subcontractor plan notes.docx

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23-Apr-2012

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Home General Procedures CM-PE-705 Subcontracts Procedure

CM-PE-705 SubcontractsProcedureTable of Contents

1. Purpose2. Subcontract Responsibility and Management Policy

3. Responsibilities

4. Subcontracts Plan

5. Subcontracts Schedule

6. Subcontracts Package

7. Subcontractors List

8. Bidding Period

9. Bid Opening and Analysis

10.Negotiation and Award of Subcontract

11.Kick-Off Meeting with the Subcontract

12.Revisions to Subcontract Documents

13.Variations in Scope and Extra Work

14.Claims

15.Issue of Purchase Order Amendments

16.Progress Payment Certifcates

17.Payments to Subcontractors

18.Subcontract Close-Out19.References
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20.Responsibility Checklist-Part I

21.Responsibility Checklist-Part II

22.Flowchart

1. Purpose

This procedure describes the basic management policy, organization and techniques employed i

field labour purchase orders, with or without supply of materials (hereafter referred to a

erection part of all supply with erection purchase orders. (The erection part hereafter ref

labour part of all purchase orders for field services, including temporary facilities. (The

The supply part of supply and erection purchase orders is handled in accordance with existingwhat subcontracting activities and/or documents are required.

This procedure does not apply to orders for engineering services only.

Note: Responsibilities of the various departments or individuals are shown in the Responsibilit

2. Subcontract Responsibility and Management Policy

Subcontracting is the responsibility of the Company Procurement Department both during prop

For fiscal reasons the functions of formulation, issue, adjudication and the administration of su

The formulation of Subcontracts is executed in the home office by a Project Subcontracts Mana

Continuity is assured by the fact that each subcontract is a stand alone document and that there

2.1 Formulation of Subcontracts

The formulation of subcontracts is performed by a Project Subcontracts Manager who is directl

The Project Subcontracts Manager as a member of the Project Management team and reports to

2.2 Administration of Subcontracts

The administration of subcontracts is also performed by the Project Subcontracts Manager who

The Project Subcontracts Manager is a member of the Site Management team and reports to the

3. Responsibilities

3.1 Manager of Subcontracts

The home office based Manager of Subcontracts has a supervisory and monitoring responsibilit

The responsibilities of the Home Office Manager of Subcontracts include:
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a. General

developing, issuing and maintaining general procedures and policies for subcontracting

maintaining the Procurement Department's computerized and worldwide Subcontractors

Directing the improvement and standardization of subcontract documents.

b. Individual projects

preparing subcontract write-ups at qualification and bidding stages of proposals in cons

advising the Project Subcontracts Manager in his contribution to the subcontracts plan.

advising the Project Subcontracts Manager in the preparation of the Special Conditions

ensuring that the subcontract progress and cost control structures have a sound technical

ensuring that client and Company subcontract requirements for the individual projects a

ensuring that the following documents will be presented to the Manager of Procurement

1. list of qualified bidders

2. bid analysis

3. award of subcontract

3.2 Project Subcontracts Manager (Home Office Activities)

The Project Subcontracts Manager has direct responsibility and authority to accomplish the foll

preparing the subcontracts plan. preparing the Special Conditions of Subcontract for the project and for the individual S

preparing sensitivity studies.

coordinating the preparation of subcontract packages with the Subcontract Coordinator

compiling of subcontract packages; ensuring that they are checked by all disciplines con

preparing of subcontract bids analyses.

organizing meetings with subcontractors.

obtaining safety and quality information, programs and procedures from potential subco

participating in project planning and scheduling of work related to Subcontracts, as well organizing and maintaining a complete file of all prequalification and bid corresponden

initiating the order preparation/issue.

The Project Subcontracts Manager informs the Project Manager, the Project Construction Mana

3.3 Project Subcontracts Manager (Site Activities)

The Project Subcontracts Manager has direct responsibility and authority to accomplish the foll

administering the subcontracts including scope and commercial matters.

acting as the single point contact for the subcontractor.


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controls subcontractors' manpower and progress.

controls, trends and forecasts the costs of the subcontractors.

handling of scope changes.

handling of extra work.

handling of claims, within the given limits.

closing out of the subcontracts.

preparation of subcontractor performance reports.

3.4 Project Construction Manager/Construction Coordinator

The Project Construction Manager participates in home office subcontracting activities until he

The Project Construction Manager is responsible for the project construction operations and thu

3.5 Subcontract Coordinator

The Project Manager will assign a coordinator for each subcontract early in the project.

The subcontract coordinators will ensure that drawings and free issue materials arrive in time a

The information must be channelled through the Subcontracts Manager.


4.1 Subcontract Strategy

As early as practical the Project Subcontracts Manager will consult with the Project Managercontract with the client, country where the construction work is to be done and location of tProcedure and Execution Manual (ref.19.8).

