8.

COST ALLOCATION AND DEFINITIONS

8_Cost Allocation and Difinitions

 COST ALLOCATION AND DEFINITIONS

CONTRACT NO. :

IKPT WORK NO. : PD. 14037

PROJECT : DAYUNG COMPRESSION PHASE-2 (DC-2) PROJECT

PLANT : DAYUNG COMPRESSION

WORKS : PIPING & PAINTING WORK

JOBSITE LOCATION : GRISSIK, PALEMBANG, INDONESIA

8_Cost Allocation and Difinitions

 INDEX

PAGE

1. GENERAL 1

2. CONCEPT OF COST ALLOCATION 2

3. DEFINITIONS OF COST ITEMS 4

3.1 Direct Work Cost 5

3.2 Indirect Work Cost 5
3.3 Overhead and Profit 6

4. CLARIFICATION AND INTERPRETATION 6

ATTACHMENT(1) TABLE OF COST ITEMS (P.1/23-23/23)

8_Cost Allocation and Difinitions

1. GENERAL

This "COST ALLOCATION AND DEFINITIONS" is prepared for both the INQUIRY and
CONTRACT purposes, and is intended to provide the BIDDERs or the CONTRACTOR, as the
case may be, with the firm interpretation of the cost structure as per IKPT's "Code of Account"
designed for adaptation to IKPT's project accounting system, by classifying various costs,
charges, expenses, taxes and similar impositions, fees and so forth for various works, services
and liabilities involved in construction works into respective cost items and work categories.

This "COST ALLOCATION AND DEFINITIONS" shall be used:

- in the INQUIRY DOCUMENTS -

as the directives to the BIDDERs how the breakdown of their offer prices should be made, in
order to ascertain that the prices quoted by the respective BIDDERs are all properly
categorized in the same manner and broken down as intended and required by IKPT, and that,
the prices and the breakdown thereof are adequately filled in to IKPT-furnished "Forms of
Proposal" which are attached to the Instruction to Bidders, and

- in the CONTRACT DOCUMENTS -

as an aid to the CONTRACTOR for the invoicing offices in order to ascertain that such
offices to be undertaken by the CONTRACTOR are made properly in accordance with
IKPT's Invoicing Procedure governing the payments to the CONTRACTOR under the
CONTRACT, which Invoicing Procedure is established for individual projects.

This "COST ALLOCATION AND DEFINITIONS" shall constitute a part of the INQUIRY
DOCUMENTS in the bidding stage, and shall eventually form an integral part of the
CONTRACT DOCUMENTS.

The terms and phases defined in the GENERAL TERMS AND CONDITIONS and in such
other documents as the SPECIAL CONDITIONS are also used in this document and, unless
specific remark is made herein, it shall be interpreted and construed that they have the
respective meanings assigned to them in such documents as referred to above.

2. CONCEPT OF COST ALLOCATION

The concept of "COST ALLOCATION" is as such that is given in Fig.-1 : "CONCEPT OF

COST ALLOCATION" which outlines the structure of the CONTRACT PRICE.

As shown in the Figure mentioned above, the CONTRACT PRICE

consists of:

8_Cost Allocation and Difinitions -1-

- Construction Cost which is divided into the two cost portions, i.e., "Direct Work Cost" and
"Indirect Work Cost and Expenses", and

- Overhead and Profit,

and the Direct Work Cost is composed of three(3) cost items and Indirect Work Cost and
Expenses consists of nine(9) cost items.

8_Cost Allocation and Difinitions -2-

 Fig.-1: CONCEPT OF COST ALLOCATION

1.1 Materials
a) Materials
1. Direct b) Transportation
Work and Insurance, etc.
Cost
1.2 Direct Labor

1.3 Construction Equipment

2.1 Common Temporary

Facilities
a) Construction
Facilities
b) Camp Facilities
Construction
Cost 2.2 Transportation and Insurance,
etc.
a) Construction
Equipment
b) Common Temporary
Facilities
Contract
Price 2.3 Material Handling
2. and Storing
Indirect
Work 2.4 Supervisory and Administrative
Cost and Staff and Laborers
Expenses a) Staff
b) Laborer

2.5 Traveling Expenses

a) Staff
b) Laborer

2.6 Camp Operation

2.7 Field Office Expenses

2.8 Home Office Expenses

2.9 Insurance, Taxes

and Duties

Overhead
and 3.1 Overhead and Profit
Profit

8_Cost Allocation and Difinitions -3-

3. DEFINITIONS OF COST ITEMS

In order to define the respective cost items, the following terms and phrases are used in this
document, and which terms and phrases, mean respectively as defined below:

1) "Prime cost" means the price, at which the equipment, materials, supplies, commodities,
consumables, utilities or others of the sort are estimated to be sold or supplied to the
BIDDERs or are to be sold or supplied to the CONTRACTOR, or the works or services are
estimated to be rendered to the BIDDERs, or are to be rendered to the CONTRACTOR,
and in which price, no expenses on the part of the BIDDERs or the CONTRACTOR, as the
case may be, in respect of purchase or taking out thereof are included.

