Category: Projects and contracts

Based on my experience working on large scale renewable energy projects, this series of posts on energy contracts looks at some of the key technical considerations that are often overlooked or misunderstood.

If you’re interested in reading more on EPC contracts, Considering Contracts is out and available for purchase. You can buy this here

What could possibly go wrong on a Solar PV project during construction?

I gave a talk on EPC contracts at the All-Energy conference in Melbourne earlier this month.  The other speakers talked on the role of the lender’s independent engineer, the commercial & industrial solar PV sector and the transition from fossil fuels to renewables from an environmental management perspective.

One of the questions that was asked of us all right at the end was to do with large scale solar PV installations.  If solar PV facilities are effectively like large assemblies of lego pieces, what could possibly go wrong during construction?

It’s true, they should be fairly straight forward to construct, so why is it that some facilities are completed so much later than planned?

Design suitability

Solar PV facilities aren’t complicated to design for, but if the design is inappropriate, there are a myriad of issues that can result.  For example:

  • Overcomplicated mounting structures can be difficult to assemble, and may not handle slopes or undulations in the ground very well
  • Lightning may be more frequent and more severe than the electrical design allowed for
  • Geological conditions may make trenching and piling activities more difficult than expected
  • Electrical equipment selection may not comply with grid connection/code requirements

Programme of works – sequencing of activities

Constructing a PV facility means tracking and controlling the movement of millions of components, and managing the activity of hundreds of workers.  If the programme of works, or project schedule, is not well thought out, logical and comprehensive, the project risks onsite activities descending into chaos.

The project schedule should result in the efficient flow of components and equipment; be that the delivery of goods and machinery to site, the order and layout of any storage or laydown areas, and the timing of movement of components from storage to installation zones.

Installation activities should also be carried out efficiently, and in the right order.  Modules cannot be installed by the module installation teams if the mounting structure assembly teams have not completed their works.  If the mounting assembly teams are not working efficiently, the module installation teams will be sitting on their hands.  Modules (or other sensitive equipment) should not be installed if there are heavy duty civil works still to be done (like trenching) in the nearby areas.

Trenching activities can only be done if the trenching machines are available.  The availability of machinery becomes very important in sticking with the project programme.  And if there are lots of projects going on at the same time, in fairly remote areas, the availability of such equipment is not necessarily a given.

Labour management

Where is your contractor from?  Are they originally a foreign organisation who ran out of work in their home country so came to your shores seeking more opportunity?  And if so, have they hired local people to work on your project?

Each country, and indeed each region within each country, has its own labour environment, bringing its own set of issues and challenges.  If the contractor doesn’t have local capacity, they may not have a good understanding of what these issues and challenges are, or how to overcome disputes if they arise.

Strikes, go-slows or the downing of tools has an enormous impact on project execution, and the contractor needs to know how to find a resolution to labour issues as soon as possible.

Also, there may be expectations as to local working conditions, or assumptions around working practices that may not necessarily be written anywhere, but which the contractor may be expected to know.  The contractor could very well go through nasty culture shock on site, and throwing hands up in the air and stomping away from the workforce won’t really get things done.

Local knowledge and capacity is critical.

Compliance with environmental authorisations/management plan

Depending on the size of the facility, there is likely to be some form of environmental permit or authorisation, which is the result of an environmental impact assessment.  This permit may outline constraints that apply to the project (such as no-go areas around wetlands or areas of heritage significance) and it will likely require the project to have an environmental management plan that is implemented as the project progresses.

Compliance with the permit and the associated EMP is very important.  Non-compliance may result in delays, or perhaps even the withdrawal of granted permits.

Any new site findings can throw a real spanner in the project works.  Unearthing a burial site, for instance, can close down an entire section of a facility.

Watch this space – Part 2 coming soon.

Project planning within the energy sector (part 3 of 3)

This post is part three of a three part series on project planning within the energy sector.  Part one provides an introduction and some context, and bit on why project planning is important.  Part two looks at some of the considerations when planning a project within the public sector; mostly about how to go about procuring consultants to carry out the works.  This post looks at project planning within the private sector; from the perspective of an energy consultant.  Similar principles apply for contractors or suppliers responding to a request for proposals, but I typically wear a consultant’s hat.

