans been prepared? ► Has the process of detailed risk identification been initiated? ► Has the evaluation of Execution and Contracting Strategy been initiated? ► Has the Class 4 Cost Estimate (-30% to +50%) been prepared? ► Has the preliminary L-1 schedule been prepared, duly sequenced and networked? ► Has Draft Procurement Plan prepared? ► Has Enquires floated for Long Lead Items? ► Has the Execution & Contracting Strategy been prepared? ► Has the Environmental Impact Assessment been approved? ► Has the Geo-Technical Study been completed? Have plot plans/ plant layout been prepared? ► Has the mandatory engineering definition been achieved? ► Has the Class 3 Cost Estimate (-20% to +30%) been prepared? ► Has the Level-1 Integrated Project Schedule been prepared, duly sequenced and networked? ► Have project risks been identified & qualified, mitigation plans prepared and contingencies estimated? ► Has Constructability Assessment been initiated? ► Has Baseline Procurement Plan prepared? ► Has Order Placed for Long Lead Items? ► Has All engineering deliverables prepared timely & to the correct standard? ► Has all equipment & material purchased and being delivered within time & budget? ► Has all the statutory clearances for build has been obtained? ► Has the execution organization in place? ► Are all execution manpower & other resources are deployed? ► Have all services contract been laid out? ► Are all HSEQ need of the project addressed? ► Is the operation organization in place? ► Is the operation philosophy defined? ► Is the Raw Material & Consumable sourcing strategy defined & infrastructure is in place? ► Is the product evacuation strategy defined & infrastructure in place? ► Are maintenance strategies defined and in place? ► Are all CSR being implemented as per the vision adopted?
- 3. OUR FRAMEWORK FORFEASIBILITY ASSESSMENT AND BUSINESS CASE FEL 1 Identify FEL 2 Assess & Select FEL 3 Define FEL 4 Execute FEL 5 Operate G4 G1 G2 G3 Define Best Project Execute Defined Project Realize Value Identify Options Select Best Option Is the opportunity aligned with Company strategy? Is it the best alternative to implement the project? Should the Project proceed? Can operations start? “Make the right promise” “Deliver on the promise made” FID ► Define Objective ► Market Study ► High Level Technical Study ► Financial Analysis ► Business Case Definition ► High Level Project Definition ► High Level Demand Supply Analysis ► High Level Technical Study ► High Level Financial Analysis ► High Level Business Case ► Business Objectives ► Detailed Market Study ► Technical Study ► Statutory Approvals ► Financial Analysis ► High Level Business Case ► High Level Project Objectives ► Customer, Supplier, Competition, Market Environment, Substitutes ► High Level Technical Study ► Statutory Approvals Requirement Details ► Financial Analysis ► High Level Business Case Activities Deliverables ► Review Business Case ► Technology Eval. ► Facilities Design Basis ► CAPEX estimation ► Financial Design Basis ► PEP ► Updated Business Case ► Technology Recommendation ► Design Basis ► CAPEX ► Financial Requirement ► Project Executive Summary ► Project Execution Plan ► Detailed Business Case
- 4. PROJECT DEVELOPMENT, REVIEWAND APPROVAL KEY QUESTIONS ► Have options (e.g. capacity/ location/ technology) been identified for the opportunity under consideration? ► Has technology assessment been completed for listed options? ► Has site evaluation been initiated? ► Have conceptual layouts and conceptual engineering definition been completed? ► Have major risks associated with the opportunity, along with critical success factors for the project been identified? ► Has the Class 5 Cost Estimate (-50% to +100%) been prepared? ► Have major milestones for the opportunity/ project been identified? ► Has Conceptual Procurement Plan been prepared? ► Has Long Lead strategy worked out? ► Have we evaluated and finalized the technology option for further definition? ► Have we evaluated and finalized the site for the project? ► Have the Lessons Learnt from similar projects been reviewed and incorporated? ► Has the preliminary Project Execution Plan been prepared? ► Has the preparation of Environmental Impact Assessment been initiated? ► Have project sustainability objectives been frozen? ► Has initial Geo-Technical study been initiated? Have preliminary plot plans been prepared? ► Has the process of detailed risk identification been