GLOSSARY

Authorization Point in time that project scope and estimated cost, schedule, and
operational performance are “officially” established (i.e., the point in time at
which a project team makes a “contract” with a company’s senior
management with respect to what will be delivered).
Benchmarking A number of activities fall into the general category of benchmarking. There
is benchmarking of activities internally and externally; with competitors or
non-competitors; using consortia, one-on-one, or data-based; domestic and
global; qualitative and quantitative. IPA uses what is termed Quantitative
Competitive Benchmarking (QCB). QCB is the benchmarking of one’s
performance against competitors using quantitatively developed and derived
measures of project outcomes and causal factors. QCB uses quantitative
databases drawn from a large number of firms in the same or allied
industries. The goal is to obtain a rigorous numerical comparison of
business results on an “apples-to-apples” basis. QCB answers the most
basic of questions: “On the measures that count to our business, how good
are we?”
Capital Cost Total installed capital cost: includes all owner and contractor costs for
engineering (process design, production engineering, and project
management services), major equipment, bulk materials, construction labor,
subcontracts, construction management, as well as any other project-related
costs normally capitalized, such as licensing fees and initial catalyst
charges. It also includes any expenditure for post-mechanical completion
modifications required to meet original project objectives. It does not include
expenditures for basic R&D or test facilities.
Complexity The number of continuously linked block steps in a process required to
perform all chemical and physical operations for the manufacture of
product.
Construction Duration Time, in months, from first foundation work through mechanical completion.
Site preparation activities are normally excluded from the determination of
construction duration.
Contingency By IPA definition, contingency is the amount of money that experience has
demonstrated must be added to an estimate to provide for uncertainties in:
(a) project definition and (b) technological uncertainty. It is normally selected
such that the estimate, including contingency, is the most likely cost.
Contingency is not intended to provide for changes in the defined scope of a
project (e.g., change in capacity or product slate) or for unforeseeable
circumstances beyond management’s control (e.g., 100-year storms, strikes
against equipment vendors). Contingency is normally expressed as a
percentage of the base capital cost (i.e., the capital cost estimate excluding
contingency) for the entire project.
Cost Deviation Difference, in percent, between a project’s final constant dollar capital cost
(adjusted for any post-authorization scope changes and external events)
and the constant dollar capital cost estimated at the time of authorization.
Cycle Time Project cycle time is the total time required to conduct a project, starting with
the beginning of project definition (FEL) and ending with the completion of
startup (the steady state operation of the facility). Execution only covers
detailed design and construction. Therefore, cycle time is often more
important than execution because it measures the overall time a company
takes to bring an idea “to market.”
DART Cases Generally the most serious, nonfatal injuries and illnesses. Includes cases
involving days away from work and/or days of restricted work activity or job
transfer. Cases involving days away from work are cases resulting in days
the employee would have worked but could not because of the job-related
injury or illness. Cases involving days of restricted work activity or job
 transfer are cases in which, because of injury or illness, the employee was
assigned to another job on a temporary basis, worked at a permanent job
less than full time, and/or worked at a permanent job but could not perform
all normal duties.

Engineering Duration Time, in months, from start of preparation of first “issue-for-construction”

drawings through point at which engineering is basically 95+ percent
complete.
Engineering Status A component of the IPA Front-End Loading (FEL) Index. It measures, at the
time of authorization: (a) the degree to which a set of key engineering tasks
(e.g., PFDs, P&IDs, heat and material balances, etc.) has been completed;
and (b) the participation/buy-in of the business group, as well as plant
operations and maintenance.
Execution Schedule Time, in months, from the start of production engineering through
Duration mechanical completion.
Execution Schedule Ratio (times 100) of the actual time required for execution to the time
Performance estimated by the IPA Engineering and Construction Schedule Model (the
industry norm).
Execution Schedule Difference, in percentages, between the actual time required for execution
Predictability and the time estimated at authorization.
Feedstock Principal material being acted on in a chemical process.
Front-End Loading Front-End Loading (FEL) is the process that considers a company’s financial
resources, facilities, people, and organizations in order to translate a
company’s marketing and technological opportunities into capital projects.
The primary objective of FEL is to achieve an understanding of the proposed
project that is sufficiently detailed such that changes in the production
engineering, construction, and startup phases will be minimized. Key
products of the front-end loading phase include: (1) engineering documents
such as PFDs, P&IDs, plot plans, heat and material balances, single line
electrical diagrams, and major equipment specifications; (2) a strategy for
executing the project; (3) a cost estimate accurate to within perhaps plus or
minus 10 percent; and (4) agreement by all corporate functions regarding
the project’s objectives and scope.
FEL Duration Time, in months, from formation of core project team through submittal of
authorization request.
Internal Rate of Return Discount rate that equates the present value of all expected cash outlays
with the present value of all expected cash revenues.
Late Design Change In general, a “late design change” is a modification to a project (either in or
out of scope) that changes project cost by more than one-half of one percent
(rule-of-thumb) or alters the schedule in any way.