Private sector project planning

While there are overlaps between project planning principles in the public and private sector, the focus of a consultancy (in particular) is very different from that of a project manager procuring the services of a contractor.  In general, a consultant is responding to the specifications developed by the client – outlined in a request for quotations, tenders, proposals etc.  They sit on the other side of the fence, and are now looking at the statement of works that someone else has developed, with a critical eye.

Deciding to go ahead with a project

Depending on how much work is out there, projects will typically be pursued if they are deemed to be sufficiently low risk with a good probability of making a profit.  The organisation should be capable of carrying out the stated statement of works, they should have resources available to do the works, be familiar with working in the project location (particularly if the project is to be carried out somewhere remote and/or in a different country) and the overall project focus should align with their corporate strategy.  The client should have a decent reputation, and should be likely to be able to pay invoices.

Responding to tender or proposal requests, or even short quotation requests, can be incredibly time consuming and therefore costly for a consultancy, and so this initial assessment of the call for submissions is very important.  How long will it take to prepare a bid submission?  Who is going to prepare the bid and how much does their time cost?  Does the overall project revenue potential merit preparing and submitting a bid?  And is the consultancy likely to win the bid?  Are there likely to be loads of competing bids?  All of these factors should be considered, and if the result of this go/no-go assessment comes out with an answer of ‘go’, you then move on into the preparation of bid submission.

Preparing the scope of works and associated quotation and schedules

Projects differ; there’s no getting around that, and this post would be infinitely long if I tried to cover all project types and permutations.  So I assume here that the client requires the services of a consultant, and that the consultant is required to provide a scope of works, for a fairly fixed or predictable price.  Other projects may allow the consultant to work on a time basis, which moves a lot of the scope risk onto the client, but for the purposes of this post, we’ll assume that the consultant is expected to give some sort of assurance as to how much the services for a piece of work will cost.

With that in mind, a client’s request for quotations/tenders etc will typically include a required statement of works, that may or may not be at a fairly high level of detail.  They will generally ask for the consultant to provide a methodology that will be followed, with the associated price, and expecting completion date(s).

Some clients may not have prepared this at all or (unfortunately) don’t really know what they are asking for, and will request the consultant to develop this on their own scope of works, based on their experience in the sector, their understanding of the overall project requirements and intended project outcomes.  There should have been some discussion with the client at least, to inform this understanding.

Regardless of how much information is forthcoming from the client, this means is that the consultant is typically required to drill down into the detail of what tasks and activities need to be completed during the project’s execution, when this should be done by and by whom, and how much this will cost.

The 75MW solar PV facility I worked on in De Aar, South Africa.  This was a big scope of works, with loads of assumptions and exclusions.
The 75MW solar PV facility I worked on in De Aar, South Africa. This was a big scope of works, with loads of assumptions and exclusions.

Defining the assumptions and exclusions

If the required statement of works has been thoroughly thought out by the client and is fleshed out in the procurement documents then developing the scope and methodology in the bid can be fairly straight forward.  Each task is included and costed accordingly, and laid out in a proposed project schedule.  If there is no statement of works provided, the consultant will need to give more time to developing the tasks and activities that need to be carried out, and costing these.

Regardless, the scope of work provided to the client should be clear, unambiguous and logical.  And what becomes increasingly important, particularly in bids that have a fixed price attached, or penalties associated with missed deadlines, are the associated assumptions and constraints.  This is where I’ve ended up spending a lot of my time on bid submissions, and they can make all the difference.

Spelling out your assumptions helps the client to understand how you have interpreted what they require, what kind of information or input you’ll require from the during project execution, how much information or documentation you’ll be required to review, what other external dependencies exist (e.g. receiving consents or comments from project stakeholders), how much time has been allocated to tasks outside of the consultant’s control, etc.  The consultant’s contract price and project schedule is developed accordingly, and any change in the assumptions may lead to a change in the price or completion date.  These assumptions are not necessarily fixed, they can be discussed further or negotiated with the client, but they give a basis of understanding for the tasks and activities listed in the scope of work, and protect the consultant from disputes arising from a lack of information or clarity.

Similarly, the consultant should also be explicit in what activities or functions are not included in their scope of works.  For example, the consultant may state that they are not responsible for any activities relating to the preparation or submission of any applications for project licences or consents.  This means that this activity has not been included in the overall project price, and if the client requires that the consultant carry out this work, it will be in addition to the stated scope of works.  There should also be a blanket statement somewhere saying that if it’s not in the scope of works, it’s considered to be an exclusion.

Exclusions, as with assumptions, protect the consultant from the client misunderstanding the intention of the stated scope of works, and protect the consultant from the dreaded scope creep.

A good amount of time should be given to thinking about what is not included.  If the consultant has a good understanding of the sector, and of the tasks and activities that are required for the type of project, they will have a good idea of what type of additional activities could be required that may not be listed in the statement of works, but may be expected by the client regardless.

Besides the above, other important project planning activities would apply.  Who will work on the project, and what kind of rate are they on?  What type of quality control activities will be in place to ensure the work is carried out properly?  What risks exist in the project and how will they be avoided or mitigated?

project planning upon appointment

If the bid is successful, and you are appointed, the next stage of project planning begins.  A kick off meeting with the client is always a good idea.  You contact your team to let everyone know how much of their time will be required and when.  You may receive project documentation and information from the client and you’ll probably set up the system for managing and filing said documentation and communications.

A pause here, before you set off on actually carrying out the project work, to confirm with the client as to the overall methodology, project tasks, communication strategies, reporting expectations etc, is recommended.  Particularly if all communication to date been limited to the content of your bid submission.  Any questions before we kick off?  Anything unclear in our scope?  Anything unreasonable in our assumptions?  Do you need any activities listed in our exclusions put back in (with an associated price adjustment)?  Have we misunderstood anything you’ve expected of our us in your statement of works?

Right, let’s get going then.

Project planning within the energy sector (part 2 of 3)

This post is part two of a three part series on project planning.  Part one provides an introduction and some context, and bit on why project planning is important.  Part three looks at project planning within the private sector.  This post looks at some of the considerations when planning a project within the public sector.

Almost all of the larger projects I was involved with while at the City of Cape Town involved the procurement of goods or services from external parties.  This post therefore focuses on some of the key planning considerations in public sector (mostly municipal, but some principles apply to other spheres of government) procurement.  Projects carried out in-house still require upfront planning, to avoid spending unnecessary time and resources on publicly funded projects (paid for in staff time).

Municipal/governmental projects

How does (south african) government procurement typically work

Government projects are interesting although they can be infinitely frustrating at times.  Projects that require the services or products of external consultants, contractors or suppliers, need to follow the applicable procurement rules.  These are bound by municipal and national legislation, and internal procurement policies and processes.  These processes need to be fair, transparent and in the public’s interest, as you’re typically spending public funds.  A lot of work therefore goes into the development of procurement documentation, and project planning is an absolutely crucial stage of any public procurement process.

This documentation is made up of several parts.  There’s the stuff that legal and (in Cape Town’s case) Supply Chain Management put together.  This outlines the nature of the contract being entered into, what the rights and responsibilities of each party are, what documentation needs to be provided, and what securities or bonds need to be put in place (if applicable).  They’re also very sticky on where pages need to have been signed…  The legal stuff will vary, depending on the type of project being undertaken.  A request for quotations will look different to a request for tenders, or a request for expressions of interest.  But the concept remains.  The documentation forms a legally binding contract.  The municipality is required to pay for goods or services rendered, and the contractor is required to provide those goods or services.

And these goods or services are described in the project specifications.

Solar water heaters installed on City clinics. One of my first energy projects for the munic.
Solar water heaters installed one of numerous City clinics. One of my first energy projects for the munic.
project specifications and functionality scoring

Within these documents is the required scope of works or specifications, for which the contractor must develop their quotation for the goods or services to be provided.  This outlines the overall project intention, the reason for appointing the contractor, and the relevant project details.  It may include project specific items such as:

  • project outcomes and deliverables (e.g. 100kW solar PV rooftop installation);
  • any technical details that are to be complied with (e.g. mounting structure should not result in any compromise to the building’s waterproofing);
  • location;
  • time-frame and/or required completion date;
  • requirements relating to the methodology or procedures to be adopted by the contractor in the provision of services (e.g. quality assurance protocols);
  • compliance requirements (e.g. compliance with local standards, consents, authorisations, licences etc.);
  • documentation submission requirements (e.g. progress reports, quality reports, O&M manuals, certificates of compliance etc.);
  • communication obligations (e.g. weekly meetings, communication protocols etc.);
  • health and safety obligations (e.g. H&S site plan, H&S officer appointment etc.); and/or
  • any other technical requirements to be complied with.

Bidders are then required to develop a quotation for the provision of good and/or services, and these submissions are reviewed accordingly.  In order to review each submission fairly, the procurement documentation should require the same type of information from each bidder.  Bids are typically reviewed against functionality scoring criteria, contract price and, in the case of South Africa, economic impact criteria, to promote Broad Based Black Economic Empowerment objectives.

Procurement documents will differ in the way they review bids and appoint successful bidders.  Some may list functionality related items as go/no-go or gate-keeping criteria.  For example, bidders may be required to provide, say:

  • evidence of five years’ experience within the sector;
  • evidence that they’ve completed projects totalling at least 200kW of solar PV installation;
  • the name and experience details of a professionally registered electrical engineer on staff to inspect and sign off on the system’s design and installation; and
  • at least three references for completed projects.

If they cannot provide the information requested, they are unable to proceed to the next review stage (i.e. price comparison).

Alternatively, functionality scoring could be weighted and used in the overall bid review process.  For instance, the criteria above could be assessed and scored and given a weighting of 30%, and the overall contract price could be given a weighting of 70%.  The winning bidder may therefore be the one that has proven experience, but who may not necessarily be the cheapest.  The City of Cape Town moved away from this type of scoring methodology while I was there, and rather used functionality as gate-keeping criteria.

What matters is that the methodology to be used in assessing and comparing submissions should be explicitly stated, with no wiggle room for bidders to claim they were unfairly excluded or marked down.  Quite a lot of thought needs to go into the scoring criteria.

Typically, on tenders (maybe not so much on requests for smaller quotations), bidders will be invited to a clarification meeting, where the tender objectives will be outlined, and bidders can ask questions of clarity.  These meetings should be minuted, and the minutes should be distributed to all potential bidders. (This is why bidders should be required to provide contact information when they download or collect procurement documentation.)

Any other clarifications that arise following separate queries, or following internal discussions, should also be distributed to all potential bidders.

Challenges within government tenders/quotations
  • In a fixed price contract, any changes to the contractor’s scope of works may result in a price adjustment.  A loosely defined scope of works could therefore lead to numerous change requests or variations during project implementation, and this could use up a part of, or all, of the allocated contingency funds.  If these funds are exceeded, further budget may need to be allocated to the project, which can be time consuming (or even impossible).
  • Inappropriate functionality scoring can allow inexperienced or unsuitable contractors to be appointed as the successful bidder.  This could make the project harder to implement, could result in a lower quality of work, or could lead to disputes about the delivered goods or services, and their compliance with the stated scope of works.
  • Questionable interpretation and implementation of functionality scoring or other procurement processes can result in other non-successful bidders appealing the procurement outcome.  This could result in either delays during appeal review (if the original decision is upheld), a change in the appointed contractor or a further delay or cancellation of the entire procurement process/reissuing of the tender/RFQ if material concerns with the process are uncovered.
  • If it’s a new sector or field of work for the municipality, there may not be strong institutional knowledge about the subject, and it can be tricky to access external expertise to inform the development of the procurement documentation without compromising the competitive process to be followed.  This needs to be carefully navigated by the project planner – to ensure that the specifications are solid, robust and comprehensive, without opening the process up to accusations of anti-competitive behaviour.
  • Spending money can be incredibly tricky in the public sector.  Funds have to be on a department’s budget before they can even think about proceeding with a project.  This is typically fine if the department has funds allocated to it each year, but it can become trickier if the project funds have been received from a grant funding agency (as was often the case on sustainable energy projects in Cape Town).  There are typically two occasions during the year where the budget can be adjusted, and this needs to be taken into consideration with project schedules.  Money coming into the City from an external party does not result in the City being able to spend those funds immediately.  In addition, applying for the funding can be a project on its own.  As is getting all legal parties to agree on the funding terms.  Then you need to follow the same procurement rules to spend the money, regardless of the funder’s terms.  It’s often a complicated and long-winded process.  Which is why partnering with an NGO sitting (where else) outside of government can make a project run much more smoothly.  They are able to spend the money quickly, and the City can benefit from having their expertise involved in the project.  This bypasses all sorts of procurement processes within the City, which should be fine if you’re not spending public funds.

Project planning within the energy sector (part 1 of 3)

Introduction

This post is part one of a three part series looking into project planning within the energy sector.  Part one gives an intro to the topic and outlines a bit of my background, and why project planning is important.  Part two looks at procurement within the public sector (South Africa’s public sector for the most part), and some of the challenges that exist.  Part three looks at project planning within the private sector, and what some of the key things to consider are when entering into a project as a consultant.

Why am I writing all of this?  A couple of weeks ago I was interviewed as part of the Engineers Without Borders Australia’s Leadership Rewired course.  The focus was on project planning, within the engineering sector in general, but my input naturally leaned towards energy projects.  Some of the questions that came out were interesting, and made me stop to consider some of the projects that I had worked on, some of the challenges I had experienced and what some of the main lessons were that I could share.  So these posts provide a little taster of some of what we discussed, and some of my thoughts.

Quick snippet on my background

It’s probably best to start with a little bit of context so you know where this is coming from.  Most of the projects I’ve worked on in energy have been while I was at either the City of Cape Town’s Energy and Climate Change unit, or within Arup’s energy consulting team, also in Cape Town.  In both positions I was employed as an engineer, although the focus of my roles at both were incredibly varied.  Before this, in London, I worked as a management accountant, while completing my CIMA studies.  So I have worked within roles that have had me doing operational based work (same type of tasks month-on-month) and roles that focus almost entirely on projects.

Projects win.  Hands down.

They provide interesting learning opportunities, introduce you to new people, and are constantly changing and challenging you.  I then completed my Project Management Professional certification.  It’s really a fancy piece of paper which says you have enough experience to merit having a fancy piece of paper, but it does give you a solid grounding in project management principles.

Why is project planning important?

If you’re at all familiar with the PMP course content, you’ll know that the vast majority of the information to be digested and regurgitated relates to the planning phase of a project.  So much goes into project planning.  And the more effort that’s put into defining the project properly upfront, the easier the actual implementation and control of the project are.

During project planning you’re developing the project scope of works, the schedule, the estimated project cost, and the project plans (communication, HR, quality, procurement).  You’re identifying key project stakeholders and identifying and assessing project risks.

Once the project is underway, you are monitoring the project’s execution against the schedules, specifications, budgets and plans developed during project planning.

There are naturally many types of project planning and execution methodologies out there.  My experience is largely with fixed price contracts, where the development of the scope is incredibly important, and there is a lot of value gained from solid and extensive upfront planning.  Other projects, which allow contractors to invoice on a time basis may need less planning work upfront, as a portion of the project work may be the development of the project objectives.  Or the project goals and deliverables may unfold, in stages, as the project progresses.

However, project planning doesn’t just happen at the beginning and then never happen again.  If a project is carried out in stages, each stage merits its own planning phase.  What are we looking to do here?  How are we going to do it?  Who is involved?  When does it need to be done by?  How much will it cost?  How will we know if we are shanking it?

Not asking these questions can lead a team down a winding path to nowhere.  Or rather, a winding path to Expensiveville.  Or its neighbour, Overduetown.