initiated? ► Has the evaluation of Execution and Contracting Strategy been initiated? ► Has the Class 4 Cost Estimate (-30% to +50%) been prepared? ► Has the preliminary L-1 schedule been prepared, duly sequenced and networked? ► Has Draft Procurement Plan prepared? ► Has Enquires floated for Long Lead Items? ► Has the Execution & Contracting Strategy been prepared? ► Has the Environmental Impact Assessment been approved? ► Has the Geo-Technical Study been completed? Have plot plans/ plant layout been prepared? ► Has the mandatory engineering definition been achieved? ► Has the Class 3 Cost Estimate (-20% to +30%) been prepared? ► Has the Level-1 Integrated Project Schedule been prepared, duly sequenced and networked? ► Have project risks been identified & qualified, mitigation plans prepared and contingencies estimated? ► Has Constructability Assessment been initiated? ► Has Baseline Procurement Plan prepared? ► Has Order Placed for Long Lead Items? FEL 1 IDENTIFY FEL 2 ASSESS & SELECT FEL 3 DEFINE G1 G2 G3 DEFINE BEST PROJECT IDENTIFY OPTIONS SELECT BEST OPTION IS THE OPPORTUNITY ALIGNED WITH COMPANY STRATEGY? IS IT THE BEST ALTERNATIVE TO IMPLEMENT THE PROJECT? SHOULD THE PROJECT PROCEED? “MAKE THE RIGHT PROMISE” FID
- 5. STAGE GATE FRAMEWORK(2/3) ►Stage Gate Framework is flexible in terms of number of Gates to be followed depending on nature of Project Critical Projects Significant Projects Routine Projects ► CAPEX: > 25 M USD ► High Complexity ► High Risk ► CAPEX: > 5 M USD and <= 25 M USD ► Medium Complexity ► CAPEX: <= 5 M USD ► Low Complexity FEL 1 Concept FEL 2 Pre-Feasibility FEL 3 Feasibility FEL 4 Execute FEL 5 Operate G4 G1 G2 G3 FEL 1 Concept FEL 2 Pre-Feasibility FEL 3 Feasibility FEL 4 Execute FEL 5 Operate G4 G2 G3 FEL 1 Concept FEL 2 Pre-Feasibility FEL 3 Feasibility FEL 4 Execute FEL 5 Operate G4 G3 Project Classes Number of Gates Criteria ► Critical Project: Setting up New Refinery /Petrochemical Complex ► Significant Project: Adding New Unit in Existing Complex (New Diesel Hydrotreater for Euro IV quality Diesel) ► Routine Project: Revamping Existing Unit for improvement of Quality / Quantity of Product Examples
- 6. STAGE GATE FRAMEWORK(3/3) ►Stage wise functions and involvement Stages Functions FEL 1 FEL 2 FEL 3 FEL 4 FEL 5 Business Technology Project Management Project Control Engineering Procurement & Contracts Vendors & Contractors Construction Operations and Management Support Services Management No Involvement Low Involvement Medium Involvement High Involvement Responsible
- 7. Stages FEL 1FEL 2 FEL 3 FEL 4 Engineering Level of Engineering Definition <5% <20% <40% 50% to 100% Process Design Preliminary Issued for Information Issued for Design Issued for Construction Layout Definition Block Diagrams Major Equipment laid out (long leads/critical) Major Equipment & Structures laid Structures laid out Multi disciplinary model complete complete Material Take Offs - Benchmark estimates Information Actual Procur- ement Procurement Plan Conceptual Draft Plan Baseline Plan Updated Plan Long Leads Strategy Identified Enquiries Issued Order Placement Delivered Const, Comm & Operations Modularization/ Pre Assembly - Conceptual Preliminary Final Constructability - Planned Reviewed Implemented Logistics and Installation Installation - Planned Reviewed Implemented Sche-dule Project Master Schedule Schedule Level 1 Level 1 Level 1-5 Progress Reporting - - Preliminary Final Project Budget Purpose of Estimate Concept Study and cost of of prefeasibility study Viability Base line Detailed base line Methodology Parametric or capacity factored Budget vendor quotations quotations MTO’s from defined work pkgs; Detailed MTO’s and final vendor Contingency +30% to 40% +20 to +30% +10% to +20% +05% to +10% Accuracy Range L: -20% to -50% H: +30% to +100% L: -15% to -30% H: +20% to +50% L: -10% to -20% H: +10% to +30% L: -05% to -15% H: +05% to +10% STAGE WISE LEVEL I DELIVERABLES
- 8. STAGE WISE ACCURACYOF COST ESTIMATION AND CONTINGENCY Stage FEL 1 FEL 2 FEL 3 FEL 4 EstimateClass CLASS 5 CLASS 4 CLASS 3 CLASS 2 Estimation Purpose Screening Concept Study Budget, Authorization, or Control Control Cost Estimation Methodology Capacity Factored, Parametric Models, Judgment Equipment Factored or Parametric Models Semi-Detailed Unit Costs Detailed Unit Cost Accuracyof Cost Estimation L: -20% to -50% H: +30% to +100% L: -15% to -30% H: +20% to +50% L: -10% to -20% H: +10% to +30% L: -05% to -15% H: +05% to +10% Percentage Contingency +30% to 40% +20 to +30% +10% to +20% +05% to +10%