In case an initial subcontract plan has been prepared during the proposal phase then this will be

The subcontract plan should be updated regularly to implement any changes in the strategy, esti

4.2 Basic Items to be Addressed in the Subcontracts Plan (ref.19.7)

requirements for client's participation and approval.

bidding procedure.

number and type of subcontracts. (Subcontract specification).

pre-qualification requirements.

preferred price basis and the quantification requirements of each subcontract related to t

listing of anticipated supply with erection orders. (Subcontract specification).

subcontracting requirements related to the erection part of supply with erection orders.

subcontracts which require a pre-bid or bid clarification meeting.

content and status of subcontract documents.


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special requirements by country with regard to the selection of subcontractors and/or ad

subcontract schedule with key dates and manpower histograms.

a listing of estimated quantities (Quantity status summary).

listing of anticipated free issue materials per type of subcontracts.


The Project Subcontracts Manager will prepare together with the Planning Engineer, the SubcoManager.

The Subcontracts Schedule indicates the individual subcontracts and defines for each subcontra

the period of preparing the subcontract package for bids.

the bidding period.

the evaluation period ending in award of the subcontract. start on site date.

documents complete.

mechanical completion date.

start-up/commissioning date.

The Subcontracts Schedule will be monitored by the Project Subcontracts Manager who will ini

6. Subcontract Package

The subcontract package "for bids" comprises all technical, commercial and scheduling inform

A bid package includes the following sections: Ref.

0 Cover Sheet + Contents (CSC)

1 Instructions to Bidders (ITB)

2 General Conditions of Subcontract (GCS) 19.2

3 Special Conditions of Subcontract, if required (SCS)

4 Safety, Health, Welfare and Environmental PolicySafety Rules and Site Regulations (SPSR)

19.3

5 Requisition (REQ)

6 List of Applicable Documents (LAD)

7 Key-date Schedule (KDS)

8 Form of Tender Descriptions (FOTD)

9 Form of Tender (FOT)

10 Specification for Site Quality Assurance/Quality Control for Subcontracts (QAM)

19.4

11 Other special documents, if required, specifications,not forming part of the technical documents as per list

of applicable documents.


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A package for mechanical work further includes:

12 Equipment Erection Description (EED)

Packages for work in The Netherlands may further include (depending onthe contract between client and Company):

13 Subcontracting Under the Chain Liability Act Data 19.1

Sect. 1 Instructions to Bidders

This document comprises the following:

a. The introduction, definitions, bidder's qualifications and general bid conditions (para. 1 throu

b. Special bid information, example tender statement and complete bid (para. 6 and further). Tsafety and quality to be submitted with the quotation.

Sect. 2 General Conditions of Subcontract

This document is a company standard comprising the standard conditions that apply to all subc

This document will neither be changed, nor given a job number. Any deviations will be include

Sect. 3 Special Conditions of Subcontract

Special Conditions of Subcontract are written by the Project Subcontracts Manager if and when

The (draft) Special Conditions of Subcontract will be sent to the Law Department, the H.O. Ma

The evaluation of specific country requirements will be made by the Project Subcontracts Man

Sect. 4 Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Regulations

As a rule the client's safety policy and site regulations are applicable.

This document will be reviewed by the Project Construction Manager and by the home officeSPSR).

The SPSR will be checked by the Project Subcontracts Manager for consistency with the subco

If there is no client document available the Project Construction Manager will use the company

Sect. 5 Requisition

The requisition of which typical subcontract-formats are available within the Procurement Depfor quotation/purchase.

Sect. 6 List of Applicable Documents

The List of Applicable Documents shows all technical documents that (may) have a bearing on


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The Engineering Specialist will identify these documents and submit a draft list including docu

The completed list will be reviewed by the Project Manager or his delegate.

As the list shows documents that relate to pricing, it will not be updated to show current revisio

The Subcontracts Coordinator will arrange for printing the documents shown in the List of App

Sect. 7 Key-Date Schedule

For each subcontract the Project Subcontracts Manager with the Planning Engineer will prepare

the key-date schedule will include:

start date of construction.

periods during which the technical documents will be supplied to the subcontractor.

periods during which the equipment and/or materials will be supplied to the subcontract

key dates or milestones for certain parts of the construction work as required.

date of contractual completion.

date of subcontractors' commissioning activities.

Sect. 8 Form of Tender Descriptions

The Project Subcontracts Manager will select the sections of the standard Form of Tender Desc

Sect. 9 Form of Tender

The Project Subcontracts Manager will select the sections of the standard Form of Tender relev

The schedules available are:

ScheduleSchedule 2Schedule 3 rSchedule 4Schedule 5

ScheduleScheduleScheduleSchedule 9

A package for piling further includes:

Schedule 10 subcontractor's rig and pile data

Sect.10 Specification for Site Quality Assurance/Quality Control for Subcontracts

This specification (company standard) defines what is required from Subcontractors concerning


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This section should be discussed during a Clarification and/or Pre-award meeting and should be

Sect.11 Equipment Erection Description

This section only to be added with subcontract packages for mechanical work.

It gives detailed description how the equipment and in some cases in which sequence should be

This existing format should be prepared and completed by the specialist engineer in coordinatio

Sect.12 Chain Liability Act Data

This section (company standard) should be added in subcontract packages for work in The Net

It describes to the subcontractor what Company and Subcontractor have to do to meet the requi

During the negotiations with potential subcontractors, Company has to make sure that we achie

The following basic principles to be maintained and where applicable to be discussed with and

1. careful screening and selection of Subcontractors.

2. withholding from the payments to SUBCONTRACTOR amounts equal to the actual am

3. monitoring of SUBCONTRACTOR's actual manhour expenditure.

4. not assuming the role of SUBCONTRACTOR's tax and/or premiums consultant.


7.1 As soon as the Subcontracts Plan for the Project has been approved, the Project SubcontrDepartment's computerized Subcontractors Register.

The potential bidders' quality, past performance on safety, experience, capability, organization,package for bids (ref 19.5).

For each individual subcontract the Project Subcontracts Manager will discuss and prepare the

If required, the list will be submitted to the client for review and approval.

7.2 The number of valid bids to be obtained depends on the nature of the subcontract. The mini

8. Bidding Period

8.1 Invitation to Bid

Following approval of a subcontract package for bids, the Project Subcontracts Manager willcontact person.

8.2 Expediting of Bids

The Project Subcontracts Manager will ensure that all bidders promptly acknowledge receipt of


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8.3 Questions from Bidders

All communications with the bidders will be through the Project Subcontracts Manager, who w

In case a question from a bidder reveals a need for clarification or change of the bid informatio

and the Project Subcontracts Manager.

8.4 Sealed Bids

Sealed bids will be required for reimbursable projects and in those other cases where a sealed bi

8.5 Confidentiality

Bid information (bidders lists, minutes of pre-award meetings), bids and bids analyses will be d


9.1 Bids Receival

The Project Subcontracts Manager will receive and keep safe all bids.

9.2 Bids Opening

As soon as practical after the bid closing date, all sealed bids will be opened by the Project Sub

A bid opening protocol will be filled out by the Project Subcontracts Manager and signed by all

9.3 Subcontract Bids Analysis, Preliminary Issue

Bid evaluation criteria and/or weighing factors agreed upon early in the project in consultation

The Project Subcontracts Manager will make a detailed commercial evaluation of the bids. Wiand will submit this for review/approval to the appropriate parties.

Clarification may be obtained by telephone. However, for auditing purposes the bidder shall al

For unit rate subcontracts the Project Subcontracts Manager will prepare a sensitivity study to e

The preliminary issue of the bid analysis includes a recommendation which bidder(s) is/are tosum contracts if the final estimated costs exceed the budget. Executive involvement should be s

The approved preliminary issue of this bid analysis is the authorization for the Project Subcontr

Approval of the preliminary and final bid analysis by the client is limited to subcontracts that ar

9.4 Technical Bid Evaluation

If bidders have submitted technical alternates to their bids, the Engineering Specialist will make

Bids including detail design by the subcontractor will always be completely evaluated by the E


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In all other cases approval of engineering will be required for the recommendation which bidde

10. Negotiation and Award of Subcontract

10.1 Bid Clarification Meetings

The selected bidder(s) will be called in for final negotiations. The principal purpose of these many questions concerning the bidder(s) response to Subcontract Package for Bids. The meetin

properly marked-up to reflect any variations agreed to, and that minutes are kept. Samples of aof the meeting. The Project Procurement Manager as well as the Project Construction Manager

10.2 Minutes of "Pre-award" Meetings

The minutes will be numbered and distributed in accordance with the project numbering/distrib

The minutes will be numbered in sequential order.

The minutes of the meeting will be distributed (at the end of the meeting) as follows:

subcontractor

client, if applicable

Company : Project Engineer/Project Manager

Company : Project Construction Manager

10.3 Subcontract Bids Analysis, Final Issue

After the "pre-award" meeting(s) the Project Subcontracts Manager will update and finalize the

This final issue should clearly indicate the selected subcontractor with the reason(s) for the sele

Approval by the Engineering Specialist is required if a technical alternate has been selected or i

In both cases the Engineering Specialist will approve the proposed subcontractor on technical g

Approval by the General Manager or an other executive is required if the estimated final cost e

Approval by the client is required for subcontracts that are reimbursed by the client.

