Risks in power plant OMMI (Vol.

1, Issue 3) December 2002

APPLYING ENGINEERING CONTRACTOR SKILLS TO MANAGE AND

MITIGATE RISKS ON POWER PLANT
D J Irving, Mitsui Babcock Energy Limited, Renfrew, UK

(Eur Ing) David Irving has over twenty years experience in the
energy industry, the vast majority being spent with Mitsui Babcock,
and with most of his work having been associated with mechanical
integrity. In Mitsui Babcock he is mainly involved in the provision
of specialist technical services, aimed at assisting energy plant
operators plan and implement operations and maintenance strategies
to maximise plant life, optimise reliability and comply with
legislation (e.g. emissions, safety). He has also been involved in
negotiations for plant rehabilitation and upgrade projects. His
current position is Sales and Business Development Manager, with
particular responsibility in a number of technology based business
streams which address integrity issues throughout the thermal
power, nuclear and oil/gas sectors.

ABSTRACT
This paper describes how Mitsui Babcock, the UK based energy products, services
and business solutions provider, is assisting asset owners and operators to reduce
technical and commercial risks to their businesses. Examples are provided of work
being carried out to mitigate the risk of plant failure using design assessment, risk
based strategies, and physical testing. Information is included on how imaginative
commercial arrangements (such as self financing schemes) between engineering
contractors and asset owners/ operators, can contribute towards reducing business
risk.

1. INTRODUCTION
As commercial pressures on power plant operators increase, more attention is being
focussed on the measures which can be taken to manage and mitigate technical and
business risks.
Technical risk management tends to concentrate on the prevention of plant failures,
which can cause unscheduled downtime, safety incidents and loss of income. Actions
to minimise such threats typically comprise development of risk based maintenance
and inspection strategies, together with design and operation reviews, and analysis of
the likelihood and consequences of failure. Such analysis is often backed up by
detailed condition assessments and inspections, reviews of operation and maintenance
histories, and design (code based or by analysis e.g. finite element). Full scale
physical testing in controlled environments can also be appropriate when analytical
design does not provide sufficient reassurance that plant will operate reliably and
safely. The suitability of these strategies can vary depending on a number of factors
Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 2

including operating regimes and demands of licensing authorities and regulatory

bodies.
Business risks which may adversely affect profitability can be more difficult to
identify and therefore more difficult to quantify and manage. Any aspect of an asset’s
operation which limits output from design conditions is a business risk, but
justification to devote resources to address such issues can be very difficult. The
situation often demands a step out in faith to encourage those involved to explore
where improvements could be made, without introducing additional risk. A
constructive working relationship between the asset owner and other organisations
with appropriate specialist skills can contribute greatly to improving the business
performance and mitigating risks to mutual benefit.
Historically, the suppliers of equipment, services and turnkey project capability have
concentrated on protecting their own business interests when bidding and executing
contracts. However, the development of closer working relationships between
contractors and asset owner operators has increased in recent years, either through
long term alliances or one off projects, to the point that contractors are encouraged to
share risk and benefit from client success throughout the life cycle of the assets.

