Engineering Encyclopedia

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Introduction To Project Controls

Note: The source of the technical material in this volume is the Professional
Engineering Development Program (PEDP) of Engineering Services.
Warning: The material contained in this document was developed for Saudi
Aramco and is intended for the exclusive use of Saudi Aramco’s employees.
Any material contained in this document which is not already in the public
domain may not be copied, reproduced, sold, given, or disclosed to third
parties, or otherwise used in whole, or in part, without the written permission
of the Vice President, Engineering Services, Saudi Aramco.

Chapter : Project Management For additional information on this subject, contact

File Reference: PMT30101 Rod Kuan on 873-9701
Engineering Encyclopedia Project Management
Introduction To Project Controls

Content Page

THE PROJECT CONTROLS FUNCTION........................................................................... 1

Introduction .............................................................................................................. 1
Benefits of Effective Project Controls ....................................................................... 1
Control Resources ......................................................................................... 2
Monitor and Forecast Performance Parameters .............................................. 2
Saudi Aramco Project Life Cycle .............................................................................. 3
Conceptual Engineering................................................................................. 4
Preliminary Engineering ................................................................................ 8
Detailed Engineering ..................................................................................... 8
Construction .................................................................................................. 8
Project Completion and Close-Out................................................................. 8
Controlling Project Objectives .................................................................................. 8
Identification of Project Objectives................................................................ 8
RESPONSIBILITIES OF THE PROJECT ENGINEER IN IMPLEMENTING
PROJECT CONTROLS ......................................................................................................13
Introduction .............................................................................................................13
The Project Engineer as a Focal Point for Successful Project Controls .....................13
The Cost Influence Curve .............................................................................13
Control Of Project Scope..............................................................................13
Control Of Project Schedule .........................................................................13
Control Of Project Cost ................................................................................13
SAPMT INTERFACE WITH OTHER ORGANIZATIONS AND PROJECTS ...................13
Team Building .........................................................................................................13
Cost vs. Trust ...............................................................................................13
Other Organizations Inside and Outside Saudi Aramco ............................................13
The Proponent..........................................................................................................13
Other Projects ..........................................................................................................13
The Design Contractor .............................................................................................13
The Vendor or Manufacturer....................................................................................13

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Project Inspection.....................................................................................................13
SAPMT REPORTS PREPARED FOR MANAGEMENT ...................................................13
Benefits of Effective Reporting ................................................................................13
The Budget Item Summary Report and Supplement .................................................13
Monthly Project Update Report................................................................................13
Project Proposal Update Report ...............................................................................13
Project Completion Schedule ...................................................................................13
Proposal Engineering Statistics Report.....................................................................13
Detail Engineering Statistics Report.........................................................................13
The Quarterly Project Reviews.................................................................................13
ADDENDUM......................................................................................................................13

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THE PROJECT CONTROLS FUNCTION

Introduction

One of the most important challenges facing the Saudi Aramco project management team
(SAPMT) today is the prevention of cost and schedule overruns that sometimes impact capital
projects. Project management can be made more complicated by the multiple parties involved in
a project, the inherent complexities of a project, the pressure of time, the increasing regulatory
requirements, and the uncertainties of nature. The Project Controls function acts as a
management control mechanism to systematically channel the project activities towards
successful completion.

Effective Project Controls helps the Project Engineer to manage a project and to meet the
objectives of completing the project on schedule and within the budget. Project Controls
facilitate decision-making tools to assist the SAPMT. When properly designed, utilized, and
implemented, Project Controls provide information as it relates to:

• Project Baselines
• Project Plans/Schedule
• Project Status
• Project Performance
• Project Forecasts

Project Controls are generally performed by all project personnel; however, the Cost Engineer
and the Project Scheduler are an integral part of the SAPMT and they act as an information
center for everyone involved in the project. The Project Controls function, with the help of the
other project team members, should be placed in the project organization in such a way that it
can be most effective at determining the most accurate information obtainable for project cost
and schedule.

Benefits of Effective Project Controls

Project Controls provide the information necessary to plan, monitor, and forecast a project.
Without good Project Controls, the SAPMT will not know about the actual project status,
performance-to-date, and the course it should take towards successful completion.

Project Controls enable the necessary planning steps to be taken to define the project scope,
develop a plan of action, execute the project, and monitor the performance during all of the
Project Life Cycle phases.

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There are four basic management goals for executing every project:

• Lowest Cost
• Timely Completion
• Highest Quality/Reliability
• Highest Safety Performance

Control Resources

To accomplish these four goals, the project requires qualified resources and effective
management tools. By implementing good Project Controls, the Project Engineer can efficiently
manage the project resources, which include:

• Money
• Manpower
• Materials
• Equipment

Resources are planned and managed by using two important project controls components
namely, scheduling and cost control. All resources, whether they are personnel, materials,
equipment, or services, are quantifiable and, therefore, traceable with the proper project controls
tools.

Monitor and Forecast Performance Parameters

Project Controls achieve the following key objectives in managing and monitoring the
performance of a project:

• Establish project work scope.

• Establish project budget and cost baseline.
• Develop logic plans and schedules.
• Define what is to be controlled and by whom.
• Track project cost and schedule performance.
• Provide information for decision making.
• Provide details of final project costs and schedules.

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• Establish feedback systems for follow-up.

Saudi Aramco Project Life Cycle

A Saudi Aramco Project has six distinct phases to its Project Life Cycle. They are:

1. Conceptual Engineering
2. Preliminary Engineering
3. Detailed Engineering
4. Material Procurement
5. Construction
6. Project Completion and Close-Out

The Project Life Cycle Phases are shown graphically in Figure 1.

ERA MC ERC

Conceptual
Engineering

Preliminary
Engineering

Detailed
Engineering

Procurement

Construction

Completion
and close-out

Figure 1. Project Life Cycle

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A clear understanding of these phases permits the Project Engineer to better control Saudi
Aramco resources in the achievement of desired project objectives. In order to fully understand
the Project Life Cycle, it is important that the Project Engineer understand the activities that are
associated with each phase. The following sections give a brief description of each.

Conceptual Engineering

The Conceptual Engineering Phase in the Project Life Cycle centers outside of the SAPMT. At
this point, the activities are developmental and study oriented. The Budget Item (BI) is taking
shape. The Conceptual Engineering Phase of the project life cycle comprises developing the
following:

• Conceptual Estimate Scoping Paper

• Planning Brief
• Business Plan
• Capital Program/Budget Item
• Design Basis Scoping Paper

The Saudi Aramco Project Life Cycle begins when corporate management proposes business
plans for the period under review to the Supreme Council and Board of Directors. The Supreme
Council and the Board of Directors provide endorsement or guidance from which corporate
objectives, activities, and strategies are ultimately formulated.

Corporate objectives and Business-Line objectives are updated in the Business Plan, which is
presented to the Board of Directors every April/May. The Business Plan is a five-year forward
plan, which describes goals, levels of activity and operating plans for each Business-Line. The
Business Plan includes projected manpower requirements, estimates of annual operating and
capital expenditures for the plan period, and projections of the sources and dispositions of funds.
The Business Plan also serves as a basis for the five year Capital Plan, and it provides the
foundation for the one-year capital budget and operating plan. All plans and budgets are
consolidated along Business Lines, such as manufacturing and Exploration and Producing.

The proponent of a project is usually one of the Company's operating departments and the
eventual facility user. The Proponent sponsors the development of the project. Working in
conjunction with the Facilities Planning Department (FPD), the proponent sets basic parameters
for the scope of work and develops a Conceptual Estimate Scoping Paper (CESP) or Planning
Brief (PB) for the proposed budget. The Facilities Planning Department (FPD) validates the
CESP/PB schedules and develops the conceptual/budget estimates for each project that will be
included in the proposed budget.

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While the FPD works on the CESP and the PBs, it also maintains the master scheduling system,
which contains all ongoing and proposed BIs, which then proceeds to the Planning Advisory
Committee (PAC), first in a preliminary overview and later in a final presentation.
Recommendations generated by PAC reviews are incorporated into the program, which is then
presented to the Management Committee (MC). The recommendations produced by the MC
review are incorporated into the program. The first year of the Project Life Cycle concludes with
the presentation of the program to the Board of Directors for endorsement at their annual
meeting in November.

The Design Basis Scoping Paper (DBSP) for the BI is prepared jointly by the proponent and FPD
following approval of the Capital Budget by the Board of Directors. Once the DBSP has been
reviewed, approved, and issued, preliminary engineering commences under the direction of the
SAPMT.

Preliminary Engineering

Preliminary Engineering is defined as the engineering activities that lead up to Expenditure

Request Approval (ERA). These activities, generally, include:

• Directing and monitoring the preliminary engineering contractor

• Performing the initial, confirmatory studies

• Preparing the initial draft of the Project Execution Plan (PEP)

• Preparing the Project Proposal

• Producing the detailed Expenditure Request (ER) estimate

• Preparing the contract for detailed engineering and procurement assistance. (In
the case of a Lump Sum Turn Key [LSTK] contract construction will also be
included.)

The Preliminary Engineering phase begins with the issuance of a DBSP, which supports the BI
by clearly defining the project work scope and schedule requirements. The Preliminary
Engineering phase is probably the most challenging to the Project Engineer because the
definition of the project is in the process of being developed, both from the technical and the
managerial point-of-view.

