Change management is the process of integrating a balanced change culture for recognizing, planning, evaluating, and implementing project changes effectively and efficiently. The introduction of changes into any capital project can interrupt the flow of work, change labor and material needs, create schedule delays, and increase overall project costs, potentially hindering project success. According to the Construction Industry Institute, projects cannot undergo numerous changes that amount to a significant portion of the original scope without facing a decline in overall cost performance.
Project changes arise from a wide range of factors, such as omissions from or changes in the project scope and omissions in the gaps between the detail engineering and design, procurement, and construction project phases.
The project delivery system (PDS), work processes, and level of communication and alignment all play a role in the number of project changes that occur as well as their impact on a project’s success. EPC, or design-build, project delivery systems are often less susceptible to excessive project changes due to the cohesive nature between the detail engineering and design team and construction team. However, proper change management procedures are critical to the success of any capital project, regardless of the delivery system.
Below, we detail how an EPC project delivery system reduces change management challenges and the change management approach it utilizes as well as best practices to follow to mitigate risks.
Reducing Change Management Challenges Through EPC Project Delivery
With design-bid-build project delivery systems, there can sometimes be a lack of cohesion and integration between the design and engineering contractor and construction contractor. This can result in inconsistencies between the engineering deliverables and what is really needed, causing numerous change orders. Furthermore, engineering contractors without sufficient construction knowledge can produce layouts and designs that do not promote feasible or efficient construction, potentially leading to future project changes.
EPC project delivery systems integrate work processes and collaboration across all teams as well as disciplines by utilizing a single cohesive team from front-end planning through construction. The risk of change due to the division of execution across several contractors is significantly mitigated through the partnership with a single contractor. Any project changes that do not involve changes to the agreed-upon project scope, site, schedule, quantities, sequencing, and layout are the responsibility of the EPC contractor, meaning fewer change orders are necessary.
The Systematic Approach to Change Management in EPC Projects
Effective change management in EPC projects begins with a proper scope definition, a strong Project Execution Plan (PEP), and a detailed project schedule to provide a baseline for change. Before the start of the project, the entire EPC contractor team, including all relevant disciplines, should discuss and align on the change management work process to be followed throughout the project during the kickoff meeting and communicate it with the project owner.
Steps should be taken to ensure alignment with stakeholders regarding the scope, PEP, schedule, and cost as early as possible to reduce the likelihood of future changes that could otherwise be avoided through proper communication. This can allow for change criteria to be established early on.
When implementing changes, it is critical to quantify everything. Contractors should quantify the cost and schedule impact of each change while referencing the initial proposal that includes the project scope, definitions and quantities, and qualifications, establishing a basis for change.
The ability to influence projects with minimal cost implications is significantly higher in early project phases.
Best Practices for Change Management
Change management is an important process for any capital project, regardless of the PDS. As changes to capital projects can introduce risk, cause delays, and increase costs, strong change management work processes and procedures should be implemented in addition to best practices, such as the following:
- Agreements should be established clearly defining the project scope, cost, schedule, PEP, and scope of services.
- Develop and agree upon a tolerance for changes as well as change criteria and approval requirements.
- As the project scope becomes more detailed, ensure planning objectives continue to align with the scope.
- Gain alignment on options that are considered “either/or” in the scope to avoid lingering decisions that carry over into later project phases.
- Trend the Total Installed Cost (TIC) around what changes are being made to ensure no major financial hurdles arise during later project phases.
Detail Engineering and Design
- Implement a well-established change management work process as part of the PEP.
- Establish and freeze a baseline project scope, including Piping and Instrumentation. Diagrams (P&IDs), equipment selection and quantity, and equipment layout.
- Identify potential change as early as possible.
- Utilize a robust identification and capture culture to ensure proper communication and alignment surrounding the change credibility and project impact.
- Ensure alignment between the contractor and project owner.
- Notify the project owner as soon as changes are identified.
- Communicate consistently and regularly.
- Maintain detailed documentation of the change.
- Incorporate appropriate change criteria while assessing both cost and schedule impacts.
The H+M Approach
At H+M Industrial EPC, we utilize our highly established, robust change management work processes that align with industry standards and best practices. We work to ensure clear alignment and transparency from the beginning, allowing us to identify changes at the beginning of the project and provide a higher level of cost and schedule certainty.