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Note: The source of the technical material in this volume is the ProfessionalEngineering Development Program (PEDP) of Engineering Services.

Warning: The material contained in this document was developed for SaudiAramco and is intended for the exclusive use of Saudi Aramcos employees.Any material contained in this document which is not already in the publicdomain may not be copied, reproduced, sold, given, or disclosed to thirdparties, or otherwise used in whole, or in part, without the written permissionof the Vice President, Engineering Services, Saudi Aramco.

Chapter : Project Management For additional information on this subject, contactFile Reference: PMT30101 Rod Kuan on 873-9701

Engineering EncyclopediaSaudi Aramco DeskTop Standards

Introduction To Project Controls

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Engineering Encyclopedia Project Management


Saudi Aramco DeskTop Standards

Content Page

THE PROJECT CONTROLS FUNCTION........................................................................... 1Introduction .............................................................................................................. 1

Benefits of Effective Project Controls ....................................................................... 1

Control Resources ......................................................................................... 2

Monitor and Forecast Performance Parameters .............................................. 2

Saudi Aramco Project Life Cycle .............................................................................. 3

Conceptual Engineering................................................................................. 4

Preliminary Engineering................................................................................ 8

Detailed Engineering ..................................................................................... 8

Construction .................................................................................................. 8

Project Completion and Close-Out................................................................. 8

Controlling Project Objectives .................................................................................. 8

Identification of Project Objectives................................................................ 8

RESPONSIBILITIES OF THE PROJECT ENGINEER IN IMPLEMENTINGPROJECT CONTROLS ......................................................................................................13

Introduction .............................................................................................................13

The Project Engineer as a Focal Point for Successful Project Controls .....................13

The Cost Influence Curve.............................................................................13

Control Of Project Scope..............................................................................13

Control Of Project Schedule .........................................................................13

Control Of Project Cost ................................................................................13

SAPMT INTERFACE WITH OTHER ORGANIZATIONS AND PROJECTS ...................13

Team Building .........................................................................................................13

Cost vs. Trust ...............................................................................................13

Other Organizations Inside and Outside Saudi Aramco ............................................13

The Proponent..........................................................................................................13

Other Projects ..........................................................................................................13

The Design Contractor .............................................................................................13

The Vendor or Manufacturer....................................................................................13

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Saudi Aramco DeskTop Standards

Project Inspection.....................................................................................................13

SAPMT REPORTS PREPARED FOR MANAGEMENT ...................................................13

Benefits of Effective Reporting ................................................................................13

The Budget Item Summary Report and Supplement .................................................13

Monthly Project Update Report................................................................................13

Project Proposal Update Report ...............................................................................13

Project Completion Schedule ...................................................................................13

Proposal Engineering Statistics Report.....................................................................13

Detail Engineering Statistics Report.........................................................................13

The Quarterly Project Reviews.................................................................................13

ADDENDUM......................................................................................................................13

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Saudi Aramco DeskTop Standards 1

THE PROJECT CONTROLS FUNCTION

Introduction

One of the most important challenges facing the Saudi Aramco project management team(SAPMT) today is the prevention of cost and schedule overruns that sometimes impact capitalprojects. Project management can be made more complicated by the multiple parties involved ina project, the inherent complexities of a project, the pressure of time, the increasing regulatoryrequirements, and the uncertainties of nature. The Project Controls function acts as amanagement control mechanism to systematically channel the project activities towardssuccessful completion.

Effective Project Controls helps the Project Engineer to manage a project and to meet theobjectives of completing the project on schedule and within the budget. Project Controls

facilitate decision-making tools to assist the SAPMT. When properly designed, utilized, andimplemented, Project Controls provide information as it relates to:

Project Baselines

Project Plans/Schedule

Project Status

Project Performance

Project Forecasts

Project Controls are generally performed by all project personnel; however, the Cost Engineerand the Project Scheduler are an integral part of the SAPMT and they act as an informationcenter for everyone involved in the project. The Project Controls function, with the help of theother project team members, should be placed in the project organization in such a way that itcan be most effective at determining the most accurate information obtainable for project costand schedule.

Benefits of Effective Project Controls

Project Controls provide the information necessary to plan, monitor, and forecast a project.Without good Project Controls, the SAPMT will not know about the actual project status,performance-to-date, and the course it should take towards successful completion.

Project Controls enable the necessary planning steps to be taken to define the project scope,develop a plan of action, execute the project, and monitor the performance during all of theProject Life Cycle phases.