2. MINIMISING TECHNICAL RISKS

2.1 Thermal Plant Design and Operation

Reducing the threat of unplanned plant failure is one of the main priorities of asset
owners and new measurement techniques continue to be developed (Ref 1).
Technologies which relate the mechanics of potential failures to risk analysis models
have resulted in a number of tools being commercially available. To be effective,
these tools must be able to accommodate variations in plant operation and
maintenance strategies as well as the actual and predicted trading conditions which
could influence plant reliability. Their success is also dependent on the correct
fundamental engineering principles being applied.
One particular threat to thermal power plant is a requirement to operate in cyclic
modes, usually due to changes in electricity trading arrangements or fuel prices, when
the plant was originally designed for base load operation. Many OEMs have
standardised designs at the cost of flexibility in order to remain competitive, and
market pressures are now testing their designs through gas turbine upgrades and
cycling. Frequent start ups and shut downs lead to thermal transients which can
damage pressure parts, casings and structural members, as well as creating process
difficulties such as an increase in condensate formation during start up purges. The
integrity of the plant can be further jeopardised depending on which design codes
have been applied with, for example, the value of full header to tube welds as opposed
to partial penetration welds now being taken more seriously. Figures 1 and 2
summarise the main issues which can be troublesome on CCGT plant. Potential
difficulties on utility boilers can be similar in nature, especially where there are
significant thermal gradients throughout the circulation paths, which are a typical
cause of tube failures. The risk of lost availability, and the consequential penalties in
certain trading markets, needs aggressive management.
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1. Pump life
2. Dew point corrosion
3. Common header dam
plate bending
4. Inadequate drains, failure
or control issues
5. Tube bank dry out/
vibration
6. Header cracking
7. Pipework Fatigue

1. GT
ramp
S
rates
2. EGT
3. Gas
1. Hot liner pin failures/ casing
leaks
2. Hot casing leaks
3. Expansion Joint stiction / leaks

Figure 1: Horizontal Tube Bank/Assisted Circulation – Forced Outage Risks

1. Dew point corrosion

2. Common header
dam plate bending
ST

1. Pipework Fatigue
2. Header cracking
3. Tube bank dry out/ vibration
4. Inadequate drains, failure or control
issues

1. Hot liner pin failures/ casing

leaks
2. Hot casing leaks
3. Expansion Joint stiction/leaks

Figure 2: Vertical Tube Bank/Natural Circulation Forced Outage Risks

Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 4

Mitsui Babcock has developed a risk based approach to identify the aspects of the
plant which may require modification to ensure safe and reliable service during
periods of cyclic operation (Ref 2). Optimisation of operational procedures especially
during transients is also integrated into the assessment. Mitsui Babcock apply a health
check approach, which comprises a combination of reviewing the design, the
historical operating conditions, and the current condition. Table 1 shows a typical
likelihood and consequence analysis and Figure 3 provides an overview on a typical
power plant of how priorities can be presented, with certain issues being generic in
nature and others more plant specific.
This risk based approach has proved invaluable as a rationalisation and prioritisation
tool, ensuring resource is devoted to the areas which really are at risk. Owner
operators can use the results of this approach to plan their long term strategies for the
asset, while also minimising difficulty gaining insurance cover.

Table 1: Typical likelihood and consequence analysis

Likelihood Consequence
(L) (C)
Time Cost Safety/Performance/Life
High L>70% Immediate >$500K Plant failure and safety
Shutdown with risk. Unacceptable
up to 3 months component life
lost availability reduction
Medium 30%<L<70% Shutdown after >$100K Minimal plant safety
4 hrs One week risk. Some secondary
lost availability damage. Significant
component life
reduction
Low 10%<L<30% Minimal lost <$100K Little Effect on safety,
availability or performance and life.
continue
production with
additional
monitoring
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Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 6

