A Forecast Model for the Level of Engineering Maturity Impact on Contractor’s Procurement and Construction Costs for Offshore EPC Megaprojects

Myung-Hun Kim and Eul-Bum Lee
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Myung-Hun Kim: Hyundai Heavy Industries, Engineering Management Team, 400 Bangeojinsunhwan-doro, Dong-gu, Ulsan 44114, Korea
Eul-Bum Lee: Graduate Institute of Ferrous Technology (GIFT), Pohang University of Science and Technology (POSTECH), 77 Cheongam-Ro, Nam-Ku, Pohang 37673, Korea

Energies, 2019, vol. 12, issue 12, 1-18

Abstract: This paper focuses on the influence of detailed engineering maturities on offshore engineering, procurement, and construction (EPC) project procurement and construction cost performance. The authors propose a detailed engineering completion rating index system (DECRIS) to estimate the engineering maturities, from contract award to beginning of construction or steel cutting. The DECRIS is supplemented in this study with an artificial neural network methodology (ANN) to forecast procurement and construction cost performances. The study shows that R 2 and mean error values using ANN functions are 20.2% higher and 19.7% lower, respectively, than cost performance estimations using linear regressions. The DECRIS cutoff score at each gate and DECRIS forecasting performance of total cost impact were validated through the results of fifteen historical offshore EPC South Korean mega-projects, which contain over 300 procurement cost performance data points in total. Finally, based on the DECRIS and ANN findings and a trade-off optimization using a Monte-Carlo simulation with a genetic algorithm, the authors propose a cost mitigation plan for potential project risks based on optimizing the engineering resources. This research aids both owners and EPC contractors to mitigate cost overrun risks, which could be continuously monitored at the key engineering gates, and engineering resources could be adjusted per optimization results.

Keywords: engineering maturities; DECRIS; artificial neural network; trade-off optimization; offshore mega-project; engineering; procurement and construction (EPC) project; risk mitigation (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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