2) "Overseas purchase" means the purchase of products available in the market in such
countries or areas other than the COUNTRY and includes the activities therefor.

3) "Local purchase" means the purchase of products available in the market in the
COUNTRY and includes the activities therefor.

4) "Staff" means the such personnel of management level as Field Manager, Construction
Manager and Administration Manager plus supervisory staff and other key clerical
personnel who assist such managers as aforementioned.

5) "Laborer" or "Worker" means foreman and skilled, semi-skilled or non-skilled worker of

respective classes up to Foreman, who are engaged in physical, clerical or non-clerical
works or services other than site-management, administrative or supervisory services
undertaken by such staff as referred to in Item 4) above.

6) "Domestic packing" means such types of packing which are intended only for domestic
transportations of cargoes within the country or area of origin or purchase, and does not
mean and include any such seaworthy packing suitable for export purposes.

7) "Domestic transportation" means such transportations within the country or area of origin
or purchase, up to the port of exit or, in the event of local purchase, from the place of
purchase up to the storage area or warehouse in the SITE.

8) "Export Packing" means such types of packing which are intended for international
transportations of cargoes, whether by land, sea or air, from the port of exit in the country
origin or purchase, to the port of import in other country, and includes such containers,
whether owned, non-owned or leased, for transportations of cargoes by land, sea or air
from a country to another as aforementioned.

The respective cost items in this document represent the categories of the materials, works,
services or liabilities, and against which, the cost involved therein is respectively set forth.
The summary of the structure of each cost item and the cost involved therein are specifically
described in the Attachment "Table of Cost Items" hereto.

8_Cost Allocation and Difinitions -4-

 The materials, works, services or liabilities enumerated in each of the categories are to be taken
as typical examples and are not to be considered to be limited to only those stated therein.

3.1 Direct Work Cost

"Direct Work Cost" is composed of such costs, expenses, charges, taxes and other similar
impositions, fees and so on which are respectively categorized into the following cost items,
and they are:

Cost Item 1.1 - Materials

a) Materials
b) Transportation and Insurance, Etc.

1.2 - Direct Labor, and

1.3 - Construction Equipment,

and, the summary of the structure of each cost item and the cost involved therein are
specifically described in the Attachment "Table of Cost Items" hereto.

3.2 Indirect Work Cost and Expenses

"Indirect Work Cost and Expenses" is composed of such costs, expenses, charges, taxes and
other similar impositions, fees and so on which are respectively categorized into the following
cost items, and they are:

Cost Item 2.1 - Common Temporary Facilities

a) Construction Facilities
b) Camp Facilities

2.2 - Transportation and Insurance, Etc.

a) Construction Equipment
b) Common Temporary Facilities

2.3 - Material Handling and Storing

2.4 - Supervisory and Administrative

Staff and Laborers
a) Staff
b) Laborers

2.5 - Traveling Expenses

2.6 - Camp Operation

2.7 - Field Office Expenses

2.8 - Home Office Expenses

8_Cost Allocation and Difinitions -5-

 2.9 - Insurances, Taxes and Duties

and the summary of the structure of each cost item and the cost involved therein are
specifically described in the Attachment "Table of Cost Items" hereto.

3.3 Overhead and Profit

"Overhead and Profit" is composed of such costs, expenses, charges, taxes and other similar
impositions, fees, contingencies, profit and so on which are categorized into the following cost
item, and it is:

Cost Item 3.1 - Overhead and Profit

and the summary of the structure of the cost item and the cost involved therein plus profit are
specifically described Attachment "Table of Cost Items" hereto.

4. CLARIFICATION AND INTERPRETATION

IKPT reserves the right for making interpretation and/or clarification of this document or any
part hereof. Should there be any ambiguity in this document or any contradiction or
discrepancy between the respective sections of this document or between this document and
other documents forming the INQUIRY DOCUMENTS or the CONTRACT DOCUMENTS
as appropriate, the BIDDERs or the CONTRACTOR, as the case may be, shall be required to
notify IKPT thereof in order to seek for IKPT's interpretation and/or clarification. In this
connection, the BIDDER or the CONTRACTOR, as the case may be, shall observe the
relevant provisions of the INQUIRY DOCUMENTS or the CONTRACT DOCUMENTS as
appropriate.

If any BIDDER or the CONTRACTOR fails to bring to due attention of IKPT any of such
ambiguities, contradictions or discrepancies as aforementioned, and if such failure on the part
of the BIDDER or the CONTRACTOR eventually results in misinterpretation or non-
clarification thereof, and in such a case, although any necessity for adjustment or correction of
the offer price or of the CONTRACT PRICE arises, IKPT may require of such BIDDER in
question or the CONTRACTOR, as the case may be, to adjust or correct the offer price or the
CONTRACT PRICE and/or the unit rates therefor, and in such an instance, the BIDDER in
question or the CONTRACTOR shall comply therewith.

Notwithstanding the foregoing, unless such adjustment or correction is to be made in the

manner favorable to the interest of IKPT, no adjustment or correction shall be permitted.

8_Cost Allocation and Difinitions -6-