Industry 4.0 in oil and gas - Constructing...
Transcript of Industry 4.0 in oil and gas - Constructing...
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Industry 4.0 in oil and gas
“OS 2.0”
Don Ward
Chief Executive
Constructing Excellence/ECI
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www.eci-online.org
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1. Introduction to ECI, Constructing Excellence’s sister organisation
2. The agenda for change in engineering construction (oil and gas)
a) Collaboration
b) Digitalisation
3. OS 2.0
Contents2
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Establish the Evidence• Industry-focussed research• Task forces
Share the Knowledge• Conferences• Workshops• Site Visits
Apply the Practice• Publications, reports• ACTIVE• In-house support
Core activities
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Failings on mega projects
Poor performance, productivity and HSE
Inadequate innovation
Insufficient integration, collaboration and early
supply chain involvement
The key issues affecting the use of capital
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Owners: 50% cost saving needed. Data and transparency across supply chain is key.
EPCs: Collaboration, standardisation and efficiency as well as focus on whole life value rather than just operating costs.
Manufacturers and vendors: Greater standardisation and innovation alongside a share in both risk & return. Also leasing proposals.
Demand-side consultants: Greater reward for industry based on long-term project success and rewards for innovation. Long-term relationships, continuity of work, portfolio so that lessons learned can be applied on future projects
Supply-side consultants: Reduced friction and lower costs of entry, transparency and fit and greater organisational memory.
Academics: Align industry to small number of key success factors and then work together on these. Create space for academic involvement. Robust baseline and measurement over time
Challenges and Opportunities
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Finance - create a demonstrable platform to show what people will get when they invest.
Behaviours – need to build trust across the supply chain from the top down, existing hierarchies often prohibits trust.
Trust – create an industry structure that supports move to more granularity and transparency e.g. the way Amazon has done in the grocery sector.
Shared Gains - common targets & incentivisation with a single integrated project team sharing risk and reward – the current contractual model does not support this.
Big Data – effective data management and sharing will create transparency and enable new entrants into the industry and create more investment. There is an opportunity to explore and de-mystify activities such as block-chain.
Mindset – more than a procurement framework, it needs to include a contractual, legislative and collaborative framework. This requires client leadership to deliver and drive.
Leadership – needs to be defined and often comes from crisis.
Collaboration – projects such as Heathrow T5 and the Olympic Park demonstrate the value of collaboration. Owners need to be educated to mandate change and not drive down costs and create an adversarial environment.
Receptiveness – collaborative leadership is the right leader at the right time, who is receptive to change. Have companies contracted out too much leadership?
Benchmarking – Look at the business context, careful not to misuse benchmarking data, especially on project costs.
What will it take to make a difference?
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“Has the oil & gas industry finally turned its
reputation for always delivering projects behind
schedule and over budget?”
There is a growing list of mid to large projects that
have delivered on target over the last 12 months…
Six reasons are cited:
1. Spare capacity through the supply chain
2. Service sector collaboration
3. Improved project management
4. Greater corporate discipline
5. More pre-FID planning
6. Reduced scope
Wood Mackenzie
14th August 2018
“Investors are about to find out whether
the world’s largest oil companies have
learned their lesson”
$80bn cost blowout in major projects during
era of $100 crude
The world’s biggest energy companies are
going to sanction the first slate of mega
projects since the oil price crash in 2014
Firms will approve about $300bn in spending
on such projects in 2019 and 2020
Dan Murtaugh, Bloomsburg
14th August 2018
Two views of the sector in August 2018…
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The crisis led to incremental improvement but not transformational change
• “we have seen bits of incremental change locally but no transformational change or innovation”
• “we focused on being more predictable, now need to be more competitive [on cost & value]”
• “no structural change, just individual firms on particular projects”
• “there is a disruption coming from someone who has figured out how to do it radically differently”
Competition for capital increases while project performance does not
• “we are not competing well with other destinations for capital”
• “oil and gas has competition from renewables purely on cost, this is a new dimension of the challenge”
Annual conference Oct 2019
“Did we waste a good crisis?”