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There are four basic management goals for executing every project:

Lowest Cost

Timely Completion

Highest Quality/Reliability

Highest Safety Performance

Control Resources

To accomplish these four goals, the project requires qualified resources and effectivemanagement tools. By implementing good Project Controls, the Project Engineer can efficientlymanage the project resources, which include:

Money

Manpower

Materials

Equipment

Resources are planned and managed by using two important project controls componentsnamely, scheduling and cost control. All resources, whether they are personnel, materials,equipment, or services, are quantifiable and, therefore, traceable with the proper project controls

tools.

Monitor and Forecast Performance Parameters

Project Controls achieve the following key objectives in managing and monitoring theperformance of a project:

Establish project work scope.

Establish project budget and cost baseline.

Develop logic plans and schedules.

Define what is to be controlled and by whom.

Track project cost and schedule performance.

Provide information for decision making.

Provide details of final project costs and schedules.

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Establish feedback systems for follow-up.

Saudi Aramco Project Life Cycle

A Saudi Aramco Project has six distinct phases to its Project Life Cycle. They are:

1. Conceptual Engineering

2. Preliminary Engineering

3. Detailed Engineering

4. Material Procurement

5. Construction

6. Project Completion and Close-Out

The Project Life Cycle Phases are shown graphically in Figure 1.

ERA

ConceptualEngineering

PreliminaryEngineering

DetailedEngineering

Procurement

Construction

Completionand close-out

MC ERC

Figure 1. Project Life Cycle

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A clear understanding of these phases permits the Project Engineer to better control SaudiAramco resources in the achievement of desired project objectives. In order to fully understandthe Project Life Cycle, it is important that the Project Engineer understand the activities that are

associated with each phase. The following sections give a brief description of each.

Conceptual Engineering

The Conceptual Engineering Phase in the Project Life Cycle centers outside of the SAPMT. Atthis point, the activities are developmental and study oriented. The Budget Item (BI) is takingshape. The Conceptual Engineering Phase of the project life cycle comprises developing thefollowing:

Conceptual Estimate Scoping Paper

Planning Brief Business Plan

Capital Program/Budget Item

Design Basis Scoping Paper

The Saudi Aramco Project Life Cycle begins when corporate management proposes businessplans for the period under review to the Supreme Council and Board of Directors. The SupremeCouncil and the Board of Directors provide endorsement or guidance from which corporateobjectives, activities, and strategies are ultimately formulated.

Corporate objectives and Business-Line objectives are updated in the Business Plan, which ispresented to the Board of Directors every April/May. The Business Plan is a five-year forwardplan, which describes goals, levels of activity and operating plans for each Business-Line. TheBusiness Plan includes projected manpower requirements, estimates of annual operating andcapital expenditures for the plan period, and projections of the sources and dispositions of funds.The Business Plan also serves as a basis for the five year Capital Plan, and it provides thefoundation for the one-year capital budget and operating plan. All plans and budgets areconsolidated along Business Lines, such as manufacturing and Exploration and Producing.

The proponent of a project is usually one of the Company's operating departments and theeventual facility user. The Proponent sponsors the development of the project. Working inconjunction with the Facilities Planning Department (FPD), the proponent sets basic parametersfor the scope of work and develops a Conceptual Estimate Scoping Paper (CESP) or PlanningBrief (PB) for the proposed budget. The Facilities Planning Department (FPD) validates theCESP/PB schedules and develops the conceptual/budget estimates for each project that will beincluded in the proposed budget.

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While the FPD works on the CESP and the PBs, it also maintains the master scheduling system,which contains all ongoing and proposed BIs, which then proceeds to the Planning AdvisoryCommittee (PAC), first in a preliminary overview and later in a final presentation.

Recommendations generated by PAC reviews are incorporated into the program, which is thenpresented to the Management Committee (MC). The recommendations produced by the MCreview are incorporated into the program. The first year of the Project Life Cycle concludes withthe presentation of the program to the Board of Directors for endorsement at their annualmeeting in November.

The Design Basis Scoping Paper (DBSP) for the BI is prepared jointly by the proponent and FPDfollowing approval of the Capital Budget by the Board of Directors. Once the DBSP has beenreviewed, approved, and issued, preliminary engineering commences under the direction of theSAPMT.

Preliminary Engineering

Preliminary Engineering is defined as the engineering activities that lead up to ExpenditureRequest Approval (ERA). These activities, generally, include:

Directing and monitoring the preliminary engineering contractor

Performing the initial, confirmatory studies

Preparing the initial draft of the Project Execution Plan (PEP)

Preparing the Project Proposal

Producing the detailed Expenditure Request (ER) estimate

Preparing the contract for detailed engineering and procurement assistance. (Inthe case of a Lump Sum Turn Key [LSTK] contract construction will also beincluded.)

