CONTEMPORARY MANAGEMENT OF INTERNATIONAL POWER PLANT PROJECTS

J. SlLER AND R. GEIBEL

ABB KRAFTWER~E AG BOVERISTR. 22

68309 MANNHEIWGERMANY

Abstract - Working in the international arena necessi- tates coping with rapid and constant changes. This paper will highlight some important managing con- cepts for successful business in the 90's. Financing and local supply requirements lead to changes of em- phasis in sales activities. Supply management and a global network of subsidiaries and partners ensures high process quality and the possibility to better meet customer demands. This is discussed in the context of the three spheres of world wide economic influence; Europe, Asia and the Americas. Project management, organisation and commercial structure as effective tools of successful projects are highlighted. Examples of large power projects and equipment developments in the "Borderless World" will be presented.

1. INTRODUCTION The Borderless World has been with us for gen-

erations. Trade has moved across borders since the time of Marco Polo. Over time organized commerce has evolved to the market of today reflected in Asia by the ASEAN Nations, in America by NAFTA; in Europe by the European Community.

These organisations reflect the major regions of the world in terms of the "borderless" economic communities they have formed. In a world of instant communication; 24-hour work days; political stabil- ity's and changing alliances, the challenges to sell, manage and serve a customer have beconie enormous. Everything moves faster, time is com- pressed and the business of doing business becomes more intense. This paper discusses some of the ways the manager of today can handle the pressures and challenges of the Borderless World. We will discuss sales, production network, supply management and

project organisation, as they relate to power plant projects (see Exhibit 1).

T O D A Y ' S C H A L L E N G E

CONTEMPORARY MANAGEMENT of international

POWER PLANT BUSlNESS

ected Managing Strategie

Exhibit I : Today's Challenge and contemporary Manage-

11. SALES ment

The process to win a project has changed in the Borderless World. To be successful, power plant suppliers have to adapt to market demands by em- phasising their service capabilities. The traditional sales department organization, favouring the experi- enced lone wolf, is no longer up to date. An organi- zation that deals with all aspects of customer needs is required. The establishment of process and project

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oriented teams is a requirement for efficient, state of the art sales organization.

Today power plant project structures based on multinational consortium are very common. Financ- ing considerations and the spread of the risk are some of the main reasons for this configuration. With large plant projects, it is understood that the qualified ten- derer must design and offer a financing solution [ I ] . Lienhard writes that more and more frequently the solution to successful sales activities is the export in- surance [2] (e.g. Hermes in Germany). When organizing a project, the technical portion often be- comes secondary to the commercial requirements.

With this in mind ABB now uses a concept desig- nated the "capture team". It is a synonym for a team focused on the goal to win a specific project. One person remains responsible for the project, the capture team leader, but he is part of a team of specialists for: Marketing, Project Managing, Con- trolling, Financing. Engineering, Production, etc. The different resources represented by the team members, crcate a synergy.

All departments that are engaged in the sales process are represented within such a team. Exhibit 2 shows the know-how oriented configuration of th t cam.

Project Management I I'Ahl ,

,,//' / sys System Leaders and Specialists

Detail Engineering \ Back up Experts

1 to 4: Systems focussing Marketing, Controlling, Financing, Engineering, Production, etc.

Exhibit 2: Sales organi7;ltion capture team

The capture team must be itivolved prior to the decision to go to tender. The strategy to include the right expert, at the right time, i n the right way is criti- cal. Projects must compete for the limited resources available an'd care is needed in development of the succcssful tender. The effort is a world wide one with the local rcquiremcnts closely coordinated with the best regional solutio tis.

111. PRODUCTION NETWORK AND SUPPLY MANAGEMENT

Sources of financing and export insurance dictate the composition of the consortial partners and the volume of the contract. Exhibit 3 shows production networking and supply management as two strategies to meet both challenges.

I ; --?T--i--:--

I Foreign E

I Financing Problems Difficulties and

Exhibit 3: Production Nework and Supply Management as

Production networking is the ability to manufac- ture in inultiple regions by an international network of subsidiaries. Being local not only helps to solve these problems, but also gives local know-how for an effective cooperation with partners and customers. Using local know-how allows effective knowledge of capabilities and culture to maximise results. Local weakness are reinforced from the regional head quarter and local solution can be adapted for regional improvements.

