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Topics: Construction, Risk Management, Teams
How can we optimize the cost of the challenging projects?
Now a days, the most asked questions from the investor/ developer is how can we optimize the cost of the challenging projects especially Hydropower?
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1. Reduce scope to the bare minimum "must have"
2. Challenge the team to come up with a cost effective delivery approach which remains within other constraints (e.g. deadline, quality measures)
3. Pick the right partners and pick contract types which will ensure that costs can be contained

Kiron
is not about today, it is about always. First thing to ask to the stakeholder is: what it does mean "optimize" for you? If optimize meant for them "cost reduction" then they are in a big problem what no matter that you have the possibility to work with it for example refining the scope in the way @Kiron stated above working on "must have".
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1 reply by KWIYUH MICHAEL WEPNGONG
Sep 13, 2020 1:13 PM
KWIYUH MICHAEL WEPNGONG
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Thanks Sergio for this angle of reasoning
I agree with Sergio. What does "optimize" even mean? Is that minimizing your non-recurring costs, operational costs, total life-cycle product costs, money flow, IRR, etc. Each of those can have a different "optimal" solution.
Sep 12, 2020 12:00 PM
Replying to Sergio Luis Conte
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is not about today, it is about always. First thing to ask to the stakeholder is: what it does mean "optimize" for you? If optimize meant for them "cost reduction" then they are in a big problem what no matter that you have the possibility to work with it for example refining the scope in the way @Kiron stated above working on "must have".
Thanks Sergio for this angle of reasoning
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1 reply by Sergio Luis Conte
Sep 15, 2020 6:39 AM
Sergio Luis Conte
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You are welcome. Is the reason of my headache in my daily work from long time ago mainly today where things like agile becomes buzz words and are taking as silver bullets. I was part of the group that created the PMI´s benefit realization practice guide and the intention of creating it was trying to push people to put focus in benefits instead of costs and to understand that costs are not money only (just in the way of Lean thinking). Modern organizations must understand that if they want to survive. But still people are talking about things like ROI and etc.
Don't you think cost optimization or value engineering is same?
Companies that focus on cost optimization often mean cost reduction and assume they can get the same scope and quality.

While this is true to a certain extend, the cost reduction targets are higher drive cost down beyond that optimal point and result in skipping scope and less quality (skipping scope might be a good strategy to reduce features to the necessary few though).

So far, it has less to do with value engineering though.
Sep 13, 2020 1:13 PM
Replying to KWIYUH MICHAEL WEPNGONG
...
Thanks Sergio for this angle of reasoning
You are welcome. Is the reason of my headache in my daily work from long time ago mainly today where things like agile becomes buzz words and are taking as silver bullets. I was part of the group that created the PMI´s benefit realization practice guide and the intention of creating it was trying to push people to put focus in benefits instead of costs and to understand that costs are not money only (just in the way of Lean thinking). Modern organizations must understand that if they want to survive. But still people are talking about things like ROI and etc.
I agree with Thomas.

As a jack of all trades, I would put my Business Analyst (BA) hat on and:
1. modularize your project
2. gather requirements about each module
3. estimate each module
4. prioritize each module

Fortunately, building hydropower is a waterfall, phase-based project, so you should be able to plan first, then execute.

I believe that in your prioritization, you will have several stakeholders fighting for importance, i.e., safety, legal, compliance, engineering, QA, finance, etc Building. hydropower is a huge, multi-stakeholder project. I would put safety and compliance on top - these two areas would also have the most significant risks.
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1 reply by Marcus Udokang
Sep 16, 2020 12:13 AM
Marcus Udokang
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Well said, Andrew. Great points, from a BA perspective.
Sep 15, 2020 11:31 AM
Replying to Andrew Soswa
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I agree with Thomas.

As a jack of all trades, I would put my Business Analyst (BA) hat on and:
1. modularize your project
2. gather requirements about each module
3. estimate each module
4. prioritize each module

Fortunately, building hydropower is a waterfall, phase-based project, so you should be able to plan first, then execute.

I believe that in your prioritization, you will have several stakeholders fighting for importance, i.e., safety, legal, compliance, engineering, QA, finance, etc Building. hydropower is a huge, multi-stakeholder project. I would put safety and compliance on top - these two areas would also have the most significant risks.
Well said, Andrew. Great points, from a BA perspective.
I believe the best way ( if it would be possible for the respective project ) is to find the best cost-minimizing technical solution. The design solution especially innovative gives you the best option to keep the quality according to requirements as well as the overall performance of the project.
Surely type of contract as mentioned by Kiron has an important role.
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