Prohoc Stakeholder Magazine 7TH Issue Winter 2017/18 www.prohoc.fi
On the cover:
PROJECT CONTROL AS A SERVICE COMPLETING PROJECTS SUCCESSFULLY — 04
Leaning towards the future:
REDEFINING PROHOC TO EMPOWER PROJECTS — 12
ELECTRICAL SUPERVISING AND COMISSIONING BEEN THERE DONE THAT! — 16
Contents — #7 04
Project control as a service
Joona Piirto - the CPO of Woima Corporation
Complete your projects with our ProControl service.
A solution integrator set on a mission.
Frictionless supply chain - dream or reality?
Every manufacturing executive dreams about it.
This place won’t leave you disappointed.
Redefining Prohoc to Empower Projects
Electrical supervising and comissioning
Leaning towards the future.
- Been there done that!
Project Contract Strategies
5 tips for surviving winter
Contractual arrangements from the owner’s perspective.
Brace yourselves! The winter is coming, as it does every year.
Prohoc Scope is a stakeholder magazine giving insight to the daily business and development of Prohoc Oy and its personnel. PUBLISHER: Prohoc Oy EDITOR-IN-CHIEF: Matti Manner ART DIRECTOR: Anssi Koskinen/Staart COVER PHOTO BY: Mikko Lehtimäki PRINTED BY: Brand ID, Pori, Finland. Papers and inks used are eco-friendly and produced responsibly.
PEOPLE FIRST, projects second! We see the world of projects is getting more and more complex, fast-paced and turbulent. We commit to help our people and our customers to be successful in all their life endeavors. We believe that by empowering people we can make every project a bit more successful. In this Scope magazine, we’ll introduce our new people-centric strategy, our mission of Empowering People and our vision of becoming the most Trusted and Wanted Project Partner. Celebrating the diversity of people and taking care of each other is the key to reach our full potential. Our goal is to provide the best employee experience and the best customer experience to everyone, every day – both personally and professionally. Making a successful project requires many good ingredients. There’s the ways of working, project management discipline, breaking down the work in a structured way, the focus on planning and the transparent and speedy communication, not to mention the right partners. These are all highly needed, but projects do need good orchestration and ability to manage the known unknowns and especially the unknown unknowns. We believe that it’s still the people that make projects shine, and our take on that is that our job is to make sure the people can shine in the world of projects! You’ll also learn from our new project control service, where our focus is to support the project managers in all coordination and supporting activities, leaving the PM to steer the project with accurate data and focus on problem solving and forward-looking activities. Our take is that project planning and control is becoming increasingly important and we want to be there, supporting our customers. As we are nearing the yearend, it’s a good time to thank all the great people we work with. May your festive season be full of joy and laughter, and hope you’ll have a time to relax and charge your batteries as well. Enjoy your read!
Matti Manner CEO Sport enthusiast, yachtsman and all-around business engineer Matti is the chief executive officer of Prohoc. After traveling around the globe trying to find world class suppliers he is now navigating Prohoc to become one. TWITTER: @MattiManner
PROJECT CONTROL as a SERVICE ProControl empowers organizations to complete their projects in time, in budget, in scope and according to quality criteria. Project Control is a support service that brings the best out of existing project management. “Having the right project management capability that always matches the business needs is a big asset.” says Ilkka Palola, Director of Information Services at Prohoc. Organizations with robust growth or volatile business are struggling with the right amount of competent project management resources. It is also quite common, that PMs’ time is used in routine project tasks while customers, change management and other more important things would need more attention. It is also common, that there is not a long que of good candidates for the project manager role. It is a challenging job and requires an induction period that most companies do not have enough time for in turbulent business environment. This is where project control service comes in. Instead of duplicating project manager capacity, we divide the project management tasks for the critical ones, that the project manager is responsible for, and leave the rest for the project controller. “We see this challenge in most of our customer’s project delivery organizations. We really want to provide a service that genuinely helps our customers to deliver the best possible project service for their end-customer.” Ilkka says.