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Industry-level standardisation could eliminate a lot of waste but remains elusive• “if we all let go of our individual company standards it would help the supply chain a
lot and it would help the operator to be dealing with the same kit”• “try to get away from bespoke mega projects to smaller scale repeatable projects”
Banks assert more control and drive risk further down the supply chain, increasing cost
• “how do you distribute and share risk”• “the scale of the up-side means it is worth taking some risk [through innovation]”• “we need a collaborative partnership with investors, owners, operators and supply
side - we have common cause”
Many companies still fail to capture lessons learned and transfer knowledge to new projects
• “we haven’t learned and we haven’t transferred learning”• “we need to convert lessons that were learned the hard way so we don’t repeat
mistakes”
The big themes of change in recent years (2)
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Articulate a clear road map to go from today to a different way of working• "I don't see a clear path yet"
More collaborative contracting/alliances• Align everyone's commercials with the success of the project
• Make it worthwhile for owners to invest in building capabilities in the supply chain
• Make it worthwhile for the supply chain to rethink the fundamental approach to project delivery
• Empower the people delivering the project across the supply chain
Harnessing the full power of innovation and digital technology to enable structural
transformation of how projects are delivered• Improve or transform processes first, then enable them with appropriate digital technology
• Transform in an agile way (develop and fail fast)
• Consider ring-fenced new business units to pilot new disruptive approaches
• Leverage the digital transformation to attract new talent
Sector-level standardisation of processes and requirements• Allow re-use of design elements and equipment versus bespoke solutions
• Better capture learning curve benefits
What can improve performance?
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Starting Point – Change in circumstances in the Oil & Gas sector (UKCS)
• Collaborate to remain competitive – Sir Ian Wood Report (Maximising Economic Recovery - MER) 2014
• Increased control and competition at a business and project level do not guarantee competitiveness.
• Positive examples of collaborative behaviour leading to project success.
• Report focus mainly on the need for more business / business and operator / operator collaboration.
• Dramatic oil price reduction in Q4 2014 (from circa $110 / BBL) drove urgent oil & gas sector action.
• New Industry Regulator formed in 2015 – Oil & Gas Authority (OGA)
• MER Report recommended.
• With powers to mandate industry collaboration.
• ECITB Project Management Conference – Nov 2015
• Collaboration for Efficiency and Cost Reduction
• Collaboration Workshop feedback
• How do we really improve collaboration at project level??
• Many of the PM conference delegates were looking for help with how to achieve project collaboration.
Collaborating at project level
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The 2015 ECITB PM Conference showed there was an
‘overwhelming endorsement for a
better approach to project collaboration’
In 2016 the ECITB launched the
Project Collaboration Toolkit
Designed as an easy-to-use ‘go to’ guide
to support project collaboration
from inception through to close-out
(framework of ISO 440001)
Project Collaboration Toolkit
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Major refinery complex: Asset reliability programme – a data management project
UKCS new field development: Subsea and tie-back project
Major offshore platform: Decommissioning and topsides removal project
Production: Concentric gas lift flowline project
UKCS major field: Second phase development project
Nuclear: ECITB Nuclear Sector collaborative practice comparison
Pilot Projects
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Brent Bravo Decommissioning
• Through the principles of collaboration, the project team size was reduced by 20%• Project was delivered within a very tight 11 month period• Base workscope delivered significantly under budget
• Additional workscopes to be included without any additional funds required.• Reduction in like for like removal preparation costs vs Delta of circa 70%.
Brent Bravo
Case Studies
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Callater – North Sea Subsea Tie-back
Through active collaboration the Apache Callater project team were able to achieve:• Fast ramp up, less than 6 weeks after award(s)• Critical items of scope ordered/completed early• A smaller team size, efficient communications, no man-marking or role duplication• 10% cost saving overall against original approved budget• A better, more effective way of working and:• Faster project delivery and start-up
Callater
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Total Alwyn Gas Flow Line• Small project to use existing
material and lines.• Toolkit used for engineering and
detailed design phases.• Closer communication and
common understanding of scope
Project Collaboration
Benchmarking and review• Toolkit compares well with
highly regulated sector.• Review supports revision 2 of
the Toolkit
Nexen Buzzard Phase 2“Nexen Buzzard Phase 2 – Field Extension - Live update from the 5th case study into the use of the Toolkit has shown that the Toolkit has helped support the business case for the setting up of a collaboration between the main drilling, well operations, subsea and topside facilities contractors with a single interface with the client. Nexen are benchmarking their collaborative behaviour against the metrics in the Toolkit and the early signs are really positive”.