The Project Engineer must maintain the focus of the project and he must manage input from all
involved departments, which try to get the project to include their specific interests. The Project
Engineer must diligently control the project scope, both as proposed and as actually incorporated
in the project scope.

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Detailed Engineering

The scope of work for Detailed Engineering is the work product of the Preliminary Engineering
Phase. An efficient and speedy start of Detailed Engineering is assured by a thorough
completion of the ER estimate, approval of the Project Proposal, and preparation of the detailed
engineering contract. The Project Engineer must always look for ways to save time and money
when he executes the project. The Project Engineer should select the best contractor available
for the detailed engineering phase in order to minimize deviations in construction due to drawing
errors and materials problems. Major activities performed during the Detailed Engineering
Phase are as follows:

• Preparation of Design Drawings

• Preparation of Material Procurement/Saudi Aramco Material System Specification
(SAMSS) and Direct Charge (DC)
• Preparation of Construction Bid Packages
• Providing Technical Support to Construction

Construction

The Construction Phase of the project life cycle usually represents the largest percentage of the
monetary value of the project. If Preliminary Engineering, Detailed Engineering and Material
Procurement have been executed on schedule, then construction should progress with all
materials available when required at the site. The early decisions and thorough planning by the
Project Engineer during the Engineering Phases allow the Construction Phase to progress more
smoothly. Major activities performed during the Construction Phase are as follows:

• Tie-ins to Existing Facilities

• Progress Control & Measurement
• Physical Installation of Facilities
• Functionality Checks
• Mechanical Completion

Project Completion and Close-Out

During project completion, the Project Engineer is responsible for securing agreements from all
parties that mechanical completion has been achieved. After approval of the Mechanical
Completion Certificate (MCC), the commissioning process begins, the levels of staffing for both
the SAPMT and contractor diminish, and the Project Engineer prepares to turn the project over to
the operating proponent and financially "close out" the BI.

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In order to assure that the facility has been produced per the Project Proposal, the operating
proponent will review the approved Project Proposal and associated minutes of the meeting,
which were prepared during the Preliminary Engineering Phase. It is important that the Project
Engineer prepare the minutes comprehensively and definitively to assure a mutual understanding
by all parties at the completion of the project two to three years later. Major activities performed
during the project completion and close-out are:

• Site Acceptance Testing

• Hand over of Spare Parts
• Completion of Punch List Items
• Financial Close-Out
– Final Release of All Contractors
– Resolving All Outstanding Costs with Vendors
– Closing All Internal Cost Codes

Controlling Project Objectives

Identification of the project objectives requires coordination of the input from many departments
within Saudi Aramco. In order to guide the development of the project effectively, it is
extremely important to understand the objectives of the project. During coordination of the
objectives, it may be important for the Project Engineer to address differences between some
organizations in selecting the proper project objectives. The Project Engineer must continually
refer back to the basic project documents such as the DBSP, Project Proposal, and the Project
Execution Plan to assure himself that the project is still on track.

Identification of Project Objectives

Project objectives can generally be divided into two groups:

• Business Objectives
• Performance Objectives

Business objectives are the non-engineering objectives. In determining the business objectives
of the project, the following list may be considered:

• Project intent/purpose objective

• Schedule objective
• Cost objective

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• Economic objective (Rate of return)

• Risk Analysis/Factors

Performance Objectives are the Technical objectives. In determining the performance

objectives of the project, the following list may be considered:

• Basic project performance objective

• Design standards
• Operating factor
• Materials utilization and interchangeability
• Establishing spares objective
• Computerization and automation
• Provisions for future expansion
• Constructability objectives

Some objectives may compromise other factors, which creates differences of opinion between
departments. For instance, in order to minimize construction labor and schedule, the Project
Engineer may want to use as much modular skids as practical; however, the proponent may not
want the skids because they tend to be more crowded than conventional construction. In an
example concerning the pursuit of the maximum operating factor, engineered equipment items
are specified with long life seals and bearing or extra life electronics, which costs more than the
standard supply. This scenario conflicts with the objective of minimizing costs.

The Project Engineer is responsible for assuring that the project objectives comply and
compliment the company's business objectives. Some company objectives that should be kept in
consideration include:

• Effective utilization and training of Saudi personnel

• Maximized utilization of surplus and excess materials
• Effective utilization of capital
• Conservation of the environment
• Industrial Security

The control of the project scope of work at the early stage of its life is extremely important. It is
the Project Engineer's responsibility to conscientiously manage the project, to constantly reassure
the direction of the project, and to remain firmly focused on the activities to come.