Top-5 Benefits While the business needs are obvious, so are the benefits: More time. Project controller takes over the routine tasks from the Project Manager. Controller releases PM’s time to focus on e.g. customer communication, risk mitigation and finishing the project. Balancing the capacity. External, on-demand project control can balance the project management capacity and helps to avoid bottlenecks in PM resources. Harmonization and project discipline. Controller can ensure that project practices are being followed, required metrics collected and reported. In addition, the controller unifies the project performance and quality. Facilitated decision making. Controller provides timely and reliable information on the project performance and suggestions regarding future activities and priorities. Verification and validation of project management compliance. Controller makes sure that way of working and tools fulfil
WE REALLY WANT TO PROVIDE A SERVICE THAT GENUINELY HELPS OUR CUSTOMERS TO DELIVER THE BEST POSSIBLE PROJECT SERVICE FOR THEIR END-CUSTOMER.
also stakeholders’ (such as classification bodies, project consultant etc.) requirements for project follow-up, reporting, documenting, risk management and continuous improvement (ref. e.g. ISO9001, ISO14001, OHSAS18001). Continues ≥
What does a Project Controller do? Project Control service can consist of combination of project tasks. Controller can be given financial, quality, reporting or scheduling role – or a combination of these. “Sometimes financial control is the key issue, but it can also be scheduling, quality or project information that requires the expertise and extra pair of hands.” Ilkka explains. Typical PC tasks are: Assisting in creating a project plan and conducting risk assessment Metrics collection; gathering and
“When discussing the solution with different project managers, it is obvious that this is not a one-sizefits-all service. Each organization and PM have their own strengths and interests, and therefore it is important that control service can adapt to them.” says Ilkka. Selecting the right type of project controller to support the projects depends on project model, PM capabilities, organization and legislation that is involved and unique project needs. “Obviously also the toolset for project control needs to be adjusted according to customer’s needs.” Ilkka states. For more information about ProControl - Project Control service, please contact:
Ilkka Palola firstname.lastname@example.org Tel. +358 50 3687533
SALES SUPPLIER ENGINEERING OEM
Communication and change mgmt
Project information Project notes and records
PROJECT REPORTS status, budget, schedule, risks, changes, quality, metrics
verifying data and preparing reports
Scheduling and schedule follow-up
QUALIFICATION INFORMATION E.g. Class FAT / SAT
Budget follow-up in close cooperation
with business controller Supervising project procurement and delivery
FINAL DOCUMENTATION AS-BUILT DOCUMENTATION
Project document control Project communication and collaboration control Updating project risk assessment Keeping record and communicating change management to all stakeholders Preparing project milestone reporting for invoicing and/or revenue recognition Collecting feedback from project stakeholders and generating Lessons Learned reports to boost continuous improvement
EACH ORGANIZATION AND PM HAVE THEIR OWN STRENGTHS AND INTERESTS, AND THEREFORE IT IS IMPORTANT THAT CONTROL SERVICE CAN ADAPT TO THEM.
JOONA Piirto J
oona Piirto is the CPO of Woima Corporation. WOIMA is a solution integrator set on a mission to solve the energy and the massive waste induced problem for the customers in developing countries by delivering modular wasteWOIMA® Waste-to-Energy power plants. The solution is uniquely tailored to enable decentralized production of clean energy best suited for these conditions by incinerating waste sustainably thus responding to the urgent need of improved quality of life and energy availability. TELL US ABOUT YOUR BACKROUND? “I grew up in Ilmajoki, Southern Ostrobotnia. I received my Bachelor’s degree in Mechanical Engineering in Seinäjoki before I moved to Vaasa where I got a Master’s degree in Industrial Management.” Piirto tells. “I started working from a fairly young age in our family business where I inherited my entrepreneurial drive and the excitement to create value for the customer.” Joona says. “Then I started to work for Wärtsilä to develop Project and Quality Management operations while delivering catalyst systems for Ship Power and Power Plant projects. After that, I got the chance to join a very challenging project-team in Wärtsilä Energy Solution through Prohoc where my main responsibilities were Project Planning and Requirements Management.” “Eventually an opportunity was presented to be part of a team which is creating a new story to energy business; the WOIMA Corporation. I felt that WOIMA can be onto something great, inevitably there will be challenges, but that will be exactly the reason which makes it interesting and together with our collaboration network and WOIMA values, everything is possible!” Joona says. WHAT MOTIVATES YOU IN PROJECTS GENERALLY? “What totally captivates me in projects, is the opportunity to be involved in capturing and creating unique value for the customer." “It is always fascinating when I can engage myself
and my team to a bigger mission. It is the difference which our team can do in providing the solution for the customer successfully that is what really makes my day – every single time.” Joona tells. WHAT IS THE MOST IMPORTANT TASK OF THE CPO? “The CPO shall manage the critical capabilities of the organization which ensure project and supply chain management activities to occur seemingly in accordance with the set strategy enabling the organization to deliver the desired results – on time.” Joona explains. “ACHIEVING RESULTS CAN BE CONSIDERED THE ULTIMATE TASK.” “The CPO is responsible to take into account not only the mere outcome but most importantly how the results are to be achieved to attain sustainable competitive advantage. Therefore the task is complex and addresses several areas such as articulation of what are the objectives in terms of the company’s mission and strategy, identification of the most meaningful capabilities in respect to the objects, the beneficial alignment and development of the capabilities for maximum impact, and finally the establishment of measurement system for the management and control of these capabilities.” he continues. “If the focus is only on the
“I STARTED WORKING FROM A FAIRLY YOUNG AGE IN OUR FAMILY BUSINESS WHERE I INHERITED MY ENTREPRENEURIAL DRIVE AND THE EXCITEMENT TO CREATE VALUE FOR THE CUSTOMER.
