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Portfolio for ENERGYWAY Ltd an energy company with a proposed open wave energy generation pilot of the coast of Scotland. The Project should identify and justify the selection of a PROCUREMENT STRATEGY stating the role of the Project Manager in the selection. A contract scheme also is required with justifiable reasons and factors considering the nature of the project been a pilot and risks inherent.
Preferred Organizational structure in the different phases of the project that will promote project aims and objectives should be suggested with reasons and motives.
Possible people management issues that rise in the course of the project and how they are meant to be tacked also should be addressed.
Project Schedule also should be outline
Global Energy where we are
Energy security and sufficiency is among the great challenges facing the countries of the world after the turn of the century. Fossil fuel which over the years has been the major driver of economies over the world is constantly been pressured by increasing demand in energy that is driven by growing population. Statistics as published in the report by BP energy review report places Oil as the highest ranked source of global energy this accounts for approximately 33.1% of our global energy consumption despite the decline in the oil market. Natural gas consumption and production is also on the rise with recorded consumption growth of about 2.2 % and production of about 3.1%
This ever increasing need for energy is driving nations over the world to push further in the search of fossil fuel which directly further diminishes our global fossil fuel reserves and also the threatens the environment in the likes of the climate change challenge and CO2 impact on the environment.
The issue of the environment has come into the fore in recent times with governments looking at sustainable and renewable energy systems.
1.1 Population Growth and Energy Need
Population growth and the associated demographics is one that cannot be stopped in developed and especially in developing countries but can be controlled.
As population grows exponentially across the world the need for energy also increases. In the areas of transportation, industry and in the social sector which covers homes and local electrification, energy is the vortex to the proper functioning of these various areas. For both developing and developed countries any disruption in the supply of energy will be very disastrous to both economic and social spheres<Energy Security Markovis 2011>. As explained by <sacha Muller> one of the indicators of a well planned and functioning economy is a reliable energy supply line<ref>
This grave need for energy has brought into the global and economic sphere a new issue which is that of energy security. The European Union and International Energy Agency defines it as the provision of reasonably priced, reliable and environmentally friendly energy. The surrounding clauses around the definition raises a lot of questions about what context can a price be considered reasonable, what do we classify friendly practice in the acquisition of energy. Considering the instabilities in certain parts of Africa and the Middle East who are major suppliers of the world's crude oil, the issue about stability in terms of price and supply is constantly in doubt.
This lead to the consensus by the Brazilian government in the late 1970's to look into alternative sources of energy due to there over dependence on fossil fuel. Lots of other nations have taken a queue to looking and investing in smarter and sustainable ways of implementing energy systems.
1.2 Innovation in alternative energy source
Our planet is evolving fast with pressure on the land mass, water and the air. The effect of Climate change and global warming due to human activities with a direct link to energy consumption is evident in rising water levels that lead to floods in some parts of the world, excessive heat in other parts that lead to droughts, tectonic activities(earth quake) also in most cases induced by the perturbations caused by exploration activities. The growing awareness of the looming disaster that comes with our activities has prompted nations and companies around the world to look into smarter ways of generating and efficiently utilizing her energy. The role of technology in this shift is huge and cannot be over stated. Advances in solar, wind, hydro and biomass have been recorded over the years, although capital intensive and expensive, projections into the further tell that the costs will decline with time.
1.3 Why OPEN WAVE ENERGY
The need for smarter energy solutions to meet at list some of these very critical areas has promoted research in areas of energy which include open wave energy engineering an aspect of hydro-power generation.
Open wave energy engineering alongside other alternative energy solutions as are been developed are tackling the issue of over dependence on fossil fuel as has been the main fuel source for decades.
One of the most abundant natural resource to the disposal of man WATER has turned to an indispensible tool in our quest for cleaner and more reliable energy. The ocean is a reservoir of energy that is now been transformed into usable forms with novel projects in open wave energy generation. The waves generated by wind movement carry energy that is transformed to usable form using cutting edge technology.
