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Contact Type in Oil and Gas - 1

The document discusses two common project delivery systems used in oil and gas projects: 1) Design-build contracts where a single firm is responsible for design and construction based on the owner's design brief. This can shorten timelines but requires extensive owner involvement. 2) Turnkey contracts where a single firm handles design, procurement, construction, and commissioning to deliver a fully functioning facility per the owner's requirements. This is commonly called an EPC (engineering, procurement, construction) contract and used for process-type projects.

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Halimi Ayoub
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101 views5 pages

Contact Type in Oil and Gas - 1

The document discusses two common project delivery systems used in oil and gas projects: 1) Design-build contracts where a single firm is responsible for design and construction based on the owner's design brief. This can shorten timelines but requires extensive owner involvement. 2) Turnkey contracts where a single firm handles design, procurement, construction, and commissioning to deliver a fully functioning facility per the owner's requirements. This is commonly called an EPC (engineering, procurement, construction) contract and used for process-type projects.

Uploaded by

Halimi Ayoub
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Project delivery systems are commonly used in oil

and gas projects:


1. Design–build
2. Turnkey contract

Design build Contact


In design–build contract, owner contracts a firm singularly responsible to design
and build the project.
In this type of contracting system, the contractor is appointed based on an
outline design or design brief to understand the owner’s intent of the project.

The owner has to clearly define

▪ his/her needs,
▪ performance requirements, and
▪ comprehensive scope of works prior to the signing of the contract.

It is a must that project definition is understood by the contractor to avoid any


conflict in future, as the contractor is responsible for the detailed design and
construction of the project.

A design–build type of contract is often used to shorten the time required to


complete a project. Since the contract with the design–build firm is awarded
before starting any design or construction, a cost-plus contract or reimbursable
arrangement is normally used instead of a lump-sum, fixed-cost arrangement.

This type of contract requires extensive involvement of the owner during the
entire life cycle of the project. They have to involve for taking decisions during the
selection of design alternatives and the monitoring of costs and schedules during
construction, and therefore, the owner has to maintain/hire a team of qualified
professionals to perform these activities.

Design–build contracts are used for relatively straightforward work, where no


significant risk or change is anticipated and when the owner is able to specify
precisely what is required.

In case of design–bid–build type of project delivery system, the contractor is


contracted after completion of design based on successful bidding, whereas in
design–build type of deliverable system, the contractor is contracted right from
the early stage of the construction project and is responsible for design
development of the project.
Turnkey Contract (EPC)
As the name suggests, these are the types of contracts where, on completion, a
key is turned in the door, and everything is working to full operating standards.

In this type of method, the owner employs a single firm to undertake the design,
procurement, construction, and commissioning of the entire works.

The firm is also involved in the management of project during entire process of
the contract. The client is responsible for the preparation of their statement
requirements, which becomes the strict responsibility of the contractor to deliver.
This type of contract is used mainly for the process type of projects and is
sometimes called EPC.

In EPC contracting systems, the contractor has to execute

▪ the project based on FEED by the owner and has to deliver the project
within an agreed time and cost, commonly known as lump sum turnkey
contract.

Table 3.4 illustrates the difference between design–build and EPC type of project
delivery system, Figure 3.6 illustrates typical logic flowchart for EPC project, and
Figure 3.7 illustrates EPC project system contractual relationship.
Logic flowchart for EPC projects. EPC, engineering,
procurement, and construction.

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