results and not equally as well in the means, the performance will eventually diminish, and the results will be short lived.” Piirto states. WHAT IS THE MOST IMPORTANT TASK OF THE PROJECT MANAGER? “Project Manager should focus on having constant presence of effectiveness in the project.” Joona says. “Therefore the PM has to have the ability to make well-informed decisions and the capability to achieve completion to the set decisions as it is commonly the decision which sets the initial value creation in motion”. “Self-evidently unfinished action is rarely a desired outcome for which the customer is willing to conduct transactions.” Joona states. “This requires a clear understanding of the critical actions which provide the most considerable progress for the project. Continuous and coherent prioritization of project activities together with timely decision making and follow through of actions to their ultimate finish will pave the way to a successful project.” he explains. “This highlights the importance of careful planning of the project to which all stakeholders must be involved to enable the steering the project to most attractive outcome possible.” Joona tells. “Furthermore, in order for this to occur by a naturally committed team, Project Manager must translate the set project objectives to each involved team member in such a way that each one can consider them as prime motivator to deliver their best each day – effectively.” Joona explains. HOW WOULD YOU DESCRIBE THE MEANING OF INFORMATION AND PROJECT CONTROL IN GENERAL? “Accurate and timely information must always be at hands of the Project Manager thus enabling logical decisions to take place and at times a proper escalation, which diverts the project back to optimal heading.” Joona says. “Therefore, it is absolutely crucial that the tasks which set out to collect and consolidate the project status information are done systematically.” he continues. “Especially in challenging projects, sufficient execution of these tasks by single individual may be overwhelming.” “Luckily, the support for these tasks for the Project Manager is provided by vital team members such as Project Controllers who can deliver reliable project information from the whole project whether it is purchasing, documentation, quality, change or risk management facilitating the decision making process tremendously.” “The actions which provide the facts regarding what have been achieved and what is still to be achieved is the absolute foundation to which deci-
sions and steering of the project is to be based on. Sometimes these actions are unfortunately dismissed on various reasons which however immediately leaves issues under the radar consequently creating the environment for bigger problems to grow.” Joona says. WHAT KIND ISSUES WOULD PROJECT CONTROL SERVICE BY PROHOC SOLVE? “Whether the reason may refer to lack of resources or a gap in competence, the most important factor is to realize the fact and execute concrete actions to prevent that from happening. Action may be to invest time to develop the competence, which may take some time. Alternatively, the solution can be to fill the gap immediately by a ProController who has the set of tools, techniques and competence needed to free the Project Manager to operate in such way which will make to biggest impact for the project.” Joona says. HOW ARE WOIMA’S PROJECTS GOING AT THE MOMENT? “The most prominent current sales projects are being developed in South Africa and Indonesia. There are also large amounts of activity in other developing countries as well which further consolidates the sheer size of the Waste-to-Energy market.” Joona tells. “Naturally also the product development project for the modular wasteWOIMA® power plant is on full blast where we polish the value chain for the customer. Currently, we proceed steadily together with the design and supplier partners to ensure the capability to deliver several wasteWOIMA® Waste-to-Energy solutions to customers.” Joona explains. GREETINGS FOR THE READERS? “Most of us have had a very busy year, and I would like to express my gratitude for the collaboration with Prohoc we have had throughout the year.” Joona says. “Based on the various encounters, we at Woima are all set on a right path. I hope all the best for the readers and may the following year be filled with even more amazing business adventures for all of you!” Piirto wishes.
