Do you want results or a completed project?
The odds of success are not on your side!
In one ore processing operation, spending just a few thousand dollars could have avoided massive operational cost overruns that lasted over 2 years, and avoided capital spending of over $100 million on a project that didn’t need to be built. Hind-sight is 20:20, however, in that case (like many others), the situation could have been avoided.
Here’s what happened:
- $1 Billion invested in a new mine and nearby processing plant. Project work was late and over budget (not unusual) and got outside the tolerance limits of their finance folks. Cost cutting was imposed.
- Contractor work was stopped and legal battles about who owed what to who ensued.
- Construction was substantially complete. Commissioning began without planned help from suppliers.
- CAPEX spend stopped. OPEX spend climbed.
- Operators and Maintainers had to “wing it” to get things up and running. Start up was painful and slow. Trial and error: mistakes were made, lessons learned, and eventually production settled down at a level below desired output. Some equipment simply didn’t perform as it should.
- A separator machine just didn’t separate to the concentration required. It leaked excessive amounts of dust that caused problems in other machinery throughout the plant. Maintenance costs were outrageously high.
- Overtime and contracting costs were excessive and the overtime levels were bordering on unsafe.
- Plant output was down over 30% from design due to underperformance and excessive downtime from equipment failures.
- The dust drove the use respirators by anyone entering the plant while it was operating.
- Inadequate separation resulted in:
- Shipped quantities were 30% higher than expected – all the excess was waste.
- Each train traveled over 2700 km, and required 2 d, 12 hours to reach the destination plant.
- Separation was still needed at the end of the line – new separator built ($100 million in CAPEX).
- The added CAPEX, excessive shipping and maintenance costs made continued operation non-viable.
We were engaged to investigate and help solve the maintenance cost problem.
The separator was an obvious place to start. We used Reliability Centered Maintenance to determine what must be done to preserve asset functioning. The desired performance was design performance even though we knew it had not been achieved. We trained a team of operators and maintainers and facilitated analysis of the separation system. While defining functions (the first step in the process) we identified both the problem and its cause. It was being operated incorrectly! A simple change in operating practice solved both the separation quality and dust problems.
The fix was embarrassingly simple.
The cause was a lack of knowledge due to the cost cutting at commissioning.
Outcomes:
- Operators learned how to operate the system correctly. Guesses made at commissioning had been wrong.
- Separation efficiency improved and exceeded what the supplier had promised.
- Immediate savings in transportation costs, reducing train size by 30%.
- No further need for the new separation plant. Unfortunately $100 million was sunk into it, but it was moth-balled saving some operating expense.
- Dust emissions were almost zero. Respirator PPE no longer needed. Operator and maintainer attrition slowed.
- Dust induced breakdowns reduced. All the overtime and contractor costs associated with those breakdowns was eliminated as in-house staffing could handle the reduced workload.
- The maintenance program we defined using RCM resulted in far fewer breakdowns with more or less predictable frequencies. Maintenance program costs were reduced below initial estimates. That also enabled more accurate spare parts forecasting and lowering of both purchasing and logistics costs.
What can you get from this?
Project overruns are common-place and cost savings measures are often imposed. Operators and maintainers must pick up the slack and do it without the benefit of training and field service support (both are items where cost cutting applies).
Even “mature” operations often have O&M problems stemming from projects that were completed years ago. In another operation we identified significant safety risks that were not being treated and could have resulted in fatalities. They’d been lucky operating for nearly 20 years before that was discovered. In another operation we identified operating practices that were resulting in excessive emissions of radioactive waste in addition to solving problems with excessive equipment breakdowns. Hazards, operating and maintenance problems become normalized if they are not resolved early.
Some facts:
- 91.5% of big projects go over budget and the mean overrun is 62%! (Bent Flyvbjerg and Dan Gardner, Currency, 2023).
- 18% of IT projects have cost overruns greater than 50%, and for those the average is 447% (same source)
Note. Decimal point is NOT missing. - 66% of IT projects end in partial or total failure (Standish Group).
- 31% of IT projects in the USA get cancelled and 53% have performance so bad that they are challenged (Standish).
- 17% go so badly that they threaten the company’s existence! (McKinsey).
- 70% of digital transformations fall short of meeting targets (BCG).
- Unsuccessful development projects in the USA alone cost $260 billion (BCG).
- Total cost of operational failures due to software quality problems was $1.56 trillion (BCG).
At the root of most of these problems we find projects with overly inflated business cases. To get past CAPEX hurdles, project managers will overstate benefits and understate costs. They almost never include low cost methods like RCM to ensure success once the project goes into operation. They quickly cut training and field service support costs in efforts to keep their projects on time and within budget. IT projects are much the same with one additional twist – they almost always have 1 or 2 major software upgrades that impact implementation work BEFORE “go live”.
With software, we can help avoid a lot of trouble if engaged BEFORE systems are selected and implemented.
With hardware (plants, equipment, fleets), we can help avoid a lot of future trouble during design, and before commissioning.
If you are already up and running, we can and always do, find something that was missed.
Take the time to do it right, and you can avoid the cost and consequences of doing it over.