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What we’ve learned…….
The opportunities for direct comparisons are rare but:
We now know it’s possible to achieve a
40% cost saving on a like for like project
We see no reason why substantial savings like this can’t be
achieved on other projects through collaborative working.
https://www.ecitb.org.uk/Project-Management/Collaboration/Project-Collaboration-Toolkit
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McKinsey: Productivity and digitization are correlated – and construction is at the low end
1 Based on a set of metrics to assess digitization of assets (8 metrics), usage (11 metrics), and labor (8 metrics) 2 Compound annual growth rate,
3 Based on data of top 20 E&C companies by market value globally
Digitization (2015 or latest) vs. Productivity of US industries, %
90
15
3.2
40
3.8
35
95
30
25
20
10
5
04.03.02.01.00-1.0 4.2 4.40.2 3.4 4.6-1.6 -0.2-0.4-1.2 -0.6 0.4-1.4 -0.8 0.6 0.8 1.2 1.4 1.6 1.8 2.2 2.4 2.6 2.8 3.6
Productivity growth 2005’-14, CAGR2, %
Digitization index1 ,%
ICT sector
Media
Finance and insurance
Construction
Utilities
Professional and business services
Chemicals and pharmaceuticals
Agriculture, forestry, fishing, and hunting
MiningOil and gas
SOURCE: BEA; BLS; US Census; IDC; Gartner; McKinsey social technology survey; McKinsey payments map; Livechat customer satisfaction report; Appbrian; US contact center decision –
makers guide; eMarketer; Bluew olf; Computer Economics; industry expert interviews; McKinsey global institute analysis, Capital IQ, Gartner
IT key metrics data 2012
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In 2017 McKinsey mapped the construction technology landscape
uncovering 3 clusters of innovation …
~1,000 firms in the construction phase
Construction
Back Office
Pre-
constructionScheduling
Document
Mgmt
Matl’s
Mgmt
Design
Mgmt.
Performance
Management
Contract
Management
Ops &
Mgmt.
Safety
Equip.
Mgmt
Field
Productivity
Back-office and
adjacencies cluster
Digital collaboration cluster
On-site execution cluster
Quality
Control
2017
1000
3
$10B
North America
Firms
Clusters
Investment
Geo center
of gravity 70%
CONFIDENTIAL – NOT FOR DISTRIBUTION
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~2,400 firms across the full project lifecycle
A year later, the ecosystem looked very different
with exciting movement Back-office Digital CollaborationOn-site Execution
Drone Enabled
Yard Inspection
Off-site Fabrication
Value Engineering
Productivity Management
Design Simulation
Virtual learning
3D Printing
Machine Learning
Deep Learning
Equipment Management
Portfolio Planning and Management
Risk Management
Design Management
Process Simulation
Testing and Training
Robotics/Automation
Predictive Assessment Performance Equipment Marketplace
Constructions Materials Marketplace
Labor and Professional Marketplace
Bidding Process
Contract Management
Manpower Optimization
Compliance
Materials Management
Real-time Monitoring
and control
Progress Tracking and
Performance DashboardsQuality
Control
Resource
PlanningEstimating
CRMCapital Financing
Project Scheduling
3D Modeling
Laser Scanning
Document
Management
BIM
2018
2400
Constellations
$18B
North America
Firms
Clusters
Investment
Geo center
of gravity 85%
CONFIDENTIAL – NOT FOR DISTRIBUTION
Operating System 2.0Creating a new business model for capital projects
Stephen P. Mulva, Ph.D.
Director, CII
London, England (UK)April 2019
Industry Platform
• Modern business is confronted with:
– Systems (legacy models and MIS)
– Enabling technologies (Blockchain)
– Point solutions (applications)
– Platforms (Android, AWS, etc.)