ESPECIALLY IN CHALLENGING PROJECTS, SUFFICIENT EXECUTION OF THESE TASKS BY SINGLE INDIVIDUAL MAY BE OVERWHELMING.
FRICTIONLESS SUPPLY CHAIN - Dream or reality? E
very manufacturing executive dreams about it – how to develop a frictionless supply chain in both internal and external operations. This challenge has been on the table since the outsourcing boom started in the 1990s. By outsourcing the actual manufacturing to the supplier network, corporations achieved many advantages but also faced new challenges. Why did companies start outsourcing operations and focusing on their core competencies? There are many reasons, but maybe the most obvious explanation was to make the company flexible by lightening the assets. The flexibility enabled faster innovations. Ideas didn’t have to get dumped because of limited own manufacturing capability. The production could be purchased from a supplier, which had the specialized capability and capacity. Lighter assets allowed big corporations a better shape to face economic downturn as well. This was a huge benefit in the late 2000s. But what did corporations need to give away by reaching a flexible and less capital-intensive manufacturing model? Not much – but the control of information was gone. The crucial information that was needed to man-
ufacture a product was no longer found solely inside the company. While the assets were shifted to supplier companies, also the information and knowledge were transferred to the suppliers. This phenomenon established the networked economy and ecosystem. During the last 20 years, the executives and managers have tried to solve the challenge of operational friction between customer and supplier. Outsourcing brought along asymmetric information, problems in information visibility, and lack of information transparency. These challenges made headache with longer lead-times, increased costs of poor quality and poor throughput of products. Because of the value creation model in the manufacturing industry has changed, it’s obvious that we need new governance models too, right? Luckily the cloud revolution and innovative digital solutions help manufacturing professionals in this complex area. We have had a privilege to witness many success stories in manufacturing industry where companies jumped into the digital transformation journey and erased the mythical friction between them and their suppliers. Does your company want to continue dreaming? Or are you ready to move your supply chain from ground to cloud, utilize modern information governance and enjoy the unfair advantage? Find out more www.jakamo.net
Jarl Matti Anttila CMO & Co-founder of Jakamo
PORVOO Only a 45-minute drive away from Helsinki, the beautiful city of Porvoo offers various ways to spend a lovely day of leisure. Whether you prefer enjoying culinary, outdoor recreation or history, this place wonâ€™t leave you disappointed.
The colorful wooden houses and cobbled streets of Old Porvoo attract over 1,5 million tourists every year. In addition to excellent restaurants, there are a lot of historical sights to enjoy.
Forests, water and fresh air – you got it! Enjoy the best of Finnish nature.
For the past years, small and interesting restaurants have little by little started filling Porvoo. Organic ingredients and delicacies from small local manufacturers can be found in many places – Porvoo is a great place to dine if you want to do it ecologically. Be sure to make a reservation for dinner as these places are popular!
HISTORY ENTHUSIAST OUTDOOR TYPE
PORVOO CATHEDRAL The cathedral took its present form at the end of the 15th century, but the oldest parts date back to the 13th century. Sadly, the beautiful cathedral has burned five times over the years. The last time was an arson in 2006. It took two years to repair the historical building. Kirkkotori 1 LINNAMÄKI (CASTLE HILL) Just a short walk from Old Porvoo you can find two castle hills. Great Castle Hill (Iso Linnamäki) used to be the site of one of Finland’s biggest ancient fortresses. The steep moats surrounding the top of the hill are a good reminder of the past. Looking down from the hill, it’s easy to understand why ancient leaders chose the place as their shelter. On Lesser Castle Hill (Pikku Linnamäki) you can find an Iron Age burial site. Pappilankuja DOLL AND TOY MUSEUM The museum’s collection includes more than a thousand dolls and countless amount of other toys. These are real toys, played with by real kids. Full of nostalgia, the museum is a piece of Finnish everyday history, an interesting place to spend time for both kids and grown-ups. Jokikatu 14
SIKOSAARI AND EKUDDEN NATURE TRAILS Just a few kilometers South from the city center you can find two beautiful nature trails. They are both about 1,5 kilometers long and the terrain along the path is easy, so they’re easily accessed with kids too. Enjoy the fresh air, views and the calming effect of the protected forests. VIRVIK If you’re longing for a longer walk, 20-kilometer long Virvik route is the choice. You can start from the proximity of the city center and choose the length and difficulty of your walk. The beautiful route goes through an old forest and includes campfire sites, outdoor lavatories and also many places to spend the night in.