A multinational manufacturing network, gives you the chance to provide what each customer needs; high quality of product performance and service, short cycle and delivery time and effective cost-competi- tiveness, which adds up to profitability and success for both parties. A way to achieve this goal i s to in- stall a process-driven manufacturing methodology that guarantees consistently high quality output across all sites, as if the whole network were under one roof.

ABB has a world wide network for power genera- tion equipment in three regions: Americas, Europe and Asia, 24 manufacturing sites in 14 countries, supported by 250 offices in 84 countries. One of the keys to quality products i s technology transfer. We

solutions

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have transfered technology around the globe, from Europe to USA, Brazil, India and China, with exten- sive training and licensing of local manufacturers. In every case, the transfers have resulted in a team of specialists capable of significant share of future sys- tems engineering, design and manufacturing.

Supply management is a strategy that brings the knowledge of the supply base into our own processes as a strategic managerial decision. In other words it incorporates the strength and ideas of the external suppliers into our daily decision making.

Key suppliers of strategic material are candidates for a partnering program , if they are "best in class". International networking suppliers are preferred. The aim is to build up a relationship in an atmosphere of openness and trust that will benefit both partners. The four principles of supply management are shown in Exhibit 4.

0 I We manage our relationship with suppliers as we manage relationships among ourselves

._. . -~~

r Suppliers are an integrated part of our overall approach to improving total quality

-~ - . __ - ~~

Joint ABB /supplier actions eliminate excess cycle tlme and reduce project risk in our operations 1

I Suppliers are fully incorporated from the earliest concepts in the design, development and delivery of our projects

~ - ~~~

Exhibit 4: The four principles of supply management

One aspect of supply management is the continu- ous improvement process. Exhibit 5 shows the step- wise improvement of the suppliers quality perform- ance by a certification process.

A "best in class" supplier is moved from qualified to preferred to certified supplier (partner) via a pro- cess of qualifications and improvements. Which in- cludes costs, quality and cycle time, all coordinated by our supply management team.

IV. PROJECT MANAGEMENT

International implementation of projects is not a new idea. Prominent examples include the supersonic Concorde, Airbus and Eurotunnel.

Within Europe there has been a business frame- work and political structure - the European Com- munity - in place since 1957 to assist the implemen- tation of such projects. The EC set rules and regula-

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tions and procedures to be followed. Often it is not the project result that is remembered, but the fact, that it could be completed "cross culturally".

I

1 Process Quality __ -

I 1 Certified Supplier

I

Performance 1 - ._-/l

Exhibit 5: Quality improvement, an aspect of supply man- agement

~ ~ ~- ~-

Exhibit 6: Supersonic passenger plane Concorde

But what about today's multi-supplier, multi time- zones, multi-partner and multi cultural projects? To- day projects are being initiated that must be imple- mented from the three world regions simultaneously. The old hierarchical organization of projects just does not suffice. Today's organization must be changed.

The attitude of people towards organizational changes is reflected as follows: "We trained hard ... but it seemed that every time we were beginning to form up into teams we would be reorganized, I was to learn later in life that we tend to meet any new situ- ation by reorganizing: and what a wondefil method

it can be for creating the illusion of progress while producing conhsion, inefficiency and demoraliza- tion". This was said by Petronius in 2 10 B.C. [3].

That was an experience 2203 years ago and it shows that organizational changes can be destructive. But there is ng doubt, that today's world with its rap- idly changing rules and constellations requires an adequate strategy for organizational design. The best solution is to institutionalize the change. An Organi- zation has to be set up that is process oriented, tem- porary, constantly changing and varied. And at the same time it is understood, that the people within that organization have to be motivated, accept the concept and be fully committed to the objectives. It is on the management to achieve this. Using Systems integra- tion we are half of the way there.

The organization shown in Exhibit 7 represents a system approach instead of the component oriented hierarchical matrix of the past. The focus here is on the system leader that takes ownership of a system. He is then allowed to manage the interfaces and influences the processes within his system. This own- ership includes subcontractor and partner responsi- bility.

