Ethanol Rail Transfer Terminal

Major refining and chemicals company
Critical Strategy Needed for New Truck Terminal Facility to meet Client’s Cost and Schedule Objectives
Sector
Chemicals
Type
Grassroots
Size
Up to $50m
Location
Texas
Schedule Deviation
0.0%
Cost Deviation
N/A
Challenge
A new terminal was required to take advantage of forecasted market conditions and offtake agreements.  The terminal was challenged from an operational schedule perspective due to an offtake agreements expiring.  The customer had awarded the project development of a new truck terminal to Engineering, Procurement and Construction Company that had negotiated a Lump Sum Turn Key proposal as the basis for the capital approval request.    The capital approval board rejected appropriation request due to costs of capital in their view not competitive. 
Need
As the terminal was a necessity to the business strategy, the board requested the expertise of IAG to challenge the capital request and business case.  The objective was to significantly reduce the capital requirement, maintain the capacity and improve the schedule months. 
Our Strategy
Our strategy was to challenge the business case, scope and project delivery approach.  We quickly facilitated over a hundred detailed analyses of the scope of work.  The challenge of the client specifications, client preferences and optimization of the facility layouts yielded a reduction in quantities.  To then further reduce costs, we devised a commercial approach to break the project into multiple lump sum contractor packages, self-perform procurement and management of the contractors to eliminate redundant mark ups.  This revised approach yielded a 30% capital savings to the funding request.
Results
The project was awarded to IAG at project sanctioning, where we delivered the project 4.5% under the new approved amount (no change orders), increasing again the savings to the client.  We also improved the schedule by three months.  Our transparent model on costs and great working relationship with our engaged customer was key to the project success.  Our client’s persistence in driving the most competitive use of capital and allowing challenge of the delivery model allowed a profitable business venture to be realized.