The potentials of the open wave energy is huge due to the even distribution of wave energy across the globe. It presents a green and energy friendly way to generate energy also with the advances in meteorology and weather predictions the trends of wave patterns can be predicted and forecast to indicate possible generation capacity.
Challenges in this area of energy generation include technology and environment. Technology is in its infancy with lots of pilots and tests so expensive at the moment, the environmental challenges as well pose one of the greatest challenges to man and machine.
Procurement Strategy and Methodology for OSW
The process of assembling and analyzing bids from interested companies on a project before a legal contract is finally reached is referred to as tendering(Construction Contract Preparation and Management Geoff Powell pg 72,73 2012).
Design Project prepare tender documents
Assess returned Tender
Write tender report
Employer considers report
In the supply of services/goods to the state, need for effective and open tendering is necessary. This allows for transparency for project financiers and the public. Considering the need for improved energy supply and in working with the Renewable Energy Obligation in the United Kingdom that Dundee City council considers to look at an energy solution that looks in the direction of renewable.
The Dundee City Council after looking at environmental resources available considers expanding its wind energy development portfolio but this case its option is directed towards offshore wind. This decision is centered on the strategic location of Dundee in the map of Scotland as regarding exposure to wind. Scotland get over 25% of the total wind in Europe and statistics show that close to 50% of this travels through the coast lines of Dundee.
For energy projects in Scotland and Europe, tendering is a requirement by law also considering the magnitude in terms of cost and effect. Utilities Directive (2004/17) applies to projects and services in the energy sector.
Tendering provides a unique opportunity to the project sponsor to carefully make a decision from a range of options(bids) on the basis of his laid out objectives(Export-Import Theory&Pracitice Belay Seyoum pg 145). The success of the process is centered on the ability of the procurement team to build an elaborate procurement plan of which tendering is an element, the objectives of the project have to be clearly classified and characterized. This process allows for a tradeoff between efficiency, effectiveness, control and flexibility (Project Finance, Bot Project and Risk, pg 322). Failure to clearly capture elements from cost, social objectives into the tender will affect the total effectiveness and efficiency of the project.
The process primarily involves two parties, one party the project owners who ask for bids from the second party who could perform the project task in total or in part. For projects primarily if the process tendering and contracting are key to the overall success of the final stage which is execution. It allows for all the minute detail most importantly the legal to be fully represented.
Tendering for this energy project is set on the objectives of renewable energy need, cost not necessarily the lowest but the most feasible considering that it is a pilot, experience of the project operators in the area of developing, maintaining wind-based energy projects.
Available tendering options include single offer(bid) and framework agreement. Single offer option has restrictive tendering, open tendering, negotiated tendering. Restrictive tendering is on the basis of meeting certain project owner requirements, these requirements are passed on to interested parties through the pre-qualification questionnaire. Only parties that meet the pre-qualification requirements are invited to submit tenders. This process is considered to be more expensive because of the multiple steps involved but it also avoids pushing task forward.
Open tendering is made to work for all interested parties, here the pre-qualification is not served alone but built into the whole selection criteria after tenders have been submitted. This is normally applied where the two stage procedure is not required.
Negotiated tendering is similar to restrictive but with the project owner allowed to negotiate terms of the contract before the award, this is seen in selected category of projects (special projects).
For our project the tendering option adopted is the Pre-qualification option although it is time consuming, it is required because of the special nature of the project. Our judgment for the suitability of this option is drawn on the basis of the following
Experience on previous jobs
Resources, both plant and people
Health and Safety records
After successful submission of bid from interested companies and analysis in line with project objectives and timeline, the tender submitted by OSWP was considered and selected since it meets our objective and also allows participation of the research institutions in Dundee which include the universities of Dundee and Abertay.
2.0.1 Project Overview
Open sea wave technologies have transformed over the years through innovation in engineering and as a company we have been able to come up with a mini-turbine system. In executing this project we have the support of our design partners, sponsors and also our host community represented by the Dundee city council.
