Contractor

Construction coordinator (in-house staff representative) 18.3 Contractors 

It is vitally important that the contractor(s) selected to perform the work understand the critical nature of the operation of a cleanroom or other industrial facility and the impact their activities may have on production. The construction manager or owner s construction coordinator should insist on periodic progre ss meetings with the contiactor(s) to update the schedule, discuss potential delays or problems and generally ensure a successfiil project through coordination and cooperation. 

System start-up and commissioning must be carefully accomplished under the direction of the designer. The time required to bring complex systems on-line is often underestimated, thus resulting in schedule delays. The success ofthe project is dictated by the level ofplanning, understanding and commitment of all concerned  

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Most companies hire a drilling contractor to supply equipment and manpower rather than having their own rigs and crews. The reasons for this are threefold ... 

This type of contract requires the operator to pay a fixed amount to the contractor upon completion of the well, while the contractor furnishes all the material and labour and handles the drilling operations independently. The difficulty with this approach Is to ensure that a quality well Is delivered to the company since the drilling contractor will want to drill as quickly and cheaply as possible. The contractor therefore should guarantee an agreed measurable quality standard for each well. The guarantee should specify remedial actions which will be implemented should a substandard well be delivered. 

The contractor is paid per foot drilled. Whilst this will provide an incentive to make hole quickly, the same risks are involved as in the turnkey contract. Footage contracts are often used for the section above the prospective reservoir where hole conditions are less crucial from an evaluation or production point of view. 

As the name implies the company basically rents the rig and crew on a per day basis. Usually the oil company also manages the drilling operation and has full control over the drilling process. This type of contract actually encourages the contractor to spend as much time as acceptable on location . With increased cost consciousness, day rate contracts have become less favoured by most oil companies. 

The industry is increasingly acknowledging the value of oontractors and service companies in improving their individual core capabilities through alliances, i.e. a joint venture for a particular project or a number of projects. A lead contractor e.g. a drilling company may form alliances with a number of sub contractors to be able to cover a wider spectrum of activities e.g. completions, workovers and well interventions. 

It is good practice to reviewa project on completion and record the reasons for departure between planned and actual performance. Where lessons can be learned, or opportunities exploited, they should be incorporated into project management guidelines. Some companies hold post project sessions with their contractors to explore better ways of handling particular issues, especially when there is an expectation of additional shared activities. 

Although a single project manager may direct activities throughout a project life, he or she will normally be supported by a project team whose oomposition should reflect the type of project and the experience levels of both company and contractor personnel. The make up and size of the team may change over the life of a project to match the prevailing activity levels in each particular section of the project. 

To protect both parties in a contract arrangement it is good practice to make a contract in which the scope of work, completion time and method of reimbursement are agreed. Contracts are normally awarded though a competitive tendering process or after negotiation if there is only one suitable contractor. 

Lump Sum contract contractor manages and executes specified work to an agreed delivery date for a fixed price. Penalties may be due for late completion of the work, and this provides an incentive for timely completion. Payment may be staged when agreed milestones are reached. 

Cost Plus Profit contract all costs incurred by the contractor are reimbursed in full, and the contractor then adds an agreed percentage as a profit fee. 

Lump sum contracts tend to be favoured by companies awarding work (if the scope of work can be well defined) as they provide a clear incentive for the contractor to complete a project on time and within an agreed price. 

The choice of contract type will depend upon the type of work, and the level of control which the oil company wishes to maintain. There is a current trend for the oil company to consider the contractor as a partner in the project (partnering arrangements), and to work closely with the contractor at all stages of the project development. The objective of this closer involvement of the contractor is to provide a common incentive for the contractor and the oil company to improve quality, efficiency, safety, and most importantly to reduce cost. This type of contract usually contains a significant element of sharing risk and reward of the project. 

While tax and royalty fiscal systems are common, another prevalent form of fiscal system is the Production Sharing Contract, in which the investor (e.g. oil company) enters into an agreement with the host government to explore and potentially appraise and develop an area. The investor is a contractor to the host government, who retains the title of any produced hydrocarbons. 

Typically, the contractor carries the cost of exploration, appraisal and development, later claiming these costs form a tranche of the produced oil or gas ( cost oil ). If the cost oil allowance is insufficient to cover the annual costs (capex and opex), excess costs are usually deferred to the following year. After the deduction of royalty (if applicable) the remaining volume of production (called profit oil ) is then split between the contractor and the host government. The contractor will usually pay tax on the contractor s share of the profit oil. In diagrammatic form the split of production for a typical PSC is shown in Figure 13.11. 

The most negative point on the cumulative cashflow indicates the maximum cash exposure of the project. If the project were to be abandoned at this point, this is the greatest amount of money the investor stands to lose, before taking account of specific contractual circumstances (such as penalties from customers, partner claims, contractors claims). 

Production levels will be influenced by external factors such as agreed production targets, market demand, the level of market demand for a particular product, agreements with contractors, and legislation. These factors are managed by planning of production rates and management of the production operation. 

On the other hand, the NDT service business has evolved towards a more open market, in which the prime contractor requires a transparent access to the data provided by the supplier, in order to ensure the comparison of data obtained from different sources and at different periods of time. Existing fomiats are most of the time proprietary formats released by instrument manufacturers, generally dealing with a unique NDT method and not including complementary information on the acquisition consequently, they fail to meet these requirements. 

The amount of land required varies as well, not only as a function of the amount of production that is anticipated, but also on the type of culture system that is used. It may take several hectares of static culture ponds to produce the same biomass of animals as one modest size raceway through which large volumes of water are constantly flowed. Constmction costs vary from one location to another. Local labor and fuel costs must be factored into the equation. The experience of contractors in building aquaculture facihties is another factor to be considered. 

J. Cuccio and co-workers, Proc. 27th Automotive Technol Dev. Contractors Coord. Mtg, Pubhcation P-230, Society of Automotive Engineers, Warrendale, Pa., April 1990, p. 335. 

C. Quackenbush, K. French, and J. Automotive Technol. Dev. Contractors Coord. Mtg, 19th Summary Keport U.S. Dept, of Energy, Washington,... 

H. Helms and co-workers. Preprints of the 28th Annual Automotive Technol Development Contractors Coord. Mtg (Dearborn, Mich., Oct. 1990). 

R. L. Mednick, Proceedings of the Eleventh Annual EPRJ Contractors Conference on Clean Eiquid and Solid Fuels, EPRIAP-5043-SR, Electric Power Research Institute, Palo Alto, Calif., 1987. 

Eor this example the cost of the battery limits plant is about four times the purchase cost of the equipment. This number is about two for module I-type plants designed and iastalled by the fine chemicals company itself, and about six for expanded module IV-type plants designed and built by contractors. 

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