The Preliminary Engineering phase begins with the issuance of a DBSP, which supports the BIby clearly defining the project work scope and schedule requirements. The PreliminaryEngineering phase is probably the most challenging to the Project Engineer because thedefinition of the project is in the process of being developed, both from the technical and the

managerial point-of-view.

The Project Engineer must maintain the focus of the project and he must manage input from allinvolved departments, which try to get the project to include their specific interests. The ProjectEngineer must diligently control the project scope, both as proposed and as actually incorporatedin the project scope.

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Detailed Engineering

The scope of work for Detailed Engineering is the work product of the Preliminary Engineering

Phase. An efficient and speedy start of Detailed Engineering is assured by a thoroughcompletion of the ER estimate, approval of the Project Proposal, and preparation of the detailedengineering contract. The Project Engineer must always look for ways to save time and moneywhen he executes the project. The Project Engineer should select the best contractor availablefor the detailed engineering phase in order to minimize deviations in construction due to drawingerrors and materials problems. Major activities performed during the Detailed EngineeringPhase are as follows:

Preparation of Design Drawings

Preparation of Material Procurement/Saudi Aramco Material System Specification

(SAMSS) and Direct Charge (DC) Preparation of Construction Bid Packages

Providing Technical Support to Construction

Construction

The Construction Phase of the project life cycle usually represents the largest percentage of themonetary value of the project. If Preliminary Engineering, Detailed Engineering and MaterialProcurement have been executed on schedule, then construction should progress with allmaterials available when required at the site. The early decisions and thorough planning by the

Project Engineer during the Engineering Phases allow the Construction Phase to progress moresmoothly. Major activities performed during the Construction Phase are as follows:

Tie-ins to Existing Facilities

Progress Control & Measurement

Physical Installation of Facilities

Functionality Checks

Mechanical Completion

Project Completion and Close-Out

During project completion, the Project Engineer is responsible for securing agreements from allparties that mechanical completion has been achieved. After approval of the MechanicalCompletion Certificate (MCC), the commissioning process begins, the levels of staffing for boththe SAPMT and contractor diminish, and the Project Engineer prepares to turn the project over tothe operating proponent and financially "close out" the BI.

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In order to assure that the facility has been produced per the Project Proposal, the operatingproponent will review the approved Project Proposal and associated minutes of the meeting,which were prepared during the Preliminary Engineering Phase. It is important that the Project

Engineer prepare the minutes comprehensively and definitively to assure a mutual understandingby all parties at the completion of the project two to three years later. Major activities performedduring the project completion and close-out are:

Site Acceptance Testing

Hand over of Spare Parts

Completion of Punch List Items

Financial Close-Out

Final Release of All Contractors Resolving All Outstanding Costs with Vendors

Closing All Internal Cost Codes

Controlling Project Objectives

Identification of the project objectives requires coordination of the input from many departmentswithin Saudi Aramco. In order to guide the development of the project effectively, it isextremely important to understand the objectives of the project. During coordination of theobjectives, it may be important for the Project Engineer to address differences between some

organizations in selecting the proper project objectives. The Project Engineer must continuallyrefer back to the basic project documents such as the DBSP, Project Proposal, and the ProjectExecution Plan to assure himself that the project is still on track.

Identification of Project Objectives

Project objectives can generally be divided into two groups:

Business Objectives

Performance Objectives

Business objectivesare the non-engineering objectives. In determining the business objectivesof the project, the following list may be considered:

Project intent/purpose objective

Schedule objective

Cost objective

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Economic objective (Rate of return)

Risk Analysis/Factors

Performance Objectivesare the Technical objectives. In determining the performanceobjectives of the project, the following list may be considered:

Basic project performance objective

Design standards

Operating factor

Materials utilization and interchangeability

Establishing spares objective

Computerization and automation

Provisions for future expansion

Constructability objectives

Some objectives may compromise other factors, which creates differences of opinion betweendepartments. For instance, in order to minimize construction labor and schedule, the ProjectEngineer may want to use as much modular skids as practical; however, the proponent may notwant the skids because they tend to be more crowded than conventional construction. In anexample concerning the pursuit of the maximum operating factor, engineered equipment items

are specified with long life seals and bearing or extra life electronics, which costs more than thestandard supply. This scenario conflicts with the objective of minimizing costs.

The Project Engineer is responsible for assuring that the project objectives comply andcompliment the company's business objectives. Some company objectives that should be kept inconsideration include:

Effective utilization and training of Saudi personnel

Maximized utilization of surplus and excess materials

Effective utilization of capital

Conservation of the environment

Industrial Security

The control of the project scope of work at the early stage of its life is extremely important. It isthe Project Engineer's responsibility to conscientiously manage the project, to constantly reassurethe direction of the project, and to remain firmly focused on the activities to come.