I I

Project Management

System Leaders and Concaptual Engineering

Basic Engineering and Execution

Systems LZ\

/ I I Exhibit 7: System integrated project organization

In power plants we typically assign systems lead- ers from the engineering department to wateristeam, gas turbine, civil, electrical and controls. The concept of capture team already organized by systems allows for a smooth hand over to the project team (see Exhibit 8).

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/ Erection and Commissioning

CAPTU TEAM

UUUU Erection and Commissioning

Exhibit 8: System integrated project organization

V. EXAMPLES OF WORKING IN THE BORDERLESS WORLD

0 Last September ABB introduced a new generation of gas turbines. The GT 24/GT 26 is a 165/240 MW 38% efficiency unit utilizing ABB's sequential com- bustion system (Exhibit 9). In combined cycle these units will have system efficiency of 583%.

The team that developed this concept consisted of 20 nationalities working in 10 countries; in a flat task-oriented organization. Work was done in large open offices without walls, which we could say re- flect the "Borderless Team Spirit".

I

Exhibit 9: ABB's Gas Turbine GT 24/GT 26

0 ALBA 3 is an 800 MW combined cycle in Bah- rain, built by a consortium -of ABB companies (Exhibit 10,ll). There we have an example of the consortium structure being dictated by the availability of financing. The network concept has succeeded here in allowing us to match suppliers with available exort credit and insurance. This plant was begun prior to the Gulf war and completed within the contract schedule.

P-A 3 Project Type: Tumkey ConsorHum Power Output: 8WMW Equipment: 6 x GTl3D 2 x ST's LO&iOll: Bahrain Partners: ABB SAE Sadelmi (I)

ABB KWL (G) CMI (8)

Main SUB.: ABS Network (S) ABB KW (CH) ABB High Voltage (CH) ABB Lummus (NL) Donaldson (USA) Wahlco (USA) *

NORDON (F)

Exhibit 10: ALBA Project Profile

Exhibit 1 1 : ALBA 800 MW Power Plant

0 The last example combines the financing needs, network and supply management, within the system structured organization. Jhanor-Gandhar a 650 MW combined cycle structured as a consortium between ABB and Marubeni Corporation (see Exhibit 12,13,14). The consortial leader is Marubeni Corpo- ration bringing financing from Japan. The Kawasaki Heavy Industries supply is directly related to financ- ing requirements. ABB is the consortial technical leader. The Project is organized with project manag- ers and system leaders coordinating engineering supply and construction. In a job that incorporates three diverse cultures the concepts of ownership and synchronised engineering are facilitated by this organization.

Project Profile - Jahnor-Gandhar Prow Type: Turnkey Consortium Power Output: 65oMW Equipment: 3 x GTl3E 1 x ST's Location: India Pa": MaNbeni Corp. (J)

KHI (J) INABB (IN)

Main SUB.: ABB KWL (G) ABB IN (G) ABB KWE (G) Donaldson (USA) Kenzle (G) AAF (UK) GBH (G) Roba (G)

Exhibit 12: Gandhar Project Profile

I pmi.dyn;lg.nnnt

T.chnk.i Loader I Jhanor-Gandhar Project

conorpt EnOin-Inn

B u k Engineering

I

Exhibit 13: Gandhar Consortional Structure

1

Exhibit 14: Gandhar 650 MW Power Plant

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VI. CONCLUSION Today in the complex ever changing Borderless World to be successhl companies must be able to of- fer and execute projects with a perspective both, local and global. We have discussed the needs to match re- sources, to partners and skills to the customer re- quirements. This goal must be accomplished faster and without loss of quality. Adapting the organization to focus on processes and systems will improve pro- ject implementation from preacquisition to turn over.

ABB is pushing forward with these concepts and believes strongly that success depends by them.

REFERENCES

Herten, H.-J., Internationales Projektmanage- ment, Dissertation, Aachen 1987, p. 301.

Lienhard, H., Schwerpunkt Finanzierung und Wandel im Selbstbild der Ingenieure, in: Blick durch die Wirtschafi, 20 Juli 1993. Petronius, cited in: Cleland, D. I., Project Man- agement, Strategic Design and Implementation, 1989, p. 134.

Nasar, S. US Remains The Leader in Productiv- ity, in: Herald Tribune International, No. 34, 415,22. October, 42/93, p. 1,4.

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