Playing with Ratios

 

ADVISORY ARTICLE

By Anil Seth

Fluor India

Gurgaon, India

 


 

Ratios will tell the full measure of meaning, if you have enough of them.

~ Unknown

 

In any of your Project, have you ever experienced that applying right ratio at right time provides right understanding and this is always taken as a welcome step. However the ratios can also create misunderstandings,

How to handle ratios to estimate the Project?

Many of us live on thumb rules or create certain rules like what I found in one of the interesting student paper by Janette Chea 1.The ratios are there to make our self ,comfortable, these are always to be backed by findings or working logic. E.g. if we are working for EPC (Engineering, Procurement & Construction) lump sum estimate, the general goby is –

E: P: C ~10:60:30.

Some of you may react that this is not always true. Well, these are thumb rules getting converted in to real scenarios after execution and eventually coming as Work Break down Structure in Tenders to bid. This Engineering “10” can also be broken down into other goals like:

  1. Engineering: Project Support~70:30
  2. Project Engineering~10-12%

Process Engineering~5-7%

Mechanical Engineering ~8-13%

Electrical Engineering ~7-9%

Instrumentation Engineering ~7-10%

Piping Engineering ~20-28%

Civil /Structural/Arch Engineering ~20-26%

Is this right! …..Again it’s an oil & gas perception based on scope of work.

Another interesting way of utilizing the ratios is the engineering bottoms up approach. This follows a logical methodology wherein the primary discipline calculates the efforts and rest is bottoms roll up:

  1. Identify the primary discipline.
  2. Workout the estimate based on certain factors (like Plant capacity/Equipment Count/Area footprint etc.).
  3. Divide the estimate with universal ratio (derived and modified to use through historical database) to arrive at overall estimate required.
  4. Modify the overall as per RISK reviewed i.e. addition /deletion due to event/estimate contingency.

Those in engineering services are very much familiar with Front-End Loading [FEL2 or FEL3], in the majority of projects for FEL2 estimation needs many Project Managers factor their engineering from total installed cost (TIC). Incase somebody requires a mature understanding a 2paper by Melissa C. Matthews is a good read, the focus of this paper is to look at specific practices that are used to create FEL 2 estimates and determine the benefits and tradeoffs of using detailed information and techniques.

More…

To read entire article, click here

 

How to cite this article:  How to cite this article: Seth, A. (2019). Playing with Ratios. PM World Journal, Vol. VIII, Issue IV (May). Available online at https://pmworldlibrary.net/wp-content/uploads/2019/05/pmwj81-May2019-Seth-Playing-with-Ratios-advisory.pdf

 


 

About the Author

 

Anil Seth

Gurgaon, India

 

 

Mr. Anil Seth is working as Project Manager in Fluor’s Indian office at Gurgaon. Fluor Daniel India Private Limited (Fluor India) provides a full range of engineering, design, procurement, and construction management services to Indian and overseas clients. Fluor India is an established quality provider of engineering, procurement, construction management (EPC) and project management services for Fluor’s energy and chemicals, power, mining, and industrial projects, and is a key support office for Fluor facilities located in North America, Africa, the Middle East, Europe, and Asia Pacific

Earlier to Fluor, was in Larsen & Toubro Ltd. at Faridabad, India and managing the Project Engineering Manager Portfolio for hydrocarbon projects. Before joining Larsen & Toubro Engineering and construction division he has worked for Indian Petrochemicals Corporation Limited. He holds B.E. degree with Honors in CHEMICAL Engineering from Panjab University Chandigarh India and has also done Diploma in Environmental Management. He is certified for Harvard Manage Mentor and specializes in Building High Performance cross functional Task Force as well as Converting Breakeven Projects to Profitable scenario. He can be reached at anilshivani99@gmail.com or Anil.Seth@Fluor.com

To see other works by Anil Seth, visit his author showcase in the PM World Library at http://pmworldlibrary.net/authors/mr-anil-seth/

 

About the Company

Fluor Corporation (NYSE: FLR) is a global engineering and construction firm that designs and builds some of the world’s most complex projects. The company creates and delivers innovative solutions for its clients in engineering, procurement, fabrication, construction, maintenance and project management on a global basis. For more than a century, Fluor has served clients in the energy, chemicals, government, industrial, infrastructure, mining and power market sectors. Headquartered in Irving, Texas, Fluor ranks 110 on the FORTUNE 500 list. With more than 40,000 employees worldwide, the company’s revenue for 2013 was $27.4 billion. For more information, visit www.fluor.com