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RESPONSIBILITIES OF THE PROJECT ENGINEER IN IMPLEMENTING PROJECT

CONTROLS

Introduction

The success of a project depends upon the SAPMT's understanding and appreciation of theProject Controls function and their commitment to it's implementation through all phases of aSaudi Aramco project. The Project Manager and the Project Engineer should fully understandthe purpose, benefits, and mechanics of effective Project Controls. Although the ProjectControls requirements are dictated by the project management procedures, the degree of theireffectiveness is directly proportionate to the leadership role of the Project Manager and theProject Engineer.

The Project Engineer as a Focal Point for Successful Project Controls

The Project Engineer plays a key role in ensuring successful implementation of Project Controls.The Project Engineer uses the project planning and progress status information to report to theExecutive Management. In overseeing the implementation of Project Controls, the ProjectEngineer performs two major tasks:

1. Monitor the contractor's performance

2. Report the project performance to Saudi Aramco Executive Management

To ensure effective Project Controls implementation, the Project Engineer is supported by his

experience in planning and scheduling and by the cost control staff, who performs the associateddetailed tasks. The Project Engineer is ultimately responsible for project performance. Heprovides the necessary support to his staff to ensure meaningful controls are implemented on aproject. Some of the Project Controls activities for which the Project Engineer is responsible areas follows:

Implementation of a Project Execution Plan

Development of Project Milestone Schedule

Appraisal of the contractor's cost and schedule control systems

Monitoring the contractor's project performance

Reporting the project status to Saudi Aramco Executive Management

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The Cost Influence Curve

As the project progresses through its life cycle, there is a decrease in the ability to incorporate

project scope changes without significant cost consequences. In other words, as each phase ofthe project is completed and more of the finished product exists, the harder it is to changewithout significantly affecting the cost of the project. These costs usually take the form of re-engineered systems designs and specifications, redrafting completed drawings, changingspecifications to materials that are already being manufactured, or identifying and ordering newmaterials.

The importance of this cost influence relationship is to recognize and reinforce how extremelycritical it is for the Project Engineer to plan thoroughly and anticipate areas of disagreement asearly as possible in the project life cycle. The Project Engineer must identify, analyze, andresolve vague areas of the project scope during the Preliminary Engineering Phase or as early as

these areas are identified. If the Project Engineer ignores these vague areas, they will become anissue later in the project life when incorporation of change may be extremely costly or where itimpacts the project schedule and ERC.

Figure 2 graphically illustrates the relationship of the timeliness of decision-making on theability to affect costs.

Figure 2. Cost Influence vs. Time

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There are several SAPMT members who are involved in the development and implementation ofProject Controls on a Saudi Aramco project. To implement effective Project Controls, it isimperative that all participants do their share in generating and developing quality Project

Controls information. The Project Controls will not be effective if either the contractor or theSAPMT is weak and lacks proper expertise. To ensure effective implementation of ProjectControls, the SAPMT must ensure that:

the SAPMT has the right expertise and that it is committed to the Project Controlsconcepts.

Project Controls procedures and guidelines are established for the SAPMT and thecontractors.

the Contractor's Project Controls capabilities are evaluated prior to awarding contract.

Project Controls documents are developed on time and they are evaluated for theiraccuracy.

Project Controls data is used constantly to enhance project performance.

The Project Engineer must concentrate on three areas of control; Project Scope, ProjectSchedule, and Project Costs. Almost all aspects of the project can be categorized into one ofthese categories.

Control Of Project Scope

To the Project Engineer it often seems like there are more people trying to change the projectscope than there are people trying to maintain the project scope. It is the responsibility of theProject Engineer to maintain the integrity of the project scope. The Project Engineer is entrustedby management and the Board of Directors to perform the work they have approved.Consequently, only the Board of Directors has the authority to change the scope. The projectscope is first identified in the Design Basis Scoping Paper (DBSP). The DBSP is issued byFacilities Planning Department after it has been approved as part of the Capital Plan. Althoughthe DBSP does not include all the details of the project scope, it does identify the purpose of theproject. The Project Engineer uses the purpose of the project to develop the Project Proposal andthe Project Execution Plan (PEP).

Of course the process of controlling the project scope continues after the ER is approved. TheProject Engineer must try to maintain the original project scope when he is approached by otherorganizations that want to add their special considerations to the scope. It is very important tohave the proponents accept the project objectives to help control the scope.

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Control Of Project Schedule

At the time the Project Engineer finalizes the PEP and the ER is approved, he has prepared the

first official project schedule, the Project Completion Schedule. The Project CompletionSchedule identifies the major milestones for the project. The schedule identifies each majoractivity within the overall project time-frame and is directly related to it by control points on theCPM schedule or GANT chart.

