P ROJECT O WNERS SHOULD INCREASINGLY ADOPT THE C OST P LUS MODEL OVER LSTK P OSITION : A GAINST THE...
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P ROJECT O WNERS SHOULD INCREASINGLY ADOPT THE C OST P LUS MODEL OVER LSTK P OSITION : A GAINST THE M OTION Kuwait City, Kuwait - 12 th June 2011 PMI AGC
P ROJECT O WNERS SHOULD INCREASINGLY ADOPT THE C OST P LUS
MODEL OVER LSTK P OSITION : A GAINST THE M OTION Kuwait City,
Kuwait - 12 th June 2011 PMI AGC Energy Forum: DMS Debates Dr.
Mohammed Sammur - Executive VP, Larsen & Toubro Salah Jebara Al
Bufalah - Head of Major Projects ZADCO & President PMI AGC UAE
Felipe Revenga Chief Operations Officer, Tecnicas Reunidas
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June / 2011PMI AGC Energy Forum: DMS Debates Felipe Revenga -
COO, Tcnicas Reunidas C OST P LUS - D ISADVANTAGES Contractor and
Subcontractor Controlled by Owner Delays and Errors assumed by
Owner Diffuse Accountability PMC not enough empowered C ONSTRUCTION
SOW Undefined and NOT CLEAR SOW self-developed during project
execution High Probability of Changes Potentially oversized Team E
NGINEERING ALL Risks by Owner Uncertainties in Project Price &
Schedule G ENERAL Procurement Cycle normally longer than LSTK Price
negotiation advantages missed No incentives P ROCUREMENT
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LSTK M ODEL A DVANTAGES O WNER S B ENEFITS Competitive Bids
according to Market Value Total Cost Fixed. Owners do not have
pressure about Costs Contractors may contribute to find sources of
financing Reliable Forecast of Total Investment Cost Risks assumed
by Contractor Single Point Responsibility (Contractor) Owner
focused on Schedule, Quality and HSE Schedule defined and agreed
Better definition of SOW since the beginning
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June / 2011PMI AGC Energy Forum: DMS Debates Felipe Revenga -
COO, Tcnicas Reunidas Early BE/FEED Validation and Freezing Early
problems detection Design Changes minimized Engineering Team focus
in Schedule and Quality of deliverables LSTK M ODEL A DVANTAGES G
ENERAL
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June / 2011PMI AGC Energy Forum: DMS Debates Felipe Revenga -
COO, Tcnicas Reunidas LSTK M ODEL A DVANTAGES E NGINEERING P
ROCUREMENT Price deviations (E&M) and uncertainties vested in
Contractor Manufacturing and Delivery (E&M) Schedule and
Quality are controlled by Contractor Vendors' Management is
Contractors responsibility G ENERAL
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June / 2011PMI AGC Energy Forum: DMS Debates Felipe Revenga -
COO, Tcnicas Reunidas LSTK M ODEL A DVANTAGES C ONSTRUCTION P
ROCUREMENT E NGINEERING G ENERAL Owner do not have to take
responsibility to Control Subcontractors. Safety performance
Optimized and Maximized Construction troubleshoots by Contractor
Contractor is empowered Total Control Construction
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June / 2011PMI AGC Energy Forum: DMS Debates Felipe Revenga -
COO, Tcnicas Reunidas LSTK M ODEL R ISKS R ISKS TRANSFER TO C
ONTRACTORS EPC-LSTK implies to contract a specialist in Risk
Management
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LSTK T IPS TO R EDUCE & C ONTROL R ISKS Early Procurement
Early and Efficient KOM with vendors Vendors Dwgs. Early reviews
and approvals at workshops Reducing Quality Deviations Construction
Organization involved since Engineering Phase Early agreement of
Subcontracts Continuous Critical Path Analysis and deviation
actions Construction & Commissioning Driven Projects Early Eng.
Works and quick mobilization to Taskforce. Design Changes
controlled and Limited at early stages Enhance Quality Policies
(Check Lists, procedures)
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LSTK M ODEL M ORE A TTRACTIVE ? Realistic Schedule, with
reasonable period for Bid preparation Balanced Terms and
Conditions. Liabilities, LDs, Bonds, etc Sharing some of the
uncontrolled risks and rewards, Multi- Currency Bid, Commodities
Indexing, Exchange Rates fluctuation, etc 1 1 2 2 3 3 Incentives
Programs (Quality, HSE, Schedule) 4 4 5 5 Apply Value Engineering
LSTK through Open Book Conversion 6 6
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June / 2011PMI AGC Energy Forum: DMS Debates Felipe Revenga -
COO, Tcnicas Reunidas LSTK M ODEL M ORE A TTRACTIVE ? OBE + LSTK M
ODEL Real Cost + an agreed Conversion factor assures a fair juice
to Client and Contractor. Time enough and develop the project and
to avoid unnecessary contingencies. Application of Cost Saving to
mach project cost to Clients budget. Short bidding period, as cost
estimate does not need to be as detailed Shorten of the overall
schedule of the project as time for Extended FEED and EPC bidding
is shortened dramatically. ADVANTAGES
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June / 2011PMI AGC Energy Forum: DMS Debates Felipe Revenga -
COO, Tcnicas Reunidas LSTK M ODEL M ORE A TTRACTIVE ? OBE + LSTK M
ODEL
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Kuwait City, Kuwait - 12 th June 2011 THANK YOU GRACIAS THANK
YOU GRACIAS Dr. Mohammed Sammur - Executive VP, Larsen & Toubro
Salah Jebara Al Bufalah - Head of Major Projects ZADCO &
President PMI AGC UAE Felipe Revenga - COO, Tecnicas Reunidas