The Engineering Construction Industry

Engineering construction (EC), also known as industrial engineering usually involves the construction of large complex projects. However, the term is not universally applied. In the UK Brookes (2012), notes that this sector encompasses oil and gas facilities power generation and large industrial complexes.

Lyons and Skitmore (2004) use the term to describe large-scale engineered centric projects in Queensland Australia. In Canada and the US (Georgy, et al. 2005) the sector is referred to as industrial construction. It includes projects such as oil and gas and the tar sands in Alberta Canada. But, the sector is referred to as engineering construction (EC) in the thesis. Sun et al., (2011) states that EC projects tend to have long construction time frames (over two years), long operation lifespans of 50 years or more. They present complex challenges and difficulties in design and construction to project management teams. These projects are complex schemes to design and execute with a tendency to overrun on projected schedule and budgets (Locatellli and Mancini 2012).

Engineering construction differs in several ways from other construction sectors. Firstly, EC projects are made up of a high proportion of mega-projects, where a mega-project is defined as one with a capital cost more than USD500 million (Brookes, 2012). Secondly, there tends to be a low number of end users, with commissioning undertaken by the client, who are normally the owners/operators of the plant. Therefore, stakeholder interactions tend to be less complicated than in other construction

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spheres. Thirdly, this sector draws a global workforce together with a wide range of disciplines from civil and structural engineering, to control, mechanical, and electrical engineering. Finally, there are complex projects regarding supply chain management, design, collaboration, project management, and constructability (Pasquire 2012).

Pasquire (2012) proposes some differentiating factors between standard construction (building and infrastructure) and EC where the value proposition is to construct and commission a plant that efficiently executes a process, involving some type of transformation through reaction, either thermal, chemical or mechanical, with little human input. These projects require compliance with stringent regulations.

Construction is typically of a long duration, frequently undertaken in harsh environments, requiring a highly skilled work force with the construction process utilising a high amount of off-site fabrication.

There is a requirement for stringent testing and commissioning to make the plant operational. Once operational, the plant normally consumes a large amount of energy. The process and technologies used are normally copyrighted and commercially sensitive.

On the other hand, the value proposition in standard building and infrastructure construction is to build structures for use either directly or indirectly by people. There is limited use of off-site manufacture and construction is not normally highly complex. However, the structures may include some complexity in IT and mechanical, electrical and plumbing (MEP) systems. The construction phase utilises a narrow range of skill sets with some requirements for specialist trades. Construction is not normally undertaken in harsh environments There is limited need for commissioning, when required it is mainly in the IT and MEP phases. The projects themselves tend to be relatively short term, with building project clients tending to be inexperienced but infrastructure project clients normally more experienced. Most of the technology used is not copyrighted and has commonality across the sector (Pasquire 2012).

However, despite the complexity, importance and cost of EC projects, research in the sector is sparse with Merrow among one of the few researchers’ active in the field (Winch 2012). Some of this research included analysis of questionnaires collected from 318 engineering construction megaprojects. Merrow concluded that whilst one-third of engineering construction projects are good the rest are “horrid” (Merrow 2011). These projects turn horrid for several reasons, with “project shaping”

being the core one. Project shaping is the process of turning the investment proposal into a clear value proposition, providing a project’s line of sight and:

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Projects fail for reasons having nothing to do with the shaping but not very often. Shaping errors and omissions are the most common root cause of megaproject failure (Merrow 2011. p103).

The other process in play is project front-end loading. This is an iterative process, converting the business case into a viable project. This has two phases. The first phase is the early design and budget development where enough development needs to be undertaken to ensure project feasibility from a budget and design perspective. The second phase is the detailed front-end engineering development (FEED), followed by the build-up of resourced planning in readiness for the execution phase. The veracity and quality of data and information informing these phases will influence successful project outcomes. The “owner team” role is pivotal, creating value for the owner by directing the development of robust project front-end loading (Merrow 2011).

Fayek et al., (2006) investigated issues of low performance in the EC in the tar sands of Alberta Canada, analysed data from owners and the supply chain questionnaires to determine the correlation between performance and project variables. They concluded that an experienced well qualified project team using good communication is critical to the success of large EC projects. Furthermore, competent supervision and a work force with appropriate skillsets can anticipate impending issues and develop mitigating strategies to minimise negative outcomes in terms of cost, schedule and quality.

Young (2012) in a report on the performance of Australian industrial projects notes ongoing improvement reported on smaller projects ($AU 100 million) over the previous ten years to the point where some projects are now matching the best performances seen global. Yet, this trend has not been matched on larger technically complex projects, which experience 75% failure rates, where failure is defined as cost and schedule overruns of 25% or greater. Projects above $AU 100million experience a high degree of uncertainty, where outcomes become increasingly unpredictable and failure more likely.

A report by the Business Council of Australia (BCA) provides some explanations. These include the small number of mid-range projects up to $AU 2 billion constructed within the Australian EC industry (BCA 2013). Consequently, construction professionals have little opportunity to develop experience and expertise in the complex mega-projects arena. Madder et al., (2012) points to a lack of appropriate continuous professional development for EC project management staff, noting a lack of systematic continuous professional development with training being ad hoc and “accidental”. They propose that