How Do Small to Medium Sized Capital Projects Get the Attention They Deserve?

Over the last several years, the U.S. refining and petrochemical industry has undergone a renaissance of sorts. Lower natural gas prices and improved refining margins have been a catalyst for capital improvements at many of the nation's refineries and chemical plants. Couple that with tighter EPA regulations and it is easy to see why these industries have spent billions over the last several years expanding throughput and investing in cleaner technology. This growth has not slowed down either.

Historically, major owner-operators have relied on external support for engineering and design services for large capital improvements. Most of these technical services are completed by firms that specialize primarily in large capital projects. These engineering firms are typically structured with several layers of management, which are required to run large projects. Overhead costs are often high as well, as the administrative staff required to support these projects is fairly robust.

But what about small and medium sized capital projects, those that have an engineering budget of < $3MM? Are the larger consulting firms structured to efficiently manage and run these sized projects? In our discussions with engineers and managers at many chemical plants and refineries regarding this topic, the answer has generally been "No". Based on their previous experiences, these clients maintain that the structure and size of larger engineering firms does not allow them to run and execute smaller capital projects efficiently. They also believe that many of the larger firms are simply not interested in taking on smaller sized projects, as they may not fit their business model.

Either way, this has created a vacuum of sorts in the industry, as many of the plants, with plans for expansion, are smaller in size. For these smaller facilities, the size of their capital budgets and projects may not garner the attention of larger engineering firms. This is especially the case for refineries with a throughput capacity of less than 100Mbbl/day. On average their capital budgets are smaller, and they would likely be better served by a more nimble and efficient engineering and design firm. The same is the case for plants located outside of the “energy beltway.â€Â Engineering services are plentiful along the Gulf Coast, but what about those located in more remote areas? These plants often have a difficult time attracting good engineering talent for their projects. With improved methods of communication, technology, and transportation however, refineries that were once considered "too remote" are accessible to any firm that is willing to foster a working relationship.

The bottom line is that engineering firms that specialize in small to medium sized projects (< $3MM) are structured very differently than larger firms. Their hierarchy is typically flatter, with fewer management levels, and typically comprised of more experienced personnel. Depending on the size and complexity of the project, in many cases this structure allows the Project Manager to also be a technical resource. This in turn allows for lower costs and improved efficiencies. For maximum results, smaller facilities should look for the following 10 characteristics from their engineering firm:

1. A desire to foster a strong working relationship with the client.
2. Technical personnel with extensive experience in industrial operations and design. Thus, the firm's use of stringent hiring techniques and criteria are critical.
3. Technical staff should include personnel that are considered Subject Matter Experts (SME) in their respective fields. The firm should provide ongoing training to keep technical personnel current on the latest standards and tools in their respective disciplines.
4. The ability to provide practical solutions to challenging tasks. Keeping the design simple and practical is instrumental in maintaining efficiency and reducing execution costs.
5. Implement sound project development and execution principles.
6. Staffing levels for each project must be managed judiciously to control costs. All project costs, budgets and schedules should be provided weekly to the client.
7. Whether due to changes in scope, budget and/or schedule, the firm should be agile and able to respond quickly to client requests. This is especially the case for projects with tight budgets and schedules.
8. The firm should work closely with plant Operations and Maintenance personnel to clearly understand and define the scope.
9. Ergonomics and area accessibility, for both Operators and Maintenance personnel, should be considered as part of each design. This is critical for projects involving retrofits of existing equipment.
10. The use of technology, such as 3D scanning, is not always the answer. Smaller firms should be capable of providing this technology if necessary, but should not recommend its use for a project unless it is cost effective.

It is clear that the management style required to run small to medium sized projects is quite different than what is needed for larger projects. By looking for these attributes, smaller plants will more likely find a firm that is built specifically to address their needs in an efficient, cost effective, and timely manner.

Joe Brinz, P.E. is the Principal Mechanical Engineer at Engineering & Inspection Services, LLC.