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Asset improvement projects in the oiland gas industry are rarely if evereasy, starting with sheer physical chal-

lenges such as getting materials to remotegeographies or offshore rigs. Add in thenumber and variety of contractors involvedin a project and the challenges multiply.

Just think of the different players in-volved, and their varying roles.

First, there is the owner/operator organ-ization that will be using the improvements,and any maintenance contractors who arepart of normal operations. The owner organization likely has contracted with anengineering, procurement, and construction(EPC) firm to design and install the assetsthat are at the crux of the project. In addi-tion, project leaders must collaborate withelectrical firms, welders, process controlconsultants, construction equipment opera-tors, and logistics firms.

It is this coordination challenge – just asmuch as the scale or scope of the work itself– that leads to complexity in oil and gas in-dustry capital improvement projects.

An additional element of complexity, atleast in North America, is that projects areoften about incremental improvements.Major new refineries typically aren’t beingbuilt, but companies are looking to squeezemore productivity from existing facilities,perhaps by adding new vessels or process-ing units. In most cases, the existing assetsmust stay running.

“The projects today are often about de-bottlenecking,” observed Geoff Roberts, Or-

acle’s industry manager for the oil and gassector. “By adding some new equipment ortechnology, a site can often improve theprocess or capacity for the major assets thatthey already have.”

Risks at stakeWhen project leaders don’t have an auto-mated means of keeping contractors in synch,unexpected costs and delays can result. Andas projects unfold and changes become nec-essary, the potential for problems multiplieswithout coordination.

Take something as seemingly straight for-ward as an additional crane needed for aproject. Perhaps a vessel arrived on site

earlier than expected, and to install it, acrane must be brought on site as well. Butif that change isn’t coordinated with the dif-ferent teams on site, a negative “ripple effect” may ensue, said Russ Novak, direc-tor of consulting with ARC Advisory Group, aDedham, Mass.-cased analyst firm, as wellas a former manager in the energy industry.

For example, said Novak, if the acceler-ated arrival of a crane isn’t coordinated withthe manager in charge of the yard, then tomake way for the crane, materials mighthave to be moved, possibly disrupting workin an adjacent work area.

“You need to guard against those rippleeffects by tracking every change in the

May 2012

Optimal Project Outcomes Flow from Contractor CoordinationBy creating an integrated business process for project insight and changes, owners/operators keep contractorsin synch.

Industry brief sponsored by Oracle

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A broad and deep software suite for project management spans applications for portfolio manage-ment, project scheduling and management, and contract management, as well as foundational elements for integration and content management.

project in relation to the entire project man-agement structure so you can determine ex-actly what else might be affected,” saidNovak.

When change management is handledpoorly, costs may spiral, and contractorswho don’t get paid for additional work orare otherwise left unsatisfied might take

legal action. Litigation risk from contract-re-lated matters exists in every industry, butappears to be an elevated risk within the oiland gas industry.

According to the 2011 Fulbright Litiga-tion Trends Survey, a cross-industry, annualstudy of litigation trends commissioned bythe international law firm of Fulbright & Ja-

worski, 60% of energy industry respon-dents named “contracts” at the leadingtype of litigation matter, outpacing envi-ronmental and personal injury litigation.By contrast, across all industries in theeighth annual study, just 48% of respon-dents named contracts at the most fre-quent litigation matter.

Toward a foundationWell-coordinated contractor relationshipstend to diminish litigation risks, but of moretactical importance, they keep projects ontrack. To coordinate projects, most companiesuse some form of project management soft-ware, but it might lack advanced functionssuch as role-based key performance indica-tors, or workflow-enabled applications aimedsquarely at contract management.

Many companies have automated partof the challenge involved in project man-agement, but still have information silos.For instance, change requests to a projectmight be facilitated through a custom-builtweb portal, but the data related to an ap-proved change might have to be manuallyre-entered into the project schedule orrekeyed into an enterprise resource plan-ning (ERP) system to kick off any neededtransactional processes.

