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Q&A: David Mead, risk analyst at IPA

Investing in capital projects in pulp and paper? Keep them on track and budget with these tips from a risk analyst

IPA conducts risk analysis and offers best practices workshops for individual projects and sites in a range of industries including pulp and paper.

Here, Mead reveals some of the ways mills can reduce their project risk.

PPC: How can pulp and paper companies benefit from project analysis?
DM: Pulp and paper companies are spending huge dollars on capital projects. In general, companies are working leaner and everybody has got more and more things on their plate. IPA is able to help project teams work more efficiently and spend less money on projects. We do this with a database of completed projects that we use to show statistically how project outcomes are affected by the upfront work that project teams do. It really is an eye-opening thing.

That was something that I never understood when I was working in project management for manufacturing companies – how does my project compare to everybody else’s? Am I spending more money to install a pump system than my competitors? And that’s really so important nowadays for pulp and paper companies, and for industry. They’re spending so much money – and it’s gotten more important that the money is spent efficiently.

We see client companies make an average of 17 per cent reduction in project costs over a four-year period just by working with us to reduce project risks. If companies are focused on safety, safety improves; if they take their eye off safety, safety gets worse. By reviewing projects at a site and letting them know what risks their projects have and how to reduce them, sites know what to focus on and can make those big improvements in their project systems.

PPC: At what stage in a project is project analysis most useful?
DM: We often talk to mill project teams prior to full-funds authorization, at their FEL-3 gate. And there, we’re able to evaluate the project, give them advice on gaps and let them understand their risks – and then either accept those risks or close those risks before they move forward.

When we review completed projects, we talk with teams about their preparation before authorization, how they executed the projects, and review their costs and schedules. This allows us to give them advice on best practices to improve future projects.

PPC: What are some of the common challenges mills are facing when executing their capital projects?
DM: It seems like the biggest risks for mills are the same as those for other sectors – doing the right amount of definition work up front. We also see a lot of problems in pulp and paper with having real, clear project objectives up front. Clarity of objectives is a huge driver for outcomes. Also, having a complete and fully integrated team is one of the most important drivers of outcomes as well.

We see a lot of problems with mills at older sites where teams don’t do the necessary preparation before authorization. An example of this is an understanding of the locations they will be excavating. If a team is going to dig a foundation for a pump or to put in new footers or something like that, and they haven’t captured the data for the underground obstructions, there may be risks. When they start to dig, they may hit a pipe or an electric line – and then they either have to redo their foundation design, or they have to move the equipment location, or reroute the pipes. That’s a big thing for sites, and one of the things that I saw when I was working in manufacturing as well – you can do a lot of work with old drawings and things like that, but there may still be a lot of undocumented problems underneath the soil that can cause problems.

The number of major late changes is increasing with pulp and paper. That’s clearly based on not doing the work up front. And there are always good reasons for not doing the work up front. Teams are light; they don’t have all the people they need. Mills are focused on putting out paper products, not doing projects. So the project guys sometimes don’t have the priority of operations and maintenance.

PPC: Where do you see the biggest gaps in project management?
DM: We’re seeing a reduction in cost effectiveness, longer schedules and operability issues.

Throughout industry right now, we see engineering contractors having more delays than before. And engineering delays affect how well construction can be performed – especially with mill projects, because they usually do a portion of their construction during an outage. If engineering is late, a lot of times it pushes the teams to begin construction before they’re completely ready. Project controls require having a control-grade cost estimate, where you can follow it through execution to understand if detailed engineering is getting behind in its schedule.

All of the upfront work is a clear driver of safety and cost and schedule. If engineering gets behind, then everybody is rushing to catch up. If you rush and put more people out there in construction, you may have chaos that leads to more safety risk.

PPC: What can mills do to improve safety risk during a project?
DM: What we see as best practices is to have a safety review before authorization where the team and the operations and maintenance have all understood what the safety implementations are, and what the safety plan should be. This helps make sure the equipment that goes in is safe when it is installed, rather than coming back later to do it. One of the things we see is that if the team hasn’t done that safety review up front, then it becomes something that is done later during detailed engineering when things are more expensive, or during construction when it’s even more expensive. Anything that you can understand up front is less expensive than if you make changes later.

PPC: What factors can affect the cost competitiveness of projects?
DM: Any time there’s a change in the personnel that’s driving the team through the project, it gives the opportunity for there to be more chaos and for more changes in scope. So you’re trying to make changes later on in the project when things cost more and take more time.

Pulp and paper companies certainly understand their safety metrics, and they certainly understand their cost and schedule predictability themselves. Teams can look and see how many safety incidents there are, and can look at their actual costs versus their estimates. It’s easy to see if they’re overrunning or under-running.

But another really good thing for paper companies to understand is not just predictability, but whether they are spending too much. One of the things that we see with pulp and paper, and many other industries as well, is having estimates that are too high. Projects that have high cost estimates end up spending more.

This article originally appeared in the Summer 2019 issue of Pulp & Paper Canada.