OVERVIEW OF KBRS

FRONT END
LOADING (FEL)
WORK PROCESS

KELLOGG BROWN & ROOT, INC.

FRONT END LOADING (FEL)

DEFINITION
A Specialized And Adaptable Work Process
Translates A Marketing And Technological Opportunity
Into A Well Defined Capital Project
Prepares Deliverables In Sufficient Detail To Receive
EPC Funding
Forces Critical Decisions To Be Made Earlier
Improves Project Definition Thereby Reducing Changes
During The EPC Phase
Identifies Purposely And Proactively Alternatives To The
Projects Baseline Premises, Scope, And Design

FRONT END LOADING (FEL)

GOALS AND OBJECTIVES
Develop A Well-defined And Economically-viable Project
Define The Primary Technical And Financial Drivers For
Capital Project Investment
Challenge Baseline Premises And Purposely Seek Out
And Evaluate Alternatives And Opportunities
Enhance Predictability Of Lifecycle Costs
Minimize Changes During The EPC, Turnover And
Startup Phases To Reduce Project Schedule And
Reduce Capital Cost
Reduce The Business And Project Execution Risk
Balance Project Technical, Financial, And Operational
Profitability Drivers

WHY ARE FEL PROJECTS

DIFFERENT?
Assigns project responsibility to multi-discipline / multifunctional integrated team
Demands far higher level and frequency of communication
than EPC projects
Far more informal interfaces than EPC projects
Close and effective Client-Contractor management
interfaces assume a higher level of importance than for
EPC projects
Projects Co-led by the Client and Contractor are more
successful
Improves capital productivity of projects by using best
available technology
Requires more development of personal relationships that
result in respect and trust than EPC projects

WHY ARE FEL PROJECTS

DIFFERENT?
Emphasizes Elimination Of Low Or Zero Value Scope
Demands Continuous Re-alignment Of Clients Desires And
Requirements With Contractor Needs
Demands Significantly Higher Frequency Of Client
Satisfaction Feedback
Timescale Is Far Shorter Than EPC Projects
Focuses On Overall Project Profitability Rather Than Only
Cost, Schedule And Work Hours
Focuses Almost Entirely On Clients Business Needs
Demand More Experienced Staff When Compared To EPC
Projects Results In Higher Hourly Rates
Demands Significant Access To Downstream Experience
Early During Process Design Phase (Operations,
Maintenance, Construction)

VIPs DRIVE LOWER INVESTMENT

Industry Average Cost

FEL Improvement Only

FEL Improvement
+
Value Improving Practices
Engineering

Procurement

Construction

Turnover & Startup

EARLY FEL IMPLEMENTATION

EXPERIENCE - CHEVRON
17% Cost Index Improvement
14% Execution Schedule Index
Improvement
4% Operating Performance Index
Improvement

Based on 1999 IPA Data Gathered over 5-year Period

FEL vs EPC
FEL

EPC

Project State

Undefined

Defined

Changes

Actively Seeks Changes

Actively Resists
Changes

Impact Of Change

Low

High

Opportunity For Change High

Low

Contract Type

Typically Reimbursable

Typically Lump Sum

Value Improvement
Potential

High

Low

Client Participation

Encouraged

Discouraged

Philosophy

Information Driven

Deliverable Driven

ABILITY TO INFLUENCE PROJECT

ECONOMICS
Project Planning
100

% Influence on Project

90

Conceptual Design

80
70
60
50
40

Basic Engineering

FEL 1

30
20

FEL 2

Detailed Engineering

10
0

Construction

FEL 3
EPC

PRIOR TO THE 1980s

Clients completely developed their business
concepts and project scope in-house (FEL 1)
Clients had large in-house engineering staff
Clients developed process designs (FEL 2) and
contractor EPC bid packages (FEL 3)
Contractors executed detail engineering,
procurement, and construction (EPC)
Clients typically handle commissioning and
startup with some contractor assistance

