construction project management
best practices—the project shall be
constructed to specifications for
quality, time and budget.
9
Construction
The HPP construction should be managed according to general construction project management best practices—the project shall be constructed to specifications for quality, time and budget . Furthermore, social and environmental impacts and human health and safety must be considered at all times . Important components of construction project management include contract strategy, construction program and scheduling, planning and task sequencing, and risk and cost management .
9.1 Form of contract
Typically, a project developer creates three or four separate contracts: civil construction; E&M equipment; grid connection;
and penstock (often included under civil construction).
For each of the above, an engineering, procurement and construction (EPC) contract is tendered and signed. Under the EPC contract, the contractor designs the installation, procures materials and builds the project, either directly or through subcontracting. Typically, the contractor carries project risk for schedule and budget in return for a fixed price (lump sum).
Coordination among multiple EPC contractors (interface management) is often the responsibility of the developer or the developer’s engineer. This critical oversight and coordination task requires a very experienced engineer because oversight responsibility begins with the study and planning phase and continues until plant commissioning.
It is uncommon to assign a general contractor to carry overall responsibility for plant engineering. In such case however,
there would be less coordination from the developer side, but the general contractor would have to be supervised, including applying principles similar to those used for individual EPC contractors.
For international projects the Fédération Internationale des Ingénieurs-Conseils (FIDIC) provides standard contract forms, referred to as the red book, yellow book, silver book and green book, depending on contract type (Figure 9-1). The FIDIC contracts are written in formal legal English and are drafted based on common law background.
The FIDIC silver book pertains to EPC and turnkey projects, generally applicable to HPPs. The silver book is a template for a lump-sum contract and assigns risk to the contractor, and offers greater certainty to the employer concerning project cost and completion date. There is no engineer; the employer covers engineering responsibilities.
9.2 Scheduling
During HPP project construction, a comprehensive schedule is crucial; using a professional program for this task is recommended. At a minimum, the schedule should include the following components:
• Tasks and durations
• Restrictions placed on any task
• Contingency of each task
• Milestones and key dates
• Interdependencies among tasks
• Parties responsible for tasks
• Project critical path
• Actual progress against plan
For an HPP project the schedule should include levels of detail for each construction lot:
• Site access/site clearance
• Civil works construction
• Dam and diversion works
• Headrace/penstock
• Powerhouse
• Manufacturing and transport of E&M equipment
• E&M installation
• Switchyard and connection to the grid
• Commissioning and testing
The construction schedule should be completed during the detailed design phase. Each scheduled task will be worked out in detail and the influence of the tasks on one another should be investigated to emphasize key deadlines that have an impact on the overall construction period.
The schedule will consider time contingencies and delays due to weather or other unforeseen circumstances, and will highlight the critical path.
The procurement schedule should incorporate a focus on items that require a long manufacturing lead time (such as E&M equipment or penstock) to ensure they are ordered and delivered on schedule. This tactic will also highlight any timing issues between delivery and construction, or a need for on-site storage.
Milestones are goals that are incorporated in the contract that are connected to contractual obligations, advance payments or penalties. Milestones should be highlighted in the schedule to assure on-time completion.
Figure 9-1: FIDIC standards
Source: FICHTNER
Conditions of Contract for Construction for Building and Engineering Works designed by
the Employer The Construction
Contract
Conditions of Contract for Plant and Design-Build for
Electrical and Mechanical Plant
for Building and Engineering Works
designed bye the Contractor Mechanical Plant
AND
Lump sum contract, funtional tendering
Conditions of Contract for EPC/Turnkey
Projects
Short form of Contract based on Red Book Contract amount:
<M500,000 USD Construction period
<6 months
9.2.1 Planning and task sequencing
Successful task planning and sequencing enables finalizing the HPP project on schedule. In particular, task sequencing ensures that the execution of subsequent tasks is possible. For example, mechanical and electrical equipment can be installed only after completion of powerhouse civil works. Successful sequencing also requires timely ordering of manufactured equipment, and anticipating and scheduling time for transport to the site.
Equipment and parts that arrive too early must be stored on site, which increases risk.
Typically, an HPP project critical path is as follows: access roads, penstock construction, tunneling, E&M equipment manufacturing, and connection to the grid. Critical issues can vary from project to project.
To develop a logical and efficient sequence, each task category should be broken down into a series of sub-tasks, accompanied by an assessment of inputs required for each task, especially those requiring interfaces.
9.2.2 Risk management
Risks associated with HPP construction should be identified and considered during the whole process. Each risk should be evaluated in terms of (a) probability and (b) consequences.
Contingency plans should be designed and established. The potential impact of any realized risks should be incorporated in project planning and scheduling, in particular those that could affect the project budget and deadline.
9.2.3 Stakeholder management
Stakeholder management is crucial for HPP projects.
Stakeholders should be consulted and involved from the very beginning of the planning phase; local concerns must be assessed and a mitigation plan established. Before construction begins, stakeholders should have been informed about what to expect, and the developer must have plans in place to mitigate any negative impacts on the population and/or the environment.
9.2.4 Cost management
The HPP project viability is influenced by construction duration.
Neither energy generation, nor revenue generation can be initiated before HPP commissioning. During construction an HPP is simply incurring costs so a shorter construction period can reduce the payback period. In addition, the construction period requires careful cost management, and therefore close attention to the construction schedule and payment structure.
The payment structure depends on the contract type.
For EPC contracts the agreed lump sum is split into several payments connected to construction milestones in the contract.
As mentioned, typically for HPPs, civil works and E&M are awarded separately. The ratio of civil costs to E&M costs are around 50/50 to 60/40. The payment structure for each is different and can vary from case to case.
The payment structure can be arranged as shown in the following points (see also Table 9-1):
• For civil works the advance payment is in the order of 10 percent. Throughout the construction period, 80 percent of the lump sum is disbursed through regular payments connected to specified construction milestones; 10 percent of the lump sum is paid upon HPP handover.
• For E&M equipment there is a payment of 30 percent in advance; 50 percent of the lump sum is paid out in increments as delivery is taken for single pieces of equipment; 20 percent is paid on acceptance.
Table 9-1: Potential payment schedule for EPC contracts:
civil works/E&M
Payment Due upon
% of Contract Civil E&M
Advance payment Commencement date 10 30
Interim payments Connected to milestones 80 50
Final payment Handover 10 20
Source: FICHTNER