- 9. STAGE WISE LEVELII DELIVERABLES FOR ENGINEERING Stage FEL 1 FEL 2 FEL 3 FEL 4 FEL 5 EstimateClass CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1 Project Scope Description General Preliminary Defined Defined Defined Plant Production/Facility Capacity Assumed Preliminary Defined Defined Plant Location General Approximate Specific Specific Specific Specific Soils & Hydrology None Preliminary Defined Defined Defined Defined Integrated Project Plan None Preliminary Defined Defined Defined Project Master Schedule None Preliminary Defined Defined Defined Escalation Strategy None Preliminary Defined Defined Defined Defined Work Breakdown Structure None Preliminary Defined Defined Defined Project Code of Accounts None Preliminary Defined Defined Defined Contracting Strategy Assumed Preliminary Defined Defined Defined Block Flow Diagrams Started/Preliminary Preliminary Completed Completed Completed Plot Plans Started Started/Preliminary Completed Completed Process Flow Diagrams Started/Preliminary Preliminary/Completed Completed Completed Utility Flow Diagrams Started/Preliminary Preliminary/Completed Completed Completed Piping & Instrument Diagrams Started Preliminary/Completed Completed Completed Heat & Material Balances Started Preliminary/Completed Completed Completed Process Equipment List Started/Preliminary Preliminary/Completed Completed Completed Utility Equipment List Started/Preliminary Preliminary/Completed Completed Completed Electrical One-Line Drawings Started/Preliminary Preliminary/Completed Completed Completed Specifications & Datasheets Started Preliminary/Completed Completed Completed General Equipment Arrangement Drawings Drawings Started Preliminary/Completed Completed Completed Mechanical Discipline Drawings Started Preliminary/Completed Completed Electrical Discipline Drawings Started Preliminary/Completed Completed Instrumentation/Control System Drawings Started Preliminary/Completed Completed Civil/Structural/Site Drawings Started Preliminary/Completed Completed General Project Data Engineering Deliverables
- 10. 10 STAGE GATE PROCESS(TBD) The project stage gate process framework will establish the decision criteria and processes for progressing the project from one stage to the next Initiation Execution Planning Close-out SG DP DM Review and close project set-up and undertake commissioning activities Safely implement project consistent with scope, specifications, cost and schedule Long term and short term plans for engineering, procurement, construction and commissioning Finalize project scope, design, cost, & schedule Operation Operate and evaluate performance relative to business strategy SG DP DM SG DP DM SG DP DM DP: Decision Package DM: Decision Maker SG: Stage Gate DM DP SG
- 11. Failure toset standards Failure to optimize design (value engineer) for project Failure to optimize design across multiple projects Over-engineering or inadequate engagement of operations including consideration of full lifecycle costs Procurement functions are overwhelmed - creates a bottleneck and loses control Poor strategic alignment Lack of project detail Unrealistic assumptions (market, technical, regulatory etc) Capital scarcity competing projects - investors require a far quicker +ve NPV than before the banking crash Far greater scrutiny on ROI and difficulties managing stakeholder expectations Unpredictable market conditions High level of Project optimism/misplaced commitment Lack of contract strategy and alignment to work scope Selecting the wrong contractor (Price rather than value or maturity) Poor understanding of the supply chain and current market conditions Fraud risk/ counterfeit product risk Ineffective management reporting Health, safety, environment (TRIR) Inexperienced project management functions Fail on market analysis and valuation • Lack of clarity surrounding the appropriate contracting model • Resource planning / availability challenges • Estimating realistic capital costs • No common project/ programme management processes • Poor understanding of where risk is best managed (client vs supply chain) • No culture of "programme delivery" vs asset operator EY’s expertise in Capital Investment Projects Appraise Select Define Execute Operate EY’s Commonly Occurring Lifecycle stage challenges Lifecycle stage specific credentials Cross- Lifecycle credentials