The approved final issue is the authorization for the Project Subcontracts Manager to inform th

10.4 Updating of Subcontract Package for Purchase

Following the selection of the subcontractor, the Project Subcontracts Manager will update the

The subcontract package "for execution" shall include all relevant sections indicated in 6.1 of t

The formal Purchase Order will be presented to the Manager of Purchasing/Subcontracts for sig

10.5 Purchase Order Acknowledgement


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The Project Subcontracts Manager shall ensure that the subcontractor returns the signed ackno

10.6 Unsuccessful Bidders

After receipt of the signed acknowledgement copy of the order the Project Subcontracts Manag

11. Kick-Off Meeting with the Subcontractor

After Purchase Order issue and before the subcontractor establishes himself at the site, the Prowho will decide on his or his representative's presence at this meeting.

12. Revisions to Subcontract Documents

12.1 Responsibility and Procedure

The responsibility for the preparation, input, review and approval of revisions to subcontract do

The Project Manager will arrange for all such documents to be sent to the subcontractor either:

through the Project Subcontracts Manager if the subcontractor is not established at the site, who

through the Project Construction Manager if the subcontractor is established at the site, whotransmittal acknowledgement slip.

Formal notification or confirmation of revised contractual documents will always be by the Pro

12.2 Red Flags

As soon as the home office makes significant changes to the subcontract package contents suchProject Construction Manager.

13. Variations in Scope and Extra Work

13.1 Definitions

"Variations in scope" or "scope changes" shall mean increases or decreases to the quantities sho

"Extra Work" shall mean modifications or alterations to work in progress or completed which a

13.2 Administration

Variations in scope shall be covered in an update of the Form of Tender.

On a monthly basis the Project Subcontracts Manager will determine if a Form of Tender updatthere is concern for the overall commitment. If the Project Subcontracts Manager recommends

Extra work shall be covered by Extra Work Authorizations (EWA's), which describe the work t

13.3 Pricing


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The Project Subcontracts Manager will prepare the required documents, will review these withManager, the Project Subcontracts Manager will advise the subcontractor accordingly.

13.4 Updating of the Purchase Order

The Project Subcontracts Manager will issue a purchase order amendment to formally incorpor

14. Claims

14.1 Definition

"Claim" shall mean a demand for payment by one party which is disputed by the other party.

14.2 Handling of Claims from Subcontractors

All claims from the subcontractor will be submitted through the Project Construction Manager

be countered by claims from Company to the subcontractor.

After review with and approval by the Project Construction Manager the Project Subcontracts

The Project Manager and the Manager of Purchasing/Subcontracts will be kept informed by the

All claims outside the limits of the Project Construction Manager's authority as well as all clai

14.3 Company Claims Against Subcontractors and Vendors

If a subcontractor fails to meet its contractual obligations Company will examine the possibility

Action will be taken with the approval of the Manager Construction.

Recoveries from vendors are usually referred to as "back-charges" and should be dealt with as o

15. Issue of Purchase Order Amendments

Purchase Order Amendments will be issued to formally incorporate in the subcontract:

all changes to subcontract documents

all approved Extra Work Authorization Reports (EWAR's)

all settled claims

Amendments will be prepared by the Project Subcontracts Manager or the Project Procurement

16. Progress Payment Certificates

At the end of each month and upon establishing and approval of the actual progress achieved,Manager and will be approved by the Project Construction Manager and the Client for reimburs

This means that all checking has been done and agreement on the amount to be paid to the subc


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The certificate further serves as the back-up to the invoice and must be attached thereto.

17. Payments to Subcontractors

Payments to subcontractors will be made in accordance with the agreed payment conditions inc

Invoices are usually paid by the Project Accountant following processing by the Field.

Payment may be made by the Client or by Company site personnel dependent upon the contract

When payment is by the Company site personnel a periodic audit will be carried out by the Proj

Final payment can only be made after receipt of the final payment certificate signed by the Proj

18. Subcontract Close-Out

18.1 Release of Liens

As soon as acceptance of subcontractor's work has been given by Company and where applicabLaws, Client requirements and approved by the Company Law Department.

A sample of release of liens or an equivalent document will be provided by the Project Subcont

18.2 Bank Guarantee

Company will, upon request from the subcontractor and if all above mentioned conditions a

subcontract.

18.3 Subcontractor Performance Report

For future reference the Project Subcontracts Manager, in conjunction with the Site EngineerProcurement Vendor Information system (P.C.S.).