The project will span over a 24 month period commencing on the 1st January 2013 with both work and non-work related activities and sub-projects kick starting. These various activities include fabrication/shipping, construction and installation, testing and monitoring after all installation.
2.0.2 Project Objective
The OSWP is a pilot that is been implemented on the coast of the quay in Dundee, the project is meant to meet the following
To test and implement the OSWP while working with the environmental regulations of the Scottish government.
To expose local and foreign interns to working in a diverse and challenging multi-national work environment
To deliver the project within scope and budget
To work and partner with the research community on this project with hope of improvement and further development in areas of energy.
2.0.3 Procurement Strategy
A project is characterized by a set of people and resources having an objective or target to be met within a specified time line <Mike Field et all 1998>. Projects and project activities are the foundation of our daily lives; we set goals and make conscious effort to meeting them and not just meeting them but keeping up with the factor of time.
OSWE is one that is new and innovative these comes with their attendant risk factor but with the right attitude and engineering spirit, the target of delivering a clean and green energy line to the Dundee electricity grid is possible.
The success of the project to a great extent is hinged on the method of delivering the project and the technical competence of all parties involved in the different stages of the project. Essentially the key to a successful project of this magnitude is a sense of common identity and passion in delivering a novel piece. Considering how complex this project will be and the extent of knowledge gathering and sharing in a multi-national work environment, the need to keep all team members and players in tune with the primary goals is paramount.
In meeting with the set objectives of this project consideration will be made to select he most appropriate method to deliver this project on the basis of the following outlined criteria
These factors are among the standard factors for consideration in building construction <building procurement>
The project just goes beyond been a pilot project of OSWE but it is a policy driven project for the Scottish government that's why best value is priority. Best value promotes continuous performance assessment as the project progresses<david hodgkinson>
Scottish Government and the direct beneficiary Dundee City Council the operators of the managers of the city of Dundee after careful consideration of our offer with advise from their team of engineers and environmental experts consent to allow the pilot test of our Open Sea Wave technology using our mini-turbine that will generate 10MW of electricity daily. Currently in Dundee there is no wave technology or hydro energy project so this will be bringing into use the enormous wave energy available on the coast of Dundee. The Scottish government, Dundee city council and our other partners have offered to support in terms of funding as well.
Due to the ever increasing demand for energy and the continuous expansion as noticed in the city of Dundee in the past 3 years with a growing student population and springing small businesses. The Dundee city council after looking at offers from several energy companies with various preferred solutions ranging from wind, nuclear to renewable, decided to look at the hydro option which it considers is the most reliable considering her cities location and proximity to the coastline. The decision was guided by the team from OSW lead by the project manager alongside a team from CEPA and Scottish water. The Project Manager who is a mechanical engineer with masters degree in environmental management was instrumental in making a balance between project objective and sustainability in terms of environmental protection.
Extensive discussions and brain storming into the how, why and the attendant environmental risks and challenges the project could encounter were addressed. With the Project manager clarifying issues of technical and environmental nature such as test and verification of the technology which was confirmed by the engineering team from CEPA and also location for the turbines was agreed after consultation to be away from serious marine activities and not far from land as well.
It was finally resolved that Project Manager considering his balanced experience in the technical and environmental areas should be the Project consultant alongside three members one each from CEPA, Dundee city council and Scottish Water on the project Consulting and Monitoring team.
Drivers and Project Objectives
After consultation by the consulting and monitoring team, the project has been rated as one that has to meet the required quality standard in all respects from construction to testing and delivery. Time is also a very critical factor that marks its success, ability of all project teams to work with their time schedule but considering that it's a risk prone project an allowable window is will be factored while structuring the project schedule. Financial support is coming in from both local and foreign sponsors so best quality and value is paramount.