Credential s Key N.B. The number within in each circle provides a link to the detailed credential which can be found in the appendix X Oil & Gas Cred X Power & Utilities Cred X Mining & Metals Cred 1 Improving Contractor Mgt 2 Gaining control of Capital Investment 3 Investment Appraisal Process 4 Program and vendor management 5 Capital Commercial Excellence 6 Smart metering delivery design 7 Revised Contracting Process 8 EPCM Incentive Review 9 Business Case Analysis for gas interconnection 10 Smart metering – Regulatory Positioning 11 Capital Projects Contracts Risk Assessments 12 Compliance & construction mgt X Infrastructure Cred 16 Internal Audit 17 Cost Verification 18 Station Redevelopment Process 19 Project Mgt Capability Enhancement 20 Transforming operations 21 Programme Assurance 22 Organisational Design 23 Security & Resilience 24 Expansion Diagnostic Review 26 Assurance & Program Management Capability 27 Independent Investment Review 28 Internal Audit 30 Tendering Methodology & Sourcing Strategies What are Shell’s Challeng es? Project life cycle Initiation Business Case Test Opportuni ty Data appraisal Concept selection Developme nt Plan Negotiati on Strategy Design basis Execution Plan Design & Commissi on Operate Maintain & Improve FEED 13 Project Assurance System Review 14 Resource Planning Process 25 Contractor Review 29 Governance Structure Design X UK&I Cred Global Cred 15 Contract Mgt System Enhancement X Construction Advisory Audit 31 Proj Mgt Plan Development 32 Construction Cost Evaluation 33 Construction Cost & Schedule Review 34 Procurement Process Improvement 35 Finance Community of Practice 36 Project Mgt Process Review 37 Oil Sands Org. Design 38 Contract Mgt Review 39 IntegratedPlanning & Project Practices 40 UpstreamRisk Management 41 UpstreamProject Coordination 42 Critical Resources Mgt 43 JV Process Management 44 Budget / Contractor Revision 45 Project Spend Analysis 46 Financial Expenditure Analysis 47 Supply Chain Process Management 48 50 Supply Chain and Skills Requirements for Onshore O&G FID Ineffective handover operational handover Poor asset register Poor asset management strategy and processes Asset integrity is not fully understood Poor investment case Poorly Optimised spares management Minimisation of overheads as plants move towards decommissioning Infrastructure and equipment sabotage Project Expansion Audit 49
Editor's Notes
- #12 Trainer Notes Process: Input (deliverables), Control (Governance Entity), Output (Progression decision) Describe the Roles and Responsibilities within the stage gate process Explain the use of criteria Benefits: Stage Gates enable the management of business risk by breaking resource commitments into increments or stages and more money spent up-front greatly improves the odds of success Notes: “Governance entity” refers to the individual or committee with authority for authorising a project’s progression through the stage gate. A project’s governance entity depends upon the stage and nature of the project. (this will either be the Steering Committee or Governance Entity)
- #14 Trainer Notes Process: Input (deliverables), Control (Governance Entity), Output (Progression decision) Describe the Roles and Responsibilities within the stage gate process Explain the use of criteria Benefits: Stage Gates enable the management of business risk by breaking resource commitments into increments or stages and more money spent up-front greatly improves the odds of success Notes: “Governance entity” refers to the individual or committee with authority for authorising a project’s progression through the stage gate. A project’s governance entity depends upon the stage and nature of the project. (this will either be the Steering Committee or Governance Entity)
- #15 Trainer Notes Process: Input (deliverables), Control (Governance Entity), Output (Progression decision) Describe the Roles and Responsibilities within the stage gate process Explain the use of criteria Benefits: Stage Gates enable the management of business risk by breaking resource commitments into increments or stages and more money spent up-front greatly improves the odds of success Notes: “Governance entity” refers to the individual or committee with authority for authorising a project’s progression through the stage gate. A project’s governance entity depends upon the stage and nature of the project. (this will either be the Steering Committee or Governance Entity)