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RESPONSIBILITIES OF THE PROJECT ENGINEER IN IMPLEMENTING PROJECT

CONTROLS

Introduction

The success of a project depends upon the SAPMT's understanding and appreciation of the
Project Controls function and their commitment to it's implementation through all phases of a
Saudi Aramco project. The Project Manager and the Project Engineer should fully understand
the purpose, benefits, and mechanics of effective Project Controls. Although the Project
Controls requirements are dictated by the project management procedures, the degree of their
effectiveness is directly proportionate to the leadership role of the Project Manager and the
Project Engineer.

The Project Engineer as a Focal Point for Successful Project Controls

The Project Engineer plays a key role in ensuring successful implementation of Project Controls.
The Project Engineer uses the project planning and progress status information to report to the
Executive Management. In overseeing the implementation of Project Controls, the Project
Engineer performs two major tasks:

1. Monitor the contractor's performance

2. Report the project performance to Saudi Aramco Executive Management

To ensure effective Project Controls implementation, the Project Engineer is supported by his
experience in planning and scheduling and by the cost control staff, who performs the associated
detailed tasks. The Project Engineer is ultimately responsible for project performance. He
provides the necessary support to his staff to ensure meaningful controls are implemented on a
project. Some of the Project Controls activities for which the Project Engineer is responsible are
as follows:

• Implementation of a Project Execution Plan

• Development of Project Milestone Schedule
• Appraisal of the contractor's cost and schedule control systems
• Monitoring the contractor's project performance
• Reporting the project status to Saudi Aramco Executive Management

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The Cost Influence Curve

As the project progresses through its life cycle, there is a decrease in the ability to incorporate
project scope changes without significant cost consequences. In other words, as each phase of
the project is completed and more of the finished product exists, the harder it is to change
without significantly affecting the cost of the project. These costs usually take the form of re-
engineered systems designs and specifications, redrafting completed drawings, changing
specifications to materials that are already being manufactured, or identifying and ordering new
materials.

The importance of this cost influence relationship is to recognize and reinforce how extremely
critical it is for the Project Engineer to plan thoroughly and anticipate areas of disagreement as
early as possible in the project life cycle. The Project Engineer must identify, analyze, and
resolve vague areas of the project scope during the Preliminary Engineering Phase or as early as
these areas are identified. If the Project Engineer ignores these vague areas, they will become an
issue later in the project life when incorporation of change may be extremely costly or where it
impacts the project schedule and ERC.

Figure 2 graphically illustrates the relationship of the timeliness of decision-making on the

ability to affect costs.

Figure 2. Cost Influence vs. Time

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There are several SAPMT members who are involved in the development and implementation of
Project Controls on a Saudi Aramco project. To implement effective Project Controls, it is
imperative that all participants do their share in generating and developing quality Project
Controls information. The Project Controls will not be effective if either the contractor or the
SAPMT is weak and lacks proper expertise. To ensure effective implementation of Project
Controls, the SAPMT must ensure that:

• the SAPMT has the right expertise and that it is committed to the Project Controls
concepts.
• Project Controls procedures and guidelines are established for the SAPMT and the
contractors.
• the Contractor's Project Controls capabilities are evaluated prior to awarding contract.
• Project Controls documents are developed on time and they are evaluated for their
accuracy.
• Project Controls data is used constantly to enhance project performance.

The Project Engineer must concentrate on three areas of control; Project Scope, Project
Schedule, and Project Costs. Almost all aspects of the project can be categorized into one of
these categories.

Control Of Project Scope

To the Project Engineer it often seems like there are more people trying to change the project
scope than there are people trying to maintain the project scope. It is the responsibility of the
Project Engineer to maintain the integrity of the project scope. The Project Engineer is entrusted
by management and the Board of Directors to perform the work they have approved.
Consequently, only the Board of Directors has the authority to change the scope. The project
scope is first identified in the Design Basis Scoping Paper (DBSP). The DBSP is issued by
Facilities Planning Department after it has been approved as part of the Capital Plan. Although
the DBSP does not include all the details of the project scope, it does identify the purpose of the
project. The Project Engineer uses the purpose of the project to develop the Project Proposal and
the Project Execution Plan (PEP).

Of course the process of controlling the project scope continues after the ER is approved. The
Project Engineer must try to maintain the original project scope when he is approached by other
organizations that want to add their special considerations to the scope. It is very important to
have the proponent’s accept the project objectives to help control the scope.

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Control Of Project Schedule

At the time the Project Engineer finalizes the PEP and the ER is approved, he has prepared the
first official project schedule, the Project Completion Schedule. The Project Completion
Schedule identifies the major milestones for the project. The schedule identifies each major
activity within the overall project time-frame and is directly related to it by control points on the
CPM schedule or GANT chart.

