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Professional project management, Certified Earned Value Professional (EVP). Sharing any knowledge and open for discussion for professional development.

W13.0_Ary_HV Transmission Line Losses Reduction – Economic Analysis using PW Method

Problem Recognition and Definition

Power loss in high voltage transmission line has a linear relationship to the loads and has exponential relationship to the current flows in the lines. Several methods available in compensating transmission losses and one the most popular method is utilizing Static Var compensation (SVC) equipment installed at the load side. It is important to analyze the econimical benefit of SVC implementation to solve transmission line loss problem.

Possible Alternatives

As mentioned above, SVC is the most practical used in electric transmission & distribution system while another system has been introduced (new technology) by using AC-DC-AC converter equipped with SVC system.

In this economic analysis both alternatives will be analyzed based on cost savings given and opportunities available from the features of these equipment.

Analysis and Criteria

The attached graph showing increasing trend of MVAr supply from hydro power generation through with distance about 30 kilometers long from the center of loads.

Figure 13-1. MVar generated trend

The average MVAr delivery is 80 MVAr and in this study, reduction to half of this value is technically accepted. Loss from 40 MVAr transmission line is worth to $499,000 per year.

Below are two alternatives with technical capability of both equipment and opportunities provided if the equipment installed.

SVC installation is designed to reduce MVAr delivery from power generation while the AC-DC-AC converter (DC Link) does the same with additional capability to transfer active power (MW) from hydro bus to thermal power station bus system. It provides extended opportunity to shutdown diesel generating plant.

Cost comparison of two generating stations is figured below and will be used as a basis to calculate cost savings:

With opportunities (savings) from the two alternatives are figured below:

And summarized data for this analysis is shown on below table

Table 13-1. Basic data of two alternatives

Equivalent worth method will be used to select the best economical option selected for implementation. And alternatives with the highest PW value at defined MARR will be proposed to management.

MARR 25% will be used in this study with 10 years useful life of equipment.

Assessment Result

Below figure shows calculation result among two alternatives. Alternative 1 (SVC) provided negative PW value and alternative 2 (DC Link) provide positive (higher) PW value despite higher investment and yearly operating cost compare to the 1st alternative.

 

Table 13-2. Study result using PW method

Post Evaluation

Extended economical analysis using another method can be done in separate page to provide strong justification. More technical study and alternative provided to solve the problem might be done and obtained as part of the next study.

References:

  1. Sullivan, W.G. Wicks, E.M. Koelling, C.P (2012). Engineering Economy, Fifteenth Ed. (chapter 6, page 233-239).New Jersey: Prentice Hall.
  2. Deng, Yongan. Reactive Power Compensation of Transmission Lines. Concordia University: retrieved from: http://users.encs.concordia.ca/~lalopes/Courses/IGEE401-F07/TL_Compensation.pdf
  3. ABB. ABB Advance Power Electronic. ABB Switzerland Ltd. Retrieved from: http://www05.abb.com/global/scot/scot232.nsf/veritydisplay/d20bc6e606717f9bc12576c40043ea95/$file/PCS%206000%20STATCOM_INCO_EN.pdf
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W16.0_Ary_Risk and Contingency Estimating of Equipment Purchase from FOREX Fluctuation

Problem Recognition and Definition

Mining and metal industry requires several material and equipment purchase from overseas and the goods are likely to have a long time to produce / fabricated and delivered to project site.

Some sellers insist to use their currency with payment term using the delivery date currency rate. Although most of transaction of overseas purchase contracts are in US dollar base, some of products which only available inEuropemarket are offered in Euro currency. Risk of foreign exchange rate uncertainty is facing the company which use US dollar as a base of budget and financial transaction.

Possible Alternatives (Impact Level)

Uncertainty of FOREX could cause a negative impact (losses) or positive impact (opportunity / profit) to the company and the level of magnitude is measured in three categories, as follow:

  • Low impact
  • Moderate impact
  • High impact

Analysis and Criteria

The concept of parametric cost estimating will be used in this study. Cost estimation for equipment purchase which planned to be paid using EUR currency is developed, forecasting will be done using regression analysis and contingency is calculated using PERT analysis based on historical data of EUR/USD during the past 10 years.

Control limit is set to define the level of contingency and forecasting of EUR/USD rates for the next one year period (based on payment due date) is made to ensure that contingency levels (control limit) is valid and workable.

