Changes / Variations / Deviations Lesson Learned – Minimizing

Changes Dispute Resolution Arising from

Changes

CHANGES / VARIATIONS /DEVIATIONS What’s Change :

• Base Assumptions on Scope, Specifications, Environment/Conditions, Social

Political, Rules and Regulations, Business Process etc. Existence of Instruction from Owner Cause – Effect – Entitlement - Damage

Business Process : • Change Management

Change Documentation Change Log / Register Change Notice Change Request

Governance :• Change Authority• Change Control Board

Outcome : Change Order / Purchase Order Amendment Change Cost and Schedule

Failure to adequately document the scope expectations of the parties in the contract

Owner’s actions/inactions during the work Contractor’s failure to understand local conditions Contractor’s inexperience with technology/type of work Contractor’s failure to adequately staff/departures of key personnel Owner’s or Contractor’s poor contracting strategy Unreasonable contractual allocation of risks Contractor’s poor subcontract management Financial weakness of Contractor Contractor’s poor accounting/estimating/control systems Owner/Contractor personality conflicts Contractor management personal/professional conflicts Contractor’s “lowball” bid approach – cost/schedule Labor issues Failure to understand the contract/law

Contract Change Claims Root Causesexamples:

Stage-Gate Project-Management Process in the Oil and Gas Industry – by G.W. Walkup Jr., SPE, SDG, and J.R. Ligon, SPE,

http://www.spe.org/spe-site/spe/spe/jpt/2006/12/Syn102926.pdf

AREAS OF DISCUSSIONS :• CONTRACTOR SELECTION

Bid Document Preparation Pre Qualification and Stage-1 Technical

Bid Commercial Bid

• CONTRACT AWARD, PREPARATION TO KICK OFF• PROJECT EXECUTION• CONTRACT CLOSE OUT

BID DOCUMENT PREPARATION• BEST PRACTICE:

SCOPE OF WORK AND CONTRACT T&C’s Proper Company Supplied Data ( Specifications, drawings, etc.) Concise Company requirement on HSE and Quality, facilities

performance, Established Project Management Of Change Defined responsibility and accountability among Company, EPC

Contractor, Government Authorities and other parties (i.e. LLI Vendor, etc.)

Aligned interfaces among stakeholders Established Warranty requirement No Ambiguity / Contradictive Statements in the Contract

(including Exhibits)

PRE QUALIFICATION AND STAGE-1 TECHNICAL BID :• BEST PRACTICE :

ENSURE CONCISE AND FOCUS CRITERIA Enable screening and selection of Qualified Registrants

DO NOT REVIEW AND ASSESS FROM THE SUBMITTED DOCUMENTS ONLY, PROOF THOSE INFORMATION WITH:

Scrutiny reviewing Contractor ‘s Proposal (Technical and Commercial)

(Stage-1) Interviews Bidder Key Personnel(s), (Stage-1) Site visits to Bidder Main Office and/or Fabrication

/Yard (Stage-1) Interview the Bidder (Main Contractor and/ member

of Consortium ), (Stage -1) Clarity of Scope, assurance of split Role &

Responsibility, and Interface (Main Contractor and/ member of Consortium)

PRE QUALIFICATION AND STAGE-1 TECHNICAL BID: (cont’d)

• BEST PRACTICE : ENSURE BIDDER (Main Contractor / Consortium) FULLY

UNDERSTAND THE SCOPE, REQUIREMENTS, AND LIABILITIES

Conduct Technical Bid Clarifications scrutiny, including Bidder HSE-MS and Quality Assurance/Control, Business Ethics, etc.

ENSURE BIDDER (Main Contractor / Consortium) FINANCIALLY CAPABLE TO PERFORM THE WORK CONTINUOUSLY AND ON TIMELY BASIS.

Proper Financial Due Diligence

COMMERCIAL BID:• BEST PRACTICE: EVALUATE THE SUBMITTED COMMERCIAL BID,

• Assurance of Capability to Perform the Contract ESTABLISHED WORK INSTRUCTION AND CRITERIA FOR

NEGOTIATION PROCESS, WHEN REQUIRED:• As per PTK 007, If all the Bid prices is above than EE,

then requires negotiation to all bidders started from 1st rank to the last rank. The Objectives is to have prices near to the Company EE.

• If the result is lower than Company EE, then re-assess the proposal – RED FLAG

BEST PRACTICE: Contract Effective Date:

LOI Date is the basis. Kick Off Meeting

Set-up series of meetings: HSE, project management, project control, procurement, contract, discipline engineering, quality assurance/control, construction.

Ensure all Contractor Key persons is mobilized and all changes of Key Personnel require Company approval.

BEST PRACTICE: Establishment of an agreed Project Master Schedule at the

earliest stage: Clear and “realistic” milestone targets. Constructability Review and Site Verification before AFC

Scheduled periodic-assessment of Contractor Performance Availability of Qualified HAZOP Facilitator Establish Procurement Management System at the earliest

stage: Assurance of Contractor’s personnel capability in

managing procurement Proper control and monitoring, include maintain updated

register MASTER LIST preparation at the earliest stage:

Assurance of Contractor’s personnel capability in managing logistic/formalities

Proper control and monitoring Master List and Custom Clearance process.

BEST PRACTICE: Shutdown and Tie-In Preparation:

Assurance of Contractor’s personnel capability in execution of SIMOPS (Simultaneously Operations)

Set-up detail plan, check list, joint walk through Implement Project Management of Change

Proper control and monitoring level Sufficient early discussion prior to issuance and execution Maintain updated register Settlement of claims to avoid dispute at contract close-out

Mechanical Completion, Pre-Comm. & Commissioning Assurance of Contractor’s personnel capability for Pre-Comm.,

clearing of punch-lists prior to Facilities Mechanical Acceptance & Hand-over

Sufficient Contractor’s experienced personnel to assist commissioning activities .

Set-up Company PMT and Discipline Engineers with sufficient competencies and experiences

to support lack of experiences / incompetence of Contractor’s Personnel(s

OBJECTIVES : Proper Close-out documentation to support Project

and AFE Close-out

BEST PRACTICE: “As Built” Documentation

Scheduled sufficient time for site verification (i.e. joint walk through)

Release of Leans Overall Final Documentation completion

• Make all reasonable efforts to resolve disputes by negotiation for mutual consent :

• Justifiable, Accountable, Auditable • Proper documentation

• Open and timely disclosure of relevant facts, information and documentation – without prejudice

• Outcome :• Justifiable compensable• Justifiable non compensable• Non justifiable

Litigation Non Litigation :

Negotiation Consultation Mediation Conciliation Arbitration

• Ref. : Undang-Undang No. 30, 1999: