John’s Law of 10

JOHN'S Law states, 'In any greenfields process plant project the value of the measuring instrumentation equals 10% of 10% of 10% of the capital value of the project'.

THE Law states, ‘In any greenfields process plant project the value of the measuring instrumentation equals 10% of 10% of 10% of the capital value of the project’.

Let me explain; consider the construction of a new mine in a mineral rich region of WA.

The BFS (Bankable Feasibility Study) estimates that the total cost of the project is $1 billion.

Of this 60% is allocated to the civil work, 30% to the mechanical design and supply and 10% to the electrical and utilities ($100million).

Of the $100 million for electrical and utilities, 60% is budgeted for the HT supply, transformers and site reticulation, 30% is allocated to utilities, boilers, water treatment, conveyors, etc, and 10% remains for automation and control ($10 million).

The $10 million automation package is than split 60% to the control system, programming and SCADA, 30% to the valves, drives, actuators and discrete I/O, and 10% for process measurement instrumentation ($1 million) – and the selection and procurement becomes the responsibility of a division of the electrical contractor, or even a dedicated instrument contractor. This explains the Law of 10 – of the capital amount, 10% of 10% of 10% is the value of instrumentation.

And without robust, reliable, accurate, best fit devices, correctly selected, installed and commissioned, the plant cannot function!

The corollary to John’s Law of 10 is John’s ‘Law of the Smallest Log gets the biggest Chop’.

To clarify, when the BFS has to be reduced (and for some reason it always has to!), where is the first area that the contractors reduce costs – instrumentation – the smallest category will get the biggest reduction.

Now the Law of 10 really starts to get interesting.

For historical reasons of ‘neatness’, the contractor segments the instrumentation package into various technologies – pressure, temperature, flow, level, analysis, vibration monitoring, gauges, gas monitoring, and possibly many more.

The duty (usage) and technical details of each and every instrument (5000-20000 in total) are listed under each category as a sub-package, each sub-package is then sent to 3 (or more) vendors, requesting the best price of a complying offer – let’s say 40 RFQs.

In due course about 30 responses are received from the suppliers, each of which is then evaluated technically for compliance, and commercially for price.

The lowest price for each category is selected, and the lucky vendors are issued with orders – somewhere between 20 and 30 (let’s say 20) orders are sent out.

The fun starts – each of the 20 orders have to be monitored for on-time delivery, and when they do arrive 20 inspections have to be coordinated at each of the supplier’s premises, 20 deliveries must be arranged to site, 20 sets of documentation (in differing formats) need to be collated, about 10 different commissioning and troubleshooting software tools need to be studied, 20 suppliers have to be contacted to arrange training, 20 suppliers must be paid and 20 performance bonds/retentions must be tracked, 20 different sets of commissioning spares must be logged and stored …. and the story goes on. This is enough additional work for 10 people for 4 months – at a cost of say $300,000.

If we consider that the original bids from the suppliers varied from lowest price to highest price by 30% max, the potential saving would be $300,000.

So where is the saving? Why not select a project partner? Maybe the saving would only be $150,000. But it would mean one order, one inspection, one delivery, one set of documents, one point of contact, one trainer, one performance bond, etc, etc.

The reason most often stated goes along the line, ‘putting all eggs in one basket’ – humbug!

Endress+Hauser Australia Pty Limited

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