pai emc 04 reva cost control

COST CONTROL

PAI/EMC/04 Rev. A Date: 20 May 08 of 10

PAR/SDF/ 021A/1 WorleyParsons – Arabian Industries (JV)

PROCESS MANAGEMENT PROCEDURE

PROCEDURE TITLE Cost Control

SYNOPSIS This procedure describes the requirements related to Cost Control and control exercised at various stages during implementation of the Engineering and Maintenance Contract

AFFECTS All personnel operating the EMC-South

RELATED DOCUMENTS

As listed in Section 8.0.

ORIGINATING DEPARTMENT

Project Management

REVISION AND APPROVALS Rev No. Date Description

Prepared by

Checked by

Approved by

Authorised by

0 June 05 First Issue JAK Not released

A 20 May 08 First issue updated

Proprietary Information

This document contains information belonging to WorleyParsons-Arabian Industries (JV). Neither the document, nor any of its constituent parts, may be reproduced or disclosed without the prior written authorisation of to WorleyParsons-Arabian Industries (JV)

COST CONTROL



REVISION DESCRIPTION SHEET

Rev. No Date Revision Description

A 20 May08 First issue updated in line with the available infrastructure and resources

COST CONTROL



TABLE OF CONTENTS

1.0 INTRODUCTION ....................................................................................................................... 5

2.0 SCOPE ....................................................................................................................................... 5

3.0 DEFINITIONS ............................................................................................................................ 5 3.1 Projects ....................................................................................................................................... 5 3.2 Works .......................................................................................................................................... 5 3.3 Services ...................................................................................................................................... 5 3.4 Sub-contract Services ............................................................................................................... 5 3.5 Procurement Services ............................................................................................................... 5 3.6 Third Party Services .................................................................................................................. 5

4.0 ABBREVIATIONS ..................................................................................................................... 5

5.0 RESPONSIBILITIES ................................................................................................................. 6 5.1 Contract Manager ...................................................................................................................... 6 5.2 Services Manager ...................................................................................................................... 6 5.3 Head - Project Support .............................................................................................................. 6 5.4 Head - Planning ......................................................................................................................... 6 5.5 Project Control Engineer ........................................................................................................... 6 5.6 Project Engineer ........................................................................................................................ 6 5.7 Planning Engineer ..................................................................................................................... 6 5.8 Quantity Surveyor ...................................................................................................................... 6

6.0 COST CONTROL ...................................................................................................................... 6 6.1 General ....................................................................................................................................... 6 6.2 Cost Control Approach .............................................................................................................. 7 6.3 Cost Control Features ............................................................................................................... 7 6.4 Cost Control Methodology ........................................................................................................ 7 6.5 Cost Control Estimate ............................................................................................................... 9 6.6 Change Orders .......................................................................................................................... 9 6.7 Baseline Budget ......................................................................................................................... 9 6.8 Structure and Costing Rates..................................................................................................... 9 6.9 Cost Data Collection .................................................................................................................. 9 6.10 Planning Inputs .........................................................................................................................10 6.11 Cost Control Reports ................................................................................................................10

7.0 RECORDS ................................................................................................................................10

8.0 RELATED DOCUMENTS ........................................................................................................10

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8.1 Procedures ................................................................................................................................10 8.2 Standard Forms ........................................................................................................................10

COST CONTROL



1.0 INTRODUCTION

This Procedure describes the Cost Control methods used for Engineering & Maintenance Contract with Petroleum Development Oman.

2.0 SCOPE

The Scope of this Procedure covers WPAI Projects listed below for EMC

- Engineering Studies - Engineering Projects - Maintenance Services - Minor Works / Services - Tank Services - Heater Services - Procurement Services - Third Party Services

3.0 DEFINITIONS 3.1 Projects

The Scope identified for execution and falling under the categories of “Engineering Studies” or “Engineering Projects” for the Reward Scheme is defined as “Projects”.

3.2 Works

The Scope identified for execution and falling under the category of “Minor Works/ Services”, for the Reward Scheme, is defined as “Works”.

3.3 Services

The Services identified for execution and falling under the category of “Maintenance Services”, “Tank Services” and “Heater Services” for the Reward Scheme according to the Engineering & Maintenance Contract are defined as “Services”.

3.4 Sub-contract Services

The Services executed by others on behalf of WorleyParsons – Arabian Industries (JV) and covered by Contract Schedule of Unit Rates are defined as “Sub-contract Services”.

3.5 Procurement Services

The Services identified for procurement of Materials are defined as “Procurement Services”.

3.6 Third Party Services

The Services executed by others on behalf of WorleyParsons – Arabian Industries (JV) not covered by Contract Schedules of Unit Rates are defined as “Third Party Services”.

4.0 ABBREVIATIONS

CM Contract Manager EMC Engineering and Maintenance Contract SM Services Manager HPS Head – Project Support HPL Head - Planning PDO Petroleum Development Oman L.L.C. (Company) PE Project Engineer PLE Planning Engineer SAPAD SAP Administrator QS Quantity Surveyor DH Engineering Discipline Heads

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SAP Systems, Applications & Products CBS Cost Breakdown Structure CCE Cost Containment Estimate FPC Final Project Cost CTR Cost Time Resource Sheet WPAI WorleyParsons - Arabian Industries (JV) (Contractor)

5.0 RESPONSIBILITIES

5.1 Contract Manager

- Contract Manager is the final approval authority of all Cost Reports to PDO

5.2 Services Manager

- Arranges tools for Cost Control & coordination with other Departments

- Reviews reports related to Cost Control

5.3 Head - Project Support

- Ensures availably of final Cost Reports for related Project & Site activities

- Co-ordinates the Cost Control Reports

- Supervises SAP Administrators and Assistants

5.4 Head - Planning - Ensures proper planning as per the budgeted cost

5.5 Project Control Engineer - Monitors the expended cost, percentage progress and projected cost at completion

- Reports and analyses the cost effect on Projects

5.6 Project Engineer - Ensure the Project is delivered within approved budget

5.7 Planning Engineer - Computation of physical progress of each Project

5.8 Quantity Surveyor - Provides cost details of actual progress and completed work activities based on actual Site

measured quantities

- Coordinates imputing details in SAP network and other applicable Cost Reports

6.0 COST CONTROL

6.1 General

Integration of the Control of Cost, related to Engineering, Procurement and Construction Management system is required for successful Project Control and delivery.

Cost Control of Projects is achieved by means of appropriate in-house developed/customised software(s) for logging of costs related to various Jobs under different cost centres from the related invoices. All personnel involved in the process would be provided appropriate hardware and access rights to carry out their respective functions.

Cost monitoring module of the work management system logs invoices made under each of the Jobs to their respective cost centres. Periodic reports are produced for each of these Jobs to present the invoices thus far in comparison to the approved overall budget. This would provide an effective tool for the Project Management Team to activate mechanisms for control of costs.

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6.2 Cost Control Approach

• Control cost against approved estimate or budget. • Provide information to facilitate management decision-making. • Provide a proactive service which integrates with all disciplines throughout the Project. • Adherence to the steps defined during cost estimate. • Approved Estimate Catalogue set up in the System • Regular progress updates to the actual cost to date and budgeted cost in order to ensure

committed cost never exceeds the current budget; • Value Of Work Done(VOWD) Indicator used to forecast budgeted completion • Flexible reporting systems to give the Project the best possible information on Project

status.

6.3 Cost Control Features

The integrated Cost Control system includes the following features:

Budgets, commitments and actual costs are entered and collated electronically, reducing both effort and the opportunity for data errors;

Data is exchanged electronically between the Cost Control Systems, Scheduling, Material Management Systems and Accounting Systems;

The system and published information is accessible from any locations using internet/intranet technologies;

Team members can all have access to the same data at the same time through appropriate levels of security.

6.4 Cost Control Methodology

The Cost Control methodology at various stages of Projects is described below:-

6.4.1 ‘Engineering Studies’ -’Cost Management - Define budgeted cost discipline/department wise – developed by PAR-SOFT - Allocate contingency funds and manage reserves against contingencies - Record % progress - discipline wise - Capture & claim Reward - Capture & claim actual time spent - Capture, analyse and claim Change Orders - Analyse and re allocate budget - Manage reserves against contingencies - Report any action required to enhance Cost Control

6.4.2 ‘Engineering Project’- Cost Management - Define budgeted cost discipline/department wise – developed by PAR-SOFT - Allocate contingency funds and manage reserves against contingencies - Record % progress - discipline wise - Capture & claim Reward and applicable Uplifts - Capture & claim actual time spent - Site measure & claim actual constructed quantity on monthly basis - Capture, analyse and claim Change Orders - Compare Actual quantum to projected quantum of construction - Analyse and re allocate budget - Manage reserves against contingencies - Report any action required to enhance Cost Control

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6.4.3 Works - Cost Management - Construction executed by WPAI - Budgeted cost based on Contract Schedule of Unit Rates - Allocate contingency funds and manage reserves against contingencies - Capture & claim Reward and applicable Uplifts - Site measure & claim actual constructed quantity on monthly basis - Capture, analyse and claim Change Orders - Compare Actual quantum to projected quantum of construction - Analyse and re allocate budget - Manage reserves against contingencies - Report any action required to enhance Cost Control

6.4.4 Services - Cost Management - Construction executed by WPAI - Budgeted cost based on Contract Schedule of Unit Rates - Allocate contingency funds and manage reserves against contingencies - Capture & claim Reward and applicable Uplifts - Site measure & claim actual constructed quantity on monthly basis - Capture, analyse and claim Change Orders - Compare Actual quantum to projected quantum of construction - Analyse and re allocate budget - Manage reserves against contingencies - Report any action required to enhance Cost Control

