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Revamping Projects
Oil & Gas Downstream Projects
4. Contracting for EPC phase
In general will include several disciplines: For an equipment or materials issued from “standard”
engineering … fabrication, construction fabrication
May be performed at several sites including the final Fabrication will take place at supplier’s and /or sub-
project site supplier’s premises
The contract documents are based on Company’s The purchase order is based on supplier’s definition as
detailed requirement agreed by buyer
The result of the work will be checked at the Owner The result of the supply will be agreed at delivery (with
Site a warranty period)
Overall responsibility of the Work, liability could be Responsibility limited to the supply and the compliance
very large. i.e 100% with the specification.
Payment can be by unit rates, time rates, progress, Payment through milestones is the normal procedure
milestones
What qualified resources does Owner have now ? And in the future ?
Separate contracts
• Not too common in Revamping projects (too many interfaces)
• Owner keeps better control of activities, but needs resources
Combined contracts
• EP: Engineering, Procurement (transportation may be included or
not), and usually construction & commissioning assistance
• EPC: Engineering, Procurement, Construction/Installation
(Operations taking care of Commissioning/Startup). Common for
Revamp projects
• EPCC: E.P.C. + Commissioning
• EPCCS: E.P.C. + Commissioning and Startup (very seldom for
Revamps, but possible for Medium-Size grassroots projects, with
Owner-loaned team)
DETAIL ENGINEERING
DETAIL ENGINEERING DETAIL ENGINEERING PROCUREMENT PROCUREMENT
PROCUREMENT PROCUREMENT ASSIGNMENT
LONG LEAD ITEMS
SUPPLY
OTHER EQUIPMENT SUPPLY SUPPLY LONG LEAD ITEMS
BULK MATERIALS ASSIGNED L.L. ITEMS
BULK MATERIALS
CONSTRUCTION
CONSTRUCTION INSTALLATION BULK MATERIALS BULK MATERIALS
CONSTRUCTION CONSTRUCTION
Lump Sum
• Pros: clear definition of work, final price fixed, Contractor responsibility
• Cons: long tendering period before contract award, rigidity, schedule
• Common for Grassroots (even medium-size), difficult for Revamps
Reimbursable
• Pros: quick contract award, global project schedule shortened, flexibility
• Cons: final price not firm, large Owner supervision team
• Owner may be assisted by a PMC (Project Management Consultant)
Owner has to manage early interface risks (FEED, early contracts, LLI)
Owner has limited flexibility to make late scope changes (even if justified)
Ready for
Commissioning Ready for Provisional Final
(mechanical start-up acceptance acceptance
completion)
Idea
Contracting
Detailed Engineering
Concept and/ or
Direct CFT
Procurement
(Simple Projects)
Proceed to Basic
(Fabrication),Construction,
Basic (or FEED) Commissioning, Start-Up, Perf.Tests
Engineering
Mechanical Completion
Provisional Acceptance
For an EPC contract, all tasks regarding the procurement and the initial
steps of the LLI supply remain under the responsibility of the Owner
The endorsement by EPC Contractor of the LLI supply has to be
implemented as early as possible during the tendering phase
CONTRACT STRATEGY
PLAN
Contracts Scope / Split
COORDINATION
Award type / Schedule
MEETING
INSTRUCTIONS TO TENDERERS
ITT (Introduction & Instructions)
Objectives
• Ensure a fair and equitable treatment of all tenderers
• Select the best contractor after an open competition
• Assure the best acceptable conditions for Owner
EPCC LSTK PROJECT (Compl. 1994): GRASS ROOTS PLANT (Compl. 1994) 2x400 MMSCFD
Trains; 2nd Train to be completed rapidly
STEPS
EVALUATION TABLE
When an ITT includes a FEED, and if the construction execution plan is based on unit-rates
contracts (x) per trade, the proposal critical path usually goes thru:
Preparation of MTOs and BOQs for construction contracts
Issue of inquiry package to the potential construction contractors (unit rates contractors
& others)
Preparation of bids by construction contractors
Receipt and review of these bids, Preparation of comparative construction estimates,
finalization of construction estimate
Estimate of related « contingencies » (MTO allowances, provision for changes...)
Input to Project estimate
Finalisation of construction execution plan; Management Price reviews
Preparation of commercial proposal with corresponding required price break-downs
and unit prices
Dispatching of the proposal (generally in sealed envelopes hand delivered at Owner
3 : good
Engineering quality 2
Procurement quality management 3
Capability adapted to scope 3
Job conformance to tender 3
Conformance to contract terms 2
Conformance to schedule 3
Quality control performance 2
Safety control performance 3
Quality of studies & technical documents 1
Management administration of project 3
Adaptability to changes 1
Subcontractors selection quality 3
Relations with client