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
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.
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 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.
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.