Criteria has been setup according to the risk level and based on the control limit level as follow:

  • Low impact, if price is within CL-1 and CL+1, this area will be considered as contingency.
  • Moderate impact, if price is within CL-2 and CL+1 and out of low impact zone, this area is out of contingency plan and risk mitigation plan shall be defined.
  • High impact, if price goes beyond moderate impact above and out of CL-2 and CL+2.

Figure 19-1. EUR/USD trend and control limit chart

  

Assessment Result

Calculation and forecasting of EUR/USD trend have been done with rates forecasting up to May 2013 (payment due date). Only polynomial order 2, 3 and 5 can be used to forecast the trend as they are within CL-1 and CL+1 (acceptable / low impact).

Figure 19-2. EUR/USD trend forecast with control limit

The forecasted payment or contingency allocation for the purchase of equipment is shown on below table.

Table 19-1. PERT analysis for contingency plan

  

Post Evaluation

A risk mitigation plan shall be registered after development of this contingency calculation in order to anticipate if the risk goes to moderate or high levels. Several alternatives are available, for instance, agreement in using fixed rate, the company to open bank account in Euro nominal to process the payment and some other alternative that can be discussed separately.

References:

  1. Hollmann, John, K. et.al (2008). Contingency Estimating – General Principles, AACE International RP 40R-08. AACE International. WV 26501.USA.
  2. Hollmann, John, K. et.al (2008). Risk Analysis and Contingency Determination using Parametric Estimating, AACE International RP 42R-08. AACE International. WV 26501.USA.
  3. Global View. (last accessed 24 May 212). Forex Database. Retrieved from: http://www.global-view.com/forex-trading-tools/forex-history/

 

W15.0_Ary_General Risk in Remote Area Mining Construction Projects

Problem Recognition and Definition

Remote construction sites are facing higher risks than average construction sites in well located area. Some risks have significant impacts to project execution schedule and therefore identifying major general risks are important before the project is executed. All identified risks shall be registered in risk register document and become a baseline to develop schedule and cost contingency plan.

Possible Alternatives (Risks Possibilities)

There are several major general risks that need to be considered into this study according to Ernst & Young latest study in 2011 for mining & metals industry risks. They are:

  • Skilled labor shortage
  • Infrastructure access
  • Social license
  • Capital project execution
  • Price and currency volatility
  • Interruption to supply
  • Fraud and corruption

All above risks will be registered and assessed include impact analysis if the risk occurs and ranked according to risk level.

Analysis and Criteria

The above seven risks shall be assessed and evaluate the impact to project schedule as well as develop risk mitigation plan. Risk register table used adopted from US Army corps of engineers is considered appropriate in this study. Variance of distribution is not shown at this time to simplify the table but it is considered important especially if the process is complex and organization supported with a specific risk assessment tools. In this blog, author put indicative data information based on self assessment in order to give illustration and to help in defining priority of risk mitigation.

Table 15-1. Generic risks register in remote construction site (click on the picture and save for the best visualization)

Assessment Result

Based on the above table, priority or attention must be focused on below risks:

  1. Skilled labor shortage
  2. Social licenses
  3. Infrastructure access
  4. Capital project process

Consequences if those risks above occur are significant to the project schedule and therefore risk mitigation plan shall be developed in more detailed.

Post Evaluation

A “what if” action plan need to be developed in more detail based on the above general risk register before execution of project construction as the above register is more generic and applied more appropriate application for pre-feasibility study purpose.

References:

  1. Hamilton, Allen, C, CCE (2007). Risk Management, Chapter 31 of Skill & Knowledge of Cost Engineering, 5th Edition. AACE International. WV 26501.USA.
  2. US Army Corps of Engineers. (May 2009). Cost and Schedule Risk Analysis Guidance.USA.
  3. Ernst & Young. (2011). Business Risk Facing Mining & Metals 2011-2012. EYGM Limited.

W17.0_Ary_Project Schedule Compliance Check to DCMA Criteria

Problem Recognition and Definition

Developing project schedule not only providing sufficient information related to start and finish time on all activities but it need to have certain criteria as recommended by several organization. One of best practices is provided by DCMA (Defense Contract Management Agency), an organization under the US Department of Defense.

Author has a project which just receive executive approval for expenditure and would like to assess if the schedule is meet some “health check” as recommended by DCMA.

Possible Alternatives

There are two possibilities that the schedule meets all criteria as recommended by DCMA or does not meet those criteria.

Analysis and Criteria

There are fourteen (14) criteria of assessment that are needed to pass out to confirm that the schedule is prepared correctly and efficiently. The criteria are shown on below table.

