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(OWN-2422) Cost Benchmarking of a Joint Venture Project

Level: Intermediate
Author(s): Johnson Olugbelenke Awoyomi, CCP CEP
Venue: 2017 AACE International Annual Meeting, Orlando, FL

Abstract: Capital cost is a key driver of investment decision making metrics. Without benchmarking or similar validation, the cost can be biased or have other quality issues that the owner and its venture partners may not be aware of. This paper will share a National Oil Company's (NOC) experience on how a Joint Venture project was implemented in Africa without cost benchmarking or empirically valid risk quantification, the consequences of such negligence, and issues and challenges that confronted the project (catastrophic cost overuns/schedule slippage). Many NOCs like the one in this paper require project benchmarking as part of their internal processes for continuous improvement of capital project efficiency/performance. The colossal waste of resources would have been reduced if the project cost and schedule were benchmarked and risks had been realistically quantified early in project scope development and prior to sanctioning. NOCs in particular need benchmarking as a tool to identify and address systemic issues in their capital project systems. Finally, the paper shares the lessons learnt for the benefit of other NOCs and the industry in general.