Design to Cost

Test Your Knowledge

Design to Cost Quiz:

Instructions: Choose the best answer for each question.

1. What is the primary goal of Design to Cost (DTC)? a) To reduce the quality of a project to meet a budget. b) To optimize the design for the best value within a defined budget. c) To create a design that is as cheap as possible, regardless of quality. d) To eliminate all costs from a project.

2. Which of the following is NOT a key element of Design to Cost? a) Predetermined Cost Goals b) Value Engineering c) Project Delays d) Collaboration and Communication

3. What is the main benefit of involving cost engineers and value analysts in the design process? a) They can provide expertise in cost estimation and value optimization. b) They can create delays in the project by overanalyzing costs. c) They can ensure the project will be completed within the budget. d) They can make all the design decisions.

4. How does Design to Cost contribute to faster time to market? a) By reducing the quality of the project, it speeds up the construction phase. b) By optimizing designs and procurement processes, it reduces project completion time. c) By delaying decisions, it allows for more time to analyze costs. d) By focusing on innovation, it reduces the time it takes to develop new technologies.

5. Which of the following statements is TRUE about Design to Cost? a) It is a one-size-fits-all solution for all oil and gas projects. b) It requires sacrificing quality and functionality to achieve cost savings. c) It encourages a culture of innovation by focusing on value-driven design. d) It is a reactive approach that addresses cost issues only after they arise.

Design to Cost Exercise:

Scenario: You are a project manager responsible for designing a new offshore oil drilling platform. The budget for the project is $100 million.

Task: Identify three potential cost-saving opportunities using Design to Cost principles. Briefly explain how each opportunity could be implemented.

Techniques

Design to Cost: Optimizing Oil & Gas Projects for Success

This document expands on the provided introduction to Design to Cost (DTC) in the Oil & Gas industry, breaking it down into separate chapters.

Chapter 1: Techniques

Design to Cost relies on several key techniques to achieve its objectives. These techniques are iterative and often employed concurrently.

• Target Costing: This is a fundamental DTC technique. A target cost is established before the design begins, based on market analysis, competitor pricing, and desired profit margins. This target cost acts as a constraint guiding all subsequent design decisions.

• Value Engineering (VE): VE is a systematic method for identifying and eliminating unnecessary costs without compromising functionality or safety. Techniques include:

  • Function Analysis: Defining the essential functions of a component or system.
  • Value Analysis: Evaluating the cost-effectiveness of each function.
  • Creative Brainstorming: Generating alternative design solutions to achieve the same function at lower cost.
  • Benchmarking: Comparing the design against industry best practices and competitor products to identify areas for improvement.

• Life Cycle Costing (LCC): LCC considers the total cost of ownership over the entire lifecycle of an asset, including initial investment, operation, maintenance, and eventual decommissioning. This holistic approach helps identify cost-saving opportunities that might be overlooked with a short-term perspective.

• Design for Manufacturing (DFM): This technique focuses on optimizing the design for efficient and cost-effective manufacturing. It considers factors such as material selection, assembly processes, and tooling requirements.

• Design for Assembly (DFA): Specifically focusing on minimizing the number of parts and simplifying the assembly process to reduce labor costs and improve efficiency.

Chapter 2: Models

Several models can support the implementation of DTC. These models provide frameworks for structuring the process and tracking progress.

• Top-Down Approach: Starts with the overall target cost and progressively breaks it down into individual components and subsystems. This ensures that cost constraints are maintained throughout the design process.

• Bottom-Up Approach: Starts by estimating the costs of individual components and subsystems, then aggregating them to determine the total project cost. This approach is useful for complex projects with many independent components.

• Hybrid Approach: Combines elements of both top-down and bottom-up approaches, leveraging the strengths of each method.

• Simulation and Modeling: Using computer-aided design (CAD) and other simulation tools to test different design options and predict their cost implications before committing to a final design. This allows for early identification and mitigation of potential cost overruns.

• Cost Estimation Models: Employing statistical models or expert judgment to predict the cost of different design alternatives. These models may incorporate factors such as material costs, labor rates, and project complexity.

Chapter 3: Software

Several software tools can facilitate the implementation of DTC:

• Cost Estimation Software: Software packages specifically designed for estimating project costs, often incorporating databases of material prices, labor rates, and historical project data.

• CAD Software: CAD software allows for detailed design modeling, enabling efficient value engineering and design optimization.

• Simulation Software: Software for simulating the performance and cost implications of different design options, allowing for informed decision-making.

• Project Management Software: Software for tracking project costs, schedules, and resources, enabling better cost control and monitoring.

• PLM (Product Lifecycle Management) Systems: Integrated systems for managing the entire lifecycle of a product, including design, manufacturing, and maintenance, facilitating cost tracking and collaboration across different teams.

Chapter 4: Best Practices

Successful DTC implementation relies on adhering to best practices:

• Early Involvement of Cost Engineers: Integrating cost engineers into the design team from the outset ensures that cost considerations are incorporated into every design decision.

• Clearly Defined Cost Targets: Establishing clear, realistic, and well-communicated cost targets is crucial for guiding the design process.

• Regular Cost Monitoring and Reporting: Continuously tracking project costs against targets and reporting progress to stakeholders enables early identification and mitigation of potential cost overruns.

• Open Communication and Collaboration: Fostering open communication and collaboration among all stakeholders ensures that everyone is aligned on cost objectives and design decisions.

• Iterative Design Process: Employing an iterative design process allows for continuous refinement and optimization of the design based on cost feedback.

• Risk Management: Identifying and mitigating potential risks that could impact project costs.

• Flexibility and Adaptability: Being prepared to adjust the design and cost targets as new information emerges and circumstances change.

Chapter 5: Case Studies

(This section would require specific examples of successful DTC implementations in the Oil & Gas industry. The following is a template for how case studies could be presented. Real-world examples would need to be researched and added.)

Case Study 1: Optimized Subsea Pipeline Design

• Project: Design and construction of a subsea pipeline.
• Challenge: High material costs and complex installation procedures led to initial cost estimates exceeding the budget.
• DTC Approach: Value engineering identified alternative materials and simplified the pipeline design, resulting in significant cost savings without compromising safety or performance. Life Cycle Costing analysis ensured long-term cost effectiveness.
• Results: Successful project delivery within budget and ahead of schedule.

Case Study 2: Cost-Effective Offshore Platform Modification

• Project: Modification of an existing offshore platform to enhance production capacity.
• Challenge: Balancing the need for increased capacity with minimizing downtime and capital expenditure.
• DTC Approach: A phased approach was implemented, prioritizing critical modifications with the highest return on investment. Innovative solutions were explored to reduce the cost of materials and labor.
• Results: Increased production capacity at a lower cost than initially projected.

(Further case studies could be added, highlighting different aspects of DTC implementation and the resulting benefits.)