There may also be information technol-ogy gaps between the engineering systemsused by EPC firms, the project managementsystems used by owners/operators, or be-tween both these systems and operationalmaintenance systems, said ARC’s Novak. AnEPC firm may have a customized engineer-ing and data management system that ishighly functional for internal purposes, butnot easily integrated with the systems usedby owners/operators, noted Novak.

Only in more recent years have systemsthat feature workflow and portal-basedbusiness intelligence begun to break downgaps between information silos and get theright mix of decision-makers involved inproject workflows.

Oracle Primavera’s project managementsolution can serve as a foundation for man-aging project schedules and resources, whilethe Oracle Primavera Contract ManagementBusiness Intelligence Edition excels at coor-dinating contractor activities and projectchanges, as well as facilitating requests forinformation. When used as an integrated setof applications, users can see detailed sched-

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Successful project outcomes rely on the effective interplay of many partners when it comes to stepslike design approvals or changes within project execution.

The Engineering & Construction Lifecycle

Business Development

Project Execution

Business Management

Plan, Design, and Procure

Project Close-Out

Operate & Maintain

Project Leads

Design Approval Change Order

Work Order

Budget & Forecast

Forecast & Actuals

Collaborative contract management improves tactical execution, but business requirements and over-all goals are set much earlier in the lifecycle.

Tactical Execution How? How do we govern project/program compliance, minimize overruns and deliver on time and on budget?

Build Enhance the Construction Process Implement innovative construction management capabilities with EPCs to ensure optimal cash flow and timely project completion

Strategic Planning What? What are the ways in which we can maximize shareholder/ stakeholder value and reduce risk?

Capital Investments 2 Broad Areas of Focus & Discussion

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ule information from the contract manage-ment solution and go into the scheduleanalysis to conduct “what-if” analyses.

“We are talking about a complex ecosys-tem of partners working a project that typi-cally involves changes,” said Roberts, “soyou need everyone within that ecosystemto be able to ask questions through a re-quest for information mechanism, while theproject owner needs a way to take all thoserequests for information and potentialchanges into consideration.”

Contract Management has workflow anddocument management capability so thatappropriate reviews and supporting docu-ments can be handled by decision-makers.When requests for information identify theneed for a change, workflow helps executethe change request and any associated bidprocesses. And via integration with ERP sys-tems, the cost and schedule ramifications offield-level changes flow through to ERP.

“It’s very much an integrated businessprocess that can start with bids or other activity in Contract Management,” said

Roberts. “That way, everyone is working offthe same numbers, the same documents,and the same level of information. You areable to arrive at a single version of the truth.”

A collaborative system for contract man-agement can be kept consistent with an enterprise’s main systems of record, such asan ERP system. For example, field-levelchanges and associated work orders executedwithin contract management can link to pro-curement and financial processes in ERP.

Various oil and gas companies use Pri-mavera’s solutions, spanning applicationsfor Project Management; Enterprise ProjectPortfolio Management, which manages re-sources and analyzes multiple projects; andContract Management. The benefits of usingthese applications have led to client suc-cesses in the oil and gas sector, including:• The use of an integrated system for proj-

ect management at a global energycompany is credited with helping accel-erate delivery of “first oil” on a project.The system also includes a web-basedcollaborative platform for owners and

contractors. The integrated systemhelped save more than a million dollarsin labor, and increased craft productivity.

• A large oil and gas E&P company usesOracle’s Primavera P6 Enterprise ProjectPortfolio Management to integrate its rigschedules with development schedules.The system is used to prioritize drillingactivities on multiple rigs and perform“what-if” analyses to prepare for unforeseen changes in rig availability.The system allows for sharing and level-ing resources across multiple projects.

Insight and controlProject participants also need simplicity inunderstanding project progress and responsibilities. That’s where business intelligence comes in, especially in the formof role-based dashboards.

For example, an executive with theowner/operator is able to obtain a quick,high-level grasp of overall project progress,changes, costs, and estimated final costs,or, the projected “out turn” for the project.

User-configurable workflows with a contract management solution allow project teams to collaborate and share documents to facilitate common taskslike requests for information.