18.4 Storage of the Subcontract File after Close-out

18.4.1 For Lump Sum Contracts

Upon completion of his work the Project Subcontracts Manager will submit his complete subco

18.4.2 For Reimbursable Contracts

After subcontract close-out the Project Subcontracts Manager will submit the complete subcont

19. References

Document Number Title Level

19.1 BN-W-UP001 Subcontracting Under the Chain Liability Act 4

19.2 BN-S-UP103 (SE00GCS) General Conditions of Subcontract 519.3 BN-S-UC002 (SC00SPSR) Safety, Health, Welfare and 5


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Environmental Policy, Safety Rules and SiteRegulations

19.4 BN-SP-UK001 (SE00QAM) Specification of Site QualityAssurance/Quality Control Requirements forSubcontracts

5

19.5 CM-PE-710 Procedure for the Assessment of ConstructionCapabilities of Subcontractors.

2

19.6 CM-PE-708 Purchasing Procedure 2

19.7 CM-PE-312 Planning and Quantification of Subcontracts 2

19.8 CM-PE-303 Project Procedure and Execution Manual 2

19.9 BN-CO-109 Subcontracts 3

19.10 BN-UC-107 E1 Subcontract Bid Analysis (preliminary) 5

19.11 BN-UC-107 E2 Subcontract Bid Analysis (final) 5

20. Responsibility Checklist - Part I

Part I of this checklist shows the responsibilities for subcontracts preparation up to and includin

Legend: MS = (Home Office) Manager of Purchasing/Subcontracts

PM = Project Manager

PSM = Project Subcontracts Manager

ES = Engineering SpecialistPL = Planning Engineer

PCM = Project Construction Manager

PPM = Project Procurement Manager

SC = Subcontract Coordinator

Note: 1 = Law Department

2 = Manager of Construction

3 = Manager of Procurement

4 = Client (if applicable)

5 = Manager QA & Safety

ReferenceSection

MS PM PSM ES PL PCM PPM SC Note

4.2 GENERAL

Subcontracts Plan

-Preparation by: x-Input x x x x 4


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-Check by: x 4

- Approval(initial/sign)

x

5.0 Subcontracts Schedule

-Preparation by: x-Input x x x x

-Check by: x

-Approval (initialsign)

x

7.1 List of Qualified Bidders

-Preparation by: x

-Input x x x

-Review x 3/4

-Approval (sign) x

6.0 SUBCONTRACT PACKAGE

Cover Sheet and Contents

-Preparation x

-Check by: x

-Approval (sign) x

6.1 Instructions to Bidders

-Preparation by: x-Input x x x

-Approval (sign) x

6.2 General Conditions of Subcontract(Company Standard)

6.3 Special Conditions of Subcontract

-Preparation by: x

-Input x x x 1/4

-Check by: x 1

-Approval (sign) x6.4 Safety, Health, Welfare and

Environmental Policy, Safety

Rules and Site Regulations(if company standard needs update)

-Preparation by: x

-Review x

-Approval x

6.5 Requisition

-Preparation x-Input x x


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-Review x

-Approval x

6.6 List of Applicable Documents

-Preparation x

-Input x x

-Reviewxor

x x

-Approval (sign) x

Expedite documents x

Compile sets x

6.7 Key Dat Schedule

-Preparation x x

-Input x x x x x

-Review x

-Approval (sign) x

6.8 Form of Tender Descriptions

-Preparation x

-Input x

-Review x

-Approval (sign) x

6.9 Form of Tender

-Preparation x

-Input x x

-Input quantities x

-Review x

-Approval (sign) x

10 Specification of Site Quality Assurance/Quality ControlRequirements for Subcontracts(Company Standard)

11 Equipment Erection Description

-Preparation by: x-Input x

-Approval (sign) x

12 Chain Liability Act Distribution(Company Standard)

6.0 Total S/C Package with Transmittal Letter

-Checking x

-Approval (sign) x

8.0 BIDDING PERIOD


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7.1 Shortlist of Bidders

- Action x

- Approval (sign) x x 4


-Action x

-Signature x

8.2 Bids

-Expediting x

-Receipt,distribution andsafekeeping

x

8.3 Questions fromBidders

- Handling x

BIDS EVALUATION PERIOD

9.2 Bids Opening

-Action x

-Witnessing (sign) xor x x

9.3 Bids Evaluation1. Commercial

-Action x

-Review x9.4 2. Technical Evaluation

-Action x

-Review x x x x

Bid Analysis Preliminary Issue

-Preparation x

-Approval (sign) x x x x 3(1)4


-Action x

-Participation x x x x x 4/5

-Participation asrequired/on call

x

10.3 Bid Analysis, Final Issue

-Preparation x

-Review x x x

-Approval(sign) x x x x 3(1)4

10.4 Update of S/C Package for Execution


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-Preparation x

-Review x

-Approval (sign) x

10.4 Purchase Order

-Preparation x

-Approval x x(2) 3(1)


-Action x

(1) will sign together with(2) at site by Construction Manager provided authorization letter has been issued

21. Responsibility Checklist - Part II

Part II of this checklist shows the responsibilities for subcontracts administration up to and incl

