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The process of reducing risk


The widespread adoption and improved focus on interface and risk management activities by developers and EPC contractors alike, to better manage multi-contracting risk, will significantly increase investor confidence as well as reducing installation costs, according to experts at TàƒÅ“V SàƒÅ“D PMSS


Interface management and the various tools and procedures developed to date can be applied across all forms of project irrespective of the technology involved.

If applied in a timely fashion from project inception through development, design, manufacture, installation, operations and maintenance, and decommissioning phases, interface management can play a critical role in reducing project risk, help increase investor and stakeholder confidence in the project and help to lower the cost of energy in the long term.

Interfaces can be broadly defined as points where elements of a project meet and are interdependent. For renewable energy projects, these interdependencies can take the form of a contractual relationship between two parties or be non-contractual, and involve the transfer of information between independent parties in order for the receiving organization to perform their scope of work based on the correct data.

Multiple points of interdependency can exist on renewable energy projects, and it is crucial that these are mapped early and managed in a thorough and systematic manner in order to ensure both the efficient transfer of the deliverables of the interface and the creation of a framework for clear communication, both of which promote the opportunity for reducing project risks associated with interfaces.

Looking at the offshore wind industry in particular, from an owner’s perspective, the first offshore wind demonstration projects of some 15 years ago were generally procured using EPC turnkey contracts and involved a minimum number of interfaces for the owners to manage. The number of interfaces involved in today’s multi-gigawatt developments, procured under a multi-contracting approach, has increased exponentially, reflecting the complex nature of these larger-scale projects. Establishing clear, open and effective communication on these projects, involving thousands of components from multiple contractors, suppliers and service providers from multiple geographical locations, is a substantial task.

Interface management is not only an invaluable tool for offshore wind projects, but will also become increasingly significant for the emerging wave and tidal industries, and at TàƒÅ“V SàƒÅ“D PMSS, we see the opportunity to transfer the lessons learned to date from our experience in offshore wind across to other renewable energy sectors.

At TàƒÅ“V SàƒÅ“D PMSS, we have consultants with first-hand knowledge and experience of interface management through involvement in numerous capacities on many renewable energy projects constructed over the past 20 years. Our approach has been developed with two key principles in mind.

Firstly, it is important to understand that no two projects are the same and the approach taken towards every project must be tailored to suit the project and the particular interfaces involved. Our experience tells us that a one-size-fits-all approach towards interface management, neglecting the identification of project-specific risk sources, is not the best way forward.

Secondly, it must be recognized that early, proactive risk identification and management is an essential part of the interface management process and critical to the success of the project. In challenging offshore conditions, where mistakes are costly and extremely difficult to rectify, getting things right the first time is essential.

The first stage of interface management is to identify the project-specific activities and interdependencies that pose significant potential risk to overall project performance. By mapping out the supply chain strategy on a project ‘Quilt’, we are able to graphically illustrate a broad overview of the relationships between all project participants, identifying their various roles and responsibilities.

Once the Quilt has been constructed, we take these relationships and develop them further into a more detailed Work Breakdown Structure (WBS). The WBS clearly identifies the key points of the scope of each contract package and clearly identifies the ‘Custodian’ and ‘Related’ contractors for each interface.

Most of the items detailed on the WBS will have a number of potential interfaces associated with them and, for most projects, the WBS will typically contain more than 1000 activities, or line items. It is not uncommon for these activities to generate over three times as many associated interfaces, all of which will require active management, and so already it can be seen that having a process of mapping and managing these in place is critical.

Essential to the capture and documentation of these interfaces is the Project Interface Register (PIR), a tool that documents and categorizes each interface and its potential risks and/or opportunities, identifies the ‘Custodian’ and ‘Related’ parties to the interface, and gives details on the content and deliverables that are related to each.

Engaging in early, proactive dialogue with key members of the supply chain, well in advance of entering into contractual relationships, is a key enabler to successful interface management. The aim of this early engagement is to gain a better understanding of key interfaces that will develop as the project moves forward and, more importantly, to gain some foresight into the information that will ultimately form the deliverables of those interfaces.

To help illustrate this, an example of where the early application of interface management can prove to be particularly important in the offshore wind industry is in the design of offshore foundation structures. Two key interfaces usually exist between the foundation design contractor and contractors that are appointed to carry out site investigation and metocean studies.

Traditionally, site investigation and metocean studies are specified and carried out during the early stages of a project and, in some cases, years in advance of the engagement of a foundation design contractor. In this scenario, it can be the case that the importance of these key interfaces is either underestimated or, in the worst-case scenario, completely overlooked. The important aspects of the deliverables of those interfaces are often missed, which can subsequently lead to delays and an increase in costs later in the project.

In this example, a key lesson has been learned: it is essential to fully understand how the output from site investigation and metocean studies – the deliverables of the interface – will ultimately be used by the foundation design contractor in detailed design. Without this understanding, project developers and EPC contractors risk carrying out abortive design and survey work, may waste time reanalyzing datasets, and, in some cases, may find themselves carrying out additional expensive offshore survey work later on, often in parallel to the detailed design activities. This is not an ideal situation to be in.

Unwelcome situations such as this can be avoided by the mapping of interfaces early on in the project and engaging in early dialogue with established players in the supply chain in order to fully explore and understand the potential requirements and the salient points of the interface deliverable.

Unfortunately, it is often the case that the problems associated with not adequately mapping, understanding and managing interfaces such as these early on are not realized until much later on in the project, usually during the detailed design phase, and by this point in the project most programmes are already strained. As a result, developers and EPC contractors are left with little alternative but to adopt unnecessary oversimplification of datasets, which can result in conservatism being designed into the project – and hence the opportunity to make cost savings in this area is lost. This scenario could certainly be avoided by the early implementation of interface management systems.

Offshore wind turbine foundation structures can typically constitute around 25 per cent of the CAPEX of an offshore wind farm. Therefore, focusing effort on this area of project management has the potential to make a significant contribution to the overall reduction in the cost of energy. Foundation design is just one area where this can be achieved; the same philosophy can be applied across all elements of a project.

While the majority of renewable energy projects do already undertake some form of interface management, it is often the case that the benefits of focus and investment in terms of time, money and experienced resources up front in the project in this area is often underestimated, and not always in proportion to the magnitude and complexity of the project under consideration.

The most effective interface management systems capitalize on direct experience and industry best practice, combined with simple and effective systems for mapping and managing interfaces and project risks. They provide an early warning system for the identification of risk issues that can cause schedule delay and cost overruns.

Furthermore, with the shift away from utility balance sheet to project finance in Europe, and the same approach expected in the US, it is essential for developers to demonstrate control in minimizing construction risk and a robust approach to risk management to the risk-averse investment community.

The widespread adoption and improved focus on interface and risk management activities by developers and EPC contractors, to better manage multi-contracting risk, will significantly increase investor confidence, as well as reducing installation costs, minimizing schedule delay and improving safety, quality and environmental performance.

TàƒÅ“V SàƒÅ“D PMSS delivers effective, timely and intellectually robust support solutions for the renewable energy market.

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