BISTRO SINNE Modern, Scandinavian tastes from local manufacturers. Dinner, lunch and brunch. For a speciality try the blind dinner: a surprise menu served in pitch-dark! Läntinen Aleksanterinkatu 1 CAFE POS3 An artisan café serving lunch, brunch and gelato. One of their specialities is French-style, homebaked bread, made from starter dough – try pairing it with perfect, organic coffee and tea. Gabriel Hagertin kuja
It’s totally worth the 25 minute drive from the city center. Right in the Southern coast of Finland, Emäsalo offers a breathtaking views to the opening sea. Take a walk in the forest or on the beach cliffs, look for swans and other birds, stay in overnight if you want to – Emäsalo is definitely a gem worth visiting.
Dedicated to wining and dining, local ingredients with an Italian twist, creativity, courage and a hint of madness, Sicapelle has often been named the best restaurant in town. Kirkkotori 3
There is currently around 20 Prohoc’s experts working in Porvoo area.
REDEFINING PROHOC TO
EMPOWER PROJECTS Prohoc is leaning towards the future with a redefined strategy that underlines the importance of PEOPLE in the world of projects.
WE COMMIT TO HELP OUR PEOPLE AND OUR CUSTOMERS TO BE SUCCESSFUL IN ALL THEIR ENDEAVORS.
e believe the world of projects is getting more and more COMPLEX, FAST-PACED and TURBULENT. And we believe the RIGHT PEOPLE and RIGHT PARTNERS are needed more than ever to be successful. The way we help our customers is that we have the right expertise, by always doing what we promise and by staying agile. We are on a mission to empower people to shine in the world of projects. Our mission underlines the fact that although we are in project business, we serve people. We commit to help our people and our customers to be successful in all their endeavors. Major part of our mission is to improve the work life of the people we work with. Our project assignments are typically at distant loca-
tions and at very challenging sites where working conditions, the ratio between work and leisure time and other aspects of life can be very demanding. We want the project managers, the engineers and all other people that are affected by what we do, to feel they are special and live a fulfilling and rewarding life, both personally and professionally. We want to bring people-centricity, fun and meaningfulness to engineering and to the whole project business. In our vision, we aim to be the most wanted and trusted project partner. This means that we achieve a position, where we are the first choice by our customers when they are in the need of services that fall onto our ballpark. To drive our mission and to achieve our vision, we have defined
the grounding rules for all our actions. Our values, which are: • WE MAKE EVERY ENCOUNTER MATTER • WE DO WHAT WE PROMISE • WE MAKE OUR CUSTOMERS SHINE • WE ALWAYS USE GOOD JUDGEMENT • WE DO THE RIGHT THING WHEN NO-ONE IS WATCHING • WE ARE PASSIONATE, BRAVE BUT HUMBLE • WE HAVE FUN ON THE WAY We live, we serve, and we empower our people and our customers by minding the values that we commit to, every day and by every one of us. The values support our decision-making, lead us when we
need leadership and they judge us when we have stumbled to live up to them. The services we provide for our customers are divided in three segments, all serving industrial projects. • PROJECT MANAGEMENT AND CONTROL • CONSTRUCTION MANAGEMENT AND COMMISSIONING • PROJECT INFORMATION MANAGEMENT We offer these services both as managed services with clearly defined scope, budget and results, and with a consultancy agreement. We aim to develop more from consultancy into managed services, where we attract our customers with mutually beneficial contracting and profit sharing (cost-saving) models. To gain mutual value-creating partnerships, we need to align our vision and our strategy together with our customers and to create longterm joint development plans and actions to raise step by step towards
the best practices in the project business. We strive to provide services that on the one hand help our customers today, but more importantly support their competitiveness by bringing agility and efficiency in the longterm. We work with global projects, but with selected key customers. During the following years we want to grow together with our customers and this might also mean establishing presence close to our customers globally, no matter what the locations are, we are able to help. As a driven and small company, we are agile to move fast both with our services towards our customers and our ability to create new value adding services for new needs. While gaining foot on the market, we focus on staying agile. We invest in working with the best tools and keep developing our internal processes to keep serving our customers efficiently and competitively. Empowering people is at the heart of our doing. We further strengthen our ability to recruit the best doers. We give them the means to do their work successfully, offer them oppor-
tunities to grow and develop their competencies. We aim high and we aim to change the world of projects to better, day by day and project by project.