• No dominant single information platform for projects exists for the
capital projects industry
• OS2 is “creating a new platform for a healthy capital projects industry
that fosters organic growth”
Sv
S
S
v
v
v
v
v S
S
Fragmentation and complexity with larger projects
OWNER
Sv S Sv
v
1960s($10s M)
OWNER
S
v
S
S
v
v
1990s($100s M)
GCENG.
v
v
v S
S
OWNER
TODAY($1000s M)
GCENG.
S
S
S
S
OFF-
SITE
FAB.
S
S
ENG.
ENG.
GC
GC
BANK BANK
v
vv
OFF-
SITE
FAB.
SS
S
S
SS
BANK BANK
S
BANK BANK
S
S
S vSubcontractor Vendor / Supplier
Industry history of delivery systems (“platforms”)
1950 1960 1970 20202010200019901980 2030
D/B/B
D/B
IPD
I2PD
OS2
OS2 business model (vs. OS1)
vs.
Capital Markets
Owners
EPC / CM
Subcontractors
Labor
Distributors
Vendors / Suppliers
Manufacturers
Raw Materials Companies
Banks
(Owners, Private Equity, Bonds, MLP’s, Syndicates)
Commercial Finance Integrator (IT) Tax
(Open Source, Cloud-Enabled Thin Platform)
(40% Transactional Cost)
(4% Transactional Cost)
Main sources of transactional waste
Suppliers
Distributors
Vendors
Subcontractors
EPCs / GCs
End Users
Layer-upon-
Layer of
Additional
Cost
Raw Materials
Aerospace Platform case study
• B787 Development Cost: From $10B to $6B (-40%)
• B787 Development Time: From 6 Years to 4 Years (-33%)
supports
demands
Suppliers
50 Tier 1 Suppliers
Engineering Engineering
Progression
Ecosystem
Fabrication
Fabrication
Construction
AssemblyPO’sHIGH Transaction Costs LOW Transaction Costs
1998 20382018
$100
M
$200
M
$300
M
$400
M
Cost impact (OS2 will mitigate escalating costs)
$500
M
$600
M
Nominal $100M
Heavy Industrial
Project
Data Averaged Across
Multiple Capital Projects
(1998 Baseline,
adjusted for inflation)$222 M
$568 M
$100M
OS2
projected
35%
Analysis performed by CII Performance Improvement Group (March 2013)
* Each project was normalized to $250M
Schedule impact (EPC vs. PEpC vs. OS2)
100% FEP complete PRIOR to PROCUREMENT start (n = 97)
Weeks 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220 225
FEP 62 weeks
Design 91 weeks
Procurement 92 weeks
Construction 93 weeks
Start-up 25 weeks
LESS THAN 100% FEP complete PRIOR to PROCUREMENT start (n = 53)
Weeks 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220 225
FEP 76 weeks
Design 85 weeks
Procurement 102 weeks
Construction 78 weeks
Start-up 22 weeks
PrairieDog Platform via OS2 Delivery Model (projected)
Weeks 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220 225
Agile Planning 113 weeks
Concurrent Design* 70 weeks
Materials & Manuf. 82 weeks
Fabr. & Assembly 40 weeks
Start-up 92 weeks
* Concurrent, Supplier-Led Design (Reuse ~70%; Custom ~30%)
Overall 225 Weeks
EPC
PEpC
OS2
Overall 113 Weeks
Overall 190 Weeks
35 Weeks (16%)
112 Weeks (50%)
Research and Development (lead entities)
RESEARCH DEVELOPMENT
(OS2 Platform)
Getting involved in OS2
Raising $22 Million for R&D
Involvement directly or through industry groups
Research and DevelopmentResearch & Development Thrust Area PRIORITY
Finance Technology Process People
1 Leasing Model 1
2 Equity Participation in Asset Development 1
3 Depreciation / Tax Advantages 1
4 New Accounting Methods 1
5 Cloud-Enabled Thin Platform 2
6 Optimal / Real-time Partner Selection 2
7 Risk, Insurance, Surety, Bonding 3
8 Supply Chain Rationalization 3
9 Sourcing Globally / Buying / Transfer Pricing 3
10 Contract Simplification 3
11 Work Force of the Future, HR, Training, Safety, Skills,
Qualifications4
12 Flexible Approach Capital Markets / Investment 5
13 New Credit Facilities 5
14 Asset Crowdsourcing (Different Owner Models) 5
15 Agile Planning & Generative Design 6
16 Design Modularization & Re-Use / Process Simplification 6
17 Modular Production Methods / Miniaturization 6
UT Industry Affiliates Program
IAP Benefit
Platinum
USD $500k
Annually
Gold
USD $250k
Annually
Silver
USD $100k
Annually
Bronze
USD $35k
Annually