The PCS (Addendum 5) establishes the schedule baseline for all project phases in detailengineering, material procurement, and construction.

The SAPMT submits the initial PCS (Revision 0) with the first MPU. The PCS also identifiesthe following major schedule milestones which are closely tracked to monitor the scheduleperformance:

ERA Expenditure Request ApprovalDE-CA Design Engineering-Contract AwardLSTK-BPC Lump Sum Turnkey-Bid Package CompletePB-BPC Procure Build-Bid Package CompletePB-CA Procure Build-Contract AwardLSTK-CA Lump Sum Turnkey-Contract AwardCONST-BPC Construction Bid Package CompleteCONST-CA Construction Contract AwardCS Construction StartMC Mechanical Completion

OS On stream

Control Of Project Cost

It is the responsibility of the Project Engineer to control project costs on his assigned projects.The Project Engineer is often tempted to allow the Cost Engineer to control project costs withlittle input from the Project Engineer; however, this would be a mistake primarily because thecost engineer does not know the details of the project as well as project Engineer. The CostEngineer does not know of potential problems, which affect the cost of the project. Thisknowledge is with the Project Engineer and he must be involved in order to relay thisinformation and the extent of its impact to the Cost Engineer.

Effective Cost Control increases the probability that the project will be completed within thebudget and any deviations from the baseline are identified early enough to implement correctiveactions.

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Cost Control should not be confused with the cost accounting function. Some people mistakenlybelieve that cost control is the record keeping of cost expenditures related to materials, labor, andother project expenses. This type of cost data is historical and it makes a partial contribution to

Cost Control. The SAPMT cannot control the projects cost performance solely by concentratingon what has already happened. Cost Control is a more dynamic function, which is not onlyconcerned with historical data. Cost Control analyzes the actual performance to-date to identifyany deviations from baselines, develops corrective solutions, and forecasts final project costs.There are three elements of an effective Cost Control function, namely:

1. Establishing a Cost Baseline

2. Monitoring Cost Performance

3. Forecasting the Final ER Cost

Establishing a cost baselineconsists of casting the project budgets and estimates into a definitecommitment and expenditure plan based on the Project Execution Plans. Based on the project'sWork Breakdown Structure (WBS), the project cost plans are broken down into project phases(e.g., engineering), procurement and construction, and project disciplines (e.g., civil, structural,piping, etc.). The projects cash flow curves are developed to show expenditure plans. This isan important task because this information will be used throughout the life of a project to trackthe performance against the cost baseline.

Monitoring Cost Performance - Once the cost baselines are established, the Cost Controlfunction concentrates on monitoring actual cost and comparing it against the cost baseline. Justas the development of realistic and accurate estimates is vital to the evaluation of a project's

actual costs, so is the timely status of a project's actual cost. The cost reporting and costperformance evaluation are essential to identify any deviations from the baselines.

Forecasting the Final ER Cost - In monitoring the actual cost, the Project Engineer alsoidentifies the causes of deviations from the project baseline. Once these causes of deviations aredetermined, corrective solutions can be developed so that the SAPMT has options for theirdecision-making. Cost Control also continuously strives to find ways to improve the costperformance by eliminating waste and implementing cost savings ideas. The Project Engineerestablishes mechanisms to manage all of the project changes beyond the base work scope.These management mechanisms are essential for the SAPMT to achieve accurate cost reporting.Based on the available cost data and analysis, the Cost Control can forecast the final cost at

project completion.

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SAPMT INTERFACE WITH OTHER ORGANIZATIONS AND PROJECTS

Team Building

It is the responsibility of the Project Manager and the Project Engineer to put together therequired resources to perform the work that is identified by the Budget Item. The most effectiveway to do this is with a project team. Forming individuals into groups by putting their names onorganizational charts does not assure the Project Engineer that he will have a team. The teamconcept is what makes the group work together. The earlier and more the Project Engineer canaccomplish the together the better the opportunity of success.

The effective project team is a group who shares a common reason for working together, isinterdependent in achieving shared objectives, is committed to work together to accomplish aspecific project or projects, and is accountable for their performance to their management.

Characteristics which are common among effective project teams are as follows:

Trust

Shared Project objectives

Interdependence

Shared sense of accountability

Pride in team members

Open communications

Recognition

In many companies, the team building process is a formalized process, which is usually lead by askilled, outside consultant who also has no involvement in the project. The purpose of themeeting(s) between the group is the early identification of the common ground on which to buildthe above characteristics.

In order to maximize the effectiveness of the team, the Project Engineer should include asmany organizations as he can in the team who have some, or all, of the above characteristics.

For example, the design and construction contractors and the proponent share many of thesecharacteristics.