WHILE GAINING FOOT ON THE MARKET, WE FOCUS ON STAYING AGILE.
GLOBAL PROJECTS COORDINATED
I ENJOY THE FACT THAT MY WORK IS NOW MORE FOCUSED TO HR, WHICH IS A REALLY IMPORTANT FUNCTION IN CORPORATE LIFE.
Sesilia Alhainen started working for Prohoc during the second quarter of 2017 as a Project Coordinator. “The ad for the job caught my attention immediately. The description of the job was so interesting and even tempting that I applied the very same day!” Sesilia says. “In my previous job, I had many similar responsibilities such as coordinating and preparing employees to get them to project sites on time and everything set up for them. The difference with my current working environment is that Prohoc employees work so globally”, she states. Off-work Sesilia enjoys a variety of sports: swimming, gym, group gymnastics and long walks in the nature. She also likes reading and generally being in touch with people that are important to her. Sesilia’s career started with drawing up electrical designs in an engineering company based in Oulu. She worked then 8 years in an architecture company where she was involved with not only the designs, but also project managerial tasks such as scheduling and project controls. She has also been busy working abroad under Finnish Ministry of Foreign Affairs in St. Petersburg, Bangkok and in Murmansk, which makes her a great asset to Prohoc with her experience working with visas and different cultures. At her previous employer she worked in industrial construction industry with subcontractors, contracts, purchasing and other administrative tasks. “At that time I used to visit project sites, which was extremely interesting”, Sesilia says. “Working with Prohoc, I’ve experienced various job assignments and quite hectic times. I enjoy the fact that my work is now more focused to HR, which is a really important function in corporate life,” Sesilia says. “Learning new things is both challenging and fun. I believe that possibilities for professional development are amazing with Prohoc because of the constant growth and ever-changing project environment,” she adds. “I wish everyone happy holidays and remind you to enjoy work and life in general. This is a once in a lifetime journey, so remember to take care of your wellbeing, too.”
Sesilia Ahlainen PROJECT COORDINATOR PROHOC
ELECTRICAL SUPERVISING AND COMMISSIONING - Been there, done that! Prohoc helps its customers by filling in the competency gaps in their organizations in challenging industrial projects.
nssi Mäki stepped in an airplane and left Vaasa for his first gig back in 2009. The destination was Douala, Cameroon, and Anssi’s job was electrical assembly works for a power plant project. “Luckily, there were more experienced people working at the same site. It was a good learning curve for me back then”, Anssi says. Since then Anssi has worked as Electrical Supervisor and assembled and commissioned industrial machinery and power plants in more than 10 countries. Anssi’s specialty is commissioning and testing the equipment. “Of course, you need to be able to broaden up the scope if the customer or the project demands so”, he states. “Even if your area of work is electrical works, you also need to understand automation and mechanical disciplines when troubleshooting the equipment since they are always part of a larger entity”, he continues. In his leisure time, Anssi enjoys jogging, motorcycles, snowmobiles
and building stuff with several ongoing projects. His portfolio consists of more than 20 initial projects in Africa, Asia, Europe, South America and USA. The projects have mainly been building new power plants and heavy industrial or harbor cranes. “The most interesting thing about my job is getting familiar with new technology, learning new things and keeping developing always in my skillset”, Anssi says. “Scheduling the projects is becoming more and more demanding nowadays. When it comes to site work, there is no slack. Luckily, we have always had a good team and high team spirit to complete the works on time.” “I can recommend all young people working abroad at some point of their early careers. It is really eye-opening to see how things work in different parts of the world!” Anssi encourages.
