Category Construction Management. for Industrial Projects

Project Management

2.1 The Principle of Project Management

The subject of project management has recently become as a key concern in various engineering fields. The proliferation of mega­projects worldwide, aiming to take best advantage of the latest tech­nological developments, itself demands new or improved methods of project management to cope with the fast developing.

As the concept of a project differs fundamentally from that of daily or routine operations, it follows that a number of principles and conceptions of project management must also diverge from those followed in the realm of daily operations management.

In operations management, production managers tend generally to focus on production / output volume per unit time — usually the current week compared to the previous week and-or the same week last year; profits accumulated and-or compared for the same time unit(s); sales or operational orders accumulated and-or com­pared for the same time unit(s); actual versus budgeted expendi­ture for the current quarter and the same quarter the year before; and sales revenue and sales volume for a given product compared

to the performance of competitors producing / marketing a similar product.

Project management may be defined as the planning, organiza­tion, direction, and control of all kinds of resources in a specific time period for achieving a specific objective comprised of various financial and non-financial targets.

This should help clarify the difference in outlook of the project manager and the operations manager. The project managers goal is to finish the project on time. Then he evaluates where he will relocate after finishing the project. The operations manager, on the other hand, never wants daily production to stop, and cannot dream of work stopping — as distinct from the project manager’s goal of overall task completion.


Most project management books focus on the management of building projects, such as housing, administration, and commercial building projects. Likewise, most engineering faculties focus on housing projects in their curricula, while industrial projects are, for the most part, in the oil and gas sector and other process industries. The aim of this book is to focus on the main tools of project manage­ment that are essential to industrial projects, focusing on, but not limited by, projects in the oil and gas sector.

A good place to start, for anyone wishing to be a project manager, is to obtain a Project Management Professional (PMP) certificate, which is a credential offered by the Project Management Institute (PMI). As of March 31,2010, there were 375,959 active PMP certified individuals worldwide.

This credential is obtained by documenting 3 to 5 years of work experience in project management, completing 35 hours of project management related training, and scoring a certain percentage of questions on a written, multiple choice examination.

This book provides questions and answers for the subjects that are more traditional in the PMP exam, but it will be more beneficial to focus on practical life applications, so these questions are tailored

to help in situations that are faced in real projects. It would not be beneficial to take this exam and receive certification but later fail in real, practical projects.

The definition of a project is a series of activities that have a start and finish time. A project, in general, is unique, and no project is similar to another. This is very important, because one should know that the problem one may face in managing a project may be unique. Also, one should have a creative mind in order to get to the right solution without a reference, so that the professionalism of the project manager depends on his or her previous experience.

Real life is like the theater, where everyone has a role in the story. So, you may be in the project play as an owner, engineering office, contractor, supplier, or service provider doing logistic service for the project. You may be at a higher level in the organization or at a lower level. In any case, you play a role in this story, so you should understand the whole story – who does what, and who is respon­sible for this and that issue. With this information, you will succeed at any project you are working on.

Chapter two discusses the scope of projects and the main charac­teristics of project management. To have a complete grasp of proj­ect management, one must first understand these basic principles and see how they work in the real world.

For us as engineers, a feasibility study is a mystery, because we are rarely working in this phase. Chapter three explains our role as engineers in the feasibility study. This chapter presents the main tools of economics to use in deciding whether to proceed with the new project. It also describes the scientific way to choose between the various alternatives. The principal of statistics is described in this chapter, in addition to the theory of probability from a practi­cal point of view, and how we can use these tools to make the right decision. The Monte-Carlo simulation technique is presented, as it is the main tool in a feasibility study for oil and gas projects, which is the main tool that we use in the decision tree method. The decision tree method is very important and easy to use, and anyone who has read about it or attended a course on it is eager to apply it. However, the actual application of this method can be difficult. In this chapter, a practical way of applying the deci­sion tree method in conjunction with the Monte-Carlo simulation is presented.

Time management is a primary tool in project management. There are many methods for making a time schedule for a project, and these methods will be discussed in chapter four. In addition, a

method for estimating activities and project time using a traditional case study in a petrochemical project will be presented in this chapter.

