The Relationship between Profit, Best Practices and Risk in Automation Projects

Peter Chipkin, President of Chipkin Automation Systems, submitted his ideas on creating a successful integration project. This article is the first in a series of articles that he hopes will encourage integrators who are considering taking on building automation projects to move forward with the confidence that they can, and will, be successful.  Peter is a Distributor of S4 Open Products in Western Canada and vertical markets and was last year’s winner of the S4 Group’s partner of the year. Thank you, Peter, for sharing your best practices.

The Relationship between Profit, Best Practices and Risk in Automation Projects

  • How do projects come in on time and on budget?
  • Design your solution using the best practices
  • Adopt the best practices in developing the budget
  • Build an effective team of practitioners (and outside consultants / experts when appropriate)
  • Execute the project using the best practices.

It is the best practices that help you develop meaningful budgets and profit projections and it is the best practices that allow you to manage and mitigate risk in such a way that you can regard your budgets and profit calculations as realistic.

Risk is not something to be scared of. It can be embraced and exploited and used as a weapon to turn a project into a profitable and functional success.

  • Embraced - in the sense that it can be identified and managed.
  • Exploited - in the sense that you can use your Best Practices (and hence risk management) to differentiate yourself from your competitors in terms of quality of deliverables.
  • Exploited - in the sense that managed risk can your bids more effective. The fewer unknowns in a project the less fat you need to build into your price.
  • Embraced - in the sense that profit comes from being on time, budget and quality.

Managing risk for Integration with Legacy Field Equipment

When a project is an upgrade an expansion or retrofit you will be working with equipment selected, designed and installed by others. Perhaps even more than one other company, because you might not be doing the first upgrade. This, quite obviously, presents some major risks. There are a few approaches to managing this risk. Many of the risks are well known and contractors have tons of experience at estimating / allowing for it / writing change orders.

But what about Building Automation Systems or Industrial Controls Systems upgrades? In the near past, this was not really an issue because closed systems meant there was little chance one vendor could replace the building level controllers of another vendor. The floor level networks were all closed. So an upgrade often meant upgrading everything – including a large amount of the installed equipment.  Now thanks to protocol gateway products this economic opportunity is available to competing vendors and the game is on, as they say.

If you manage or estimate or sell upgrades and expansions for Building Automation Systems and Industrial Control Systems then you need to be aware of the Best Practices and risks and how to manage them.  This article discusses these issues. It concludes by offering specific guidance for professionals who intend to upgrades which re-use existing trunks of devices by Metasys by Johnson Controls.

Three fundamental approaches addressing risk

  1. Investigate, mitigate and manage risk. Adopt Best Practices.
  2. Don’t accept Risk
  3. Take a chance.


Investigate, mitigate and manage Risk

Investigate, mitigate and manage risk – it all sound so sensible and obvious. However, there are two significant drawbacks to this method. When it gets done and who pays for it.

If the customer does not perform the investigation himself and includes the results in the bid package then you have to do the work yourself. You can build the cost into your estimate. Performing the activity should allow you to provide a reduced price since managed and mitigated risk doesn’t require as much contingency. If you don’t get the job you are out of pocket. The one bright spot is that the other bidders face the same dilemma. (Perhaps you can earn brownie points with the customer by discussing risk mitigation with them. It will make you look more professional.)

Even if you don’t get a chance to inspect the site properly there are things you can ask for and information you can ask for that will give you some very strong indications of the size of the risk.  Completeness of drawings, drawing age, model numbers indicate age and obsolescence, program files, screen shots, equipment lists, label files, operating procedures files, maintenance manuals and vendor documentation for field equipment. If a drawing has no changes since 1993 you can guess they are out of date. If you can’t get copies of the programming files, or if the copy you have is dated 1993 … you get the picture.

Don’t Accept Risk

You can contract out of risk provided that you know what to contract out of. Experience is a good basis for making a decision on what risks you face but it is not foolproof. There are times when we don’t know what we don’t know.  We would suggest that when you adopt a new technology, when you change your project execution style and when you do what don’t have experience with, then those are good times to do some investigation before you contract out of the usual suspects.

Is it possible to write a specification that can pre-define all the risks? Instead of investigating the quality of the existing installation you could say on your bid “This price subject to the following conditions …That all Metasys by Johnson Controls trunks currently meet the specifications and installation guidelines of the manufacturer …”Your customer may not want to accept that responsibility. They might suggest you get real. They may say “but these are 19 year old cables, touched by many service providers over the years … I can’t guarantee them…”

Chipkin Automation Systems is developing a specification that you could include in your contract. The developed document will be specific to Metasys. Check the page for updates.

Take a Chance

Presumably you will be looking for a new job in a new industry soon. Good luck.

Next month we will publish Peter’s take on key risk items when upgrading Control Systems.