OF COURSE, YOU NEED TO BE ABLE TO BROADEN UP THE SCOPE IF THE CUSTOMER OR THE PROJECT DEMANDS SO
n the world of projects, contractual strategy if among the most important decisions. In this article, we’ll introduce the most commonly used contractual arrangements from the owner’s perspective. The owner’s success in the project is about selecting the right partners and right strategy. Strategy for sharing the risks, responsibilities and rewards with the partners plays a key role in how project objectives and challenges are met. All these are defined firstly by the selection of contractual principle, and finally detailed in the contract. There are several contracting options from project owner’s perspective from where to select. Selection criteria includes project financing and risk allocation, availability of contractors and bargaining power, knowledge and possession of proprietary technologies, and adaptability with time to market needs. We talked to several investors and owners who look for right contractual setup for their projects. The result of the discussions can be foud in the following summary of strategies and their characteristics.
THE RISK IS LOADED WITH A PRICE TAG.
TYPICAL VARIANTS OF CONTRACT STRATEGIES Traditional Owner engages a design consultant (OE, Owner’s Engineer) to prepare concept-, basic- and sometimes also detailed design of the proposed project prior to the owner engaging the construction contractor(s). Sometimes referred as Plan-Bid-Build model. EPCM, Engineering, Procurement, Construction Management EPCM contractor acts as the owner’s agent (in engineering, procurement and construction) and creates contractual relationships with suppliers and contractors on behalf of the owner. Contracts are done either directly between the owner and contractor and subordinated to be managed by the EPCM, or in some occasions (typically services) they may be included in the EPCM partner’s scope. Alliancing Alliancing is a collaborative, incentive driven method of contracting, 18
where all the participants work co-operatively to the same end, sharing the risk and rewards of bringing in the project within time and under cost. EPC, Engineering, Procurement, Construction Owner’s signs an EPC contractor. The engineering and construction contractor will carry out the detailed engineering design of the project, procure all the equipment and materials necessary, and then construct to deliver a functioning facility or asset to their clients with guaranteed performance. TYPICAL STRATEGY ELEMENTS AND IMPACTS Owner's competence level and need for O/M: If owner has extensive domain knowledge, resources and access to resources, or need for the same resources during operational phase, it increases the capability and need for carrying the risk a lot. Owner's Bargaining power: This is a complex element, that depends on availability of competing technologies/suppliers (proprietary process
technology etc.), volume and repeatability in future projects, and owner’s own capabilities. Bargaining power often correlates well with Owner’s own competence level.
into it. Also worthwhile considering is the overall quality of the investment. EPC’s typically aim for minimum-to-decent viable level to meet performance guarantee, while other models might prove better in that sense.
Project Price/Cost: The cost of project is usually high in models where risk is shared (Alliancing) or contractor is carrying most of the risk (EPC). The risk is loaded with a price tag: Typically, the cost of EPC compared to traditional model can be more than 20% higher, however EPC comes with a performance guarantee which mitigates the risks. Cost of Alliancing has been statistically even higher than EPC.
Prohoc’s value proposition offers services for all the contract arrangements. For the owner of small-to-mid scale projects, our ePCM -service can prove efficient when there is no need or possibility to grasp the benefits of EPC. We can work as owner’s Project Partner in a traditional setup, where the owner engages a design partner for the concept and basic design, while Prohoc takes care of the project, procurement and construction management. Prohoc can act as a General Project and Construction Management Partner in an alliancing setup, or as the Owner’s or the EPC’s consultant in an EPC contract.
Risks and Liabilities: In addition to project cost, this is the most influential factor. It affects - not only the direct project cost (budget overrun) - but also to the indirect costs and other risks related to time, quality and HSE. Typically, the owners are more risk averse the more project is financed by project financing instruments or direct debt. Contractor availability: The ease of finding the right contractors and alliance partners varies a lot. Based on discussions, certain teams are easier to establish than others. EPCM contractors are often easier than higher risk carriers (EPCs). Alliancing is usually challenging, especially on small markets like Scandinavia. Adaptability: Possibility to adapt to changes in scheduling, domain changes (e.g. supply/demand), and flexibility in selecting the contractor and suppliers. The environmental aspects are also requiring more and more adaptability as the legislation, funding and general acceptance and opinion are affecting
INVOLVEMENT / RISK
WE CAN WORK AS OWNER’S PROJECT PARTNER IN A TRADITIONAL SETUP, WHERE THE OWNER ENGAGES A DESIGN PARTNER FOR THE CONCEPT AND BASIC DESIGN, WHILE PROHOC TAKES CARE OF THE PROJECT, PROCUREMENT AND CONSTRUCTION MANAGEMENT.