The PCS (Addendum 5) establishes the schedule baseline for all project phases in detail
engineering, material procurement, and construction.

The SAPMT submits the initial PCS (Revision 0) with the first MPU. The PCS also identifies
the following major schedule milestones which are closely tracked to monitor the schedule
performance:

ERA – Expenditure Request Approval

DE-CA – Design Engineering-Contract Award
LSTK-BPC – Lump Sum Turnkey-Bid Package Complete
PB-BPC – Procure Build-Bid Package Complete
PB-CA – Procure Build-Contract Award
LSTK-CA – Lump Sum Turnkey-Contract Award
CONST-BPC – Construction Bid Package Complete
CONST-CA – Construction Contract Award
CS – Construction Start
MC – Mechanical Completion
OS – On stream

Control Of Project Cost

It is the responsibility of the Project Engineer to control project costs on his assigned projects.
The Project Engineer is often tempted to allow the Cost Engineer to control project costs with
little input from the Project Engineer; however, this would be a mistake primarily because the
cost engineer does not know the details of the project as well as project Engineer. The Cost
Engineer does not know of potential problems, which affect the cost of the project. This
knowledge is with the Project Engineer and he must be involved in order to relay this
information and the extent of its impact to the Cost Engineer.

Effective Cost Control increases the probability that the project will be completed within the
budget and any deviations from the baseline are identified early enough to implement corrective
actions.

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Cost Control should not be confused with the cost accounting function. Some people mistakenly
believe that cost control is the record keeping of cost expenditures related to materials, labor, and
other project expenses. This type of cost data is historical and it makes a partial contribution to
Cost Control. The SAPMT cannot control the project’s cost performance solely by concentrating
on what has already happened. Cost Control is a more dynamic function, which is not only
concerned with historical data. Cost Control analyzes the actual performance to-date to identify
any deviations from baselines, develops corrective solutions, and forecasts final project costs.
There are three elements of an effective Cost Control function, namely:

1. Establishing a Cost Baseline

2. Monitoring Cost Performance
3. Forecasting the Final ER Cost

Establishing a cost baseline consists of casting the project budgets and estimates into a definite
commitment and expenditure plan based on the Project Execution Plans. Based on the project's
Work Breakdown Structure (WBS), the project cost plans are broken down into project phases
(e.g., engineering), procurement and construction, and project disciplines (e.g., civil, structural,
piping, etc.). The project’s cash flow curves are developed to show expenditure plans. This is
an important task because this information will be used throughout the life of a project to track
the performance against the cost baseline.

Monitoring Cost Performance - Once the cost baselines are established, the Cost Control
function concentrates on monitoring actual cost and comparing it against the cost baseline. Just
as the development of realistic and accurate estimates is vital to the evaluation of a project's
actual costs, so is the timely status of a project's actual cost. The cost reporting and cost
performance evaluation are essential to identify any deviations from the baselines.

Forecasting the Final ER Cost - In monitoring the actual cost, the Project Engineer also
identifies the causes of deviations from the project baseline. Once these causes of deviations are
determined, corrective solutions can be developed so that the SAPMT has options for their
decision-making. Cost Control also continuously strives to find ways to improve the cost
performance by eliminating waste and implementing cost savings ideas. The Project Engineer
establishes mechanisms to manage all of the project changes beyond the base work scope.
These management mechanisms are essential for the SAPMT to achieve accurate cost reporting.
Based on the available cost data and analysis, the Cost Control can forecast the final cost at
project completion.

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SAPMT INTERFACE WITH OTHER ORGANIZATIONS AND PROJECTS

Team Building

It is the responsibility of the Project Manager and the Project Engineer to put together the
required resources to perform the work that is identified by the Budget Item. The most effective
way to do this is with a project team. Forming individuals into groups by putting their names on
organizational charts does not assure the Project Engineer that he will have a team. The team
concept is what makes the group work together. The earlier and more the Project Engineer can
accomplish the “together” the better the opportunity of success.

The effective project team is a group who shares a common reason for working together, is
interdependent in achieving shared objectives, is committed to work together to accomplish a
specific project or projects, and is accountable for their performance to their management.

Characteristics which are common among effective project teams are as follows:

• Trust
• Shared Project objectives
• Interdependence
• Shared sense of accountability
• Pride in team members
• Open communications

• Recognition

In many companies, the team building process is a formalized process, which is usually lead by a
skilled, outside consultant who also has no involvement in the project. The purpose of the
meeting(s) between the group is the early identification of the common ground on which to build
the above characteristics.

In order to maximize the effectiveness of the “team,” the Project Engineer should include as
many organizations as he can in the team who have some, or all, of the above characteristics.
For example, the design and construction contractors and the proponent share many of these
characteristics.

