July 21, 2008
ENGCOMP offers services to Defence Construction
Originally published in The StarPhoenix newspaper,
written by Hannah Scissons (used with permission from The
A Prairie engineering firm is getting its feet
wet in the Pacific. Engcomp, a Saskatoon company only four years
old, found a new match for its services after officials with Defence
Construction Canada (DCC) heard a conference presentation by Engcomp
president Jason Mewis.
president Jason Mewis at the company's office (photo
by Greg Pender, The StarPhoenix)
He described the method of risk analysis his
company has been developing for use in project planning -- to
account for unforeseen or unpredictable factors that affect budgeting
-- and the federal government employees were keen to hear more.
Instead of a 'best guess,' Mewis conducts
a method of statistical modelling using Monte Carlo simulation...
They had one project in particular causing them
a lot of headaches, largely because their budgeting methods had
been insufficient to account for the rapidly escalating costs
of labour and materials in the last decade.
The fleet maintenance facility at CFB Esquimalt,
on Vancouver Island, is in the midst of a renovation project where
its many smaller buildings are being consolidated and upgraded
in one large facility.
The Department of National Defence originally
approved a budget of $91.8 million for the project, but that was
in 1995, and by the time the project went for tender and offers
came back more than five years later, costs had increased so much
on the booming West Coast that the initial budget was inadequate.
"The bulk of the construction work was
designed and tendered in the peak of the escalating construction
industry here, the results of that being that when we finally
did go to tender with the big package, it came in far in excess
of what the budget had allowed for," said project manager
New approvals were needed for a new budget,
and by the time that process was complete, costs had escalated
again beyond what the government had budgeted for.
So when the DCC officials heard Mewis describe
his company's method of risk analysis two years ago, it led to
further meetings and ultimately a project where Engcomp came in
and helped DCC create a budget that would hopefully be more accurate.
"Before they would just use a subjective
guess in how to account for the unknowns," said Mewis.
"There's risks involved in doing that because
you may not have a good enough understanding of where you are
with the project at that time and you may under-budget yourself."
Instead of a 'best guess,' Mewis conducts a
method of statistical modelling using Monte Carlo simulation,
which uses repeated random sampling to simulate complex systems
-- in this case the construction project.
The budget that Engcomp helped DCC develop and
get approved was for Phase 4 of the ongoing project. DCC liked
it enough that it is going to use it again for Phase 5 and it
has been talking about standardizing the process for use in other
government departments, said Mewis.
It's a method that's being used extensively
in the financial, insurance and information technology industries
already, he said.
"But in capital construction projects,
it doesn't seem to be very widely used yet, and it's starting
to come around as being more the norm."
At the time Mewis was brought in, DCC had been
focusing on trying to get better contracts, where it could legally
hold contractors to fixed-price bids and come in under budget
Mewis made the case that it's much more important
to have an accurate budget.
"The reality is that most times when you
end up going over-budget, it's not because a contractor hasn't
done something right or has deceived you -- it's because you haven't
planned well enough," he said.
In this case, Engcomp's risk analysis generated
a budget for the construction project that included a much larger
contingency fund for escalating costs and risk factors -- things
such as environmental cleanup fees, labour unrest and bad weather.
"Is it more accurate? We hope it is,"
said Laverdiere. "It does give us more flexibility to absorb
the impact of these risk factors should they occur."
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