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2 nd PMI AGC Energy Forum

2 nd PMI AGC Energy Forum. Cost plus vs. LSTK 12 June 2011. Cost Plus Projects:. Schedules - Shorter Cost - Lowest TIC Profit - Highest NPV Quality – Higher ( no incentive to cut corners)

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2 nd PMI AGC Energy Forum

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  1. 2nd PMI AGC Energy Forum Cost plus vs. LSTK 12 June 2011

  2. Cost Plus Projects: • Schedules - Shorter • Cost - Lowest TIC • Profit - Highest NPV • Quality – Higher ( no incentive to cut corners) • Delivered Plant - Fully Aligned with Owner Requirement (Operability, Maintainability, Reliability) • Relationship Builders

  3. Cost Comparison Models

  4. Schedule Comparison Model

  5. “Horses for Courses” • Phase: Concept FEED Execute • Size: Small Large MEGA • Schedule: Controlled Furious • Complexity: Proven State of the Art • Nature : Brown Field Green Field

  6. Enablers for a successful project

  7. LSTK – Conflicting Objectives OWNER CONTRACTOR • Satisfied client • Made a reasonable profit • Minimum amount of claims • Developed trusted relations with the client • Use the project as a successful reference • Paid what budgeted • Best quality for best price • Best applicable technology • Effective O&M cost Safety Schedule Budget

  8. Cost Plus – Aligned Objectives OWNER CONTRACTOR OWNER Safety Budget Schedule Delighted Owner Incentive Profit Repeat Projects • Paid what budgeted • Best quality for best price • Best applicable technology • Effective O&M cost

  9. Thank You

  10. Critical characteristics of cost plus and LSTK compensation model

  11. Compensation model drives many behaviours: • Scope • Planning and funding approvals • Technology preferences • Procurement -- Ability to attract qualified contractors/subcontractors • Quality • Cost Transparency • Responsibility and liability • Health, safety and environment • Schedule and Change management • Risk Management and Mitigation • Stakeholder Management • Warranites

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