This document compares two cement plant revamp projects - Rezzato in Italy and Devnya in Bulgaria. Both were brownfield projects with similar strategic goals. Rezzato used direct execution with European contractors, while Devnya used a lump sum EPC contract with a Chinese contractor. Rezzato had better cost control and schedule performance due to direct management, while Devnya faced challenges with communication, standards gaps, and delays. Lessons highlight the importance of project context in strategy and additional effort needed for cross-cultural projects.

1. PMI EMEA Congress 2011 - Session PRJ11
Generating Opportunities from Constraints
Ethics for Project Success
Michela Ruffa, PMP© - Director at Large – PMI © Northern Italy Chapter
Stefano Setti, PMP© - Director at Large – PMI© Northern Italy ChapterRezzato and Devnya Projects
Comparison of two success stories with a different Project Management approach
Matteo Maconi PMP® – Direttore Generale CTG Spa (Italcementi Group)
Milano, 29 gennaio 2016
Venti di Futuro
the PMI-NIC 20th Anniversary
Assemblea dei Soci 2016

2. 2
Italcementi Group at a glance
The world’s fifth largest cement producer
A worldwide presence in 22 countries
An overall staff of 18,000 people
A consolidated production capacity of
approximately 61 million tons
2014 annual sales exceeding 4.1 billion Euro
The first cement company to be listed
on the Italian Stock Exchange since 1925
Over 150 years-old successful business strategy
implemented by a family-driven company at its fifth
generation

3. Italcementi Group
subsidiary organized into 2
main Divisions
CTG – Centro Tecnico di Gruppo
3
Research
&
Development
Technical
Operations
 Strategic R&D projects:
 materials, products, solutions,
applications and technologies;
 environmental impact reduction
and support to the Sustainable
Development action plan.
 Monitoring of operating plants
performance
 Operational support and technical
assistance to Group Subsidiaries
 Management of strategic industrial
Investments

4. 4
CONTENTS
Project Context
Project Execution
Conclusions
Rezzato and Devnya Projects
Comparison of two success stories with a different Project Management
approach

5. 5
Similar Context for Both the Projects
 Brownfield projects
 Revamping of existing obsolete production lines with marginal capacity
increase
 Congested areas and complex tie-in with the existing facilities

6. 6
Similar Context for Both the Projects
 Brownfield projects
 Revamping of existing obsolete production lines with marginal capacity
increase
 Congested areas and complex tie-in with the existing facilities
 Similar strategic background
 Raw material availability
 Strategic position
 Reduction of variable costs – readjustment of industrial network
 substantial reduction of the actual environmental footprint

7. 7
Similar Context for Both the Projects
 Brownfield projects
 Revamping of existing obsolete production lines with marginal capacity
increase
 Congested areas and complex tie-in with the existing facilities
 Similar strategic background
 Raw material availability
 Strategic position
 Reduction of variable costs – readjustment of industrial network
 substantial reduction of the actual environmental footprint
 Complex relation with local community and local authorities
 Many local constraints superimposed to both the projects
 Stakeholders management
REZZATO
DEVNYA

8. 8
Similar Context for Both the Projects
 Brownfield projects
 Revamping of existing obsolete production lines with marginal capacity
increase
 Congested areas and complex tie-in with the existing facilities
 Similar strategic background
 Raw material availability
 Strategic position
 Reduction of variable costs – readjustment of industrial network
 substantial reduction of the actual environmental footprint
 Complex relation with local community and local authorities
 Many local constraints superimposed to both the projects
 Stakeholders management
 Stringent Owner requirements
 Minimization of the total investment cost within a given target
 Minimization of production cost
 Utilization of innovative technical solutions
 Respect of present BAT being ready for future SD evolution

9. 9
CONTENTS
Project Context
Project Execution
Conclusions

10. 1
REZZATO
Direct Execution with central interface
coordination by ITALCEMENTI/CTG
35 main purchase orders with 5 major
packages covering 90% of the investment:
 Detailed Design
[one multidisciplinary Italian contractor]
 Technology Equipment
[one European supplier selected
through competitive bid]
 Main Control System
 Medium Voltage Distribution
 Construction
[one Italian General Contractor
covering the whole construction scope]
EUROPEAN MAIN CONTENT
[made in Italy centered]
DEVNYA
Full Scope EPC Contract on Lump Sum
Turn Key basis assigned through
competitive bid
ITALCEMENTI/CTG Project
Management and Supervision
CHINESE MAIN CONTENT
Project Execution Strategy
10

11. 1
REZZATO
 Direct control over the planning and
execution
 Higher flexibility/shorter decision
process
 Easier communications
DEVNYA
 Risk transfer on EPC Contractor
 Lighter Project Management
Organization
 Single reference for all Project
aspects with integral responsibility
 Higher risk of cost overrun
 Complex coordination of interfaces
 Huge organization effort and higher
Project Management cost
 Complex contract management
 Very complex communication
(language + cultural background)
 Integration of Chinese contractor with
local reality (contractors and
regulations)
 Reduced control and visibility over
decisional process
Strength/weakness of the two approaches
11