Lead a Research Team Yes No No No
Embed 1 Employee at IAP Yes Yes No No
IAP Advisory Board Yes Yes Yes No
Attend Annual IAP Meetings Yes Yes Yes Yes
Bronze Level Included for CII’s Global Affiliates
Industry groups and companies supporting OS2
“By the industry,
for the industry”
OS2 Consortiums OS2 Companies
1 AACE 1 Air Products & Chemicals 28 General Motors 56 Owens Corning
2 ABC 2 Alberici 29 Gray Construction 57 Petronas
3 AGC 3 Andeavor 30 Graycor Industrial 58 Pillsbury Law
4 AIA 4 Autodesk 31 Fluor 59 Procter & Gamble
5 BRE 5 Baker Concrete 32 Hargrove 60 Pioneer
6 CII 6 Barton Malow 33 Haskell 61 Praxair
7 COAA 7 BASF 34 Hatch 62 PTAG
8 CURT 8 Bechtel 35 Hexagon 63 Rockefeller Group
9 ECC 9 Bentley 36 Honeywell 64 Roeslein
10 ECI / CE (EU) 10 BHP 37 IBM 65 Rosendin Electric
11 ECRI 11 Black & Veatch 38 InEight 66 SABIC
12 ECITB (UK) 12 BMWC Constructors 39 Intelliwave 67 Saudi Aramco
13 EDRC (RSK) 13 BP 40 ISC 68 Saul Ewing Arnstein & Lehr
14 IMPACT 14 Brasfield & Gorrie 41 Jacobs 69 SBM Offshore
15 LCI 15 Brick & Mortar Ventures 42 Johns Manville 70 Shell
16 NAC 16 Brock 43 Kajima 71 Skanska
17 NCCER 17 Burns & McDonnell 44 KBR 72 Southern Company
18 Pankow Foundation 18 Cenovus 45 Kiewit 73 Suncor
19 PPI 19 Cianbro 46 LyondellBasell 74 Stevens Engineering
20 Project Norway 20 Concord Technologies 47 Mammoet Canada Western 75 Taft Stettinius & Hollister
21 RAPID (DoE/AIChE) 21 Day & Zimmerman 48 Matrix Service Co. 76 Tecnimont SpA
22 Dow 49 McKinsey 77 Tradesmen International
23 Duke Energy 50 Metrolinx 78 United Group Services
24 DuPont 51 MetroPower 79 United Rentals
25 Enbridge 52 Mitsubishi Heavy Industries 80 Victaulic
26 ExxonMobil 53 Odebrecht 81 Wood
27 General Electric 54 Oneok 82 WorleyParsons
55 Oracle 83 Zurich
Committed organizations (start April 2019)
• Committed and/or Paid:
– CII
– COAA
– CURT
– ExxonMobil
– NCCER
– Suncor
• Final stages of Commitment and
Payment:
– BHP Billiton
– Cenovus
– Petronas
– SABIC
– Shell
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John Fotherby, ECI Chairman
Don Ward, ECI Chief Executive
Stephen Mulva, CII Director
T: +44 (0)3330 430 643
W: www.eci-online.org
Contact us
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Not-for-profit best practice and
knowledge transfer organisation,
with secretariat provided by BRE group
A platform for industry improvement to
deliver better value for clients, industry and
users through collaborative working
A national, regional, local and
international movement
About us
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The movement
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Our chairs
Mark FarmerFounding Director, Cast
Consultancy
Author, Modernise or
Die, the independent
Review of the UK
Construction Labour
Model, CLC, 2016
David WhysallManaging Director, Infrastructure, Turner & Townsend
G4C Chair 2008-2010
Phil WilbrahamDirector of Expansion, Heathrow Airport Ltd
Infrastructure Clients Group, Chair ‘Project 13’ Capable Owner workstream
Don WardChief Executive, Constructing Excellence
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G4C national co-chairs
Caroline KeyCITB, shared
apprenticeship
scheme co-
ordinator
Robin LapishHS2, supply chain manager, rolling stock
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Positively disrupting the industry delivery
processes to transform performance
Our mission
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Superior outcomes from new delivery models featuring:
A client-led transformation by procuring for
outcomes and value
Increased standardisation and pre-
manufactured content
Digitally enabled integrated teams
working collaboratively with long-term relationships
and aligned commercial arrangements
Our vision
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Strategies
Performance measurement
