What issues should be considered in the project management model of IPMT+EPC+engineering supervision?

“The project management model of “IPMT + EPC + engineering supervision”. Integrated project management refers to the general contracting of design, procurement, and construction work. Through this new project management model, it is possible to optimize project organization, ensure safety, improve project quality, reduce investment costs, and accelerate project progress, thereby effectively facilitating the timely and efficient construction and commissioning of major petrochemical projects. The project management model of “IPMT+EPC+engineering supervision” has been tested in the construction of various projects over the years, including Sinopec’s 10 million tons per year refinery project in Qingdao, the 1 million tons per year ethylene project in Tianjin, and the 1 million tons per year ethylene project in Zhenhai. These experiences have shown that this model achieves good results in terms of optimizing project organization, ensuring safety, reducing investment costs, accelerating project progress, and improving project quality; it is a viable approach that offers valuable insights for applying the scientific development concept in the construction of key petrochemical projects. Promotion and application of major ongoing projects.

IPMT is the abbreviation for Integrated Project Management Team, which can be literally translated as project integration management team； EPC (Engineering Procurement Construction) refers to the turnkey contract for design, procurement, and construction. Through this new project management model, it is possible to optimize project organization, ensure safety, improve project quality, reduce investment costs, and accelerate project progress, thereby effectively facilitating the timely and efficient construction and commissioning of major petrochemical projects. 　　Analysis of Project Management Models in Domestic and Foreign Petrochemical Projects Petrochemical projects such as those for oil refining and ethylene production are projects that involve high investment and high risks. It requires high levels of capital and technology, features complex technology, involves multiple specialties, spans a wide range of related areas, has a high degree of integration, strict quality requirements, large engineering investments, and a long construction period. The level of management in engineering construction projects directly determines the return on investment, the success or failure of such projects, and the sustainable and effective development of petrochemical enterprises. Less investment, more output, rapid construction, high quality, and ensuring operational readiness are always major challenges that must be addressed effectively in engineering project construction. 　　The project management model is a core issue in the management of engineering construction projects; it serves as the foundation for effective control and management of aspects such as HSE, quality, schedule, cost, and contract implementation. At present, the main project management models in China’s petrochemical industry are the internationally common (PMC+EPC) model and the traditional domestic owner-operated model. 　　1. A management model for the implementation of developed **petrochemical engineering construction projects. Currently, large-scale petrochemical project construction abroad, especially in the West, mostly adopts the (PMC+EPC) management model. PMC (Project Management Contractor) refers to project management contracting. PMC is a management contractor hired by the owner through a contract to act as the owner’s representative and carry out comprehensive management of the project. It provides comprehensive management for the overall project planning, project definition, project bidding, selection of EPC contractors, project supervision, commissioning testing, and evaluation and acceptance, as well as coordinated management of the EPC contractors throughout the design, procurement, and construction phases. The EPC project contractor carries out all tasks related to project design, procurement, construction, and commissioning services in accordance with the agreements stipulated in the contract with the owner. 　　PMC project management has three main characteristics: first, it enables professional management of engineering construction projects. The owner has engaged a renowned engineering company to handle project management, with the contractor ensuring that professionals with extensive experience in project management are involved in it ； Secondly, the contract amounts are often structured on a \"cost plus fee\" basis, creating a mechanism in which both the contractor and the owner share the risks ； Third, there is a high dependence on performance credit. The advantage of this management model is that it provides professional management, shares project risks with the owner, and takes on the majority of the project management tasks for the owner. However, based on the current practice of constructing major petrochemical projects in our country, the (PMC+EPC) management model is more suitable for construction environments in developed countries with well-developed market mechanisms and comprehensive contract management