ARTICLE OVERVIEW
Have you ever attended a Supplier’s post-project lessons learned meeting and a senior manager asks the team; “why are the documentation development costs outside of budget by so much?” This is a question I often hear from company managers about documentation development in engineered solutions projects.
It is my experience that the cost factors of project documentation development are multiple and intertwined. The degree to which these documentation development requirements and factors are understood, accepted and managed from cost development through to execution and completion, weigh heavily on the Supplier’s degree of financial success on the project.
This article is written from the Supplier’s perspective and will focus on project documentation development challenges involving and impacting cost for the Supplier and recommendations to mitigate those costs.
Since each project has specific documentation requirements, using another project’s approach (aka “cookie cutter”) is not recommended as it represents significant cost risk due to the variation of requirements between different projects. Unless you are executing a project repeatedly to the same Client with the same specifications, you will find that each project is unique in its documentation requirements.
This article is written as an informational overview of key cost factors and recommendations to mitigate project documentation costs and does not contain all possible execution scenarios or document development cost factors.
KEY PROJECT STEPS & SUPPLIER COST MITIGATION CONSIDERATIONS
ESTABLISHMENT OF PROJECT RISK – Client Front-End Engineering Design (FEED) studies establish a project scope, budget, cost, profitability, schedule and risk assessment. As a rule of thumb, the higher the assessed project risk, cost and profitability, the more stringent the quality, execution processes and documentation requirements are to address the established project risk.
Suggested Supplier Cost Mitigation Considerations
All elements of Client risk need a clear understanding of their impact on the Supplier. This understanding may require review by multiple Supplier personnel, with each having clear subject matter knowledge and experience in the risk requirements. Since Client risks drive project specification complexity, a lack of complete understanding of these factors may create voids in project cost development resulting in unexpected cost overruns to comply with specifications.
LAYERED PROJECT REQUIREMENTS – The project’s end user normally has a prime contractor develop the project scope and execution requirements, including the documentation scope. This process typically overlays the end user, prime contractor, regulatory, statutory and industry standards and procedures and FEED requirements. This “layering” results in complex project specifications and documentation requirements. Project specifications in the 3,000 to 8,000+ pages range are not uncommon and are driven by Client practices and the project risk established at FEED.
Suggested Supplier Cost Mitigation Considerations
These layers of requirements must be thoroughly reviewed, understood and their cost developed. Seemingly unknown requirements raised by the Client at the execution phase, may have originated multiple layers down in the project requirements. All requirements must be known to and understood by the Supplier, including those in references made to requirements in other standards. The project contract terms and conditions usually have a clause stating the entirety of the requirements, including the phrase “and separate references contained therein” (or something to that effect). The lack of a detailed understanding of all referenced requirements can become unplanned additional cost during project execution. Prior to preparing the bid, read and consider the cost of all requirements and take any exceptions necessary to the project specifications.
PROJECT SUPPLIER DATA REQUIREMENTS (SDR) – The prime contractor typically develops the project specification including an SDR List applicable to the project scope, specifications and is normally specific to each Supplier’s scope. This SDR List, along with the project specifications, defines deliverable documentation, products, services, data and processes required for the project and the risks identified from the FEED.
Suggested Supplier Cost Mitigation Considerations
Ensure the Client SDR List has comprehensive definitions of the deliverable documents. Templates and/or example documents should be furnished where specific project document formats are required. As an alternative, ask the Client to accept the Supplier’s standard deliverable documentation. This may be easier on standard products (aka “commodities”) which are mass produced to standards acceptable to the Client. This approach usually does not work on engineered solutions projects.
If the deliverable document content and format is not defined and clearly understood and agreed up front, in the execution phase you may find yourself at the mercy of the document reviewer’s “interpretation” of what the documents should contain. This becomes more critical during the Client’s final inspection/acceptance phase where Client Quality personnel may “interpret” the project requirements not clearly defined or agreed to by all parties involved.
During the execution phase, carefully monitor all document review comments from the Client. Any Client-originated non-compliance or deviation request differing with the agreed contract scope should be challenged and claimed as a change order (aka variation) request with cost and schedule impact.
PROJECT SOLICITATION PHASE – The Client’s solicitation phase is driven by the scope being delivered in compliance to the project specifications and at the best price. From my experience, the project’s risk analysis can create the potential for a different level of emphasis and project personnel involvement on similar topics, depending on the project phase. This challenge will normally manifest itself in the form of a different understanding or interpretation of requirements between Client Project Manager, Engineer and Quality personnel. The Supplier should be keenly aware of these differences as they can impact their cost in each phase.
Suggested Supplier Cost Mitigation Considerations
In the absence of a clear agreement on the project requirements by all parties, I have seen the Client’s solicitation personnel have a different agenda regarding the project requirements than the Project Management, Engineering and Quality personnel in subsequent project phases. Of critical importance is seeking a clear understanding and buy-in of the project execution and document deliverable requirements from Client personnel involved through all phases of the project. Prior to contract execution, the use of a Clarification or Deviation Register is a useful tool to establish, define, clarify and control project requirements and Supplier cost. Do not hesitate to use these useful tools. Trying to take exception to certain project requirements after the contract is signed is almost always futile.
