Engineering Construction Performance

EC organisations adopt a more structured approach to appropriate continuous professional development.

EC in common with the construction industry in general suffers with issues of knowledge transfer and learning within and between projects. Project reviews are rarely undertaken and when undertaken usually apportion blame (Love et al., 2005). Gannon and Banham (2011) report on research investigating the challenges of knowledge management on EC projects, offering recommendations for improvements. The authors noted the complex nature of knowledge transfer, yet the process works when structures are in place that aid collaboration and communication between members. Conversely, a lack of a knowledge strategy creates mistrust and frustration which in turn adversely impacts on morale and efficient work practice. Sun et al., (2011) suggest the project management team develop a strategy prior to project commencement. with the aim of promoting unity, good communication and a collaborative culture in project execution.

2.2.2 Engineering Construction Performance

A Price Waterhouse Coopers report on the global oil and gas industry notes that despite advances in technologies and production improvements, global performance from oil and gas facilities has declined by 50% relative to capital employed in real terms in the previous 10 years (Cooke and Capper 2013).

This trend is also seen in Australia where the oil and gas industry is criticised for its inability to construct to time and budget. It is clear the industry has ongoing issues with performance. Ellis et al., (2013), report an escalation of costs over the last decade to a point where it now costs 20%-30% more to build in Australia than on comparable projects in North America. Australia’s costs are driven both by compressible and incompressible factors. Compressible factors can be addressed. These include existing levels of taxation, regulatory approval times and labour productivity. Incompressible factors are more intractable and include higher ambient air temperatures causing greater inefficiencies than experienced by plant in cooler climes. The relative disadvantage with other gas and oil producing nations on the immovable incompressible factors means that the Australian industry needs to surpass the competition in the areas it can. A report by the Business Council of Australia reported eighteen planned resources projects cancelled or delayed over the previous 12 months, due to inabilities to contain capital costs (BCA 2013). The total capital cost estimate for these projects was $AU149 billion with the WEL Browse LNG project the largest project delayed, at an estimated cost of $AU43 billion.

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The report notes that if costs become too high investment will move overseas. However, one incompressible factor that can be targeted, to mitigate against this eventuality is current productivity levels. Nonetheless, considerable improvements, particularly in productivity need to be found. Failure to do so will adversely affect the prosperity of the entire Australian economy (Ellis and Legrand 2013).

Ellis et al., (2013) in an examination of performance shortfalls in LNG plant construction point to some of the following issues:

• Australian workers spend less time at work because of different shift patterns, to some extent driven by the remote locations of LNG developments,

• When at work, time spent working productively is lower due to multiple causes, such as material and equipment not being available,

• When working, time is spent less effectively due to relatively less experienced workers, which can lead to rework and

• Australian workers take 30 percent more time to complete the same work, as do their counterparts in the US (Ellis and Legrand, 2014, p. 14).

McCreery and Murphy (2014) and the BCA report (2013) findings broadly align with these performance figures. Using the US Gulf Coast as a benchmark, both declare that on average Australia has a performance factor of 1.35, as compared to 1 on the US Gulf Coast. Simply translated this means that it takes 35% longer to do a piece of work in Australia. The BCA report (2013) agrees in part with Ellis et al., and tease out some constraints to good performance. These include distances travelled between work break areas and the work fronts and logistical issues experienced due to the remoteness of the sites. This report also highlights other issues such as the hot climate, the fly in fly out (FIFO) arrangement, which causes a “drift” to longer working hours. It is noted that whilst peak productivity occurs for 45-50 hrs per week, the longer hours worked under FIFO risks putting people in:

Low energy mode, with resultant lowering of productivity levels (BCA 2013: page 22).

McCreery (2014), notes that the Australia oil and gas workforce is an experienced one, experience gained on the ongoing construction of oil and gas facilities. Nevertheless, the available pool of experienced personnel has been stretched in the past due to the large number of LNG projects under construction in the country. However, a government report indicates an easing of skills shortage, noting that the challenge now for many organisations:

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Is to get the people with the right skills in the right place at the right time (AWPA 2013, p.162).