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Trust is defined as the confidence and reliance one party has in the professional competence andintegrity of the other party to successfully execute a project in the spirit of open communicationsand fairness. A trusting relationship is based on a mutual understanding of each others

capabilities and limitations. It is also based on the personal and corporate integrity of bothparities. Trust is a basic ingredient in effective team building, timely decision making, and inbuilding long term relationships.

Trust in the professional competence and integrity of the parties can be summarized in thefollowing perceptions:

A belief that both parties will do what they have said they will do.

A willingness for both parties to risk being vulnerable to the other, supported by thebelief that neither party will take advantage of the situation.

Sensitivity and active dedication to each others needs.

Candid communications about how each sees the relationship.

Cost vs. Trust

The Construction Industry Institute has researched the relationship between cost and trust on aproject and determined that a trusting relationship between the parties is instrumental to thesuccessful execution of projects. The relationship between trust and project cost can beconceptualized by the curve in Figure 2. As trust increases the cost of the project decreases. The

optimum point, or least project cost point, on the curve is defined as rational trust. Rational trustrepresents the highest level of mutually verifiable trust between the parties. Beyond the point ofrational trust, the relationship enters in the blind trust area.

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Figure 3. Cost vs. Trust Curve

In the construction industry, the nature of competitive contracting practices often promotes shortterm (project driven) adversarial relationships. These types of relationships are unstable, whichadds to project uncertainty. Under these circumstances, the industry relies upon the contractdocument (complemented by control systems and legal personnel) to control project uncertainty.

A cooperative relationship between the parties is considered instrumental in reducing projectuncertainty and increasing the chances for the projects success. The development of aneffective cooperative relationship is based on mutual trust. Trust is a salient factor indetermining the effectiveness of many relationships. It facilitates interpersonal acceptance andopenness of expression. A trusting relationship between the parties is based on a mutualunderstanding of each others capabilities and limitations. It is also based on the personal and

corporate integrity of both parties. Trust can be seen as the lubricant that makes it possible fororganizations to work. The same could be said for inter group relations. Trust plays a criticalrole both within organizations and in inter-group relationships. The term trust can be used torefer to many facets of a relationship, such as:

How much confidence you have in the other partys competence and ability to dowhat is being asked of them

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Whether you believe the other partys judgment is sound

How much you believe the other party is willing to help you

How certain you are that the other party does not desire to harm you

Other Organizations Inside and Outside Saudi Aramco

The Project Engineer has the sole responsibility to coordinate input from the organizations thatare inside and outside of the Company. The success of the project may be determined on howwell the Project Engineer performs this function, particularly when the technical nature of theproject is outside the area of experience of the Project Engineer.

In the early phases of the project the Project Engineer must coordinate the input from many

organizations while preparing the Project Proposal. These organizations include:

The Proponent

Other Saudi Aramco Organizations including

- Receiving or Supplying operational organizations if not the Proponent

- Facilities Planning Department

- Material Supply Organization

- Fixed Assets and Work In Progress Accounting

- Project Inspection

The Design Contractor

Other Projects with an Interface

Major Equipment Vendors

The Proponent

When the Proponent truly believes that the SAPMT is working for the projects and his best

interest, the relationship between the Proponent and the Project Engineer will be much better.Trust and shared objectives are valuable to this relationship. The Project Engineer cannot ignorethe Proponent or any of the Saudi Aramco organizations without resulting in a problem at somepoint in the project life cycle.

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Other Projects

Most of the time the Project Engineer can identify any interfaces with other projects because he

is in contact with the other SAPMTs. Sometimes the projects that he interfaces with are notSaudi Aramco projects. The only way that he realizes their existence is through conversationswith the operating proponent and actually seeing the work in progress. The Project Engineershould encourage his SAPMT to notice other work in the areas and to discuss the potential forinterference with the SAPMT. To avoid interference, someone in the team should check on theother project.

The Design Contractor

The design contractor also shares many of the objectives with the SAPMT. It is important forthe Project Engineer to select the best contractor for the work. Not only should the selected

contractor be the best technically, but he should be interested in performing the work. There areseveral ways the Project Engineer can determine if the contractor is interested in the work,including the quality of his proposal, the quality of the personnel he proposes for the work, andthe quality of his execution plan. The Project Engineer should be confident that the selectedcontractor is fully capable before entering into a working relationship.