systems. Under the current objective circumstances in our country, applying this management model directly here has revealed numerous problems. First, the PMC adopts a \"cost-plus\" contract model, which leads to a tendency among PMC contractors and their staff to delay progress. The longer the contract is in effect, the higher the costs, and the more money the PMC contractors can make ； Second, the cost of PMC contracting is high (especially due to the high labor costs of foreign contractors) ； Third, there is an excessive reliance on the creditworthiness of various contractors for contract fulfillment; during the construction process, there is a lack of oversight over the EPC contractor and the various sub-contractors, as well as insufficient mechanisms for enforcement. The actual outcome of this approach is high project management costs, along with a lack of effective control and oversight over aspects such as safety, quality, schedule, investment, and contract implementation. This article is reprinted from the Project Managers Alliance. 2. The traditional project management approach for domestic petrochemical engineering construction projects. At present, the construction of petrochemical projects in our country mostly adopts the traditional project management model of owner-led management. This model has two organizational structures. One is a functional organizational structure established under the leadership of the project construction command office or infrastructure management department, based on the division of engineering functions ； Another type is a project-based organizational structure established under the leadership of a project construction command center or infrastructure management department, in accordance with the division of the project into various components. These two organizational structures facilitate the use of the owner’s existing resources and conditions to achieve administrative coordination, with smoother vertical management. 　　However, this model has four shortcomings: first, the owner directly entrusts design firms, construction companies, and supervision agencies to carry out the engineering design, construction, and project supervision. The owner’s organizational structure directly exercises management over the project. The owner is both the investment entity and the project manager, bearing all the risks of the project. Secondly, the interface management work across various stages and components of project construction is extensive and complex, requiring the project owner’s organization to have a large management structure and numerous managers. Thirdly, due to the large volume of work involved in project management, high standards are required of project managers’ qualifications, especially those of project management leaders; however, it is often difficult for project owners to meet these standards, which leads to chaos in project management. Fourth, in line with the reform requirement of \"strengthening the core business and diverting resources from secondary businesses,\" after project completion, project managers face concerns regarding job transfers, which leads to instability in the project management team and makes it difficult to cultivate and build a high-quality professional project management workforce. Project Managers Alliance, project management issues. 　　Exploration of Management Models for Major Petrochemical Engineering Projects In recent years, China’s petrochemical industry has applied modern advanced engineering management theories, particularly those based on systems theory, to analyze the strengths and weaknesses of the current management models used in petrochemical engineering projects. By summarizing the experiences and lessons gained from petrochemical construction over the past few decades, and taking into account the characteristics of industry development, this industry has, through repeated exploration, developed and established the “IPMT+EPC+project supervision” management model suitable for petrochemical engineering projects in China. Articles from the Project Managers Alliance, offering in-depth exploration. This article is reproduced from the Project Managers Association. Implementing the \"IPMT+EPC+project supervision\" project management model primarily involves establishing an integrated project management team, IPMT, at the project management level. IPMT is a project management organization established and authorized by the owner, which represents the owner in carrying out comprehensive management of the project’s overall planning, project definition, tendering, commissioning, and evaluation and acceptance ； Select pre-project consultants, EPC contractors, and supervision contractors, and manage and coordinate their work. 　　The establishment of the \"IPMT+EPC+project supervision\" project management model represents an exploration and innovation in project management approaches, drawing on the characteristics of the commonly used overseas (PMC+EPC) management model as well as the domestically prevalent owner-led management approach. It takes into account the actual conditions of oil and petrochemical project construction in China, and is the result of combining advanced foreign engineering management theories with China’s project construction practices.