Workflows

Read P6 Events

Request For Information

Initialize Data Submit Request for Information

Submit Submit

Edit Request for Information

Approve

Create RFIReview Request for Information

Notify Approval Manager

Notify Project Manager on Reject

Cancel

Cancel

Cancel

Edit Cancelled

Edit Cancelled

Reject

Create Cancelled

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Similarly, an administrator with a contrac-tor primarily will be interested in seeingthe status of any bids, requests for infor-mation, or change requests the contractoris involved with.

The web user interface acts as a role-based control center. From a technical per-spective, the user interface uses “portlets”configurable to various roles within and out-side of the organization.

Another foundational element in keep-ing contractors and project leaders in synchis the concept of business process manage-ment, which is enabled by software featuressuch as user-configurable workflows anddocument control. Some workflows wouldbe common to any project, such as a “request for information” workflow or a “bidrequest” workflow.

Workflow routings can be configuredso that the appropriate experts or teamleaders can answer questions or considerapprovals. All the appropriate documentscan be attached to the workflow so thatdecision-makers have the necessary in-formation in front of them. The combina-tion of workflow and documentmanagement also enables audit trailing,which is seen as a useful feature forchange management.

“Change management has always beena big issue in managing projects,” Novaksaid. “Some of the companies involvedwith project management software reallyemphasize having provenance over change– when a change was made, who made it,what supporting documents were involved,and who approved it. That type of functionmakes it easy to see how you got to a cer-tain point because all you have to do islook at the record.”

The human elementOf course, the success of any collaborativefoundation depends on the skills of a multi-disciplinary team who have mastered projectmanagement techniques such as stage-gatedecision-making. In Novak’s view, one of thebest practices to ensure good project out-comes is to provide the project team with atleast one senior leader who can monitor thebusiness and market conditions relevant tothe project.

“To judge whether a project has been asuccess, you don’t just look at the technicalside of the project – [if] it met the schedule, oreven the cost projection,” said Novak. “Youalso have to look at the project from a busi-ness perspective, such as whether the new as-sets are meeting expected capacity or qualitygoals. It’s important to manage both aspects.”

In the oil and gas industry, an agingworkforce makes it important to structurereview processes so that the proper expertsweigh in on decisions. On sites such as off-shore rigs where equipment might havebeen field modified, a project may beg forreviewers who know the modificationscommonly made to assets, and can adjustinstallation or procurement accordingly.

Robin Short, senior vice president of internal operations with the Houston chap-ter of the Project Management Institute, aswell as a project manager with Transocean,

the offshore drilling contractor, believes it iscrucial that any software systems used toassist in project management be able to ac-commodate review steps by experiencedengineers and project managers who knowfirst hand the conditions found on rigs inprocurement of parts, logistics challengesfor getting materials to remote places, orother real world constraints that must beweighed to keep projects feasible. “The soft-ware is only going to be as good as the datafed into it,” said Short. “Whatever you putinto your systems should be reviewed by anexperienced human being.”

Oracle’s Roberts believes a collaborativecontract management foundation can ac-commodate this expert element. The foun-dation supports stage-gate decision makingand review processes, thus harnessing vet-eran expertise.

By getting all the players on a commonsystem for contract management, changerequests, requests for information, and role-based business intelligence, the coordina-tion challenge can be met, which sets thetable for better project outcomes. AsRoberts concluded, “Achieving better proj-ect outcomes in this industry is about every-one in the extended team knowing thestate of progress on changes and requests,and seeing if there are any road blocks thatcould harm progress.” �

About Oracle

With Oracle's Primavera Enterprise Project Portfolio Management solutions, oil and gas companies can

successfully select, plan, and execute projects across the enterprise, while answering critical project-related questions.

View a free demo of Primavera PPM solutions for Oil & Gas at

http://youtu.be/JCZLYW2Zy58To learn more about Oracle’s Primavera solutions

for Energy, visit www.oracle.com/goto/primavera/energy

or call 1-800-423-0245

In the oil and gas industry, an aging workforce makes it

important to structure review processes so that

the proper experts weigh in on decisions.