Table 17-1. DCMA 14 points assessment criteria

A schedule taken as a sample has 48 activities and project has been scheduled to complete in 263 work days. Project characteristic is a combination between equipment purchase and small construction activities involving small scale detailed engineering design.

The project is used as a sample considering that budget approval has just received and baseline has just been setup according to the date of budget approval.

Assessment Result

Assessment has been done and quality of the schedule is fairly good despite large number of lag is still exist concludes that the schedule still does not fit all criteria from DCMA. This activity lags shall be corrected and schedule will be adjusted following the process of lags reduction.

The result of assessment is shown on below table.

Table 17-2. DCMA 14 points assessment result

Post Evaluation

The schedule still has possibility for improvement to reduce the number of activities with lag. Calculation of CLPI and BEI will be done later when author has fully understanding on these concepts.

References:

  1. Humphreys, Gary.C (2011). Project Management Using Earned Value, Second Ed. (chapter 10, page 221-227). Humphreys & Associates. CA 92865.USA
  2. NDIA (May 2009), Program Management System Committee Scheduling Workgroup. Retrieved from: http://www.ndia.org/

 

W14.0_Ary_Blog Project Productivity and Quality

Problem Recognition and Definition

As per the last project weekly report on week 14, blog project S-curve has indicate a delay and negative float. At this time author would like to study and analyze blog project performance and provide some alternative solution to bring the project on track. Along with productivity performance analysis, quality performance will be compared also to evaluate how good the post from members time to time from star rating given from Dr. PDG as team mentor.

Possible Solution

Several alternatives to solve negative float as mentioned in Humphreys “Project management Using Earned Value” is mentioned below:

  1. Expedite critical activities
  2. Revise the schedule logic
  3. Redefine procurement package
  4. Reschedule or use the built in schedule margin
  5. Consider an Over Target Schedule
  6. No action

Analysis and Criteria

The project has been running for 15 weeks with completion target on week 22 which means 7 remaining weeks to meet budgeted target of blog posting.

Member blog posting statistic has been recorded as per week 14 reporting date as shown on below figure.

Figure-14.1 Casablanca team member blog posting statistic

Productivity of blog posting up to week 14 has been plotted into a chart as shown below.

Figure-14.2 Productivity of Casablanca team up to week 14

Although low productivity / blog posting quantity in the past weeks, quality of blog posted from majority of members is above the average of overall team. The same also measured from time to time blog quality measurement as shown on the following figures.

Figure-14.3 Casablanca team member blog posting quality chart

Figure-14.4 Quality of blog posted up to week 14

More than 60% of blogs are posted with excellent score given and accepted by client.

Figure-14.5 Chart of blog quality given by star rating from Dr.PDG

The following consideration will be included in alternative selection, where:

  • Other projects, problem solving and tools & technique are planned to finish in the mid of May 2012, refer to original schedule.
  • Another project, competitive bidding will start soon in mid of May and finish in the end of May 2012.
  • 3rd week’s of June is the last week of project period and all activities must finish at that time.

Considering the target finish date of the project and program, alternatives 2, 4, 5 and 6 are not feasible and not practical to be implemented and alternative 3 above has been opened / offered by client to produce blog (deliverables) with assistance from another member and also for whoever can get 95% score on mid term exam can get credit for complete blog posting for remaining weeks.

The first alternative could become the most possible solution if all members can identify the urgent and critical of their activities. Prioritizing of urgent and important tasks (project in negative float) include work time management is required to solve the problem

Result / Selected Alternative

As per the above analysis and considering urgent vs importance, we are now in situation of urgent and important zone and corrective action plan need to be developed by all team members in order to fast tracking and remove the negative float of this project.

Figure-14.6 Urgent versus important matrix

Post Evaluation

By preparing an action plan, each member can monitor each action taken, not limited to this project but other projects as well where the similar situation is occurring. Fast tracking until the problem is solved should be done and reported in individual weekly report.

References:

  1. Humphreys, Gary.C (2011). Project Management Using Earned Value, Second Ed. (chapter 15, page 300-303). Humphreys & Associates. CA 92865.USA
  2. Casablanca Team Blog project report. Accessed from: http://finance.groups.yahoo.com/group/casablanca_q1_2012_aace/
  3. AACE Casablanca Blog dashboard. Retrieved from: https://aacecasablanca.wordpress.com/wp-admin/
  4. JISC Info. Urgent and Important Matrix. Last accessed May 2012. retrieved from: http://www.jiscinfonet.ac.uk/infokits/time-management/urgent-important-matrix