2.2 Refining Risk Based Strategies

With a small number of critical components such as major pressure parts on a boiler, a
clear picture emerges fairly quickly as to where the threat of forced outage is likely to
arise, and where remedial work should be focussed. However, on certain areas of the
plant, where there may be a large number of similar components, it is often the case
that a large proportion of items or locations land on the same area of the
likelihood/consequence criticality matrix. This is because the likelihood of failure is
almost impossible to distinguish between different items without embarking on a
quantified risk assessment on every item which would not only be uneconomic in
most cases, but would produce a final result which is subjective and open to different
interpretation.
Mitsui Babcock is developing and refining risk based strategies which entail closer
scrutiny of the consequence of failures (Ref 3), the model being shown in Figure 4.
Recent work to develop hydrocarbon leak reduction strategies attaches a normalised
scoring system to a predefined list of aspects which would be affected in the event of
a failure. The list is mainly influenced by the business drivers of the owner/operator,
examples being the business, the asset, people and the environment. Typical
information on which the model is based would include the mechanical configuration,
operating regime, process conditions, and other supporting information such as
Control of Substances Hazardous to Health Regulations 1999 (COSHH) assessments
at each location of interest, with the results presented as a database (Figure 5). (Note
the purpose of Figure 5 is to demonstrate the principles of highlighting items of
concern and is not intended to be read in detail.)
The indirect effects of the failure and how it might escalate are studied with the
implications on adjacent equipment or components, the threat to personnel, the
environmental effect as well as the financial implications such as lost production and
cost of repairs. The scoring is therefore more customer driven than the conventional
criticality matrix, and can be modified to accommodate changes e.g. configuration,
operations, manning and other failure mechanisms.
Reporting is by exception as extracted from the database, and risk is evaluated for a
range of operating conditions, not necessarily the most onerous. This can be
important with potentially damaging natural acoustic resonances being excited at
specific process conditions a typical example. Further techniques such as on line
monitoring, Finite Element Analysis (FEA) and Computational Fluid Dynamics
(CFD) can be applied for further reassurance where necessary.
This approach has been used to rationalise inspection programmes, by focussing on
high risk areas. On one recent example for a major energy plant operator, an original
list of over two thousand locations which were thought to require detailed review
within a leak prevention strategy was reduced to less than 5% of the original which
resulted in major inspection cost savings and confidence that failure risk had not been
increased.
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Input Data

Plant Process Escalation Environmental

Severity Severity Severity Severity

Likelihood Total Severity

of Failure (Consequence)

Risk
Figure 4: Consequence Model
Risks in power plant OMMI (Vol. 1, Issue 3) December 2002

Figure 5: An Example of Database Following Application of Consequential Model

Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 9

2.3. The Role of Testing

Demonstrating code compliance of pressure parts, pipework and structures within risk
assessment strategies is a requirement for all power plant. In the nuclear industry
sensitivity to the possibility of failure is particularly intense, with regulatory bodies in
place to police asset integrity issues. The development and application of a nuclear
safety case often relies on a combination of design by code and /or analysis, but there
can be occasions when this does not provide sufficient reassurance to the licensing
bodies. Codes and standards have been created and developed to address risk, but the
conservatism which typically exists in codes can make the difference between a
licence to operate being granted or not, with obvious implications on the risks to the
plant owners business.
To overcome this potential impasse, the use of testing must be considered. Opinions
throughout industry on the relevance, cost effectiveness and applicability of testing
has varied in recent years. It is believed in some quarters that computational analysis
techniques have become so advanced that material behaviour can be predicted with
more accuracy than ever before. In addition there is a perception that testing is
expensive.
One example on which Mitsui Babcock have been heavily involved is a nuclear power
station which had been in operation for 35 years, and which was being assessed for
suitability to operate for a further six years. Seismic loading had not been a factor in
the original design calculations, but updated rules required the plant design be
modified to accommodate seismic events. Code calculation checks indicated that
some reinforcement was required, and this had to comply with ASME III. The
components to be reinforced were the main beam support brackets and auxiliary
beams as shown in the boiler layout (Figure 6). There were severe restrictions in terms
of access, and reinforcement which could physically be accommodated could not be
designed to be code compliant by standard calculation routes. Rather than embark on
complex and potentially inconclusive analytical techniques, the licensing authorities
agreed that a test programme in controlled laboratory conditions could be
implemented to prove the proposed reinforcement design (Ref 4).
Preliminary design work was performed to confirm the loads which the components
would have to withstand under steady state and seismic conditions, and full scale tests
were carried out using lower bound material properties and a range of weld
dimensions, in built defects and worst case loading positions. The ability to vary weld
profiles (or omit welds completely from certain locations) provided an opportunity to
simulate a wide range of worst case situations which analytical models would struggle
to analyse. Figure 7 shows the reinforcement bracket under seismic loading, Figure 8
the vertical load to failure test, Figure 9 the torsional stability test for the main beam.
The results of the tests as shown in Table 2 concluded beyond any doubt that the
proposed design would withstand the anticipated loadings.
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Table 2: Maximum Test Loading (In Service Conditions)

