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Contract Strategies for Major Projects
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Contract Strategies for Major Projects
by Edward W. Merrow
Contract Strategies for Major Projects
Cover
Title Page
Copyright
Dedication
Acknowledgments
Introduction: What This Book Is Aboutintroduction
CHAPTER 1: Ten Key Principles of Contracting
CHAPTER 2: Data, Methods, and Nomenclature
CHAPTER 3: Contracting and Project Outcomes: The Common Strategies
CHAPTER 4: Exploring Why They Work the Way They Do
CHAPTER 5: The Unusual EPC Lump‐Sum Strategies
CHAPTER 6: Collaborative and Relational Contracting Strategies
CHAPTER 7: Prequalification
CHAPTER 8: The Use of Supplemental Incentives
CHAPTER 9: It's All About Risk
CHAPTER 10: Who Should Control Contracting Strategy?
CHAPTER 11: The Effects of Scale
CHAPTER 12: Toward Fair, Balanced, and Smart
Appendix: Description of Independent Project Analysis, Inc.
Glossary
Index
End User License Agreement
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Prev
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Title Page
Table of Contents
Cover
Title Page
Copyright
Dedication
Acknowledgments
Introduction: What This Book Is Aboutintroduction
Point of View: What Constitutes Success?
The Context
Defining the Elements of Contracting Strategy
The Organization of the Book
The Applicability of This Book
Notes
CHAPTER 1: Ten Key Principles of Contracting
Principle 1: There Is No Free Lunch
Principle 2: Contractors Do Good Projects Well and Bad Projects Poorly
Principle 3: Complex Projects Need Simple Contracting Strategies
Principle 4: Owners Are from Mars and Contractors Are from Venus
Principle 5: Large Risk Transfers from Owners to Contractors Are More Illusion Than Reality
Principle 6: Contractors Have Shareholders and They Are Not
Your
Shareholders!
Principle 7: Contracting Games Are Rough Sport
Principle 8: Assigning a Risk to Someone Who Cannot Control It Is a Fool's Errand
Principle 9: All Contracts Are Incentivized
Principle 10: Economize on the Need for Trust
Summary
Notes
CHAPTER 2: Data, Methods, and Nomenclature
Description of the Database
4
Summary
Notes
CHAPTER 3: Contracting and Project Outcomes: The Common Strategies
The Key Performance Indicators and Their Measurement
The Primary EPC Options
Contracting Strategies and Project Results
Contract Type and Safety Performance
Cost Competitiveness and Cost Predictability
Schedule Competitiveness and Schedule Deviation
When Speed Is King
Contracting for Regulatory Compliance Projects
Summary
Notes
CHAPTER 4: Exploring Why They Work the Way They Do
Traditional EPC‐LS (Design‐Build Fixed Price)
Understanding EPC‐Reimbursable
A Deeper Dive into EPCM
The Downsides of EPCM
Why EPCM Contracting Is Problematic
Making EPCM Work Better
Understanding the Split Strategies
Differences Among Re/Re, Re/LS, and LS/LS
Why So Much Reimbursable Construction?
Summary
Notes
CHAPTER 5: The Unusual EPC Lump‐Sum Strategies
Functional Specification Contracting (Duty Spec)
Design Competitions
Convert to EPC Lump‐Sum (Convertibles)
Key Problems in Convertible Contracting
Guaranteed Maximum Price (GMP)
Summary
Notes
CHAPTER 6: Collaborative and Relational Contracting Strategies
IPD/Alliancing: In Search of Collaboration Through Contracting
Case Studies of One‐Off IPD/Alliances
The Six Pillars in Context of Results
Partnering/Long‐Term Alliances
Repeat Supply Chain Contracting
The Effects of Scale on the Unusual Contracting Forms
Notes
CHAPTER 7: Prequalification
Contracting Market Assessment
The Purposes of Prequalification
Forced Changes of Contracting Strategy
The Prequalification Process
Does Prequalification Improve Contractor Selection?
The Key Prequalification Criteria
Safety First
Contractor Finances
Technology Experience
Local Construction Experience
Quality of the Contractor Team
Location of Contractor's Home Office
Data Transparency, Transfer Methodologies, and Ownership
Selection
Summary
Notes
CHAPTER 8: The Use of Supplemental Incentives
The Conceptual Basis for Incentive Contracting
When and What Incentives Are Used
Cost Incentives and Outcomes
Schedule Incentives and Schedule Outcomes
Liquidated Damages (LDs) for Delay
15
Do LDs Work?
