W5_Stephon_SINGLE PO vs MULTIPLE POs FOR MINOR PROJECTS.

1                   Problem or Opportunity Statement

The offshore minor projects of an IOC are being delayed due to a limitation on the number of Personnel on board (POB) the target platforms at every point in time. This limitation results in a significantly long wait by EPCI contractors to perform the site installation phase of the projects after the engineering, procurement and workshop fabrication phases have been accomplished. To reduce financial losses in terms of accumulating interests on the part of EPCI contractors and the resultant claims, a decision has to be made as to the contracting strategy to be used for the projects.

                

            

                    

2                   Development of Feasible Alternatives

Two alternatives are to be considered for a final decision. These are whether to use a single contract (PO) for all the phases or to perform the site installation and as-built documentation phases on a separate contract (PO).Considering that we are dealing with only two options in this problem, we will attempt to use the dominance decision model but where it fails to eliminate one option, we will conclude with the non-dimensional scaling model.

 

                    

3                   Development of the Outcomes for Each Alternative

Below is the table of alternatives, their attributes and the ratings assigned to them.     

                    

Alternatives     Attributes	Single EPCI contract/PO	One Contract for Engineering to Workshop Prefabrication and another for Site Installation works to As-built documentation
Risks in Interfacing (between phases such as fabrication and site installation)	Low	Medium
Specialization/Quality	Fair	Good
Management Demands (cost, time, locations/logistics)	Medium	High
Cost (Contracting)	Medium	High
Claims	High	Low

                    

                    

 

 To accomplish the non-dimensional scaling process, we will need to convert all the attributes to one dimension.

 

To convert attributes where the larger values are less desirable, the following formula will be used:

Rating = Worst Outcome – Outcome being converted/Worst Outcome – Best Outcome

 

To convert attributes where the larger values are more desirable, the following formula will be used:

Rating = Outcome being converted – Worst Outcome/Best Outcome – Worst Outcome

 

The following table shows the resultant values after conversion.           

                    

Alternatives     Attributes	Single EPCI contract/PO	One Contract for Engineering to Workshop Prefabrication and another for Site Installation works to As-built documentation
Risks in Interfacing (between phases such as fabrication and site installation)	1	0.5
Specialization/Quality	0.3	0.7
Management Demands (cost, time, locations/logistics)	0.5	0
Cost (Contracting)	0.5	0
Claims	0	1
TOTALS	2.3	2.2

 

 

                    

                    

4                   Selection of the Acceptable Criteria

Given that we have only two alternatives, the dominance model would suffice for decision making if all the attributes of one alternative are better or at least equal to those of the other alternative. For the non-dimensional scaling model used, the alternative with the highest total score will be selected.

                    

5                   Analysis and Comparison of the Alternatives

Going by the dominance model, none of the alternatives can be said to dominate the other as there are attributes for which each is better than the other. Considering the Non-dimensional scaling model used, the single PO strategy earned a higher total score than the multiple POs strategy.

                    

6                   Selection of the Preferred Alternative

After our analysis and the selection criteria stated above, the strategy of choice is the single contract/PO strategy. This strategy scores better than the other strategy in the areas of risk reduction, contracting costs and management demands.

                    

7                   Performance Monitoring and Post-Evaluation of Results

Since all attributes here are considered of equal importance to the company, risks and claims resulting from improper phase hand-offs, contracting costs as well as project management effort and costs will be monitored and reported for evaluation of the chosen alternative. However the quality of deliverables will also be monitored to ascertain that it remains within acceptable thresh holds.

 

                References:

i.     Sullivan, W. G., Wicks, E. M. & Koelling C. P. (2012).  Engineering Economy Fifteenth Edition. Chapter 14

ii.    Giammalvo, P.D. (2012). AACE Certification Preparation Course Module

iii. National Institute of Standards and Technology – U.S. Department of Commerce Technology Administration. (1995). Multiattribute Decision Analysis Method for Evaluating Buildings and Building Systems (Publication No. NISTIR 5663). Gaithersburg, Maryland 20899.