The case presented here is a
representative example based on real project review experience. Specific
details have been generalized to preserve confidentiality while maintaining
technical and commercial relevance.
Project
Background
The project involved the development
of a mid-scale industrial energy facility intended to supply power and
utilities to an industrial estate. The project was promoted by a private
investor group and was approaching Final Investment Decision (FID). At this
stage, the project had:
- A completed Feasibility Study
- Preliminary Front-End Engineering Design (FEED)
- An indicative EPC cost proposal
Despite apparent readiness, the
investors requested an independent project review to validate assumptions,
assess risks, and confirm investment readiness.
Initial
Project Assumptions
The original project plan was based
on several key assumptions:
- EPC execution under a lump-sum turnkey contract
- An aggressive construction schedule aligned with early
revenue targets
- Capital cost estimates derived from limited FEED
documentation
- Technology selection based on vendor recommendations
While these assumptions appeared
reasonable on the surface, they had not been independently challenged.
Scope
of the Early Project Review
The independent project review
focused on four main areas:
- Technical maturity and FEED completeness
- Cost and schedule assumptions
- EPC contract structure and risk allocation
- Key execution and operational risks
The objective was not to redesign
the project, but to assess whether the project was truly ready to proceed to
EPC award and construction.
Key
Issues Identified During the Review
1.
Incomplete FEED Definition
The review revealed that several
critical FEED deliverables were either incomplete or missing, including:
- Preliminary P&IDs for auxiliary systems
- Utility balance calculations
- Plot plan optimization
These gaps increased the likelihood
of scope growth during detailed engineering and construction.
2.
Underestimated Capital Costs
The EPC cost estimate was found to
be optimistic. Key cost drivers that were underestimated included:
- Electrical and instrumentation scope
- Civil works related to site conditions
- Commissioning and start-up activities
Benchmarking against similar
projects indicated a potential cost overrun risk of 15–25%.
3.
Schedule Risks
The proposed schedule did not
adequately account for:
- Long-lead equipment procurement
- Permitting and regulatory approval timelines
- Interface coordination between contractors
The review concluded that the
schedule was aggressive and carried a high risk of delay.
4.
EPC Contract Risk Allocation
The draft EPC contract contained
several clauses that shifted excessive risk back to the project owner,
including:
- Broad exclusions hidden in appendices
- Limited remedies for underperformance
- Ambiguous change management provisions
These issues would likely have led
to disputes during execution.
Recommended
Corrective Actions
Based on the findings, the
independent reviewers recommended:
- Extending the FEED phase to close identified technical
gaps
- Revising capital cost estimates using a transparent,
bottom-up approach
- Adjusting the project schedule to reflect realistic
execution logic
- Rebalancing EPC contract risk allocation and clarifying
scope
Although these recommendations
required additional upfront effort, they significantly reduced downstream risk.
Impact
on Project Outcome
Following implementation of the
recommendations:
- The project budget was revised upward before FID,
avoiding surprise overruns later
- EPC tendering was based on a clearer and more complete
scope
- Contractor bids were more consistent and comparable
- The final EPC contract contained fewer exclusions and
clearer performance guarantees
As a result, the project proceeded
to construction with improved predictability and significantly reduced claim
exposure.
Lessons
Learned for Investors and Project Owners
This case highlights several
critical lessons:
- Early-stage optimism must be balanced with objective
review
- FEED completeness is directly linked to cost and
schedule certainty
- EPC contracts do not eliminate risk unless properly
structured
- Early independent reviews are far more cost-effective
than fixing problems during construction
The cost of the early project review
represented a fraction of the potential cost overruns it helped prevent.
Why
Early Project Reviews Add Value
Independent project reviews provide:
- Objective assessment of technical and commercial
assumptions
- Early identification of hidden risks
- Decision support before irreversible commitments are
made
For investors, this approach
protects capital and improves long-term project performance.
Conclusion
This case study demonstrates that
cost overruns are not inevitable. Many can be prevented by identifying and
addressing risks early in the project lifecycle. Early independent project
reviews enable informed decision-making, reduce uncertainty, and significantly
improve the likelihood of project success.
For capital-intensive projects, the
question is not whether a project review is affordable—but whether proceeding
without one is acceptable.
How
Our Consulting Services Support Early Project Reviews
At Engineering Projects &
Industry Review Hub, we support investors and project owners through:
- Independent project and investment readiness reviews
- FEED and EPC validation
- Cost, schedule, and risk assessment
- Technical and commercial due diligence
Our role is to help clients make
confident, well-informed decisions before capital is committed.
How
We Support Investors and Project Owners
We
provide independent feasibility preparation & reviews, FEED advisory, and
EPC risk assessments to support informed investment decisions.
📩 Contact us: afakar@gmail.com
WhatsApp: +62
813-6864-3249