Operability Incentives
Safety Incentives
What Contractors Think (But Often Don't Say) About Incentives
Conclusions About Supplemental Incentives
Notes
CHAPTER 9: It's All About Risk
The Meaning of Risk
Principles of Risk Assignment and Pricing
Key Risk Areas
Schedule
Site Conditions
Interface Management
Local Content
Labor Availability
Notes
CHAPTER 10: Who Should Control Contracting Strategy?
The Role of the Business Sponsor in Contracting
Owner Legal Organization
The Projects Organization Should Control Contracting
Notes
CHAPTER 11: The Effects of Scale
Notes
CHAPTER 12: Toward Fair, Balanced, and Smart
What Contracts Should Do
What Contracts Should Not Attempt to Do
The Primacy of the Owner Role
Returning to a Normal Relationship
Suggestions for Owners
Suggestions for Contractors
Notes
Appendix: Description of Independent Project Analysis, Inc.
The Source of Project Data
Glossary
Index
End User License Agreement
List of Tables
Chapter 2
TABLE 2.1 Contracting Database
Chapter 3
TABLE 3.1 For the Businesses, Success Is Determined by Underruns, Not Compet...
Chapter 11
TABLE 11.1 How Contracting Strategies Respond to Increasing Scale
List of Illustrations
Chapter 2
FIGURE 2.1 Standard stage‐gated project development process.
FIGURE 2.2 Project sample geographical distribution.
FIGURE 2.3 Project sample industrial sector distribution.
FIGURE 2.4 Project sample project type distribution.
Chapter 3
FIGURE 3.1 What industries prioritize schedule during FEL?
FIGURE 3.2 Front‐end time responds to schedule priority.
FIGURE 3.3 Reporting rates distort safety results.
FIGURE 3.4 The industrial sector drives safety outcomes.
FIGURE 3.5 Cost competitiveness and cost growth by contract approach.
FIGURE 3.6 Schedule competitiveness and slip by contract approach.
FIGURE 3.7 Cycle‐time competitiveness by contract approach.
FIGURE 3.8 Speed and cost when schedule‐driven.
FIGURE 3.9 Contract strategy performance for compliance projects.
FIGURE 3.10 Contract strategy performance for schedule‐driven compliance pro...
Chapter 4
FIGURE 4.1 Bid duration drives EPC‐LS cycle time.
FIGURE 4.2 The timing of uncertainty reduction is key.
FIGURE 4.3 The scalability of cost performance varies greatly by contracting...
FIGURE 4.4 Contractors make higher estimates for themselves.
Chapter 5
FIGURE 5.1 Functional specification project results are highly variable.
FIGURE 5.2 Design competitions produce excellent projects.
FIGURE 5.3 Most design competitions include three or more competitors.
FIGURE 5.4 More players improve design competition results.
FIGURE 5.5 Convert to EPC lump‐sum is a problematic strategy.
FIGURE 5.6 GMP is cost predictable.
Chapter 6
FIGURE 6.1 IPD/alliancing is expensive and slow.
FIGURE 6.2 Repeat supply chains provide the best value overall.
Chapter 8
FIGURE 8.1 The larger the project, the more consequential the FEL.
FIGURE 8.2 Owner performance drives project performance.
FIGURE 8.3 Incentive use increases with project size.
FIGURE 8.4 Incentives are most used on EPC‐R and EPCM.
FIGURE 8.5 Use of supplemental incentives is declining.
FIGURE 8.6 Types of cost incentives employed in different contracting settin...
FIGURE 8.7 Schedule slip is a serious problem for industrial projects.
FIGURE 8.8 Schedule incentives accelerate split strategy projects only.
Chapter 9
FIGURE 9.1 Evaluation risks should be included in contract negotiations.
FIGURE 9.2 Incomplete FEED drives projects to slip.
Guide
Cover Page
Title Page
Copyright
Dedication
Acknowledgments
Table of Contents
Begin Reading
Appendix: Description of Independent Project Analysis, Inc.
Glossary
Index
Wiley End User License Agreement
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