6.4.5 Subcontract Management - Construction executed by Subcontractor - Budgeted cost based on Contract Schedule of Unit Rates - Allocate contingency funds and manage reserves against contingencies - Capture & claim Reward and applicable Uplifts - Site measure & claim actual constructed quantity on monthly basis - Capture, analyse and claim Change Orders - Compare Actual quantum to projected quantum of construction - Analyse and re allocate budget - Manage reserves against contingencies - Report any action required to enhance Cost Control

6.4.6 Procurement Services - Cost Management

- Budgeted cost for Procurement based on quotations - Allocate contingency funds and manage reserves against contingencies - Capture & claim transportation cost if carried out outside the PDO transportation system

(4PL) - Capture & claim loading, handling and unloading cost - Capture & claim applicable Reward - Record actual delivered quantity against ordered quantity - Capture, analyse and claim Change Orders - Analyse and re allocate budget - Update WPAI released Purchase Order values and maintain records - Contain cost within budget - Manage reserves against contingencies - Report any action required to enhance Cost Control

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6.4.7 Third Party Services - Cost Management - Budgeted cost for Third Party Services based on quotations - Allocate contingency funds and manage reserves against contingencies - Capture and claim Services provided to Third Party by WPAI - Record actual delivered Service against ordered Service - Capture, analyse and claim Change Orders - Analyse and re allocate budget - Contain cost within budget - Manage reserves against contingencies - Report any action required to enhance Cost Control

6.5 Cost Control Estimate

Estimate as agreed between PDO and WPAI becomes the Cost Control Estimate. If CCE is not available, an appropriate budget as approved by CM is adopted. For all Projects, HPS/PE authorise a budget at the beginning of work.

6.6 Change Orders

All approved Change Orders are transferred to the budget figures to reflect the current status of the Scope.

6.7 Baseline Budget

Project Control Engineer coordinates the preparation of the baseline budget, and the maintenance of current budget with assistance from the Control Account/CTR owners as required. The baseline budget will then become the basis against which Project cost performance is monitored, change requests are managed and forecasts are projected.

No variance to budget is made or transfer of budget is made without an approved Change Order

6.8 Structure and Costing Rates

The Cost Breakdown Structure as used in the Contract and reflected in the Estimate Catalogue for the Project is followed in all the Cost Control Reports. The various elements of cost reflected in the invoices is captured and presented as a summary under the following three categories:- - Engineering - Procurement - Construction Engineering cost is accounted in terms of man-hours spent on the Projects multiplied by the Contract Unit Rates. Procurement cost is monitored in terms of invoices raised to PDO which are back-to-back with the invoices to WPAI from vendors. Construction cost is accounted in terms quantities multiplied by the Contract Unit and Day work Rates.

6.9 Cost Data Collection

Man-hour expenses for Engineering is dove-tailed into the cost monitor system from the time accounting system which compiles the timesheets of all employees with appropriate approvals. For Procurement and Construction, HPS ensures that all relevant data as billed via PDO SAP network is reflected in the cost control systems so as to correlate contract billings with actual accomplishments in tune with payment terms.

It will be responsibility of PE, assisted by SAPAD and SAP Assistants, to ensure that all invoices related to a Project are entered at the appropriate cost centres in the system.

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6.10 Planning Inputs

Physical progress of each discipline in Engineering and/or overall Project is input into the cost monitor system on a continuous basis so as to obtain meaningful comparison between Value of Work Done and actual invoicing at any point of time. PLE’s will input these figures against each Project on a regular basis. HPL will ensure that this is done in time.

6.11 Cost Control Reports

Cost Reports are normally issued along with the Progress Report at a frequency agreed with PDO, as addressed in the Project Execution Plan. The Report details the performance of each Control Account/CTR in terms of planned, earned, actual, committed and forecast Final Costs. A Value of Work Done (VOWD) curve is also included.

For Engineering, costs for completion will be worked out in direct proportion to the actual expenses to date vis-a-vis physical progress achieved. There will not be any predicted costs for completion in Procurement and Construction. Only a comparison of the approved estimate versus value of work done and invoicing will be given.

For the limited purpose of Cost Control, Value of Work Done will be computed as the product of Approved Cost Estimate (including Change Orders, if any) and the physical progress achieved.

For the Final purpose of Cost Control, Value of Work Done will be computed as the product of final actual Engineering, Construction, Procurement, Third Party Services quantities, including Change Orders.

7.0 RECORDS

Duly Signed copy of Estimate Catalogues

Latest cost control reports for Projects

8.0 RELATED DOCUMENTS

8.1 Procedures

WPO/SMP/02 Control of Documents

WPO/SMP/06 Control of Records

WPO/SMP/12 Coding and Numbering of Documents

PAI/EMC/02 Planning, Scheduling & Reporting

PAI/EMC/05 Project Management

PAI/EMC/05 Design & Engineering

PAI/EMC/08 Works Management- Minor works & Services

PAI/EMC/09 Procurement and Material Management

PAI/EMC/10 Subcontracting

PAI/EMC/15 Construction, Demolition and Alterations

8.2 Standard Forms

TBA