Determining the Root Cause of Project Delay - Not as Easy as It May Appear

Jury Trial, North America

In this case, a dispute between a refinery owner and turnaround contractor concerned a two-month schedule overrun. The analysis required a clear view of what transpired versus what was planned, including a disruptive accident, late completion of repairs essential to start-up, and weather-related events. Our expert insight into turnaround execution, in conjunction with building a timeline of events, formed the basis of opinion that helped guide the settlement.

Not unlike an automobile, a refinery incorporates complex pieces of machinery that must periodically be inspected, maintained, cleaned, and "tuned up." However, refinery tune-ups-referred to as "turnarounds" in industry parlance-are significantly more complicated than those on a car. Refinery turnarounds are planned months in advance, and the schedule typically involves hundreds, or even thousands of individual tasks, many of which are interrelated and must be performed in a certain sequence. Because of the complexity of turnarounds, refinery owners usually engage outside specialty contractors to execute such work. Any interruption or delay in one turnaround task can negatively affect subsequent tasks, extending the turnaround schedule and often costing millions of dollars in lost production while the refinery is shut down. Establishing who or what may have been responsible for turnaround delays can lead to disputes between the owner and its turnaround contractors.

A refinery owner engaged several contractors to provide the manpower, equipment, materials, and tools to perform a turnaround. Originally scheduled to last two months, the turnaround took over four months. A few days into the work, a major accident involving an equipment subcontractor disrupted a critical work task, extending the entire schedule. The owner filed a major claim against the subcontractor. Had this been the only delay event experienced, the equipment contractor would have had sole responsibility. As the work proceeded, however, a number of other events occurred that extended the schedule.

Baker & O'Brien was engaged to conduct a detailed review of how the turnaround actually proceeded in comparison to the original schedule, with a focus on the actual identifiable impact of various delay events, including: (1) the early accident involving the equipment subcontractor; (2) the late completion of repairs to a key piece of equipment necessary for re-start of the facility; and (3) weather-related incidents, including two hurricanes.

Our report, which was submitted into evidence, examined the initial accident involving the equipment subcontractor to determine if it had an effect on the eventual duration of the turnaround. Similarly, the other delay events were analyzed to determine the impact to the downtime of the refinery. Following the deposition of our experts, the case settled prior to going to trial.

Gary N. Devenish

Vice President, Houston Office Manager

Industry
Petroleum Refining
Service
Insurance Claims / Litigation / Operations and Maintenance
Region
North America