Responsible for cost, schedule and quality
PROJECT CONTRACTOR OWNER Provides small team for quality control
Responsible for cost, schedule and quality
CONTRACT STRATEGY 19
Let’s face the fact: Finnish winter is dark. The lack of daylight affects our vitality. It is totally normal to feel more tired than normally. Do yourself a favor and add an extra hour of sleep to your nightly routine. (Some researches claim that even two or three extra hours may be needed!) Or allow yourself a refreshing nap every now and then. You’ll notice the difference.
tips for surviving
joy the rare
There is light during the long winter months and the sun does shine every now and then. When it does, don’t miss it! Go out. Take a walk, go skiing or ice-skating. A very Finnish way to spend a wintery day is sledding. Don’t forget to dress properly! As we Finns say: there’s no such thing as bad weather – only wrong accessories. If you can’t make it outside during daylight, invest in a bright light lamp and treat yourself fifteen minutes every morning. The results speak for themselves.
THE FINNISH WINTER Brace yourselves! The winter is coming, as it does every year. There’s nothing you can do about the weather, but there’s a bunch of stuff you can do to make the dark and cold months feel a bit brighter and warmer.
AS WE FINNS SAY: THERE’S NO SUCH THING AS BAD WEATHER – ONLY WRONG ACCESSORIES. 20
HURRY UP, GO GET YOUR LIBRARY CARD!
So you’ve had your tv-series marathon. How about a good old book instead? The Finnish libraries are praised for a good reason, as the selection of traditional, electronic and audiobooks is wide – also in English and many other languages. Provably, reading rewires the brain for more intelligence and empathy, so hurry up, go get your library card! (Anyone who has an address in Finland can get one.)
Warmth comes from within. And there are lots of tasty options! Try Finnish mulled wine glögi, hot chocolate or tea. Don’t be afraid to add a hint of mint liquor to your hot choc. We call it ”the inner wool sweater” as it adds an extra portion of warmth.
Is there anything better than changing the atmosphere from –20 C° to +60 C°? We think not! If you don’t have a sauna of your own, there are also public saunas in the biggest cities. Or you can go to a public swimming pool, a spa or even a gym – you can find one in almost everyone of them. The impact will continue a while keeping your body warm until the next day.
IS THERE ANYTHING BETTER THAN CHANGING THE ATMOSPHERE FROM -20 C° TO +60 C°?
We think not!
Facts & Figures
No. OF COUNTRIES WE'VE HAD OPERATIONS IN
WEâ€™VE BEEN PART OF MORE THAN
Prohoc growth 2016 - 2017
Prohoc does what it promises (customer survey) 100 % LARGE SCALE PROJECTS
Net Promoter Score (more than 50 is considered excellent) 51,2
Industries Prohoc Served in 2016-2017 Industry: ENERGY
OIL & GAS
WHY PROJECT CONTROL MATTERS?
of project managers time is spent in communicating and gathering data
of work activities could be automated using already demonstrated technology
of all project risks are directly related to information flow issues and poor communication
Prohocâ€™s experts are from every major technical discipline:
SITE MANAGEMENT 7 % QUALITY 8 % HSE 10 %
PROJECT MANAGEMENT 5 %
CIVIL ENGINEERING 10 %
ELECTRICAL 20 % DOCUMENTATION 10 % AUTOMATION 15 %
MECHANICAL 15 %
PROJECT'S DONE THE RIGHT WAY PROMANAGEMENT PROCONSULTING PRORESOURCING PRODOCUMENTATION
Prohoc Oy Virtaviiva 8 F, FI-65320 Vaasa, Finland Aleksanterinkatu 22 C, FI-33100 Tampere, Finland Osmontie 34, FI-00610 Helsinki, Finland tel. +358 6 315 7700 www.prohoc.fi FOLLOW US: @ProhocOy