Legend: MS = (Home Office) Manager of Subcontracts

PM = Project Manager

PCM = Project Construction Manager

ES = Engineering Specialist

PPM = Project Procurement Manager

PSM = Project Subcontracts Manager

SI = Site EngineerSC = Subcontract Coordinator

Note: 3 = Manager of Procurement

4 = Accountant

ReferenceSection

MS PM PSM ES PCM PPM SI SC Note

11. Kick-off Meeting withSubcontractor

-Action x

Final Drawing Quantity Take-off

-Preparation x x

-Review x

-Transmit to Subcontractor x

Form of Tendere Update

-Decision to implement x x

-Preparation x


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-Forecast of Quantities x x

-Review x x

-Approval x

-Implementation x

13.2 Extra Work Authorization -Specific Job Procedure

-Prepartion x

-Input x x x

-Review x

-Approval (sign) x x

14.0 Claims and Backcharges

-Preparation x

-Input x x x

-Review x

-Approval x x

-Processing x

16.0 Progress Payment Certificates

-Preparation x

-Input x

-Review x x

-Approval x

17.0 Payment to Subcontractors-Approval x x

-Action 4

12.0 Revision to S/C Documents

-Approval x x

-Processing x

15.0 Issue of P.O. Amendments

-P.O.A.R. x

-Approval (sign)x x x 3

4

-Action x

18.0 Subcontract Close-Out

-Preparation x

-Input x

-Review x x

-Approval x x

-Final P.O. amendment x

22 Flowchart


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Image A-D


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Image A

Image B


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Image C


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Image D


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Home General Procedures CM-PE-705 Subcontracts Procedure

CM-PE-705 Subcontracts Procedure

Table of Contents

Purpose

Subcontract Responsibility and Management Policy

Responsibilities

Subcontracts Plan

Subcontracts Schedule

Subcontracts Package

Subcontractors List

Bidding Period

Bid Opening and Analysis

Negotiation and Award of Subcontract

Kick-Off Meeting with the Subcontract

Revisions to Subcontract Documents

Variations in Scope and Extra Work

Claims

Issue of Purchase Order Amendments

Progress Payment Certifcates

Payments to Subcontractors

Subcontract Close-Out

References

Responsibility Checklist-Part I

Responsibility Checklist-Part II

Flowchart


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1. Purpose

This procedure describes the basic management policy, organization and techniques employed in

subcontracting programs. This procedure applies to orders, placed or intended to be placed, foractivities involving site labour. This includes:

field labour purchase orders, with or without supply of materials (hereafter referred to as

"Subcontracts").

erection part of all supply with erection purchase orders. (The erection part hereafter referred to as

"Subcontracts")

labour part of all purchase orders for field services, including temporary facilities. (The labour parthereafter referred to as "Subcontracts")

The supply part of supply and erection purchase orders is handled in accordance with existing

Procurement procedures (ref.19.6). For the erection part of such orders, (ref.19.9) to which this

Subcontracts Procedure applies, the Manager of Subcontracts decides on a case-by-case basis what

subcontracting activities and/or documents are required.

This procedure does not apply to orders for engineering services only.

Note: Responsibilities of the various departments or individuals are shown in the Responsibility

checklist at the end of the procedure.

2. Subcontract Responsibility and Management Policy

Subcontracting is the responsibility of the Company Procurement Department both during proposal

and project execution phases.

For fiscal reasons the functions of formulation, issue, adjudication and the administration of

subcontracts are kept strictly separate.

The formulation of Subcontracts is executed in the home office by a Project Subcontracts Manager

who will also execute the administration on site. Progress reporting regarding the status of each

subcontract to be coordinated with the Project Procurement Manager.


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Continuity is assured by the fact that each subcontract is a stand alone document and that there is

maximum standardization in subcontract format, layout, contents and text.

2.1 Formulation of Subcontracts

The formulation of subcontracts is performed by a Project Subcontracts Manager who is directly

responsible for all subcontracting activities in the home office, from preparation up to and including

award of the Subcontracts.

The Project Subcontracts Manager as a member of the Project Management team and reports to

the Project Manager, who has ultimate responsibility for all subcontracting activities including client

liaison and approvals.

2.2 Administration of Subcontracts

The administration of subcontracts is also performed by the Project Subcontracts Manager who is

directly responsible for all subcontracting and subcontract administration activities on site up to and

including subcontract close-out.

The Project Subcontracts Manager is a member of the Site Management team and reports to the

Project Construction Manager who has ultimate responsibility for all subcontracting activities on

site. Where required he will be supported by the Manager of Subcontracts.

3. Responsibilities

3.1 Manager of Subcontracts

The home office based Manager of Subcontracts has a supervisory and monitoring responsibility for

all construction subcontracts handled by Company, during proposal and project execution phases.

He reports to the Manager of Procurement.