SOLICITATION RESPONSE – Project specifications and contract Ts & Cs drive development of the Supplier’s proposal. The proposal developer’s degree of familiarity with the qualified resources (materials, processes and personnel) necessary for project scope planning and execution is directly proportional to the proposal’s quality, profit potential and value to the Supplier. Any lack of understanding of the necessary resources for process execution and documentation development may create cost challenges in the execution phase.
Suggested Supplier Cost Mitigation Considerations
A key consideration in this area is the difference between cost and price and who should determine each. Cost is defined by how much actual time and material is required to meet the project requirements. Price is cost + desired profit. Cost is most efficiently developed by those with repeated hands-on experience in performing the work. Establishing cost by unqualified or unrealistic estimation usually results in inaccurate costs, whether under or over. The price should be determined by Supplier Sales and Company management. They can determine; a) market expectations or b) whether buying a market share (by reducing profit) is warranted or c) if scope should be reduced or d) other factors. Where the established price was mandated during execution to drive down the cost budget (which was initially a higher value), my experience is that a cost overrun is likely to occur. Should this happen, the opening sentence of this article may become a deja vu moment.
Effective cost management of document development through careful planning and execution will always yield better results than cost reduction unilateral mandates without knowledge of the details involved.
Another consideration in the solicitation phase is having the proposed scope and cost developed by an experienced SME (subject matter expert) in each discreet topical section of the proposal. E.g., technical scope is developed by a technical SME, documentation scope developed by a documentation SME, contract scope developed by a management/legal SME, etc. A mismatch of responsibilities at this phase may produce undesirable or inaccurate costs.
Make sure all Supplier subcontractors are given the complete project specifications and made aware of their responsibility to meet these specifications. Coating, material, testing, documentation and other requirements need to be understood when developing cost. Not doing this at the bid phase usually yields unplanned subcontractor cost variations during execution.
Suppliers of product commodities, made to exacting industry and quality standards, may have reduced project requirements – make sure this is clearly spelled out in their bid request. Also ensure the product commodity Supplier is aware of and acknowledges their responsibility for any project process actions or deliverable documentation that are required.
It is my experience that trying to get serialized parts, material traceability or welding/NDE/test records after delivery, where they were not a requirement of the PO, is an almost certain showstopper for your project.
PROJECT EXECUTION PHASE – The execution phase is driven by compliance to the specifications and agreed schedule. Most engineered solutions projects require project execution documents in the form of project schedules, SDR list, quality plans, project execution schedule, quality management system records and other planning/performance documents. These requirements typically involve both the Supplier and their fabrication subcontractors, and their progress is normally monitored by the Client. In some Client contracts, liquidated damages clauses are used to mitigate schedule delays.
Other document deliverables can involve, design calculations, assembly/detail drawings and diagrams, component datasheets, manufacturing/inspection/test procedures, installation & operation/maintenance manuals, final data books and other requirements.
Suggested Supplier Cost Mitigation Considerations
Adhering to the suggested considerations listed herein, will reduce cost overrun issues to the greatest extent possible, produce fit for purpose engineered solutions and provide documentation compliant to project specifications.
Use properly trained and experienced resources during execution. Using unqualified or inexperienced resources may introduce quality issues requiring additional cost to correct.
Ensure all project resources (including subcontractors) are aware of and acknowledge the project specification requirements and especially the project deliverable documentation requirements of the SDR List, document definitions and Client document control procedures. Ignorance of all project requirements usually has a negative impact on execution cost.
An experienced Supplier project documentation deliverable specialist should use a project document control system which keeps accurate and up to date records on each incoming or outgoing document transmittal. All essential elements of document control must be recorded and monitored. This control is invaluable in managing turnaround and throughput time for both the Client and Supplier. The personnel managing this process should be fully cognizant of both project engineering requirements and the resulting documentation deliverables. This position is critical and should not be staffed with untrained or inexperienced personnel.
Creation of project document deliverables should be done by qualified resources (in-house or outsourced), using SME-generated content. The final documentation product must be reviewed and approved by the Supplier SME responsible for the intellectual property or the process being documented.
If liquidated damages cannot be avoided, request a bonus for early delivery as a gesture of reciprocity for the liquidated damages penalty.
SUMMARY
The intended takeaways from this article are the importance of:
- Project risk development and topics that drive it
- The layering of project requirements and how that adds to overall complexity
- The importance of an SDR List and how it drives project specification compliance and execution
- Client solicitation relation to project scope and risk
- Factors in the Supplier response to Client’s solicitation
- Details of project execution and the qualified resources involved
AUTHOR’S NOTE
This article is intended to be informational in nature and should not be used to make specific business decisions. Since deliverable documentation requirements for each Supplier’s project are unique, for the best cost control possible, project execution should be undertaken for each project considering the unique requirements of that project. For more information about the topics in this article, or support in creation and/or management of project documentation deliverables, contact the author direct – [email protected].