CURRENTLY
Clients Partially Develop Their Business Concepts And
Project Scope In-house
Clients And Contractor Jointly Complete Development
Of Project Scope (FEL 1)
Clients Have Much Smaller Engineering Staff
Clients And Contractor Jointly Develop Process Designs
(FEL 2) And Contractor EPC Bid Packages (FEL 3)
Contractors Executed Detail Engineering, Procurement,
And Construction (EPC)
Clients And Contractor Jointly Handle Commissioning
And Startup

FEL IN PROJECT LIFE CYCLE

FRONT END LOADING (FEL)

Conceptual
FEL-1

Feasibility
FEL-2

Definition
FEL-3

EPC

= Decision Gates (stage process)

PARAMETERS OF FEL PHASES

FEL 1

FEL 2

FEL 3

(CONCEPTUAL)

(FEASIBILITY)

(DEFINITION)

+/- 40%

+/- 25%

+/- 10%

Cumulative
Engineering
Hours Spent

1-5%

5-15%

15-30%

Contingency

15-20%

10-15%

8-12%

Cost Estimate
Accuracy

FEL IS CLIENT FOCUSED

Focuses on Client Goals and defined business
needs
Focuses on Client Profitability not Contractor
hours and costs
Balances clients project profitability drivers
Assists Client in getting data required for EPC
and Operations Phases
Proactively seeks data, resources, support,
decision making

FEL PROJECT PERFORMANCE

Co-Led FEL Projects Result in Superior Project
Performance in Terms of Cost & Schedule
ENGINEERING & CONSTRUCTION
SCHEDULE SLIP

Source: IPA Inc., The Changing Role of Design Contractors:

Their Effective Use in Project Definition, November 1993.

15
10

C o -L e a d

O w ner

C o n tra c to r

C o -L e a d

PER C EN T

20

O wner

10
9
8
7
6
5
4
3
2
1
0

C o n tra c to r

PER C EN T

COST GROWTH

COMPARISONS OF POORLY DEFINED VS WELL

DEFINED PROJECT

Cost Growth

Adapted from IPA Data

Schedule Slip

GOOD PROJECT DEFINITION

REDUCES RISK

% Cost Deviation (Actual/Estimate)

60

+ Standard
Deviation
Median

40
- Standard
Deviation

20

-20
Best Practical

Good

Fair

Poor

Front End Loading Index

Screening

FEL 1 (CONCEPTUAL PHASE)

DELIVERABLES

Strategic Business Assessment

Key Technology Selected & Risk Identified
Market Assessment For Feed, Products & Capacity
Potential Sites Identified & Under Evaluation
Cost Estimate (+/- 40%)
Preliminary Project Milestone Schedule
Block Flow Diagrams Completed
Process Cases Identified
Critical Long Lead Equipment Identified
VIP Reports

FEL 2 (FEASIBILITY PHASE)

DELIVERABLES

Strategic Business Assessment

Project Schedule Level 1
Cost Estimate (+/- 25%)
Overall Project Execution Strategy
Contracting & Purchasing Strategies
Permitting & Regulatory Compliance Plan
Soil Survey & Report
Project Alternatives Analysis
Process Flow Diagrams For Selected Option(s)
Preliminary Utility Flow Diagrams & Balances
Preliminary Equipment List & Equipment Load Sheets
Materials Of Construction
VIP Reports

FEL 3 (DEFINITION PHASE)

DELIVERABLES

Strategic Business Assessment

Detailed EPC Project Master Schedule
Completed Environment Permit Submittal
Project Plan / Project Execution Plan

Cash Flow Plan for EPC Phase

Training, Commissioning & Startup Plans
Contracting Plans
Materials Management Plan
Safety Process & Quality Management Plan

Cost Estimate (+/-10%)

Finalized Utility Flow Diagrams & Balances

FEL 3 (DEFINITION PHASE)

DELIVERABLES (CONTD)

P&IDs - Issue IPL

Plot plans & Critical Equipment Layouts
Equipment List & Equipment Datasheets
Single-line Electrical Diagrams
Control System Summary & Control Room
Layout
Materials of Construction
VIP Reports
Process Hazards Analysis