MAXIMUM TEST LOADING (IN SERVICE CONDITIONS)

Main Beam Bracket Reinforcements

Design: Vertical to 1426kN (249kN), Horizontal to 686kN (174kN)
Reserve Factor = 1.44 to 2.13Seismic:Vertical to 1446kN (459kN), Horizontal to
558kN (215kN),
Reserve Factor = 1.32 to 1.95

Auxiliary Beam Reinforcements

Design: Vertical to 376kN (186kN), Longitudinal to 208kN (102kN)
Reserve Factor = 1.34
Seismic - Vertical to 440kN (357kN), Longitudinal to 75kN (58kN)
Transverse to 75kN (20kN) :
Reserve Factor = 1.16

Main Beam/Auxiliary Beam StabilityTests

Design + Seismic Vertical to 1035kN (305 + 279 kN)

The experimental reserve factors (the range resulting from the different weld
configurations) were far in excess of those calculated by code methods, which were of
the order of 0.6, which would have rendered the design unacceptable for continued
operation. The testing programme revealed how conservative the codes are, and that
localised yielding of the material does not necessarily constitute a loss of function.
The ductility of the reinforcement designs was shown to be a crucial factor in the fit
for purpose analysis, and although deflections were perceived to be high from visual
observation, the integrity and strength of the material was still acceptable.
Without the tests, justifying the risk to continue operation would probably not have
been possible. The costs associated with designing, building and running test rigs
were significant, but relatively small when compared to the implications on the future
of the power station.
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Fig. 6: Layout of Boiler Internals

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Figure 7: Main Beam Support Seismic Testing

Figure 8: Main Beam Support Vertical Load Testing

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Fig. 9: Main Beam Torsional Stability Test

3. MINIMISING BUSINESS RISK

3.1 The contractor/customer relationship
Historically, the relationship between engineering contractors and customers was not
generally conducive to each party working towards project success, with risk
management within each party being mainly focussed on minimising risks to their
own businesses.
The need for a different way of working has been recognised by many contractors and
operators alike for perhaps the last one to two decades. This has resulted in
engineering contractors re-appraising the source of risks and aligning themselves to
the risks that their customers experience, on the basis their customers’ success will
result in growth for their own business. Applying these principles can take several
forms, from the now well established outage alliance approach through to other
imaginative methods of adding value to the customer’s day to day operations.
3.2 Outage or project alliances
One trend in the power industry has been for engineering contractors and plant owners
to form alliances or other business agreements which secure mutually beneficial long
term relationships aimed at strengthening the business of each organisation.
Establishing and sustaining such relationships has an immediate impact on the risk to
Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 14

