KUWAIT OIL COMPANY (K.S.C.)

Transcription

1 KUWAIT OIL COMPANY (K.S.C.) ALTERNATE CONTRACTING STRATEGIES FOR EPC BY D.RAMESHBABU SNR. ENGINEER

2 S OF COMMON S S OBJECTIVE Primary aim of this presentation is to present the various contracting options for executing major construction projects and enumerate the criteria used to select the most suitable option.

3 S OF COMMON S S WHAT IS A CONTRACT? It is an agreement between two or more entities with legal binding, enforceable in a court of law to execute: A defined scope of work. At an agreed price. Within a specific duration. At a specified Quality and Within the frame work of other agreed terms.

4 S OF COMMON S S Unwritten Generally between known entities and / or simple low value jobs S OF Written Commonly between commercial establishments and for complex medium and high value jobs

5 S OF COMMON S S COMMON S Contract types are generally categorized based on how the cost is disbursed to the Contractor ie.

6 S OF COMMON S S UNIT RATE / RE METHODOLOGY Client issues estimated Bill of Quantities (BOQ) in the Tender. Bidders quote a unit rate against each BOQ item to build up the total contract price which is based on NTEV. Successful bidder is selected on the lowest price quoted. During execution, the actual quantities executed under each BOQ item is jointly measured and valued at the quoted rate for interim payment purpose. At the end, final executed quantities will be again re measured and valued to evaluate the final account. In case of variation or additional works which do not have BOQ rate(s), both parties agree new rates for valuation.

7 S OF COMMON S S UNIT RATE / RE NATURE OF PROJECTS WHERE IT CANBE UTILIZED This contract type is more suitable for construction and supply projects where the different types of items, but not their numbers, can be accurately identified in the contract. A few examples are: Security fencing Road Laying Construction of Pipelines Cable installation Construction of simple buildings / storage facilities etc. It can also be used for Maintenance service contracts

8 S OF COMMON S S UNIT RATE / RE Advantage Disadvantage

9 S OF COMMON S S METHODOLOGY In this kind of contract, bidders quote a Fixed/Lump sum fee against a defined scope of work provided by the Client based on completed FEED. Lowest complying bidder is awarded the contract. During execution, the contractor is paid periodically based on the actual project progress. Generally there would not be any changes to the final contract price.

10 S OF COMMON S S NATURE OF PROJECTS WHERE IT CANBE UTILIZED A lump sum contract is the most preferred option wherethescopeofworkiswell defined and FEED is completed, where there is stable soil conditions and no unforeseen above /underground obstructions. The following types of complex projects may be executed using this method: Construction of process facilities like GC s, BS etc. Cross country Pipelines with auxiliary facilities like Booster pumps / compressors, manifolds, Metering skids etc. Complex buildings like multi specialty hospitals, office complex, buildings for special purpose etc.

11 S OF COMMON S S Advantage

12 S OF COMMON S S Disadvantage

13 S OF COMMON S S METHODOLOGY This type of contract involves payment of the actual costs, purchases or other expenditure generated directly on the project plus an additional compensation. The tender includes broad scope of work in form of statement of requirement. Bidders provide a mark up on top of the total cost which the successful bidder will be eligible to claim. Complying Bidder with the lowest markup is awarded the Contract.

14 S OF COMMON S S METHODOLOGY THERE ARE SEVERAL VARIANTS OF THIS OF. Cost + Fixed Percentage Contract. Cost + Fixed Fee Contract. Cost + Fixed Fee with Guaranteed Maximum Price Contract. Cost + Fixed Fee with Bonus Contract. Cost + Fixed Fee with Agreement for Sharing Any Cost Savings Contract.

15 S OF COMMON S S NATURE OF PROJECTS WHERE IT CANBE UTILIZED involving latest technologies Where scope of work is not fully defined Which need to be completed quickly Where client is not certain about the technology Construction of specialized buildings.

16 S OF COMMON S S Advantage

17 S OF COMMON S S Disadvantage

18 S OF COMMON S S METHODOLOGY A contract that may be of either a fixed price or cost reimbursement nature, with a provision for adjustment of the fixed price or fee. It provides for a tentative target price with a capping price or fee, with price or fee adjustment after completion of the contract This is for the purpose of establishing a final price or fee based on the contractor's actual costs plus a sliding scale of profit or fee that varies inversely with the cost and also time In no event the final price or fee to exceed the maximum price or fee stated in the contract. In some cases the contract may also includes penalties.

19 S OF COMMON S S

20 S OF COMMON S S NATURE OF PROJECTS WHERE IT CANBE UTILIZED

21 S OF COMMON S S Advantage

22 S OF COMMON S S Disadvantage

23 S OF COMMON S S Overall Project duration LSTK Unit Rate Cost Plus Incentive Highest Low Lower Lowest Overall Project Cost Highest Lower Lower Low Change Orders Highest Low Lowest Lower Risk to Contractor Highest Low Lowest Lower Risk to client Lowest Lower Highest Low Client Involvement Least More Most Higher Claims and Disputes Most Low Lowest more

24 S OF COMMON S S S

25 S OF COMMON S S As implementation of major projects involve considerable amount of time and resources failure to select the right contracting strategy may have an impact on the schedule, cost, safety and quality of the project and will have a direct impact on their long term strategic goals. Hence it is imperative that Clients proposing to implement major projects shall carefully analyze and select the strategy that is best suited taking in to consideration the above aspects.

26 S OF COMMON S S THANK YOU