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The responsibilities of the Home Office Manager of Subcontracts include:

a. General

developing, issuing and maintaining general procedures and policies for subcontracting operations.

maintaining the Procurement Department's computerized and worldwide Subcontractors Register.

Directing the improvement and standardization of subcontract documents.

b. Individual projects

preparing subcontract write-ups at qualification and bidding stages of proposals in consultation with

the H.O. Construction Manager.

advising the Project Subcontracts Manager in his contribution to the subcontracts plan.

advising the Project Subcontracts Manager in the preparation of the Special Conditions of

Subcontract for the project

ensuring that the subcontract progress and cost control structures have a sound technical, financialand economical basis and that the proper control systems are selected.

ensuring that client and Company subcontract requirements for the individual projects are met.

Ensuring that specific project procedures are made.

ensuring that the following documents will be presented to the Manager of Procurement for his

review/approval:

list of qualified bidders

bid analysis

award of subcontract

3.2 Project Subcontracts Manager (Home Office Activities)

The Project Subcontracts Manager has direct responsibility and authority to accomplish the

following for the Project(s) he is nominated for:

preparing the subcontracts plan.


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preparing the Special Conditions of Subcontract for the project and for the individual Subcontracts

incorporate any deviations, if required.

preparing sensitivity studies.

coordinating the preparation of subcontract packages with the Subcontract Coordinator fromEngineering (see 3.5).

compiling of subcontract packages; ensuring that they are checked by all disciplines concerned for

completeness, correctness and clarity before being issued for bids.

preparing of subcontract bids analyses.

organizing meetings with subcontractors.

obtaining safety and quality information, programs and procedures from potential subcontractors

for review by the Safety Engineer, and Manager of Quality Assurance and Safety and the ProjectConstruction Manager.

participating in project planning and scheduling of work related to Subcontracts, as well as reviewing

detailed plans, schedules and manpower loadings submitted by subcontractors.

organizing and maintaining a complete file of all prequalification and bid correspondence,

subcontract documents, minutes of meetings and correspondence between Company and

subcontractors.

initiating the order preparation/issue.

The Project Subcontracts Manager informs the Project Manager, the Project Construction Manager

and the Manager of Purchasing/ Subcontracts promptly about major problems with regard to

subcontract activities.

3.3 Project Subcontracts Manager (Site Activities)

The Project Subcontracts Manager has direct responsibility and authority to accomplish thefollowing:

administering the subcontracts including scope and commercial matters.

acting as the single point contact for the subcontractor.

controls subcontractors' manpower and progress.

controls, trends and forecasts the costs of the subcontractors.

handling of scope changes.


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handling of extra work.

handling of claims, within the given limits.

closing out of the subcontracts.

preparation of subcontractor performance reports.

3.4 Project Construction Manager/Construction Coordinator

The Project Construction Manager participates in home office subcontracting activities until he

leaves for the site. Prior to his assignment the Project Construction Manager is represented in the

home office by a Construction Coordinator.

The Project Construction Manager is responsible for the project construction operations and thus

has ultimate responsibility for all site subcontracting and subcontract administration activities

including client liaison and approvals.

3.5 Subcontract Coordinator

The Project Manager will assign a coordinator for each subcontract early in the project.

The subcontract coordinators will ensure that drawings and free issue materials arrive in time and

that quantities are kept up-to-date and trended.

The information must be channelled through the Subcontracts Manager.


4.1 Subcontract Strategy

As early as practical the Project Subcontracts Manager will consult with the Project Manager and the

Project Construction Manager and the H.O. Manager of Subcontracts, to establish the subcontract

strategy, taking into account the specific requirements of the project, such as the contract with the

client, country where the construction work is to be done and location of the site, specific site


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conditions and experience with subcontractors in the area. This strategy will be laid down in the

Subcontracts Plan. The Subcontract Plan will be issued as per Project Procedure and Execution

Manual (ref.19.8).

In case an initial subcontract plan has been prepared during the proposal phase then this will be

further developed as described above.

The subcontract plan should be updated regularly to implement any changes in the strategy,

estimated quantities, subcontract schedules etc.

4.2 Basic Items to be Addressed in the Subcontracts Plan (ref.19.7)

requirements for client's participation and approval.

bidding procedure.

number and type of subcontracts. (Subcontract specification).

pre-qualification requirements.

preferred price basis and the quantification requirements of each subcontract related to theexpected state of design engineering at the time of the request for bids. (Subcontract specification).

listing of anticipated supply with erection orders. (Subcontract specification).

subcontracting requirements related to the erection part of supply with erection orders.

subcontracts which require a pre-bid or bid clarification meeting.

content and status of subcontract documents.

special requirements by country with regard to the selection of subcontractors and/or

administration of the subcontracts. (Subcontract strategy)

subcontract schedule with key dates and manpower histograms.

a listing of estimated quantities (Quantity status summary).

listing of anticipated free issue materials per type of subcontracts.



