June 15, 2021 | Articles
“Architects design, engineers engineer, and financiers calculate,” says Luis Lugo, Hill International, Inc.’s Senior Vice President and Southeast Regional Manager. “All of these roles are critical to project success. A true project advisory team is one that can combine these roles to improve the strategy of the owner—with this approach any project can be brought into focus.”
For owners embarking on a major capital project or program, project advisory support increases the probability of project success and can improve the performance of the entire team, including designers, financiers, contractors, and, over the entire project life-cycle, maintenance and operation personnel. Recently, many owners have been seeing more quantifiable benefits of project advisory support, such as better overall project strategy and risk management, which lead to reduced life-cycle costs and shortened schedules. Key to these benefits is the composition and background of the project advisory team.
Lugo explains: “Often, owners start working with design teams and investors early in the project life cycle, and during this period they turn to these resources for project advisory support. While invaluable in terms of achieving the best design or the most favorable project financing, this kind of advisory support can be somewhat narrow.
Undoubtedly owners may receive great input from those that surround them; nevertheless, without a complete team, there may be gaps in the advisory services. Those gaps can represent missed opportunities or even increased costs and unnecessary risks.”
Lugo recommends that owners seek out project advisory support that takes a holistic approach, one that considers all aspects of the project as a cohesive unit, from planning and conceptual design to project closeout, operations, and maintenance. “This type of advisory support assembles experts from outside the project to consider each element as part of a greater whole,” says Lugo. “Best practices and lessons learned from similar projects, risk management and claims avoidance, and industry trends are some of the viewpoints thorough advisory services provide. Due diligence studies and other related services are common advisory services that are vital to project success and should be approached through the lens of the entire project, not as stand-alone deliverables.”
One example Lugo cites is the advisory support Hill provided to Sistema Interoceanico de Guatemala, S.A. (SIGSA) for the massive Interoceanic Corridor project in Guatemala. The owner plans a multi-billion-dollar, 372-KM (231-mile) long and 100-meter-wide (459-foot) corridor. The project will connect two new ports on Guatemala’s Atlantic and Pacific coasts via a parallel freight rail line, oil and gas pipelines, eight free-trade industrial facilities and a service road. The reason for the project is the projected exponential increase in world trade, particularly with China, the United States, and Europe. The limited opportunities for further expansion in the Panama Canal, and the coming of Ultra Large Container Vessels, which can range up to 24,000 twenty-foot equivalent units further heighten the need for an alternate pathway for goods.
“SIGSA brought us in fairly far along in the process,” says Lugo. “Various firms had worked on previous studies and plans, and had developed many good ideas to deliver a project that would benefit the people of Guatemala as well as investors, be considerate of the environment, and build the corridor efficiently and effectively.”
“After careful consideration of the existing plans and studies, our team was nevertheless able to provide SIGSA with numerous recommendations to improve the project process. For example, our team saw points regarding concessions that could result in unintended conflicts with different players acting in their own best interests over the interests of the entire corridor. Therefore, we suggested SIGSA consider a different way of managing these aspects inside their business model. This would make certain that no matter what component of the corridor was involved, it would operate in the best interests of the entire span and scope of the project.”
Other ideas the advisory team presented included a clear overall view to an otherwise fragmented process, the logical and cost effective division and design of the construction phases of the rail line along with the necessary system-wide supportive infrastructure, and recommendations considering more environmentally friendly—but no more costly—alternatives to dredge the new ports on each end of the corridor. These and other recommendations would allow SIGSA to realize the corridor at a reduced initial cost and schedule, without compromising the functionality or mission of the project, while making the project more attractive to the public and to potential international investors and operators.
“The Interoceanic Corridor is a great example where we assembled a team of best-in-class experts from every field and across the industry. We had rail, ports, and petrochemical industry veterans, risk managers, and more, and this whole team delivered realistic, implementable ideas for SIGSA’s use,” says Lugo. “The ultimate result, ideally, would be a corridor that is not only built more efficiently, but also one that operates more smoothly over its entire life cycle.”
Lugo adds that Hill, as a firm, is different from other advisory services providers. “Hill is exclusively a program, project, and construction management firm. We do not design, we do not build, we do not finance, and therefore we are free of conflicts of interest. This gives us a perspective few, if any, other advisors can match.” Lugo notes that Hill’s history gives the firm’s advisory support a particular flavor, as well. “Decades ago, Hill was founded as a construction claims firm. We brought this culture to our PM/CM work, and even today our focus is on protecting owner’s interests against risks. We know from experience what can go wrong on a project, no matter where in the world or in what market sector. We leverage this downstream experience to best support projects upstream.”
Lugo concludes that, in a perfect world, owners should bring their advisory teams on as early as possible during the project life cycle. “The sooner in the planning process advisory support is added, the more it can benefit a project and protect the owners. The experience of experts can help owners make the best-informed decisions while the project is still on paper, as opposed to when work is already underway. Even a minor change can have major impacts on costs and schedule.”
As owners become more aware, project advisory services will likely grow in demand. Owners with a major project or program to deliver can best realize the benefits of these pre-construction services by choosing a team with a diverse background and varied skillsets, and by bringing their team aboard early. The result, often, is a project that exceeds expectations for the long term.
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