The Vendor or Manufacturer

For large or unique equipment which is sometimes purchased on Saudi Aramco projects theequipment vendors can be very important to the success of the project. It may be smart toinclude these important vendors in the team as early as they are identified. It may be necessary

to modify the project to accommodate unique features of the equipment or for the equipmentmanufacturer to modify his equipment to fit the particular situation. It is important to have aclose and trusting relationship with the manufacturer for him to modify his equipment within theproject schedule.Project Inspection

During the construction phase, the Project Inspection group can be the most valuableorganization in Saudi Aramco to the Project Engineer. Project Inspection is the organization,which at the end of each day, has to certify that the facility is built in accordance with the designdrawings and the Saudi Aramco Engineering Standards. It is important for the Project Engineerto assure the inspection early in the construction phase that he is fully supports them and that he

sincerely wants their input. The Project Inspection personnel cannot be viewed as hindering theprogress of the work. The Project Engineer is responsible for ensuring that Saudi Aramcosmoney is not wasted; therefore, Project Inspection is one of the best tools available to him toachieve this goal.

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SAPMT REPORTS PREPARED FOR MANAGEMENT

Benefits of Effective Reporting

The requirement that the Project Engineer reports to management offers several advantages. Theadded emphasis associated with the reporting requirement causes the Project Engineer to do amore thorough job of understanding the project status. When the Project Engineer understandsthe project thoroughly, he enjoys discussing the project with and reporting to management,which encourages good communications. Better reporting also improves communications withinthe SAPMT. As other team members see this added emphasis, they too want to stay informedand improve their knowledge level about the project. Team members that are moreknowledgeable have a positive impact on the project and result in timely and accurateinformation about the project status being available at all levels of the organization.

The more time the Project Engineer spends on understanding the project, the better he willunderstand each area and the better he will be able to define the responsibilities of the otherproject team members. As a result, potential problems are identified earlier.

Some of the reports that the Project Engineer prepares for management include the following:

Budget Item Summary Report and Supplement (BISR)

Monthly Project Update (MPU) report

Project Planning Update (PPU) report

Project Completion Schedule (PCS)

PES/DES

Quarterly Review

The Budget Item Summary Report and Supplement

The SAPMT is responsible for keeping Saudi Aramco Executive Management informed aboutthe project status and performance. The BISR (Addendum 1) is generated monthly for activeprojects of at least $50MM and for other projects under specific conditions. The report providesthe following project status information:

Progress Percent Completion Status

Status on Major Project milestones

Cost Status

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Project Completion Forecast

To enhance the BISR reporting, the SAPMT is required to include a Supplement Report, which

highlights performance measures and provides greater visibility into project activity. Theadditional information is reported to the Management Committee. The five major categories ofadditional reporting requirements are:

1. Performance measures

2. Cost analysis

3. Major milestones accomplished

4. Major issues and concerns

5. Contingency management

The BISR Supplement (Addendum 2) provides the Management Committee with projectperformance information in a summary format. Performance indices have been developed in thefollowing project reporting categories:

Cost

Project Completion

Expenditure Forecast Performance - Full Year

Program Management Costs

Project Management Cost

In each of the above categories, the BISR Supplement compares the current plan to the planindex. The variance is shown and reasons for the variances are explained along with the actionstaken to correct the problems.

Monthly Project Update Report

The SAPMT prepares an Monthly Project Update (MPU) for all projects under the control ofEngineering & Project Management that have received Prior Approval Expenditure Request

(PAER) or Expenditure Request (ER) funding. All of the Job Orders (JOs) within a Budget Itemthat are under the responsibility of a single Project Manager constitute the Scope of Workcovered by one MPU.

The SAPMT submits the MPU by the third SAO work day of each month. The first MPU issubmitted for the month following ER funding approval. MPU reporting is discontinued whenfinancial closure of TC-60 funds occur. The last report must state "This is the last report." in theComments section.

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The MPU report includes the project status information as it relates to:

Progress percent completion

Cost status

Capital vs. expense

Schedule status

Schedule milestones

Procurement status

Forecast for project cost and completion

SAPMT concerns

Project Proposal Update Report

A Project Proposal Update (PPU) report is prepared on the form Saudi Aramco 7057 (Addendum3). The basic purpose of a PPU is to communicate project status information from SAPMT forall Engineering & Project Management Budget Items (BIs) in a preliminary engineering phase.That includes all project-proposal work, preparation of an Expenditure Request (ER) estimate,bid-package development, and other engineering activities accomplished under TC-68 funds.

The first report is submitted for the month following TC-68 funding approval. The report is

prepared monthly, with the original due by the third work day of each month. The final report issubmitted for the month in which any ER funding is approved.

After approval of the ER funding, the PPU report is discontinued and is replaced by the MPUreport(Addendum 4).

The PPU report includes the project status information as it relates to:

Preliminary Engineering Progress

Schedule Milestones

Cost Status

Approved TC-68 Funds

Expended TC-68 Funds

Estimated project cost as stated in the most recent approved Budget Brief

Latest total cost estimate for the project's current scope including contingency

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Expenditure forecast by quarter for the total Budget Item

The PPU report shows the actual project status as compared to the project baselines established

by the TC-68 funds and original/latest schedules to complete the preliminary engineering phase.

