The Seven Deadly Sins of Cogen-Project Management

During the construction boom in combined-cycle/cogeneration plants of the 1990s—known as the ‘dash to gas’—we were brought in, under different employers, to help several projects that had fallen behind schedule, or that were suffering from acrimonious relations between a major contractor and the Project Owner (Fig 5-1).

In those days, multi-million dollar lawsuits got tossed back-and-forth like hot potatoes, as each project player unfurled its various contracts, and pointed to some obscure clause to argue the latest dispute. Unfortunately, the projects reaching this point would spur highly skilled engineers and craftsmen to swap out their sweat-soaked tools of hard hats, wrenches, and welding torches, for the quill-tipped instruments of point/counterpoint, claim/counter-claim, and lawsuit/counter-lawsuit.

After seeing this sad story play out time and again, project after project, we noticed that all of the troubled projects had one thing in common: They were doomed from the onset because some fundamental precepts of project management had been misunderstood, or were ignored purposely.

Hear that boom?

Now, with a new construction boom in combined-cycle/cogen plants revving up, we’d like to remind today’s participants of some lessons learned in the last boom.

Let’s look at the seven phases that combined-cycle/cogen projects typically go through. Depending on how they’re managed, these can be either the seven steps to success or the seven deadly project sins:

1.     Project conceptualization and definition. This is where it all begins. Where a developer’s vision starts to become a reality—at least on paper. Unfortunately, this first phase often was a problem in the 1990s, because when a reality revealed in the financial spreadsheets or CAD drawings clashed with the developer’s vision, then he often dismissed the reality, and ordered his team to move forward anyway (Fig 5-2). This “damn-the-torpedoes, full-speed-ahead” mentality famously worked in Naval warfare, but it failed over and over again in cogen-project development. So our advice to today’s developers is to be brutally honest here!

2.     Resource assessment. Be brutally honest, too, in this second phase, assessing your resources. Even though it’s very early in the game, you need to bring onboard qualified people with relevant, and up-to-date experience on your specific type of project. One developer in the 1990s happened to have a trusted friend with the mechanical skills to fix any car, no matter the trouble, and to lay down a very nice welding bead in his backyard shop. So the developer brought his mechanically inclined friend into his project right from the get-go, and assigned him the job of sourcing, procuring, and erecting an F-class combined-cycle project. But that’s a job too big for a backyard mechanic, so the project was doomed right then.

3.     Obtaining permits. After the right people are onboard, their efforts need to be tightly coordinated, as we saw in the permitting phase of this project: A small power producer was adding a new unit to its existing plant, so an environmental consultant was contracted to obtain the needed air-emissions permit. Reasonably enough, the consultant began by asking for the historical air-emissions data from the O & M crew at the existing unit. Paperwork went back and forth between the parties, an application was submitted, and soon enough, the new permit was issued. So at this point, the project appeared to be going smoothly. But what wasn’t noticed until much further down the development road was that the three parties—the existing unit’s O & M crew, the environmental consultant, and the regulatory agency—were talking about air-emissions in three different scientific units: parts per million, dry (ppmvd), tons per year (tons/yr), and pounds per million British Thermal Units (lb/MBtu). As a result, the new permit was issued with three different—and conflicting—sets of emissions limits! Months later, when source testing of the new unit was being conducted, ­the developer happily submitted the data to the state regulators, showing full compliance with his permit —at least, with the permit-limits that he was looking at (in ppmvd). But the regulators evaluated the test-data using the different, and more stringent units. So they determined that the new unit had failed its source testing! This math mistake seemed innocuous enough, but the regulators refused to correct it by revising the permit, largely because earlier problems at the site had created an acrimonious relationship between the power producer and that regulatory agency.

4.     Contract negotiations. Once the air permit is in-hand, a new cogen project seems to start galloping forward in this fifth phase. But whoa, Nelly! Contract negotiation turned out to be a very tricky art form during the dash to gas. Negotiating and writing so many different contracts— power-sales, steam-sales, and fuel-purchase agreements—proved to be more complicated than anticipated, because of contractual ambiguities that would “jump up and bite” the project later down the road. To paraphrase the old real estate adage, the three most important issues in this phase are risk, risk, and risk! Exactly who is taking it, according to the contracts’ fine print? Is it the fuel supplier because of fluctuating gas markets? The lender because of market currency? Or is it the equipment suppliers because of performance guarantees?