　This management model was first adopted in the 900,000 tons per year ethylene project at Sinopec’s joint venture with BP in Shanghai Sinopec BP. The approved total investment for the overall design of this project is 22.259 billion yuan; it is one of the largest world-class integrated petrochemical projects in China at present, with Chinese and foreign parties holding 50% shares each. During the initial construction phase, the foreign party insisted on adopting the (PMC+EPC) management model, but significant conflicts arose during its implementation. First, the entire project contract is divided into four separate contracts – a patent contract, a basic design contract, a technical service agreement, and an EPC or EP+C contract – which are signed one after another; as a result, patent holders and project contractors demand exorbitant prices, leading to protracted business negotiations. Secondly, in terms of organizational management, various parties involved act on their own, making it difficult to coordinate the entire process. Thirdly, foreign contractors, driven by their own economic interests, are willing to significantly increase costs and extend project timelines, while the Chinese side insists on strictly controlling costs and accelerating progress while ensuring safety and quality, which has led to severe conflicts between the two sides. Fourth, foreign parties simply copy foreign standards, making it difficult to advance localization efforts. These contradictions have plunged the project’s progress into a \"double vortex\" of endless disputes between domestic and foreign owners on the internal side, and continuous negotiations between external owners and contractors on the external side, severely hindering the project’s advancement. The advantages of the Sino-foreign joint venture parties cannot be fully utilized, and the legitimate rights and interests of the Chinese side are not properly protected. In response to these issues, Sinopec resolved to explore and adopt new management models. After repeated discussions with BP’s senior management, it was ultimately decided to approve the project management model of \"IPMT+EPC+project supervision\" proposed by Sinopec. 　　“The project management model of “IPMT + EPC + engineering supervision”. The integrated project management team consists of the IPMT steering committee and the IPMT project management department. “The core of the “IPMT + EPC + project supervision” management model is as follows: (1) A three-tier organizational structure for project management. “The management model of \"IPMT + EPC + project supervision\" features a three-tier project management structure with clear interfaces between the tiers and well-defined responsibilities. The first tier is the decision-making level, composed of the members of the IPMT steering committee, who are authorized to make decisions on major and critical issues related to project implementation ； The second level is the management layer, composed of members of the IPMT project management department organized in a matrix structure. It is responsible for coordinating with EPC contractors and project supervision units, ensuring effective control over HSE, quality, schedule, costs, and contract implementation, as well as handling other project management tasks aside from EPC management and project supervision ； The third layer is the execution layer, which consists of the EPC contractor, the supervision contractor, and the pre-project consultants, and is responsible for carrying out the specific tasks related to project management and construction. 　　(2) The matrix structure of the IPMT Project Management Department. The IPMT Project Management Department is composed of professionals engaged in project management within China’s petrochemical construction industry. With project management as the vertical focus and professional management as the horizontal focus, a matrix-style management structure that integrates both aspects has been established. This organizational structure draws on the advantages of professional management provided by the PMC management model ； Second, it avoids the drawback of hiring PMC contractors, which entails high project management costs ； Thirdly, given the current weak contract-compliance awareness among domestic engineering contractors, this model implements a management mechanism that combines contractual constraints with administrative coordination in order to prevent loss of control during the process of using contracting as a substitute for proper management ； Fourthly, by engaging EPC project contractors, the drawbacks of extensive and complex interface management that arise from the owner’s direct management approach are avoided, resulting in a **reduction in the number of staff in the IPMT project management department** ； Fifthly, it takes into account the current situation where the quality self-regulation mechanisms of EPC contractors both domestically and internationally, as well as domestic construction subcontractors and manufacturing subcontractors, are inadequate. This model draws on the supervision mechanism of the owner’s direct management approach, introducing supervision contractors that are widely accepted in China’s engineering construction industry ； Sixth, the IPMT Project Management Department has a competent team with diverse backgrounds, mostly not coming from the project owner, which avoids the problem of having to find new managers once the construction tasks are completed. The IPMT Project Management Department helps to cultivate a professional management team in the petrochemical engineering construction industry. 　　