By Josh Girvin, O3 Solutions CEO
“There is nothing in it for us” is a common justification used for not implementing Advanced Work Packaging (AWP). Many people, particularly those with a limited understanding of how AWP works, cannot understand the benefit to their company and are quick to consider it someone else’s torch to carry.
Before we consider the validity of this argument, we need to understand what the benefits of AWP are. During my time as Co-Chair of the CII Performance & Benchmarking Subcommittee last year, the group created a tool for understanding AWP benefits across all project categories. CII members can access the full tool But to summarize the results, AWP can deliver significant advantages in cost, schedule, quality, safety, predictability, communication, and visibility.
All too often we focus entirely on the potential cost savings, rather than seeing the multitude of other advantages over typical project delivery methods. Money remains the driving force. Return On Investment (ROI) is, understandably, directed at finding out if AWP will provide more in savings than it will cost. ROI generally considers the overall value of AWP to the project as a whole, without breaking the costs and the savings down to the various stakeholders.
So, are the naysayers right?
To really understand this, we need to consider three aspects:
- Which organization you represent
- What contracting strategy is being used on the project
- Your understanding of ‘benefit’
AWP FOR OWNERS
Let’s take a look from the Owner’s perspective first, because they are often the ones with the greatest say over the choice to implement AWP on a project.
- The majority of engineering work is done on a reimbursable basis, and if the contractor is new to AWP, there may be additional costs for implementation, relating to training and process changes.
- The primary financial benefit only comes when executing the work on a reimbursable basis and being able to enjoy the savings from the efficient execution of the work.
The overall benefits for the project, regardless of contracting strategy, will also come in other forms, such as:
- Better visibility of progress and earlier identification of issues, allowing for correction.
- Greater schedule accuracy and certainty derived from detailed planning and interface management.
- Improved safety performance due to well-planned work and minimal changes.
AWP FOR CONTRACTORS
Now let’s put our contractor’s hat on.
- If your contract is reimbursable, executing the work more efficiently could reduce your contract value and your overall revenue for the project.
- When working lump sum, you are taking the execution risk, but also stand to gain if the work is completed sooner and with fewer resources.
Other benefits to the contractor include safety, quality, schedule, communication, and reputation. And the more you do it, the more mature your organization becomes, and the benefits stack up.
IS AWP WORTH IT?
Projects are always estimated based on historical information for rates of placement. We look at how many hours it took to install a ton of steel or a yard of pipe. With the consistent application of AWP and the resulting improvements in planning, we can expect to see a reduction in historic placement rates. We can reset performance expectations, creating a ‘new norm’.
So, the next time that lump sum contractor is bidding to the same Owner, they can justify using AWP to lower their hours on the project and reduce the cost, increasing their chances of winning the work.
As the Owner, you reap the financial benefit long-term, regardless of contract strategy.
As a Contractor, you can use translate the performance increase into a differentiator against your competition.
IS AWP REALLY A BENEFIT, AND TO WHOM?
Using AWP on a project will bring several immediate gains in a range of areas including safety, cost, schedule, quality and predictability. These improvements will greatly increase the likelihood of delivering successful project outcomes.
But we also
Owners can invest their capital across a broader portfolio of projects and maximize the return for their shareholders.
Contractors (both Engineering and Construction) will have more projects available to work on, and a more consistent flow of work, as the removal of historic overruns can help to reduce the ‘boom and bust’ cycle nature of capital construction projects.
We need to make sure that everyone is suitably incented to implement AWP in the short term so that everyone can benefit from the approach and continue to refine the process. But in the long term, these improvements can be a seismic change for the better in our industry.