Project Management in the Oil and Gas Industry

4.4.4 Impact of Operation Efficiency
The operation efficiency is the responsibility of the owner because errors 
occur during operation either as a result of faulty design or they don’t meet 
the requirements of the owner and the required reliability. Errors usually 
lie between the owner and the engineering office.
The most common errors in industrial projects are due to the lack of 
choice of high quality equipment, which causes many problems and obsta-
cles that affect the operation performance and, thereby, affect the overall 
revenue of the project. This is evident in Figure (4.9).
There is a last reason and an important element, which is the fact that 
operations need to have experienced and well trained staff, especially on 
the same type of operation.
Figure 4.8 Effect of project delay on the whole project.
Time delay
Time
Engineering
phase
Construction
phase
Start up
Cost, $
+
–
Operation
Maintenance
& rehabilitation

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Project Cost Control 139
Any slack in the preparation of competent leaders or high professional 
operators will have a negative impact on production and, thereby, will 
reduce the overall revenue of the project.
The following is the cost control questioner that presents the actual 
cases we face in projects and the same questions you will answer in the 
PMP exam. Please try to solve for the best answer and contact me or pres-
ent them on my website.
Quiz
1. The client’s project manager asks you to provide a written cost estimate 
that is 30 percent higher than your estimate of the project’s cost. He 
explains that the budgeting process requires managers to estimate pes-
simistically to ensure enough money is allocated for projects.
What is the BEST way to handle this?
• Add the 30 percent as a lump sum contingency fund to han-
dle project risks.
• Add the 30 percent to your cost estimate by spreading it 
evenly across all project tasks.
• Create one cost baseline for budget allocation and a second 
one for the actual project plan.
• Ask for information on risks that would cause your estimate 
to be too small.