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Trust is defined as the confidence and reliance one party has in the professional competence and
integrity of the other party to successfully execute a project in the spirit of open communications
and fairness. A trusting relationship is based on a mutual understanding of each other’s
capabilities and limitations. It is also based on the personal and corporate integrity of both
parities. Trust is a basic ingredient in effective team building, timely decision making, and in
building long term relationships.

Trust in the professional competence and integrity of the parties can be summarized in the
following perceptions:

• A belief that both parties will do what they have said they will do.

• A willingness for both parties to risk being vulnerable to the other, supported by the
belief that neither party will take advantage of the situation.
• Sensitivity and active dedication to each other’s needs.

• Candid communications about how each sees the relationship.

Cost vs. Trust

The Construction Industry Institute has researched the relationship between cost and trust on a
project and determined that a trusting relationship between the parties is instrumental to the
successful execution of projects. The relationship between trust and project cost can be
conceptualized by the curve in Figure 2. As trust increases the cost of the project decreases. The
optimum point, or least project cost point, on the curve is defined as rational trust. Rational trust
represents the highest level of mutually verifiable trust between the parties. Beyond the point of
rational trust, the relationship enters in the blind trust area.

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Figure 3. Cost vs. Trust Curve

In the construction industry, the nature of competitive contracting practices often promotes short
term (project driven) adversarial relationships. These types of relationships are unstable, which
adds to project uncertainty. Under these circumstances, the industry relies upon the contract
document (complemented by control systems and legal personnel) to control project uncertainty.

A cooperative relationship between the parties is considered instrumental in reducing project

uncertainty and increasing the chances for the project’s success. The development of an
effective cooperative relationship is based on mutual trust. Trust is a salient factor in
determining the effectiveness of many relationships. It facilitates interpersonal acceptance and
openness of expression. A trusting relationship between the parties is based on a mutual
understanding of each other’s capabilities and limitations. It is also based on the personal and
corporate integrity of both parties. Trust can be seen as the lubricant that makes it possible for
organizations to work. The same could be said for inter group relations. Trust plays a critical
role both within organizations and in inter-group relationships. The term trust can be used to
refer to many facets of a relationship, such as:

• How much confidence you have in the other party’s competence and ability to do
what is being asked of them

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• Whether you believe the other party’s judgment is sound

• How much you believe the other party is willing to help you

• How certain you are that the other party does not desire to harm you

Other Organizations Inside and Outside Saudi Aramco

The Project Engineer has the sole responsibility to coordinate input from the organizations that
are inside and outside of the Company. The success of the project may be determined on how
well the Project Engineer performs this function, particularly when the technical nature of the
project is outside the area of experience of the Project Engineer.

In the early phases of the project the Project Engineer must coordinate the input from many
organizations while preparing the Project Proposal. These organizations include:

• The Proponent
• Other Saudi Aramco Organizations including
- Receiving or Supplying operational organizations if not the Proponent
- Facilities Planning Department
- Material Supply Organization
- Fixed Assets and Work In Progress Accounting
- Project Inspection
• The Design Contractor
• Other Projects with an Interface

• Major Equipment Vendors

The Proponent

When the Proponent truly believes that the SAPMT is working for the project’s and his best
interest, the relationship between the Proponent and the Project Engineer will be much better.
Trust and shared objectives are valuable to this relationship. The Project Engineer cannot ignore
the Proponent or any of the Saudi Aramco organizations without resulting in a problem at some
point in the project life cycle.

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Other Projects

Most of the time the Project Engineer can identify any interfaces with other projects because he
is in contact with the other SAPMTs. Sometimes the projects that he interfaces with are not
Saudi Aramco projects. The only way that he realizes their existence is through conversations
with the operating proponent and actually seeing the work in progress. The Project Engineer
should encourage his SAPMT to notice other work in the areas and to discuss the potential for
interference with the SAPMT. To avoid interference, someone in the team should check on the
other project.

The Design Contractor

The design contractor also shares many of the objectives with the SAPMT. It is important for
the Project Engineer to select the best contractor for the work. Not only should the selected
contractor be the best technically, but he should be interested in performing the work. There are
several ways the Project Engineer can determine if the contractor is interested in the work,
including the quality of his proposal, the quality of the personnel he proposes for the work, and
the quality of his execution plan. The Project Engineer should be confident that the selected
contractor is fully capable before entering into a working relationship.

