Francisco Ruga - Executive Partner of DMS PARTNERS
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WHAT IS FEL?
The Front-End Load (FEL) Methodology is a structured and systematic approach to project management and planning in the engineering, procurement and construction (EPC) industry that aims to ensure that extensive capital projects are completed with successful performance, minimization of risks within agreed deadlines and agreed budgets.
APPLICATION
It is normally applied in complex projects with large capital costs, especially in the plastics, rubber, food, beverage, metallurgical, mining, chemical, petrochemical, pharmaceutical, textile, machinery and equipment, automobile and refining industries.
PHASES
The Front-End Load steps are intended to be used as a systematic process for planning, managing, and developing project budgets and schedules. The most important steps of FEL are:
FEL 1: business concept development
The objective of the stage is to test the project idea against the investment criteria at a final project cost estimate of +/- 50%. This step begins the process of designing and outlining project requirements.
FEL 1 must provide sufficient information to create the structure of a project such as, but not limited to: market research, project objectives, production and commercialization forecasts, competition analysis, partners, cost of capital, location, available infrastructure, selection technology alternatives, risk analyses, exit criteria, among others.
GATE 1 – Board decision on the objectives, criteria, risks and uncertainties recommending review of the concept or continuation to the next phase.
FEL 2: Conceptual design and feasibility study This stage focuses on scope development. The objective of this phase is to study the identified options and direct the project to one option, refine the assumptions, update the economic data and begin defining the project. The expected final cost estimate is +/- 25%.
FEL 2 must provide sufficient information to create the structure of a project such as, but not limited to: definition of capital cost alternatives, review of market projections, commercial, logistical and financial strategies, applied environmental legislation, safety concepts, risks and health, development of the technology to be used, definition of the project team, evaluation of available raw materials, definition of the size of the main equipment, development of execution strategies, among others.
GATE 2 – Board decision on real definition of objectives, risks and uncertainties recommending the review of the conceptual project and/or continuity to the next phase, ensuring the necessary alignments and resources
FEL 3: Basic / Detailed Engineering
The objective of the FEL3 stage is to develop the basic engineering in its entirety and a % of the detailed engineering (depending on the complexity and cost of the project), an execution plan and the detailed cost estimate for the alternative selected in the previous phase (FEL2) between +/- 10 to 15%.
FEL 3 must provide a robust project with few uncertainties and sufficient information to establish CAPEX structures for final approval before starting the EPC (engineering, procurement, construction) itself.
FEL 3 must provide a series of attributes for a project of magnitude such as, but not limited to: more accurate CAPEX, approved engineering drawings of all disciplines, equipment layout, purchase quotes for critical equipment (long lead time) , engineering and construction companies, approved licenses, engineering, supply and construction strategy plan, execution schedule approved by the client, fully complete project team, among others.
GATE 3 – Board decision on defining project continuity, with the following approvals: CAPEX, management team, financing plan, strategic partners and confirmation of market/commercial/production forecasts from the perspective of 3 scenarios (pessimistic, realistic and optimistic).
CONCLUSION
The FEL methodology guarantees a much more in-depth study in the initial phases of the project, providing a detailed view before execution begins. The main benefits are: reducing costs, minimizing risks, meeting the schedule within deadlines, a diligent approval system, corporate alignment, transparent communication and achieving success at the end of the project.
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