Project Completion Schedule

The Project Completion Schedule (PCS) report is prepared by the SAPMT for all of the projectsunder the control of Project Management which have approved ER funding. The PCS wasdiscussed earlier in this module.

Proposal Engineering Statistics Report

The Proposal Engineering Statistics (PES) report was established to accommodate design

progress reporting from the start of the project proposal through full funding. After ERAfunding the report becomes a Design Engineering Statistics (DES) report.

The PES is prepared jointly by the contractor and SAPMT prior to each management reviewmeeting. The PES is jointly approved and signed by the contractor project manager and theSaudi Aramco project or design manager. Distribution within Saudi Aramco is then made by theProject Manager, as required, also under confidential cover.

The PES provides project data which is essential to evaluate the engineering productivity and theperformance of the Preliminary Engineering contractor. During this phase the engineeringcategories, or breakdowns, differ a little from the DES report format, but the information and

report format are similar.

Detail Engineering Statistics Report

The DES report is used for presentation of the performance of the detailed engineeringcontractor during the Quarterly Review meetings and at the project close-out. The DES serves asa standard means of:

Monitoring engineering-office functions

Collecting engineering-work quantities

Reporting unit manhours and relative cost.

The DES Report shows the contractor's performance as it relates to the detailed engineering andprocurement effort. By analyzing the DES report the SAPMT can determine engineeringproductivity on the project.

The data provided by a contractor is proprietary and, therefore, all Saudi Aramco personnelexposed to that information must regard the data as confidential.

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The Quarterly Project Reviews

A quarterly review meeting provides Saudi Aramco Executive Management with the current

status of the project and a forum for open discussion of project matters among ExecutiveManagement, the SAPMT, the PMC (if involved), and the engineering and constructioncontractors. The quarterly review meetings are planned to provide the Saudi Aramco ExecutiveManagement pertinent project status information, such as:

Cost Performance against the Expenditure Request (ER) estimate

Schedule Status as compared to Expenditure Request Completion (ERC) date

Overall performance of contractor(s)

Problem areas that may impede project performance

The quarterly review meetings provide an opportunity for all the major project participants topresent their performance and express concerns which need the Saudi Aramcos ExecutiveManagement's attention. During the quarterly reviews the presentations are made by:

Saudi Aramco Project Management Team

Project Management Contractor

Engineering and/or Construction Contractors

The Saudi Aramco Executive Management evaluates the overall performance and in case of

performance lapses, directs the appropriate participants to implement corrective actions withinthe specified time frames. After the quarterly review meeting the SAPMT follows up to ensurethat the corrective measures are implemented to remedy the problem areas.

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GLOSSARY

BI Budget Item

BISR Budget Item Summary Report

CESP Conceptual Engineering Scoping Paper

CONST-BPC Construction Bid Package Complete

CONST-CA Construction Contract Award

CPM Critical Path Method

DBSP Design Basis Scoping Paper

DC Direct Charge

DE-CA Design Engineering-Contract Award

DES Detail Engineering Statistics Report

ER Expenditure Request

ERA Expenditure Request Approval

ERC Expenditure Request Completion

FPD Facilities Planning Department

JOs Job Orders

LSTK Lump Sum Turn Key

MC Management Committee

MCC Mechanical Completion Certificate

MPU Monthly Project Update Report

PAC Planning Advisory Committee

PAER Prior Approval Expenditure Request

PB Planning Brief

PCS Project Completion Schedule

PEP Project Execution Plan

PES Proposal Engineering Statistics Report

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PM Project Manager

PPU Project Proposal Update Report

SAPMT Saudi Aramco Project Management Team

WBS Work Breakdown Structure

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ADDENDUM

1. Budget Item Summary Report (BISR)

2. Budget Item Summary Report Supplement

3. Project Planning Update Report (PPU)

4. Monthly Project Update Report (MPU)

5. Project Completion Schedule (PCS)

6. Proposal Engineering Statistics Report (PES)

7. Detail Engineering Statistics Report (DES)

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ADDENDUM 1: Budget Item Summary Report (BISR)

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ADDENDUM 2: Budget Item Summary Report Supplement

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ADDENDUM 2: Budget Item Summary Report Supplement

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Addendum 3: Project Planning Update Report (PPU)

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Addendum 4: Monthly Project Update Report (MPU)

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Addendum 5: Project Completion Schedule (PCS)

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Addendum 6: Proposal Engineering Statistics Report

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Addendum 7: Detail Engineering Statistics Report

Documents

Pmt 30101