The Vendor or Manufacturer

For large or unique equipment which is sometimes purchased on Saudi Aramco projects the
equipment vendors can be very important to the success of the project. It may be smart to
include these important vendors in the “team” as early as they are identified. It may be necessary
to modify the project to accommodate unique features of the equipment or for the equipment
manufacturer to modify his equipment to fit the particular situation. It is important to have a
close and trusting relationship with the manufacturer for him to modify his equipment within the
project schedule.
Project Inspection

During the construction phase, the Project Inspection group can be the most valuable
organization in Saudi Aramco to the Project Engineer. Project Inspection is the organization,
which at the end of each day, has to certify that the facility is built in accordance with the design
drawings and the Saudi Aramco Engineering Standards. It is important for the Project Engineer
to assure the inspection early in the construction phase that he is fully supports them and that he
sincerely wants their input. The Project Inspection personnel cannot be viewed as hindering the
progress of the work. The Project Engineer is responsible for ensuring that Saudi Aramco’s
money is not wasted; therefore, Project Inspection is one of the best tools available to him to
achieve this goal.

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SAPMT REPORTS PREPARED FOR MANAGEMENT

Benefits of Effective Reporting

The requirement that the Project Engineer reports to management offers several advantages. The
added emphasis associated with the reporting requirement causes the Project Engineer to do a
more thorough job of understanding the project status. When the Project Engineer understands
the project thoroughly, he enjoys discussing the project with and reporting to management,
which encourages good communications. Better reporting also improves communications within
the SAPMT. As other team members see this added emphasis, they too want to stay informed
and improve their knowledge level about the project. Team members that are more
knowledgeable have a positive impact on the project and result in timely and accurate
information about the project status being available at all levels of the organization.

The more time the Project Engineer spends on understanding the project, the better he will
understand each area and the better he will be able to define the responsibilities of the other
project team members. As a result, potential problems are identified earlier.

Some of the reports that the Project Engineer prepares for management include the following:

• Budget Item Summary Report and Supplement (BISR)

• Monthly Project Update (MPU) report
• Project Planning Update (PPU) report
• Project Completion Schedule (PCS)
• PES/DES
• Quarterly Review

The Budget Item Summary Report and Supplement

The SAPMT is responsible for keeping Saudi Aramco Executive Management informed about
the project status and performance. The BISR (Addendum 1) is generated monthly for active
projects of at least $50MM and for other projects under specific conditions. The report provides
the following project status information:

• Progress Percent Completion Status

• Status on Major Project milestones
• Cost Status

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• Project Completion Forecast

To enhance the BISR reporting, the SAPMT is required to include a Supplement Report, which
highlights performance measures and provides greater visibility into project activity. The
additional information is reported to the Management Committee. The five major categories of
additional reporting requirements are:

1. Performance measures
2. Cost analysis
3. Major milestones accomplished
4. Major issues and concerns
5. Contingency management

The BISR Supplement (Addendum 2) provides the Management Committee with project
performance information in a summary format. Performance indices have been developed in the
following project reporting categories:

• Cost
• Project Completion
• Expenditure Forecast Performance - Full Year
• Program Management Costs
• Project Management Cost
In each of the above categories, the BISR Supplement compares the current plan to the plan
index. The variance is shown and reasons for the variances are explained along with the actions
taken to correct the problems.

Monthly Project Update Report

The SAPMT prepares an Monthly Project Update (MPU) for all projects under the control of
Engineering & Project Management that have received Prior Approval Expenditure Request
(PAER) or Expenditure Request (ER) funding. All of the Job Orders (JOs) within a Budget Item
that are under the responsibility of a single Project Manager constitute the Scope of Work
covered by one MPU.

The SAPMT submits the MPU by the third SAO work day of each month. The first MPU is
submitted for the month following ER funding approval. MPU reporting is discontinued when
financial closure of TC-60 funds occur. The last report must state "This is the last report." in the
Comments section.

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The MPU report includes the project status information as it relates to:

• Progress percent completion

• Cost status
– Capital vs. expense
• Schedule status
– Schedule milestones
• Procurement status
• Forecast for project cost and completion
• SAPMT concerns

Project Proposal Update Report

A Project Proposal Update (PPU) report is prepared on the form Saudi Aramco 7057 (Addendum
3). The basic purpose of a PPU is to communicate project status information from SAPMT for
all Engineering & Project Management Budget Items (BIs) in a preliminary engineering phase.
That includes all project-proposal work, preparation of an Expenditure Request (ER) estimate,
bid-package development, and other engineering activities accomplished under TC-68 funds.

The first report is submitted for the month following TC-68 funding approval. The report is
prepared monthly, with the original due by the third work day of each month. The final report is
submitted for the month in which any ER funding is approved.

After approval of the ER funding, the PPU report is discontinued and is replaced by the MPU
report(Addendum 4).

The PPU report includes the project status information as it relates to:

• Preliminary Engineering Progress

• Schedule Milestones
• Cost Status
– Approved TC-68 Funds
– Expended TC-68 Funds
– Estimated project cost as stated in the most recent approved Budget Brief
– Latest total cost estimate for the project's current scope including contingency

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• Expenditure forecast by quarter for the total Budget Item

The PPU report shows the actual project status as compared to the project baselines established
by the TC-68 funds and original/latest schedules to complete the preliminary engineering phase.

