Major factors that affect these points include accuracy during the project development phase, the method selected to implement the project, chosen project partners, and how well the scope of supply and delivery limits are defined.
Typical solutions in Tissue project implementation
The trend continues wherein tissue manufacturers are buying with larger scope from machine suppliers. The tissue manufactures are chasing lower project investment cost and risk reduction (avoiding surprises during the implementation) whereas suppliers are trying to increase their margins with larger scope and at the same time trying to balance the risk exposure.
Usually the tissue project implementation method is EPC (Engineering, Procurement, and Construction). In using the EPC method, in most cases, the Tissue Machine supplier delivers the agreed scope with fixed price during a fixed time schedule. It also means that scope and delivery limits are agreed tightly before contract signing, making changes or modifications difficult or may be expensive to implement.
Sometimes this also means that what is being purchased is a ‘function’, rather than the specific technology or brand, since this gives the EPC supplier more flexibility in terms having a set of sub suppliers to choose from to secure lowest cost and reduce risks. Risk allowances are also scoped in the fixed contract price, as in all cases for EPC projects, to avoid any surprises during the project delivery. The client, on the other hand, will not have any visibility of the cost composition and thus any savings will be for the benefit of the EPC contractor.
The challenges of large scope EPC projects
Unfortunately, from an investor’s point of view, the EPC approach oftentimes leaves gaps in the scope of services and equipment. Here are some examples:
- Under the services scope, the overall project scheduling and follow-up is left out;
- The interaction between mill engineering and civil engineering, with its massive and vital information exchange during the project’s first phase, is not fully recognized;
- The civil consultant, mostly unexperienced from Tissue projects and lacking basic process know-how is left on their own by the “EPC supplier.” Note that the civil consultant might not even be on-board to give input to the schedule, information exchange, layouts etc. when the EPC contract is signed;
- The permitting procedure with need for vital technical data early in the project is omitted resulting in unnecessary project delays;
- Even though many suppliers are really good at performing training and education, the basic process training covering how the different processes within the entire mill interacts and how energy and raw material usage can be reduced is missing;
- Equipment, utilities and systems that are not directly interfering with the tissue making are many times excluded from the suppliers EPC approach.
These gaps cause delays, additional cost and surprises for the investor.
Benefitting from machine suppliers standardized solutions and still optimize the tissue project for your needs
The optimal end result will be received by doing things in the right order and by choosing the right implementation method for a specific project.
The project development phase needs to be as detailed possible, based on a proper business plan, feasibility study, technical conceptual study, and a pre-engineering where the entire project is considered from an overall view – not only based on machine supply. With proper support and know-how during the development phase, it is possible to reach detailed accuracy and achieve a realistic budget and schedule, if coupled with the right technology.
Whichever project implementation method was chosen, the important thing is that the project contracting shall be done with utmost care and support from experts in the industry. Even if EPC was the chosen approach, the investor will still end up with several contractual entities since machine suppliers very seldom accepts a “Turnkey” supply which includes all the utilities, infrastructure and civil work. In those cases it could be even more important that the total investment is divided into the right contractual packages.
The packages should be defined based on how:
- information exchange can be optimized between the entities;
- the schedule can benefit from work performed in parallel or in a strict sequence;
- delivery limits are interfering between the different entities;
- process guarantees are effected and expected to be fulfilled;
- the package contributes to reducing the total cost of ownership with highest sustainability.
It is mandatory that scope splits and delivery limits must be agreed clearly between the different suppliers and a clear and ‘full picture view’ must be presented to understand that everything is taken into account when project implementation phase starts, to avoid delays and increase in project cost.
For more than 50 years, Pöyry has been successfully executing projects or the pulp & paper industry all over the world
The Independent Consultant: finding optimal solutions on behalf of Investor
With the right Independent Consultant who has a deep knowledge of the business and technical items, investors have the possibility to have professional support throughout the entire project life cycle and beyond. Starting with market analysis, conceptual and feasibility studies continuing with permitting, balance of plant, mill engineering, civil engineering, site services and process optimization, when the mill is in operation. Getting an Independent Consultant is a good choice for investors who want to get an optimal result with minimum investment. An Individual Consultant will find the best possible solutions and support the investor with the project implementation and advise the right technology choices and scope split between different suppliers so it fits the actual projects specific needs. This project implementation model is called EPCM (Engineering, Procurement, and Construction Management) and it means that the investor is having contractual relationship with all parties but it is the EPCM consultant who has the responsibility on the side of engineering and project coordination, together with the investor. Principally, this means that the investor and the consultant are always on the same side of the table in all negotiations and together will ensure to find optimal solutions.
EPCM is a more flexible and ‘open’ implementation method as investor has full visibility of the costs and progress. An EPCM approach can still include large scope of supply from key suppliers making it possible for the investor to benefit from the suppliers’ standardization, same as suppliers can benefit from directing all their energy and power into their respective core business.
An individual consultant with in-house competence from other industries can even support investors seeking opportunities outside the box such as finding synergies with neighbouring industries or looking for alternative water, raw material and energy sources to become more sustainable and/or to increase competitiveness. For any investor, it is important that the process and the flow of information are transparent and the owner has the opportunity to keep track of the progress of the project throughout its life cycle. A smooth process and getting the best result benefit always both the investor and the supplier.
Take control of the gaps by teaming up with a professional project partner.
Pöyry is an international consulting and engineering company. We serve clients across power generation, transmission & distribution, forest industry, biorefining & chemicals, mining & metals, infrastructure and water & environment. Together, we deliver smart solutions and work with the latest digital innovations. Pöyry’s net sales in 2017 were EUR 522 million. The company’s shares are quoted on Nasdaq Helsinki. Approximately 5,500 experts. 40 countries. 115 offices.
Ulf Johnsson has 20 years’ experience from global Tissue projects in different phases and in different roles both as consultant and as a machine supplier. Experience covers Mill Technology, Mill Engineering, Project Execution, Concept development, Technical evaluation, Line management, Studies, Cost competitiveness, Sustainability, Training and Commissioning.
We are a world leader in forest industry consulting and engineering