Procurement Assessment Criteria
Following experience from previous sessions of meetings of the Consulting and Monitoring team , the expertise of the Project Manager and the representative of Scottish water were taken on the possible markers to be considered for the procurement and delivery of the project. A model of the thinking about building PAC was adopted but refined
A programme for executing the project has been agreed on after due consultation with client and major contractor to be a 24month period. With agreements already reached on plant site location as given by the Dundee City Council.
Complexity on technical and construction terms is involved. Due to this construction of certain components is in earnest and some are nearing completion.
Management and Accountability in this project will be administered directly from various team or sub project leaders with time to time monitoring from the managing consultants. Competence of the project teams has been tested in several projects from the past
Risk avoidance/allocation is a sole responsibility of the consultant.
Variation is not expected in primary technology but is expected in the construction of base for installing the facility on the seabed. This is primary during the design.
Price certainty for this project is certain due to the fact that we will be having a local fabrication plant with locally sourced material and labour.
Procurement Arrangement Option (PAO)
After considering the procurement assessment review objectives the following procurement pathway are been considered
Management Contracting/ Construction Management
Lump sum Contracting
Design and build / Develop and Construct
Design and build (develop and construct)
This option of delivering this project was considered because it matched the work specific criteria which involve design and development of components. But due to the extent of technical competence required the client really doesn't have much of design suggestions to make. So client involvement is certainly negligible.
Secondly the design and build option allows for certainty when it comes to price and cost of delivering the project, the extent of risk involved in this methodology strikes this out.
Finally considering the complex nature of the project and the absence of a single point of responsibility, It totally defeats the ideals of this procurement pathway.
Lump sum Contracting
This procurement scheme has been considered it allows for conceptual design to be completed by the contractor in this case the different design teams and implements design on an agreed sum. This is has its down side in terms of flexibility in cost, cost is not fixed since market forces could drive prices to move either up or down. This scheme works only if the attendant risk caused due to changing prices is placed on a party during the project.
Management construction promotes precision in terms of program with clearly defined start and end date, with allowable variations expected although not significant to derail the project time frame. Allows a loose management style where management is monitored from top but authority for implementation is passed to sub-contractors, risk is shared among partners on the project.
Competition in terms of cost and pricing wasn't a consideration because the implemented technology is the most environmentally friendly option.
On the above assumptions and presumptions a box matrix of priorities is displayed below with weighting according to our priorities on the different selected procurement paths
Lump Sum D & C M&C
Not as Important 3
Multiple Sub 1 Contracting Firms
Single Firm 2
Not as Important 2
Bear risk 1
Share risk 2
Precise Cost 1
A plus or minus is allowed 2
OSWP is considered a major project as stated earlier, it's a pilot. It's a multi-stage project with the management consultant team building a project along with the design consultant agree on design specification and cost estimation and then proceed to stage 2 where agreed specifications are implemented under the supervision of the management consultant. This follows the management construction pathway.
From the analysis of the available options in line with our project objectives the management construction is selected as the procurement pathway for this project. It poses its challenges but also has enormous benefits which are crucial for the success of the project. This method allows for the following
overlap of design and construction stages
reduced confrontation between design and supervision teams
early involvement of experts on both client and service provider
In delivering on project objectives there must be a structure in our organization that is built around members of the organization and the activities they are meant to perform. A structure establishes a relationship pattern between members in the organization, also enforces an order of command by which activities are planned, coordinated and executed.
The success of any project irrespective of size is hinged on lots of elements of which the human capital is one. The people element in projects can be broken down into three main categories
People that handle the paper work (Office level)
People that execute field work (Field level)
People that monitor field work (Field level)
Projects move through lots of paper work stages from procurement to contracting. These stages require skilled personnel to capture the relevant objectives of the project and document, their skill level and commitment into fully representing project objectives is pivotal to the success of the execution of the project. These fall into the office level human resource
The Field level resource is split into two categories, those that execute the field work (metal men, builders etc) and the project managers and supervisors. These level of human resource are directly involved in project execution on site and can make or mare the success of the project in real time. A project can look executable on paper after due consultation and analysis but it takes dexterity commitment and efficiency to translate what is present on paper to real life.