Project Completion Schedule

The Project Completion Schedule (PCS) report is prepared by the SAPMT for all of the projects
under the control of Project Management which have approved ER funding. The PCS was
discussed earlier in this module.

Proposal Engineering Statistics Report

The Proposal Engineering Statistics (PES) report was established to accommodate design
progress reporting from the start of the project proposal through full funding. After ERA
funding the report becomes a Design Engineering Statistics (DES) report.

The PES is prepared jointly by the contractor and SAPMT prior to each management review
meeting. The PES is jointly approved and signed by the contractor project manager and the
Saudi Aramco project or design manager. Distribution within Saudi Aramco is then made by the
Project Manager, as required, also under confidential cover.

The PES provides project data which is essential to evaluate the engineering productivity and the
performance of the Preliminary Engineering contractor. During this phase the engineering
categories, or breakdowns, differ a little from the DES report format, but the information and
report format are similar.

Detail Engineering Statistics Report

The DES report is used for presentation of the performance of the detailed engineering
contractor during the Quarterly Review meetings and at the project close-out. The DES serves as
a standard means of:

• Monitoring engineering-office functions

• Collecting engineering-work quantities
• Reporting unit manhours and relative cost.

The DES Report shows the contractor's performance as it relates to the detailed engineering and
procurement effort. By analyzing the DES report the SAPMT can determine engineering
productivity on the project.

The data provided by a contractor is proprietary and, therefore, all Saudi Aramco personnel
exposed to that information must regard the data as confidential.

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The Quarterly Project Reviews

A quarterly review meeting provides Saudi Aramco Executive Management with the current
status of the project and a forum for open discussion of project matters among Executive
Management, the SAPMT, the PMC (if involved), and the engineering and construction
contractors. The quarterly review meetings are planned to provide the Saudi Aramco Executive
Management pertinent project status information, such as:

• Cost Performance against the Expenditure Request (ER) estimate

• Schedule Status as compared to Expenditure Request Completion (ERC) date
• Overall performance of contractor(s)
• Problem areas that may impede project performance
The quarterly review meetings provide an opportunity for all the major project participants to
present their performance and express concerns which need the Saudi Aramco’s Executive
Management's attention. During the quarterly reviews the presentations are made by:

• Saudi Aramco Project Management Team

• Project Management Contractor
• Engineering and/or Construction Contractors

The Saudi Aramco Executive Management evaluates the overall performance and in case of
performance lapses, directs the appropriate participants to implement corrective actions within
the specified time frames. After the quarterly review meeting the SAPMT follows up to ensure
that the corrective measures are implemented to remedy the problem areas.

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GLOSSARY

BI Budget Item
BISR Budget Item Summary Report
CESP Conceptual Engineering Scoping Paper
CONST-BPC Construction Bid Package Complete
CONST-CA Construction Contract Award
CPM Critical Path Method
DBSP Design Basis Scoping Paper
DC Direct Charge
DE-CA Design Engineering-Contract Award
DES Detail Engineering Statistics Report
ER Expenditure Request
ERA Expenditure Request Approval
ERC Expenditure Request Completion
FPD Facilities Planning Department
JOs Job Orders
LSTK Lump Sum Turn Key
MC Management Committee
MCC Mechanical Completion Certificate
MPU Monthly Project Update Report
PAC Planning Advisory Committee
PAER Prior Approval Expenditure Request
PB Planning Brief
PCS Project Completion Schedule
PEP Project Execution Plan
PES Proposal Engineering Statistics Report

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PM Project Manager
PPU Project Proposal Update Report
SAPMT Saudi Aramco Project Management Team
WBS Work Breakdown Structure

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ADDENDUM

1. Budget Item Summary Report (BISR)

2. Budget Item Summary Report Supplement

3. Project Planning Update Report (PPU)

4. Monthly Project Update Report (MPU)

5. Project Completion Schedule (PCS)

6. Proposal Engineering Statistics Report (PES)

7. Detail Engineering Statistics Report (DES)

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ADDENDUM 1: Budget Item Summary Report (BISR)

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ADDENDUM 2: Budget Item Summary Report Supplement

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ADDENDUM 2: Budget Item Summary Report Supplement

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Addendum 3: Project Planning Update Report (PPU)

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Addendum 4: Monthly Project Update Report (MPU)

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Addendum 5: Project Completion Schedule (PCS)

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Addendum 6: Proposal Engineering Statistics Report

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Addendum 7: Detail Engineering Statistics Report

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