Electrical Contractor Work Comparisons

Electrical Contractor Work Comparisons

DOI: 10.4018/978-1-4666-2839-7.ch011

Abstract

The decision theory approach determines the optimal configuration by minimizing its cost for a given risk environment. Prioritization is necessary, as is some quantity of information. Supplementary information gathering may add value, but this depends on how much data the Project Manager already has and how much new information is to be gathered with analytic resources available. The payoff from spending time on project decision analysis is already high, even with the brute force approach of analyzing all projects. The payoff could be higher if project decision analyses plans are focused by taking advantage of knowledge about the general characteristics of a project even before individual projects are assessed. The objectives of the study are to identify the cost structures, utilizing simplistic management science mechanisms, in the contractual work arena. A comparison between The Premium Select’s actual contractual costs against competitively-bid similar projects by other contractors forms the basis of this investigation.
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Overview

Contractors are invariably assigned to electrical utility reliability, capacity, and/or condition projects as either the exclusive sole resource or as an additional reserve for the implementation. The renewable energy project execution consists of a general mix of expertise from a variety of resources. Six (6) major projects and their associated historical costs were investigated in this study. The chapter examines the cost structures of competitively-bid utility contractors as compared with the cost of service provided by a Premium Select Company. Several scientific management methods are employed to analyze the data in order to select the most cost-effective decision for future projects. The selection of the “smallest of the worst regret that could have happened” (minimize the maximum possible) with budgeted capitalized and maintenance dollars was the overall goal of this investigation. However, this ideal situation was not always the case. It was discovered that most of the circuit breaker retirement/replacement program costs were absorbed in overhead expenses when The Premium Select Company performed the work. Conversely, when the same corporation provided services for capacity improvement projects, it excelled in several areas of the work. Third party contractors were very competitive with substation assignments and displayed a slight weakness in transmission line projects. The overall preliminary study revealed an average cost savings of forty (40%) when external contractors performed substation work, and (0.2%) savings when The Premium Select performed transmission line work. It is important to first comprehend the framework (i.e. the parameter values) and simply select a project management policy for decision analysis strategies. The decision-maker must exploit a disciplined project selection process for funding at the very minimum, especially with renewable energy generator grid integration. It may be sufficient to simply apply a threshold where projects with high Benefit-to-Cost Ratios are funded and ventures with lower ratios are discarded. In such cases, setting the appropriate threshold might be a reasonable objective for analysis in support of the Senior Management Team. The decision-maker(s) are evaluating data from numerous sources (economic, load growth, financial, performance, environmental) for the successful implementation of the power resource. For these reasons, it may be complicated to choose such a threshold. In such cases, unequivocally ranking schemes adds substantial significance. Judgment matrices and priority vectors are utilized in the typical least cost objective function. In decision-analytic practice, the ranking of select projects is often preceded by the formation of detailed estimates of endeavor’s worth. Such improved value estimates are also beneficial, but unless uncertainty is high, enhanced estimates are not nearly as imperative as the basic use of a regimented process. For the astute decision-maker, it is essential to distinguish between these two sources of value. Sensitivity analysis of the data revealed that even when uncertainty seems high and intricate to resolve, there is considerable value to adopting a decision process that incorporates a disciplined approach to project prioritization. Outside the use of thresholds, two other time savings approaches of the Lean Quality paradigm were considered. The decision-maker would surrender a lot of value by ranking projects in terms of Expected Net Present Value instead of explicitly considering the Benefit-to-Cost Ratio (the preferred method of the electric utility industry), and this approach is not recommended. Executive leadership who already employ a disciplined methodology may be able to save effort by analyzing in detail only those ventures that materialize as close calls. In such cases, a quantitative priority methodology (ranking of the level of importance based on experience and judgment) is utilized to differentiate the essential need of the project. It is realistic to exploit this technique in extreme power supply cases, but the efficiency gains are small enough that if it is worth making the effort to analyze the marginal plan, it is likely that most ventures must be analyzed.

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