5.     Tracking progress and assessing schedule. A phase that often plagued Project Owners during the dash to gas was the lack of an accurate schedule to assess actual progress. At many projects, everything reportedly was staying on-schedule and on-budget, until about three-fourths of the way through, when incremental slippage suddenly was reported in a critical-path milestone. These “surprises” typically resulted from the developer expecting his contractual threat of liquidated damages (LDs) to ensure project schedule and control. The most successful projects, in contrast, ensured project schedule and control the old-fashioned way: They had a human being — a highly evolved creature who thinks, and breathes, and tries, and cries— frequently go onsite to eyeball the actual progress. The need for an involved Owner’s Rep wasn’t a new lesson, it was a textbook example of the old management adage “You get what you inspect, not what you expect.” No, we’re not suggesting that today’s developers completely eliminate LDs from their contracts. We’re only saying that LDs by themselves aren’t enough. They need to be supplemented with onsite inspections by qualified people, and balanced by contractual incentives for early completion.

6.     Commissioning and initial startup. In the dash to gas, this sixth phase often got so complicated and so tragic that it was likened to a Shakespearean drama by Larry Straight, the founder of Sterling Energy International, Inc., and one of the best Startup Managers in the business. Traveling between our many assigned projects, we understood Larry’s metaphor: the set would change, and the characters would have different names, but the basic plot remained the same.  The developer was confident that he had a winning project, so his main objective was getting to the acceptance testing, and he just wanted all those egghead engineers to stay out of his way! The EPC contractor, for its part, was equally confident in its design/build efforts, so its main objective was to keep the developer from getting in its way. You see the misalignment of objectives here? You might be wondering, therefore, is this phase hopeless? Is the commissioning/initial startup doomed to be an adversarial process, like haggling with a used-car salesman? Absolutely not. There were some projects in the dash to gas that DID have a smooth, professional commissioning and initial startup. Their keys to success were well-written contracts that aligned the objectives for all parties, and a talented Startup Manager on the Owner’s team. Don’t confuse Startup Manager with Plant Manager, because startup management is a discipline of its own.  Many a Plant Manager who is well-equipped to tend an existing plant, would get overwhelmed in the commissioning phase by all the reports, budgets, spare-part inventory, training programs, warranty issues, policy manuals, and other start-from-scratch tasks he must tackle.

7.     The handoff to the running back! After that initial startup was completed, and the plant passed its acceptance testing, project participants in the dash to gas hurried to open the champagne, and toast their victory. But their celebrations often were premature, because this seventh, and important step wasn’t done. Responsibility for the plant must be transferred from the EPC contractor to the owner. Yes, this was always completed in the legal sense, with a few quick signatures. But a proper turnover requires transferring the wealth of engineering knowledge from the EPC contractor to the owner’s O & M crew. The crew needs that knowledge to operate the plant reliably into the future. Think of it as handing off the football to the running back who can take it to the goal line! In our business, the “football” is called “the turnover package,” and it must not be fumbled. The turnover package is a vast pile of documents and electronic files that must be assembled, reviewed, revised, and archived. If the project is large enough, it may warrant a full-time employee handling the package, often given the title of Document Control Clerk. If it’s a smaller project, the Plant Manager and an Admin Assistant might be able to handle the task. In either case, there needs to be a formal process to (a) review all the documents for technical and contractual accuracy before they are authorized for use by the O & M crew, (b) update those documents when—and only when—changes are authorized, and (c) remove from circulation and, if appropriate, destroy obsolete documents. The best turnovers that we saw kept to a minimum the number of controlled documents—typically stamped “Controlled Copy” in red—and create a “For Reference Only” set of documents—usually stamped in black.  The best turnovers also made a formal distinction between ‘documents’ and ‘records’. Documents established engineering facts—such as the as-built diagrams of process and instrumentation systems (the P&IDs). In contrast, ‘records’ were legal evidence that some milestone had in fact occurred—such as the code-required inspections of the HRSG by an Authorized Inspector, or the regulatory-required calibration of the emissions-control system, prior to source testing stack emissions.  Every plant, regardless of size, needs a well-organized filing system and a quiet space—a library, really—to retrieve, spread out, and discuss the overwhelming stack of documents and records. Your goal should be to maintain control of the paperwork without forcing the O & M crew to comply with a cumbersome, bureaucratic system, who are trying to fix some broken pump and get the plant back on-line as quickly as possible.

Authors: Rob Swanekamp, PE, is with the HRSG User’s Group Inc. Bob Sansone is with Power Gen and Construction Practice, LC.