Yet, in contrast to the Ellis et al., (2013) findings, the BCA (2013) report notes that in the main, this

“direct” labour force is not the major causal factor of poor performance and indeed direct labour force performance matches the best seen globally. “Indirect” factors such as management, design, procurement and scheduling as well as support services such as scaffolding are a major cause of poor performance. The resultant aggregated performance factor is 1.3, in comparison to the US Gulf Coast (BCA 2013). Therefore, the focus of performance improvements needs to be on the “indirect” element of the aggregated level.

Meanwhile, in the UK, Gibson (2009) carried out a report on engineering construction. The report sought to address two “fundamental questions” in the UK engineering construction industry. The first question addressed whether UK productivity and skills in engineering construction were lagging other industrialised countries and secondly asked what could be done to improve current productivity levels.

The report highlighted areas where the UK underperforms in comparison with other countries, noting shortfalls in the following areas:

• the use of integrated client teams involving construction and operations managers from the beginning of the project;

• investing sufficient time in planning and scheduling before construction;

• the criteria for contractor selection; the schedule strategy, particularly the amount of design completed when construction begins;

• using robust project controls owned by the client;

• having sufficient numbers of supervisors;

• using local labour (as opposed to men travelling within the UK) and

• involving craft labour in construction task planning. (2009, p.18).

The Gibson report (2009), looked specifically at issues experienced by the British EC industry. This report has been one of the widest ranging to date and one of the few to address the UK sector in totality.

The report used evidence collected from many sources. These included an analysis of literature on

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industry performance, meetings and discussions with global clients and contractors, site visits, dialogue with trade unions and the use of data and analysis produced by Independent Project Analysis Inc. (IPA).

The report notes that whilst the technical skills of the UK workforce may be equal to those in other countries, productivity levels are somewhat lower than those achieved globally. Between 1998 and 2008 for construction and refurbishment of petrochemical facilities, productivity has been 11% less than the US Gulf Coast and 5% less than mainland Europe (Gibson 2009). Furthermore, several British workforce characteristics affect productivity, one of which is aging, with 41% of the onsite workforce over 50 years of age and 65% over 40. The report also proposes further reasons for the variable productivity rates achieved in 2009, which include:

Unexpected restrictions caused by the condition of the site which only came to light after construction has started; inadequacies in the design, delays in delivery of equipment to be installed, poor project scheduling or the organisation of the site: low work rates: inadequate supervision and industrial disputes. (Gibson, p.15).

Consequentially, a lot of unproductive time is expended on projects, where in some extreme cases up to 75% of the working day is spent on non-value adding activities.

The issues of worker productivity are also examined, informed in part by interviews carried out with employers on the subject, who were almost unanimous in questioning craft-worker commitment and loyalty. They state that the workforce has lower than expected work rates, are prone to absenteeism and take longer break periods than allowed. Gibson counters that senior management must accept a large degree of responsibility for this culture described and that the responsibility for the lower productivity experienced in the UK rests ultimately with management. Among other things, management tend to select supervisory staff based on their competencies on the tools rather than man- management skills (Gibson 2009).

These issues described are also encountered in oil and gas refurbishment, an EC sub-sector. This includes low performance levels experienced in Floating, Production, Storage and Offload (FPSO) life extension projects in the North Sea (Brown 2013), delay and cost over runs of oil and gas refurbishment works in Singapore (Wall 2014), scope creep, lack of definition and low efficiencies experienced on oil and gas refurbishment projects (Folkert and Brouwer 2014). Yet, there has only been a small amount of LNG refurbishment undertaken worldwide with the Karratha Life Extension (KLE) the first in Australia to undertake the refurbishment of an LNG plant.

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Construction productivity is “difficult” to measure (Eastman and Sacks 2008), but Odesola (2015) notes a correlation between productivity and performance. The EC industry suffers from issues with poor outcomes in performance, measured in terms of times cost and quality and innovative implementation outcomes. This informed the research implementing lean construction where the impact of implementation was measured in terms of performance outcomes. Lean construction is an approach that seeks to improve project performance and owes its origins to lean or flow production (Eriksson and Westerberg 2011).