(3) Adopt a management mechanism that combines contractual constraints with process coordination. During the project implementation, strict tracking and supervision of contract fulfillment are ensured to leverage the contractual constraints, while coordination and management throughout the entire construction process are strengthened. Implement a scheduling meeting system that combines regular and irregular meetings to strictly prevent loss of control over the process. 　　(4) Carefully select EPC contractors and supervision contractors to fully leverage the role of the contractors. The owner takes the lead in establishing a bidding committee, strictly implements the bidding system, and selects project contractors and supervisors in an open, fair, and impartial manner. It is explicitly required that the EPC project contractor establish an organizational structure that is compatible with that of the IPMT project management department. The purpose is to ensure smooth coordination in project management. The supervising contractor is required to appoint a chief supervision engineer and supervision engineers for various specialties, who are responsible for overseeing the design, procurement, construction phases of the EPC contractor, as well as aspects such as safety, quality, schedule, costs, and contract implementation. This ensures that the professional skills and management capabilities of the project management team and the project execution team are integrated, with clear and smooth interfaces, thereby enabling coordinated and efficient management of the entire project across all aspects. 　　Main application results: The project management model of “IPMT+EPC+project supervision” was first successfully applied to the 900,000 tons per year ethylene project at Sinopec Shanghai. A brief comparison will now be made between two similar large-scale petrochemical projects that adopted different management models during the same period: Sinopec entered into joint ventures with BASF and BP in 2000 and 2001 respectively to build the Yangba 600,000 tons/year ethylene project (hereinafter referred to as the Yangba Project) in Nanjing, and the Sinopec Shanghai 900,000 tons/year ethylene project (hereinafter referred to as the Sinopec Shanghai Project) in Shanghai. The Yangba project adopted a (PMC+EPC) management model, while after numerous discussions between Chinese and foreign parties, the Sinopec project ultimately adopted an “IPMT+EPC+project supervision” management model. The two projects were completed and put into operation in March and May 2005 respectively, and passed the acceptance inspections as well as the final account audits. 　　Compared to the two projects, under conditions where the total investment, project scope, site conditions, overall capabilities of the joint venture partners, and construction teams were all extremely similar, the new management model proposed by our side resulted in cost savings of 2.05 billion yuan. Of this amount, 330 million yuan was saved in management costs related to IPMT and PMC alone. The project timeline was also reduced by 10 months. At present, the contract has been fully completed, the entire project is in commercial operation, and it has achieved excellent profit results. This article is reprinted from the Project Managers Association. Given the success of this management approach in the Sinopec projects, Sinopec has applied it to major construction projects such as Hainan Refinery, Maoming Ethylene Expansion, and Guangzhou Refinery Renovation, achieving excellent results as well. The Hainan refining project adopts a project management model of \"IPMT+EPC+project supervision\", which enables the group advantages of Sinopec to be fully utilized; the advantages of the project owner, the general contractor, the supervisor, and the construction contractor are complemented to each other in terms of overall coordination, design, and on-site management. Despite the increase in costs for equipment and materials, the project achieved the five key control objectives related to investment, schedule, quality, HSE, and contracts. The investment remained within the approved budget, with even a surplus. The actual construction time for the project was 22 months, which is one-third less than the normal duration. After adopting the project management model of \"IPMT + EPC + project supervision\" for the expansion of the Maoming ethylene plant, the construction was completed on time and to high quality, enabling Maoming Petrochemical to become China’s first petrochemical complex to achieve an ethylene production capacity of 1 million tons per year. The Guangzhou refinery renovation project adopts a project management model of \"IPMT+EPC+project supervision\", making full use of the advantages of EPC, strengthening internal coordination and cooperation, and ensuring a proper level of integration among design, procurement, and construction processes to effectively reduce the construction period. All 7 newly built units were completed ahead of schedule. The construction period for the coking unit was only 10 months, which is 3 months faster than that of the Tahe coking unit in Xinjiang – the fastest-construction coking unit in China at present – setting a record for the shortest construction period among similar units in the country. 　　At present, the project management model of “IPMT+EPC+project supervision” is being applied in major ongoing projects such as Sinopec’s 10 million tons per year refinery project in Qingdao, the 1 million tons per year ethylene project in Tianjin, and the 1 million tons per year ethylene project in Zhenhai. 　　Years of experience in engineering project construction have shown that this model achieves good results in optimizing project organization, ensuring safety, reducing investment costs, accelerating project progress, and improving project quality; it is viable and represents a useful approach to implementing the scientific development concept in the field of key petrochemical project construction. 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