Projects have the tendency to bring organizations together for a specific purpose. People make organizations and in bringing out the best in these people the organization must be structured and managed such that everyone knows his/her role in meeting the expected purpose. As has been stated there is always the likely hood that a synergy between different organizations is prompted during projects and for our project it is expected. The ability to merge these sub-groups of professionals into a single virtual organization with similar project objectives and value is vital.
Organizations are tiered and policy, decision making and job execution are performed by different groups on the across the tier. These tiers are broadly categorized into the technical, managerial, community levels. All these levels interrelate and communicate with each other at different points in the life of the project.
In achieving an organizational structure that takes into account the complexity of the project and diversity in terms of sub-group values and skill set, certain considerations are required.
Clarification of Objectives is defining project objectives at all level, this is the basis for which roles are assigned to the different participating sub-groups. With project objectives clearly captured and represented, the different sub-groups easily identify their job roles and specification.
Task and Element Function are the primary activities required in the delivery of the project. Tasks are the products to the delivered while elements are the supporting activities that lead to the delivery of the product. A clear delineation of these two early in the project allows for a clear definition and planning of our organizational structure and the relationship between members of the organization.
Division of work and grouping of people is done on the basis of location, specialization, kind of product produced. People are sorted by the kind of product they make or the kind of service they deliver (bringing together all members of a unit in the hospital), by the kinds of skills they possess.
Centralization and Decentralization
With the creation of groups comes the problem of centralization or decentralization. The major challenge here is that of decentralization where some level of autonomy is required in areas that are specifically technical and professional. For a project like ours where highly skilled personnel will be involved a level of autonomy will be allowed but communication and regular briefing with superiors on the nature of action and implication on the project will be advocated.
Principle of Organization
As suggested Lyndall Urwick the ten principles of an organization are as follows
Principle of objective: Organizations should express the purpose in relations to the work they do.
Principle of specialization: Activities that are classified as specializations should be confined.
Principle of co-ordination: There must be established a unity of effort.
Principle of authority: Advocated for the existence of a supreme authority and a clear channel of authority for every individual.
Principle of responsibility: Superiors are responsible for the actions of subordinates.
Principle of definition: Information about duties, roles, authority and responsibility of every position should be clearly outlined in writing or published to all concerned.
Principle of correspondence: Every position is required to report to a superior.
Principle of Span of Control: Maximum allowable number of subordinates under the control of a superior should be six.
Principle of balance: All units have to be in balance at all times.
Principle of continuity: Flexibility and adaptability to change(re-organization) is key in the survival of an organization.
Span of Control deals with the amount of control a single superior has over subordinates in an organization. The maximum allowable is between five and six and on the condition that their job roles interlock. At lower level where there is less interlocking the number could be larger.
Formal organizational relationships arise with responsibilities assigned to various positions. These relationships include line, functional, staff, and lateral.
Line relationship flows down through the organizational structure; it is more like a direct relationship between boss and subordinate. Functional relationships apply in areas where specialists offer a common service to all departments but have no direct authority over those who use the service. Staff relationship exists in the case of appointments of personal assistants, these staff have no formal relationship with any other member of staff except delegated. Lateral relationship is built between staff in different departments or sections on the same level, this comes primarily due to contact and consultation on specific tasks.
Line and Staff Organization is connected to maximizing the use of specialist. The tendency is that it creates a sort of matrix structure.
Project teams and Matrix Organizations are essential in the delivery of a project outcome. Project team is a temporary unit made up of members assigned to delivering on a task, this unit is more effective if clear objectives are outlined. Matrix is built around specialized activities and units that coordinate these various activities.
Projects before now were primarily centered around delivering on customer specification and need. This value system is gradually changing even with the customer at the center of the project; the staff is also made a value proposition that makes them deliver on the project.