Spending Your Turnaround Budget Contingency: Is it Inevitable?

Introduction

Turnaround (TAR) budgets contain a contingency allowance to cover cost overruns resulting from discovery work and unanticipated events. Contingency is applied to ensure that the amount of money budgeted for the turnaround is not exceeded and there is no request for more. Across turnaround organizations, there are a variety of methods used to determine the amount of contingency for the turnaround budget. Many rely on historical plant data to show when the budget was overrun by a certain amount and then that amount is added to the budget. Some sites take a systematic approach of assigning a percentage of the historical past contingency based on the defined turnaround size and other parameters.

Unfortunately, neither of these approaches challenges the culture of inevitability. Frequently, site teams assume that if the contingency fund is in place, it means that the money is already earmarked for the project and therefore, it will be spent. This way of thinking needs to be corrected. Regardless of how much emergency budget there is or how it was determined, the teams planning and executing turnarounds are obliged to not only stay within budget, but to reduce or eliminate the need to spend the allotment. This article will explain how to best manage the contingency budget.

Case Study

If the site considers that there is time and money built into the budget to pad the end of the scheduled work, they will want to use it. Consider the following scenario in which the turnaround manager is discussing the expectations with his site superintendent for the upcoming turnaround: