construction project management

What’s the Difference between Estimate-to-Complete and Forecast-to-Complete

Predicting the future is what we’re all about. But when do you use ETC versus FTC – and what’s the difference? Everyone gets nervous when they’re in the dark with how things are going on their project. Collecting real-time information on activities and costs is a big piece of the “Where are we at?” questions, but how do you take that data and leverage it to answer the “Where are we going…” questions? Forecasting the near future and long-term outcomes on projects is a critical function for project controls professionals.  To accomplish this, it’s important to first understand the two main methods for preparing and calculating a forecast: Using historical performance indicators Manual predictions of remaining effort Notice that I didn’t include “Remaining Budget” as a forecasting metric. And that’s because, simply taking total project budget and subtracting costs-to-date, does not provide a reasonable forecast. It doesn’t take into consideration any new information or productivity challenges that can significantly influence the remainder of the project. To dive deeper into these two forecasting methods, let’s drill-down into each of these to understand the difference. Performance-based Forecast – ETC Performance-based forecasts are the standard Earned Value method.  It takes the historical project performance and determines a productivity ratio based on that performance (CPI). It then uses that ratio to calculate how the rest of the project will play-out if you continue to perform at that level.  So, if you’ve been under-performing, you’ll end up over budget and behind schedule if you continue at that pace. And vice versa. It’s a bit like how your car’s computer calculates remaining distance. If you have a reasonably new car, it’ll have screens on the dashboard showing

The Future of SAGD

How can we Make SAGD more Profitable and Sustainable? Large SAGD projects in the Alberta Oil Sands have suffered an unfortunate reputation for cost overruns, delays and productivity issues over the past ten years.  These results have thrown the whole industry into question as to whether SAGD is a viable and investible solution for extracting bitumen from this oil-rich area of the country. Despite the criticisms and skittish investment community however; these challenges have invited a tremendous amount of analysis and an industry-wide awareness of the need to innovate new technology to prove it as a viable and sustainable solution. In this article, I’ll have a look at some of the lessons learned in recent years and a number of recommendations as to how we can apply better techniques and technology to make it a practical, sustainable alternative that we can all feel proud to be a part of.       SAGD stands for Steam Assisted Gravity Drainage and it is a common and growing technology in Alberta and worldwide to extract heavy oil that is deep below the earth’s surface. Invented in the 1970s, SAGD is relatively new to the oil industry, and has only been utilized in large-scale commercial projects over the last 15 to 20 years. This slow adoption rate was due to a number of barriers that SAGD projects presented.  It was not until horizontal drilling techniques were perfected, for example – and the price of oil was high enough – for SAGD to become a feasible option for oil producers.  Nevertheless, even with these barriers lifted, oil producers continue to struggle to try to make SAGD a practical solution going forward. The sheer size of these projects poses a

Are we nearing the end of Cost Reimbursable?

Get Ready for Convertible Price Projects   When we see quotes like this from the Globe and Mail, “Investors are increasingly applying pressure on oil companies to trim their investments in oil sands projects,” it becomes clear that a change in how we do business in Alberta is on the horizon.  If the investment community is losing faith in our ability to extract oil at a reasonable and predictable cost, our industry is in serious jeopardy. There is a shift underway. Cost overruns on construction projects aren’t uncommon of course, and the oil and gas industry in Alberta has not been an exception. It has in fact shown to have one of the worst records for budget overruns of any energy geography in the world. There are a number of underlying challenges that have contributed to this unfortunate track record; but one of the primary culprits has to do with the predominantly cost-reimbursable contract culture that exists in Alberta. This culture creates a challenging environment for projects to stay on budget. The nature of these contracts suggests that there is compensation for all costs incurred plus a rate uplift, with little to no risk absorbed by the contractor for when projects are extended or when they aren’t executed at maximum efficiency.   When the cost-risk is so lopsided like that, the owners face having to bear all the added cost of any inefficiencies, productivity issues and errors that occur with any contractor or engineering firm on the project. There can be dozens of contractors and engineering firms (EPCM) on a project, and with the way contracts are currently structured, everyone just passes their problems up the food chain (even the best, most efficient contractors).  Nobody’s