Showcasing and demonstration
Connecting through networks
Leadership & Influence
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Recent Outputs
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Data at the heart of Constructing Excellence
Over 20 years of performance
measurement expertise
through construction KPIs
Benchmarking & KPI portal
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G4C Future Leader
Irina Korneychuk, FaulknerBrowns
Integration & Collaborative Working
Dudley College Advance 11 Alliance
People Development
The Griffiths Skills Academy
Preservation and Rejuvenation
Your New Town Hall, Lambeth
Value
Hartlepool Centre for
Independent Living
SME of the Year
Wynne Construction
Client of the Year
Yorkshire Water
Award winners 2018
Sustainability
Ysgol Rhyd y Llan
Innovation
Smart M&E Plug & Play for Offsite
Digital Construction
M-Sparc
Health, Safety and Wellbeing
Seymour Civil Engineering
(Contractors) Ltd
Offsite Project of the Year
A14 – Pre-Cast Solution for the River
Great Ouse Viaduct Skanska.
Civils Project of the Year
Pen y Cymoedd Wind Energy Project
Building Project of the Year
The Christie Proton Beam Centre
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Digital Performance
Measurement
Offsite,
Manufacturing &
Technology
Procurement- Social Value
- Funding, Finance &
Insurance
- Responsible Sourcing
National Theme Groups 2019
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Sector Groups 2019
Engineering Construction
Nuclear
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• Factory visits – Tata Steel, Stewart Milne, Vision Modular, Fusion Build in partnership with Cogent
• Centre visits – BRE, AMRC, MTC
• CE conference outputs – will traditional methods of construction become obsolete?
• Response to House of Lords Inquiry on Offsite Manufacture for Construction
• Offsite category added to CE Awards
• Response to IPA consultation on a new approach to building
Offsite Manufacturing &
Technology Group Activities
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Client-led – clients need to lead this change through the formation of
delivery models and subsequent procurement activities that enable the
transition. Government departments and major public sector
infrastructure programmes should take a leadership role.
Procurement – the approach and process of procuring assets needs to
fundamentally change to accommodate a platform-based approach.
Consistency – the industry needs a consistent approach from
government at all levels.
Pipeline – to unlock investment industry needs a robust and accurate
pipeline of projects.
Key recommendations from IPA
Consultation
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Collaboration – industry and government clients need to find
commercial mechanisms that enable long-term relationships and deep
collaboration based on trust.
Whole life value – government procurers must look beyond capital
expenditure to take a whole life view of the asset and work with the
industry to deliver and share value across the life of the asset.
Manufacturing – the platform approach should not be about moving
traditional construction processes from sites to factories, the platform
approach should learn from and fully embrace manufacturing
approaches and technologies.
Key points from IPA consultation
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CE Members Steering Group 2019: 11 June, 8 October
CE Member Forums 2019: 4 June, 11 September
ECI Members Forum 2019: October TBC
CE National Awards 2019: 8 November
CE Annual Conference 2019: TBC December
G4C Conference: 18 June, Leeds
Nuclear: 2 May
Procurement: June
Performance Measurement: 10 April
Digital: 22 May, 25 September, 4 December
Leaders Breakfasts: 9 May, 25 September, 7 November
Forthcoming meetings and events 2019
building a better world togethertogether