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Level of Technological Off-the-Shelf: Project nearly duplicates existing proven process with
Innovation modifications limited to minor tailoring for the site; the process may employ
new integrations of known technology.
Evolutionary: Minor process modification (one or more steps in the process
are new, but the order and function of steps remain unchanged from current
practice).
Revolutionary: (a) All new process (no process like this one anywhere); or,
(b) substantially new process (analogous process may be in use, but this is
a new route or approach -- core technology is new and effects of core
technology cannot be isolated); or, (c) major process modification (even
though core technology is unchanged or can be isolated from upstream and
downstream effects).
Nameplate Capacity Instantaneous capacity (in millions lbs/year).
New Integrations A “first-time” in the industry integration of process steps that are otherwise
proven commercially.
New Steps Major functional blocks in a process that incorporates technology that is new
to the industry (see “unproven in commercial use”).
Operational The average monthly plant production in the second six months operation
Performance expressed as a percentage of the monthly nameplate capacity, excluding
the effects of market restrictions and feedstock limitations.
Operational Index Difference, in percentage points, between the actual plant operational
performance and the operational performance estimated by the IPA
Operational Performance Model (i.e., industry norm).
Percent Engineering Percent of the total project engineering effort to complete at the time of
Complete authorization.
Percent New The percentage of the total capital cost of a project associated with the new
technology portions of the facility.
Project Evaluation ®
The IPA Project Evaluation System (PES) is a reliable method for: (a)
System evaluating individual projects; (b) comparing project management systems
among companies; and (c) assessing project management systems over
time. The PES has two principal components: (a) a database that contains
data for over 1500 individual data elements for over 2500 projects; and (b) a
set of calibrated statistical models that can predict, with known accuracy,
major project outcomes. Since cost, schedule, and operational performance
are often traded against each other to optimize projects in the current
business climate, the PES offers multiple indicators rather than a single
figure of merit.
Project Execution A component of the IPA FEL Index. It measures, at the time of authorization,
Planning the extent to which the following project execution plan items have been
established: project objectives and priorities; contracting strategy and plans;
team participants and roles; a detailed network schedule; and cost and
schedule controls.
Project System A capital project system is the process (policies, procedures, methods, and
day-to-day practices) by which a company creates its capital assets. From
an organizational viewpoint, it encompasses a diversity of corporate
functions including R&D, marketing, planning, engineering, operations, and
maintenance. The goals of an excellent project system are: (1) to provide the
lowest cost assets in the shortest time in order to meet business needs; (2)
to provide business decision makers with highly predictable cost, schedule,
product quality/output results; (3) to integrate the business, technology, and
manufacturing functions to ensure that the “right” capital assets are created;
and (4) to increase the profitability of the business.
Project Types Greenfield Project constructed on a new, undeveloped site
Collocated Project located adjacent to an existing facility but stand-
alone except for utilities

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 Revamp Project to rebuild/refurbish/debottleneck an existing
operation
Add-On Project that adds extra processing steps where the process
did not previously exist
Expansion Project that increases the capacity of an existing
processing unit of the same type at the same site
Recordable Cases Any occupational injuries or illnesses that fall into one or more of the
following categories: injuries or illnesses resulting in days away from work.
Injuries or illnesses resulting in days of restricted work activity. Injuries or
illnesses not involving days away from work that result in transfer to another
job or termination of employment. Injuries or illnesses that require medical
treatment (other than first aid), loss of consciousness, or restriction of
motion. Fatalities, regardless of the time between the injury and death, or
length of illness.

Schedule-Driven IPA considers schedule driven projects to be those in which a pressing need
to meet a schedule date exists and to which funds are committed. Funds
cover items such as overtime for engineering and construction and for
expediting equipment and parts delivery to assure that critical dates are
met.
Scope The intended capabilities of the project. Scope is distinct from design. The
design is intended to implement the scope, but changes in the design may
be necessary to complete the scope. For example, if an unanticipated
purification column is required to manufacture product of the specified
characteristics, this does not constitute a change in scope, although it will
require a change in design. On the other hand, if the purification column is
required because of a change in market demands, then that requirement
constitutes changes in both scope and design.
Scope Change A change in task objectives, plans, or schedule that results in a material
difference from the terms of an approval previously granted by a higher
authority. Under certain conditions, change in resource allocation may
constitute a change in scope. IPA does not consider changes in project
design to meet the original project objectives to be changes of scope. From
IPA’s standpoint, scope changes are discretionary changes made to a
project’s original objectives; for example, changes in capacity, product slate,
reliability/maintainability goals, and project location.
Site Definition A component of the IPA FEL Index. It measures, at the time of authorization,
the level of completeness with respect to four site-related factors: (a)
equipment arrangements; (b) soils and hydrology data; (c) environmental
requirements; and (d) health and safety requirements.

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Startup Duration IPA defines the period required for startup as the length of time, in months,
from mechanical completion of the project to the time when steady state,
normal operation of the facility occurs, regardless of whether nameplate
capacity has been obtained.
Startup Index Difference, in months, between the actual time required for startup and the
time projected by the IPA Startup Time Model (the industry norm).
Startup Predictability Difference, in months, between the actual time required for startup and the
time estimated at authorization.
Unproven in A process step is said to be unproven in commercial use if one or more of
Commercial Use the following pertain:

a) Employs process chemistry that has not been commercially

demonstrated:
b) Incorporates major equipment that has not been commercially proven
(includes both new designs as well as old designs with new materials of
construction);
c) Employs new operating conditions (e.g., temperature, pressure); and,
d) Represents a new match of feed and equipment.