EPCs Are Working More Closely with Automation Vendors

The companies building plants—engineering, procurement and construction (EPC) organizations—are planning the control system before construction begins.

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Just 10 years ago, plants were planned and developed by a simple method. First you built the facility,  you loaded it with equipment, and then—at the very end—you added the control system.

But in recent years, the automation system has become too integral to plant operations for it to be an afterthought. Ethernet systems alone are forcing plant owners to get automation vendors involved in plant design. Further, automation systems run aspects of the plant beyond simply producing product. The control system may run heating, ventilating and air conditioning (HVAC), as well as maintenance for field communications and business connectivity. More and more, plant owners need the automation vendor involved at the earliest moment, sometimes before the engineering, procurement and construction (EPC) organization is even selected.

Managing the whole process of getting a plant up and going or revamping an existing plant is further complicated these days by a shortage of well-trained engineers. Sure, the Asian countries are producing a growing army of engineering graduates, but they’re many years away from obtaining the knowledge required for building plants. The best-trained engineers are baby boomers, and they’re about to retire.

The recent global economic downturn has also had a profound impact on the EPC industry. While it has alleviated some of the problem of engineering shortages—engineers are postponing retirement—the shortage of capital and shrinking demand have forced plant owners to put off or cancel some projects. Commodity prices typically come down during economic crises. In some cases, this offers owners the opportunity to re-bid projects. But overall, commodity prices have not come down enough to provide significant cost relief.

Automation’s role

The automation system is a small part of the overall cost of a plant. In recent years, though, the details of automation design have had a disproportionate impact on how the plant is designed. The cost of effectively retrofitting a brand new plant to accommodate the automation system is simply prohibitive. “Even though automation is a small part of the capital cost—usually 3 percent to 5 percent—it can have a horrible impact on the bottom line if you don’t get it right,” says Russ Novak, director of consulting, ARC Advisory Group Inc., in Dedham, Mass. “You can’t put a control system in until the other equipment is there, but that control system has to be selected early.”

The complexity of automation has resulted in another trend: keeping the same control vendor across multiple plants. “In many cases, the owners are staying with one control vendor,” says Mike Sandridge, group account vice president at controls vendor ABB Inc., in Houston. “If they have a power plant and want to expand, they’re staying with the same control vendor to make it look and feel the same. It’s an emotional as well as technical decision.”

The increasing complexity of plants has also forced owners to select Main Automation Contractors (MACs) earlier. With many larger plant owners, the automation vendor is already determined through familiarity. If most of the company’s plants use a particular vendor, there’s a strong likelihood that vendor will be selected. The team knows the system and the spare parts are already in inventory. “Most of the operating companies already have their main automation contractors under contract when they come in,” says Ken Valentine, control systems department manager, Fluor Corp., a major EPC contractor in Houston. “That means they have already decided on their automation technology strategy.”

A recent trend is to get the automation vendor involved at the very earliest stage, sometimes even before the Front-End Engineering Design (FEED) stage. Even though much of the automation will go into the plant last, the vendor’s engineers need to be part of the design. “The control systems are becoming more complicated,” says David Lancaster, consultant and former chief control systems engineer, Bechtel Corp., another big EPC company based in San Francisco. “If you don’t have your system selected early, you could wind up in a box.”

Another way EPCs are coping with the complexity of plants and the need to make automation central to plant design is to work repeatedly with a single automation vendor and integrate that vendor into all aspects of plant design. “Some EPCs are realizing the cost of integrating multiple vendors is very high and that it affects time line,” says Scott Howe, regional business manager for engineering firms at Rockwell Automation Inc., the Milwaukee-based controls vendor. “So they may offer savings if the end-users would accept their standard vendor. That reduces engineering costs, quickens time to market and reduces risk.”

Engineering shortages

With baby boomers retiring, the engineers who carry the knowledge required to build a plant and outfit it with a fully integrated automation system are becoming a scarce commodity. Many of these engineers hold 401(k) retirement packages that took a nasty hit last year. So they delayed their retirements. Even so, within a few short years, a good portion of the engineers with deep knowledge of plant technology will leave the workforce.

Some EPCs are coping with the engineering shortage by developing in-house training and by aggressive recruiting. “We’ve had our best recruiting campaign in the last two years, but if the market doesn’t improve soon, we’re at a risk of losing those engineers,” says Peter Moore, vice president for project execution services at Fluor.

Others look to Asia to help solve the scarcity of engineering talent. China alone is graduating nearly 10 times the number engineers as the United States. “Asia is graduating very competent engineers, but they don’t have the depth of experience,” says Moore. “As we build more and more facilities in Asia, they will get the experience, but it won’t happen with this generation.”

The engineers in Asia—though growing quickly—also come with the problems of translation and region. “With Asian engineers, language is a challenge and there are portability problems,” says Joe Vaszily, vice president of engineering contractors at controls vendor Emerson Process Management, in Austin, Texas. “You can’t pluck them from China and put them in the Mid-East. Plus, their countries have their own demands.”

Managing in a downturn

Even though the cycle for plant construction spans three to five years, and though the general business cycle for plant development is counted in 10 to 20 years, this recent economic downturn has had a significant impact on the EPC industry. On the downside, projects have been delayed and in some cases cancelled. The upside is that many knowledgeable engineers have postponed retirement. “If the discussion of engineering shortages happened a year ago, a lot of companies would have been concerned that fewer college students were coming out of engineering,” says Rockwell’s Howe. “But now, we have good people who have lost their jobs, so there is greater availability.”

Also, the down economy has taken the pressure off the large backlog of projects that were straining the industry. “Before the downturn, we were in crisis mode, so it’s a bit of relief that projects can be resourced properly,” says Matt Willmott, senior marketing manager for Phoenix-based controls vendor Honeywell Process Solutions. “A lot of recent activity has been in planning and preparing.” Willmott also notes that the downturn has eased up the pressure of the talent shortage.

As always, downturns force new efficiencies. EPCs are looking for new ways to cut costs. “EPCs are trying to figure out better ways to streamline their processes,” says Sandridge of ABB. “There are fewer fixed-price jobs. They want to move to time and materials instead.”  He also notes that EPCs are trending toward niche segments. “While the big ones like Bechtel and Fluor are in every business segment, the smaller ones are specializing.”

Overall, the world of EPCs and MACs has changed significantly in recent years with the growing complexity of automation systems. One big challenge of the complexity is the need for knowledgeable engineers, a problem that will grow when boom times return and the boomers retire.

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