12. REZZATO
 Common reference on EU standards
DEVNYA
 Single point of responsibility on the
EPC contractor
 Complex coordination of several
subcontractors
 Management of congested areas
(due to local lay-out constraints) and
concurrent operation of existing plant
 Communication
 Gap between Chinese and European
standards
 Difficult interface with local
bureaucracy
 Big effort from owner Project
Management team to ensure proper
working conditions
12
Health, Safety and Environment

13. REZZATO
 Direct control over the engineering
execution
 Familiarity with EU standards and
local norms
 Easier inspection and quality control
DEVNYA
 Single point of responsibility on the
EPC contractor
 Owner direct responsibility in front of
the Construction Contractor
 Complex interface management
between vendors and construction
 Very complex communication due to
different techincal approach and
geographical distance
 Difficult and time consuming
management of the local content
(“bulgarization” of the design through
local engineering companies)
 Limited control on expediting and
inspection of the material and quality
control
13
Engineering and Supply

14. REZZATO
 General Contractor representing a
single point of responsibility for all the
construction disciplines (integrated
approach)
 Strict control on planning and
progress and wider room for owner
direct intervention
DEVNYA
 Experienced Chinese manpower
installing “their own” equipment (high
productivity)
 Integrated management and
responsibility over the supply chain
 Complex contract management
 Owner direct responsibility to grant
the availability of engineering and
equipment
 Lack of “cement experienced”
subcontractors (learning curve)
 Limited possibility to import Chinese
manpower
 Complex management of local
subcontractors
 Difficult integration of Chinese
manpower with local sub-contractors
(language and cultural background
gap)
14
Construction

15. Some Snapshots from the Jobsites…
15
REZZATO

16. 16
DEVNYA
Some Snapshots from the Jobsites…

17. 1
RAW GRINDING + BURNING LINE COST
NOMINAL ANNUAL CLINKER PRODUCTION
COMPARISON OF UNITARY RATES FOR MAIN COST VOICES
DEVNYA REZZATO
[ratio vs. DEVNYA]
Unit Rates for Civil Construction
(Euro/m3 materials + manpower)
557 1305
[2,34]
Unit rates for equipment (Euro/kg) 4,6 7,1
[1,54]
Unit rates for structural steel
(Euro/kg)
1,6 2,7
[1,69]
Labor Cost “all in” (Euro/MHR) 19,5 50,4
[2,58]
Erection Productivity (hours/ton steel) 74,3 41,7
[0,56]
Erection unit rate
(Euro/kg steel)
1,4 2,1
[1,5]
DEVNYA = 82,2 €/Ton
REZZATO = 111,8 €/Ton [1,36 x Devnya]
Costs
17

18. 1
REZZATO PROJECT COMPLETED IN
LINE WITH THE BASELINE SCHEDULE
[start up 25 months from equipment
purchase order]
DEVNYA PROJECT CUMULATED
5 MONTHS OVERALL DELAY AGAINST
THE CONTRACTUAL BASELINE
[baseline = 26 months from Contract –
Actual duration = 31 months from
Contract signature]
Difficult start up - excellent respect of
the updated forecast since May 2013
Substantial respect of the baseline with
few minor adjustments along the execution
– progress gap in the close out mainly due
to postponement of ancillary activities after
start up
18
Time

19. REZZATO
 NEED OF VERY ACCURATE BASIC
DESIGN AND MANAGEMENT
TOOLS: Positive return on the
approach provided that a very
accurate and detailed preparation
and planning is carried out before the
start of the execution phase
 Packaged approach is a winning
strategy BUT maximum attention to
the RISK OF FORCING SUPPLIERS
OUT OF THEIR “USUAL” SCOPE
LIMITS
DEVNYA
 Ensure the IN DEEP
UNDERSTANDING OF THE
PROJECT CONTEXT by the EPC
contractor through the definition of
pre-agreements with local contractors
 INVEST IN COMMUNICATION
SKILLS through cultural mediators
able to facilitate the mutual
understanding
 Detailed verification and joint review
of the project schedule before the
signature of the contract to ensure
ADEQUATE CONTROL TOOLS ARE
IN PLACE SINCE DAY 1
19
Lessons learnt

20. 20
CONTENTS
Project Context
Project Execution
Conclusions

21. 2121
Conclusions
 The correct choice of the purchasing and execution strategy in addition
to a very strict control of engineering, construction and commissioning
is fundamental to respect time and costs
 The projects of the new line in Rezzato and Devnya represent a strong
effort to arrange technological innovation, sustainability and project
execution proceeding at the same pace for the success of the initiative
 The Project context plays a key role in the definition of the Project
Execution Strategy
 Adoption of Chinese contractors requires an additional Project
Management effort and wider time contingencies usually not properly
taken into account in the selection process and cost comparison
 Virtuous integration of Chinese and European content is possible
provided that adequate preparation work is carried out
 For innovative technology applications and complex revamping/brownfield
works, European/Italian suppliers/contractors do have a significant
advantage vs. low cost countries competitors