which those involved are exposed. Close working relationships require the sharing of
commercial risk, confidentialities, joint objectives and investment into each others
businesses to ensure success.
The use of alliance relationships are fairly well established in the outage repair and
maintenance arena. The successful execution of an outage has a significant effect on
meeting statutory requirements of the industry inspectorate and maximising the
financial return from the asset through high availability and good performance. The
measures typically set in place to ensure the mutual aim of take the form of Key
Performance Indicators, where the contractors income is derived from factors such as
availability, quality, health and safety and programme. It is often the case that the
contractors profit element is solely based on such performance criteria. With plant
performance forming such a high proportion of this income, the contractor is
committed to sharing significant commercial risk and will do its utmost to ensure the
plant performance criteria are met. The development and management of target
costing on projects also results in the risk share principles being a mutual driver to
control costs.
Contractor’s risks can be brought about by factors outwith their control, particularly
when income is influenced by station performance. Even if the outage has been
executed as planned, external trading conditions or issues with plant not included in
the contractors scope can lead to a deterioration in performance, which then impinges
on the contractor’s income. One other risk to guard against is complacency which can
arise for very positive reasons i.e. the close working relationships between individuals
in each organisation. It is vital that the disciplines in authorising work and
maintaining quality standards are maintained, and that the enthusiasm from those
involved does not result in short cuts which could cause difficulties at a later time.
3.3 Added Value Projects
There are many aspects of day to day operations which can adversely affect financial
performance and can be construed a risk to the asset owners business. Such risks tend
not to be associated with catastrophic failure, but are of a more commercial nature.
They can arise from best practice during operation and maintenance of the asset not
being applied and because the asset is profitable, they can go unnoticed. In many
production facilities, often with a history of de-manning to meet business objectives,
personnel are fully occupied ensuring the facility either operates when required or is
ready to do so. The opportunity never seems to arise to consider how working
practices, or plant configurations could be altered to improve the business.
A step out in faith is therefore required, and in Mitsui Babcock experience, the
engineering contractor can be a catalyst for improving the respective businesses
through added value projects. The temporary secondment of technical personnel from
an external organisation is a means of addressing this difficulty. Selection of the
individual(s) is vital, because as well as being able to input ideas and knowledge,
success will hinge on personalities. Both the operator and the contractor have to be
willing to accept there is value in assigning suitable qualified engineers, on a value
added basis i.e. without direct responsibility to execute programmes of work (outages,
repairs, maintenance, statutory inspections), but with a remit to simply “to make
things better”.
As commercial pressures on operators increase, obtaining capital sanction for
improvement schemes becomes more difficult, particularly when the nature of the
Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 15

improvement, no matter how well justified, falls outside the normal parameters to
gain internal approval. The concept of self financing schemes then becomes a more
attractive proposition as long as funding can be arranged. In return for finance from
external sources, such as the contractor, the operator sacrifices an agreed proportion
of the savings which the project generates.
With contractor personnel integrated into the operations group, ideas are developed
jointly for plant improvements, with an estimate of attendant benefits. The joint
decision as to whether or not a project is to proceed is based on an assessment of the
payback period and project risk, with both parties sharing the information on which to
base their decisions. The contractor’s profit is only provided from the shared actual
benefits after the costs have been recovered. The contract can be written to
incorporate an effective “no cure, no pay” type of agreement.
The major risk is with the contractor both in terms of financing employees to become
a member of the operations team site, and funding the cost of designing and
implementing the scheme. Operator risks effectively commences on implementation
of the project, when modifications to the asset could impinge on production.
Commitment from all parties is crucial at this stage to see the project through to
completion, despite short term inconvenience.
Mitsui Babcock has established an alliance with a major plant operator at a site where
several industrial scale boilers provide steam for process (approximately 300 T/h) and
power (approximately 20MW). The agreement is based on the cost utilisation of the
plant and uses a fundamental fuel in/steam out basis, with some other features to
accommodate the operators business drivers.
To date three projects have been implemented and successfully completed under the
partnering contract, these being:
• An existing, but unused feedwater heater was relocated to an operating
boiler which resulted in a reduction in fuel consumption by the boiler for
the same evaporation. The capital expenditure was incurred by Mitsui
Babcock with an estimated project payback of 3 years, the estimated added
value to the client is twice the original outlay based on a ten year project
life
• A tubular air heater was found to be in a poor state of repair with
significant leakage, and air bypassing the furnace reduced output from the
boiler, through fan restrictions. The air heater refurbishment allowed full
load to be achieved for the first time in many years and also allowed an
older, less efficient boiler to be disinvested. The benefits arising from this
project were due to the higher efficiency of boiler and the savings from not
having to maintain the older boiler. The capital expenditure was again
incurred by Mitsui Babcock with an actual project payback of 15 Months,
and the estimated added value to the operator over ten years is estimated to
be over three times the original capital cost.
• It was estimated that the manufacturing complex was potentially losing
money flaring excessive fuel gas production from the process. An
investigation by Mitsui Babcock found that the installation of new gas
burners on two boilers would significantly reduce the volume of excess
fuel gas produced. The project was a greater success than pre-installation
Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 16

analysis predicted and was subsequently a major factor in the site

operating without this issue impacting the refinery performance for the
first summer in many years. The project payback is expected to be 18
Months, with a ten year payback of six times the original value to the
operator.
Other additional improvement projects that are under investigation include:
• Reducing the boiler operating excess air, by improving the instrument and
control scheme.
• Implementing an on-line system for removing catalyst deposits from a
waste heat boiler. The deposits of the catalyst build up and reduce the heat
transfer properties necessitating an outage to manually remove the
deposits.
• Replacement of the steam turbine prime mover for the FD and ID fans on
two boilers with electric motors and variable frequency drives.
• Increasing the gas firing to the remaining operational units to increase the
capacity of the units and optimise utilisation of the gas supply handling
facility.
Each of the three projects completed has been in essence a learning process and it
could not be said that the partnering agreement was an instant success. Patience and
trust was required prior to implementation of the three projects. The successful
implementation of the completed projects has formed a solid foundation of trust and
willingness to manage risk.
The closer integration of the Mitsui Babcock engineer within the plant utilities team
has produced benefits for both parties. For Mitsui Babcock this has taken the form of
additional contracts, for the client it has been a different perspective on dealing with
certain plant problems.
3.4 The Value of Long Term Relationships
All forms of contract have an element of risk to the contractor, and this is normally
assessed and allowed for in the pricing structure as indicated in Figure 10. Schedules
of rates have a low level of risk to the contractor, but cost effectiveness tends to be
low as there is little scope for improvements. Similarly all contracts have a different
cost effectiveness and risk profile for the asset owner.
The outsourcing of operations and maintenance activities on specific plant areas such
as fuels handling, fuels processing on larger stations, and for the whole operation on
smaller sites is now established. As a contract develops over time, and experience of
the personnel increases, the cost effectiveness (i.e. potential to maximise profitability)
also rises as shown in Figure 11. The risk perception at the start of the contract
gradually changes following contract implementation. For example target price and
performance based contracts have the same level of cost effectiveness, but the level of
risk reduces as the contract proceeds.
Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 17

Fig. 10: Risk Profiles for Various Contract Types

Figure 11: Risk Variation During Contract Development

Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 18

In Mitsui Babcock’s experience the benefit of each party seeking to ensure the
relationship is long term and working together through the inevitable difficulties has
been proved on several occasions. Figure 12 shows the financial profile of the
sootblower spares expenditure and manhours expended on plant at the 2000MW
Ferrybridge C coal fired station in England, where Mitsui Babcock provides
operational maintenance services (Ref 5). Over a period of four years, a cost reduction
of almost 60 % has been achieved on sootblower spares expenditure and over 20% on
manhours, with no adverse risk implications. This is not the result of any one major
change, but has arisen from continuity and flexibility of personnel, joint working to
improve maintenance and operating procedures, and acceptance of each parties
position on risk management. The ability to flex resources is a vital aspect, with risk
minimised by the contractor being able to dedicate resource when required, which is
not possible using the operators in house personnel. The alternative is for the operator
to supplement core personnel with contract labour, but the incentivisation does not
exist in such arrangements to encourage the proactive approach required for a culture
to improve the returns from the asset.

Fig. 12: Expenditure and Manhour Profiles

Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 19

Scope often exists to extend relationships by the introduction of other specialist

services offered by the contractor. This can bring risk management to a diverse range
of topics associated with the operators business. For example, an energy management
approach can encourage the principles of self financing projects once the contractor
has gained operational experience on the asset. A similar situation exists with the
strategy for spares procurement and inventory control depending on how specialist the
component is i.e. if the spare component is widely used across industry sectors then
the use of internet companies can quickly source items. However, for a bespoke major
spare like a utility boiler header or drum, or components for burners or milling plant,
then developing the strategy with the engineering contractor can be advantageous. A
long term relationship with a contractor who is able to supplement site project
services with specialist manufactured products can minimise lost production risk once
the requirement to replace a component is agreed. The potential for the contractor to
secure more favourable terms with suppliers on material price and delivery through
volume sales can bring a competitive advantage to both parties, and form an integral
part of the risk based management strategy for the asset.

