Small Scale Facility Project Risk Management

Small Scale Facility Project Risk Management

The Small scale facility project requires a serious risk management to success. In first place, the financial department will classify the project as non priority project for Petco due the low rate of return expected. Secondly, the top management is not very convinced of the success of the project. They argue that the cost of adding the four reactors is as expensive as installing the two production reactors. And finally, the priorities in the company change every day to cope with activities of many other projects that are executed simultaneously at Petco. These disadvantages lead to consider a series of event that can jeopardize the successful completion of the project. In this paper, a risk assessment will be developed for the small scale facility project to be implemented in Petco.

Project execution plan

Petco's project department has completed more than three hundred important process projects during the last twenty years. According to Petco's chief project manager, Alvaro Bermudez, the company has established standards for project development using outsourced resources. He states that more than one hundred people work every year on the different projects. Process, operation, mechanical, electrical, Instrumentation, and automation discipline constitute the work breakdown structure (WBS) of any project in Petco. Every one of those disciplines exist a designated leader who report to the overall chief project manager.

The small scale facility project would be scheduled and planned under Petco's project development standards to take advantage of the huge experience of the personnel involved their projects. The main stages of Petco's standard procedures for project developing are (1) definitions, (2) detailed design, (3) bidding and purchase, (4) execution, (5) testing, (6) start up, (7) training. The first six stages run in sequence. Overlapping is common between some of the stages, i.e. one stage can commence before full completion of its preceding stage. The training activity runs in parallel with the execution stage.

Satisfactory completion of each of the above stages is marked as a milestone. Normally a milestone is the approval of a document. Thus, for the definition stage, the general specification document must be approved by the process chief manager and the maintenance manager; the milestone for the design stage is the approval of the process and instrument diagrams (P&IDs), specification for equipment, accessories, and devices purchase, i.e. motors, wiring, instruments, and automation software; bidding and purchase is deemed complete when there is not outstanding purchase order or contract to assign; the execution completes when the process engineer is satisfied with the state of equipment installations and software development.

It is important to note that the different disciplines may not have incidence or participation in some of the stages. For example, all the disciplines have to participate in the first, fifth, sixth and seventh stages, while in the other stages the process and operational people do not participate in full time basis.

Project specific risks

The small scale facility project specific main risk is the change of priorities. The cause of this risk is the company's culture of make production commitment without first check with production capacity. Petco's CEO believes that to remain in the PVC market the company has to adapt to any condition in the least possible time. They have had to implement many projects time record to follow the CEO's philosophy. Unfortunately, this small scale facility project is a long term investment, which means that the project is a third level priority as its benefits can not be seen upon completion.

The second risk for the project is the resources assigned to the project. The project requires the best people of the company. However, as the project will not increase production, those resources will be on another project. The third specific risk is the dimension selected for the reactors. The project requires devices (tanks, agitators, motors, and valves) of a reduced size. There is a risk that the engineering calculation cannot match the size of the devices available in the market. The fourth specific risk for this project will be the accuracy of the specification: mechanical, electrical, instrumentation devices. The project is based on the premise that everything will be similar to the normal sized facilities. This premise will encourage the reuse of the standard information without further research; as a result, the specification may lack accuracy. Finally, there is the risk of the project team to overlook how the small scale facility integration to the services can affect the production plant during the project execution and once the project is in operation.

Risk assessment

In this section every specific risk is assessed to determine its impact in the case of occurring. Before proceeding with each risk, the terminology to measure the probability of occurrence is explained. As stated by Carbone & Tippett (2004), there is some confusion about the many variables employed to assess risk. In this paper the terms "likelihood", "impact", and "risk score" as suggested by Carbone & Tippett (2004, p 29) will be used to assess the risk of the small scale facility project. Risk score is equal to the likelihood multiplied by the impact; the likelihood and the impact variable scales will be both from 1 to 10, being one the lowest likelihood and impact possible.

With the above definition in mind, the risk assessment for the five specific risks is as follow: (1) the change of priority in the organization is very high to occur. The impact of that event on the project is high on the schedule and cost; (2) assignation of the right resources to the project will probably not occur because Petco's policies on projects demands that more than70% of the resources involved have to have experience with previous projects. However, if it happens the impact will be very high on schedule and quality; (3) the problem with the small devices required as a result of the size of the tanks suggested (100 litres) have an equal likelihood of happening or not. If it happens some of the justification of the project can be diminished, and the cost and the schedule highly affected; (4) under the pressure condition always existing at Petco, the lack of accuracy on the specification, this risk could occur. The impact will be high on schedule and cost; (5) finally, the likelihood that team project do not consider the impact of exiting devices is low because of the hazardous analysis complete in every project in Petco.