Assessment of Two Contract Awarding Strategies; Lump Sum Turn Key LSTK and Lump Sum Procure and Build LSPB for Low Budget Oil and Gas Construction Projects C1; Less than 100 Million USD

Abstract

This study offers a thorough assessment of two contract awarding strategies; Lump Sum Turn Key (LSTK) Versus Lump Sum Procure and Build (LSPB) conducted specifically for C1(≤100 Million USD) budget projects. The study objective is to access and compare the Pros and Cons of each type of awarding strategies over four specific aspects; (1) project budget size, (2) awarding period length, (3) procurement cycle, and (4) level of engineering detail design scope of work. The effect of the project driver and stakeholders’ requirement on each of the 4 aspects is considered and analyzed. Also, the effect of a fifth aspect (brown field Vs green field) is evaluated and introduced in our study as "control". This assessment is conducted as a case study for an ongoing C1 budget project. The evaluation compares realistic time frames utilizing PERT and GANTT charts. The time frames are extracted from processes mandated by "Company" Engineering procedures" SAEP". The two awarding strategies are analyzed using "5 WHYs" technique and fish-bone analysis method for this specific case study. The project activities critical path was driven and analyzed. Level 3 schedules are built using Primavera Software. Data for all 4 aspects were obtained from the company Bench Mark projects and recommended procedures. It was observed that each of aspect number (1), (2), and (3) on its own cannot be a decisive measure to choose a specific contracting strategy for this specific low budget category, C1 projects. You need the stakeholders requirement that is translated into project initiating driver as a core input to steer the decision for selecting the contract awarding strategy. Hence, the assessment of selecting the awarding strategy for C1 projects would show different results if the project is "Cost Driven" Versus if it is to "Schedule Driven′′. For instance, if the project is initiated to maintain business then, the stakeholders would be expediting the execution and completion of the project. Thus, Project Management Team (PMT) will be on great pressure to visit all time saving avenues starting with the contracting strategy. On the other hand, if the project is cost driven then, the awarding strategy that results in lower expenditures will be selected. However, the study concluded that the level of complexity of the engineering detail design scope for a C1 project should be a decisive factor on its own for the choice of the contract awarding strategy. The reason for this conclusion is to avoid wasting valuable resources that could be exhausted in rework. This assessment was conducted using top notch project management softwares merged with lean management methodologies. The author is a strong advocate of introducing lean thinking in project management of Oil and Gas construction project. In his current job with "The Company", he is implementing Lean thinking and process improvement techniques in all project management responsibilities and has published a paper with MOES 2017 on the positive monetary advantage that lean thinking brings to construction projects extracted from his implementation in mega Oil & Gas construction project experience.