4. CONCLUSIONS
There are opportunities for the owners of power generation equipment to improve the
management and mitigation of technical and commercial risks to their businesses by
enlisting the skills of appropriate multi facetted engineering contractors. The
contractual arrangements can be established to encourage the contractor to share the
risks and to receive income which is related to the profitability of the asset.
The increased requirement of onerous operating regimes, such as frequent start ups
and shut downs, has highlighted the risk of forced outage of equipment originally
designed for more stable or base load operation. Risk based strategies for specialist
components can be relatively simple, but for high volume standard items, the risk
management process must provide a more detailed analysis of the consequences of
failure, and the potential risk of escalation.
When reviewing the suitability of designs for continued operation, code based design
standards are frequently conservative. Although viewed in some quarters as
prohibitively expensive, the implementation of a full scale laboratory testing
programme can mean the difference between an asset being granted a licence to
operate and being forced to either implement uneconomic remedial work, or cease
operation.
The identification of other risks to profitability brought about by assets not operating
to full capacity can be overcome by working with contractors, who are prepared to
commit resources and possibly finance, to implement improvement programmes. The
establishment of alliance partnerships during outages or major projects has become an
established aspect of the power generation business. There is greater overlap in
resultant risks to which each party is exposed when compared with traditional
contracting, and it is in the interests of the contractor to ensure the project succeeds, as
rewards are related to the profitability of the asset.
Seconding contractors’ engineers into the operators organisation on a value added
basis can provide the catalyst for improvement programmes, although selection of the
Risks in power plant OMMI (Vol. 1, Issue 3) December 2002 20

right individual(s) in terms of experience and personality is crucial. Such an

arrangement provides the ideal platform for instigating self financing improvement
projects which would otherwise not qualify for capital sanction. Both parties can base
their risk assessment on the same detailed plant performance information, which
would not occur in a more traditional contractor/client relationship. When providing
the front end engineering together with the finance the contractor is exposed to a high
level of risk compared with the operator, but significant gains will result in the longer
term for both parties when the project is successful.
Management of the risks associated with long term contracts such as operational
maintenance or energy management can improve as the relationship develops and the
contractor’s familiarity with the plant increases. The advantage to both parties of
persevering to sustain a long term relationship may take time to come to fruition, but
through imaginative commercial arrangements such as self financing improvement
projects and a belief from both sides that the arrangement will work, the results can be
very satisfying.

ACKNOWLEDGEMENTS
The author wishes to thank the many colleagues who have contributed to the
preparation of this paper through their dedicated efforts and hard work during the
execution of the projects described. Several other colleagues contributed by sharing
their ideas based on their day to day experiences with Mitsui Babcock clients and
alliance partners, and the author is greatly indebted to them for their invaluable
assistance.

5. REFERENCES
1. J M Farley, J A Pugh, G McMillan & T Addie “Boiler Failure Mechanisms and
Damage Detection Techniques” Mitsui Babcock Internal Technical Report 1997.
2. D J Spalding “HRSG Plant – Risk Management for Flexibility – A Changing
Perspective” IIR Conference on Maintaining Reliable and Flexible CCGT Operation
Under NETA in London April 2002.
3. D H Mitchell “Technologies for Pipework Integrity Management” Mitsui Babcock
presentation at the opening of the company’s new Technology and Engineering
facility in Renfrew, Scotland. October 2001.
4. A V Holt “Code Compliance – An Alternative Approach for Plant in the Nuclear
Industry” British Institute of Nuclear Engineers Conference on Trends in Power Plant
Operation and Maintenance in Warrington, UK. November 2001.
5. M Frith & M Gee “New Approaches to Repair and Maintenance Contracts for a
more Flexible Service” IIR Conference on Operations and Maintenance Strategies in
London. November 2001.