Resources management is another element in project manage­ment. Resource management is the main area that should be con­trolled by the project manager and the team member. Chapter five provides the key to understanding resources management for the project manager and the team member, as well. It is very important that when you join a new project the team members know what the project manager is looking for and what he or she has in mind when choosing the team members. The project manager should have special skills and experience, as he or she is responsible for implementing project management strategy when handling an international project with labor from different countries and differ­ent cultures. The distribution of resources on a time schedule will also be discussed in chapter five.

Another main element in project management is cost. Therefore, chapter six presents a way to predict the cost estimate in each phase of a project, a way to define the project budget, and a method for monitoring the project cost during the project’s time-frame.

Older project management principals focus on time, cost, and quality. Nowadays, and especially in our case as we are discussing the management for petrochemical, power stations, and other mid­dle sized industrial projects, safety, health, and the environment are very important to these types of projects, and in some cases they will be the big challenges facing project managers and project sponsors. Therefore, the four elements presented in Figure (1.1) are the main constraints to project managers’ decisions and should be managed by a project manager and his or her team members. This will also be covered in chapter six.

Contracts are the chain that connects the primary parties of the projects, such as the owners, the engineering firm, and the contrac­tors. Chapter seven describes the tender and bidding procedure and some of the ways to evaluate the bidders technically and commercially, especially in an international environment.

The market is open, and as an owner you can choose any con­tractors or engineering firm from any country all over the world, so there is a lot of competition between international companies to provide good quality to their products or services. Therefore, all the international companies follow the standards of the International Organization for Standardization (ISO) and apply the total quality management system as stated by the ISO. This will be discussed from a practical standpoint in chapter eight.


Figure 1.1 Project manager constraints.

Before starting a project, one should have a scientific way to expect the problems that he or she will face on the project during implementation and to solve them in a timely manner without affecting cost, time-frame, and quality. Risk assessment, which is discussed in chapter three, is about economic assessment, and this form of risk assessment is essentially qualitative. It is not feasible in the implementation phase. For that phase, a more quantitative risk assessment is appropriate, in order to exectute the project properly. This is discussed in chapter nine.

In chapter ten there are one hundred questions with answers that may be seen on the PMP exam. However, these questions are cho­sen to serve our practical purposes, as these questions are not for the exam but are complementary for a project that presents these practical cases.

Construction. Management for. Industrial Projects

A Modular Guide for Project Managers

Mohamed A. El-Reedy
Consulting Engineer

engineers study subjects that focus on project management in housing projects, administration projects and com­mercial buildings or other similar projects, but industrial projects have their own requirements and characteristics that set them apart from those other types of projects.

This book is not only addressed to graduating engineers who wish to improve their skills in project management, but it is also helpful to upper level management. This book covers all of the project management subjects from an industrial project point of view. The aim of this book is to be helpful to any engineering discipline or any staff in sharing or applying work of an industrial project.

Why do senior managers accept certain projects and refuse oth­ers? Why does a company have huge investments in a certain coun­try but no investments on other countries, especially in oil and gas projects? Certainly, it isn’t just because "that’s where the oil is," because there are countries that are extremely rich in oil and gas reserves in which there is little investment. These questions are important for understanding project management as a discipline and why using the tools of project management correctly will lead to successful projects.

Knowledge is power. When you understand well, you will do well. So in this book we will illustrate exactly what the project manager is thinking when he is working on a project and what his objectives and goals are. On the other hand, we will discuss what team members may be thinking through the project stages and what their objectives and goals are.

The main tools in managing the project, which are time, resources, cost, and quality management, shall be illustrated by using prac­tical examples from petroleum projects. In addition to that, this book presents all the types of contracts and methods of technical and commercial evaluation for the tenders, with highlights on the FIDIC contract and its advantages.

I have worked on major rehabilitation projects for offshore struc­tures with the best international companies from the owner, work­ing with the engineering offices, the contractors, and the suppliers. Often, the project management staff and all the team members have ideal skills and competence as described in many textbooks, but unfortunately, the end users are not fully satisfied, which is a situ­ation that usually faces us in industrial projects. The solution to this problem is proposed by using a whole building commission­ing system that is used successfully in administration building, and this management system is clearly illustrated in this book.

This book tries to be practical and, at the same time, match with the Project Management Professional (PMP) guide, so we selected one hundred questions from the PMP exam to help you obtain the certificate. But we chose questions that present actual cases we face in managing industrial projects.

Mohamed Abdallah El-Reedy, Ph. D elreedyma@yahoo. com Cairo, Egypt