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The Project Subcontracts Manager will prepare together with the Planning Engineer, the

Subcontracts Barchart Schedule based on the Subcontracts Plan and the overall requirements of the

Project Summary Schedule, in consultation with the Project Manager and the Project Construction

Manager.

The Subcontracts Schedule indicates the individual subcontracts and defines for each subcontract:

the period of preparing the subcontract package for bids.

the bidding period.

the evaluation period ending in award of the subcontract.

start on site date.

documents complete.

mechanical completion date.

start-up/commissioning date.

The Subcontracts Schedule will be monitored by the Project Subcontracts Manager who will initiate

corrective action whenever there is a risk of any activity falling behind schedule.

6. Subcontract Package

The subcontract package "for bids" comprises all technical, commercial and scheduling information

to provide the qualified bidders with a sound basis for their bids.

A bid package includes the following sections: Ref.

0 Cover Sheet + Contents (CSC)

1 Instructions to Bidders (ITB)

2 General Conditions of Subcontract (GCS) 19.2

3 Special Conditions of Subcontract, if required (SCS)

4

Safety, Health, Welfare and Environmental Policy


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Safety Rules and Site Regulations (SPSR)

19.3

5 Requisition (REQ)

6 List of Applicable Documents (LAD)

7 Key-date Schedule (KDS)

8 Form of Tender Descriptions (FOTD)

9 Form of Tender (FOT)

10 Specification for Site Quality Assurance/

Quality Control for Subcontracts (QAM) 19.4

11 Other special documents, if required, specifications,

not forming part of the technical documents as per list

of applicable documents.

A package for mechanical work further includes:

12 Equipment Erection Description (EED)

Packages for work in The Netherlands may further include (depending on the contract between

client and Company):

13 Subcontracting Under the Chain Liability Act Data 19.1

Sect. 1 Instructions to Bidders

This document comprises the following:

a. The introduction, definitions, bidder's qualifications and general bid conditions (para. 1 through

5). This text is standard and will be used unaltered for all bidding.

b. Special bid information, example tender statement and complete bid (para. 6 and further). This

text will be reviewed by the Project Subcontracts Manager and modified and/or extended, if

required, to suit specific project needs. It should also contain the requirements with regard to safety

and quality to be submitted with the quotation.


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Sect. 2 General Conditions of Subcontract

This document is a company standard comprising the standard conditions that apply to all

subcontracts.

This document will neither be changed, nor given a job number. Any deviations will be included in

Special Conditions of Subcontract.

Sect. 3 Special Conditions of Subcontract

Special Conditions of Subcontract are written by the Project Subcontracts Manager if and when the

main contract with the client or the country of operation requires conditions deviating from or in

addition to the General Conditions.

The (draft) Special Conditions of Subcontract will be sent to the Law Department, the H.O. Manager

of Subcontracts and the Project Manager for their review and approval.

The evaluation of specific country requirements will be made by the Project Subcontracts Manager

and the Manager of Subcontracts, in conjunction with the Project Construction Manager.

Sect. 4 Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Regulations

As a rule the client's safety policy and site regulations are applicable.

This document will be reviewed by the Project Construction Manager and by the home office

construction Safety Manager. Any additional requirements will be incorporated in Company's

"Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Regulations" (SE 00 SPSR).

The SPSR will be checked by the Project Subcontracts Manager for consistency with the subcontract

package and edited as required.


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If there is no client document available the Project Construction Manager will use the company

standard "Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Requirements"

(ref.19.3).

Sect. 5 Requisition

The requisition of which typical subcontract-formats are available within the Procurement

Department will be modified by the Engineering Department in consultation with the Project

Subcontracts Manager to suit the specific project needs. The requisition will be issued with a request

for quotation/purchase.

Sect. 6 List of Applicable Documents

The List of Applicable Documents shows all technical documents that (may) have a bearing on the

pricing.

The Engineering Specialist will identify these documents and submit a draft list including document

name, document number, issue status and number of sheets per document to the Project

Subcontracts Manager for processing.

The completed list will be reviewed by the Project Manager or his delegate.

As the list shows documents that relate to pricing, it will not be updated to show current revisions of

documents unless those revisions have been submitted to the bidders.

The Subcontracts Coordinator will arrange for printing the documents shown in the List of Applicable

Documents and will submit the necessary number of complete and checked sets of these documents

to the Project Subcontracts Manager.

Sect. 7 Key-Date Schedule


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For each subcontract the Project Subcontracts Manager with the Planning Engineer will prepare a

key-date schedule defining sufficient key-dates and periods to enable bidders to schedule

construction activities, manpower, equipment, materials, supplies etc.

the key-date schedule will include:

start date of construction.

periods during which the technical documents will be supplied to the subcontractor.

periods during which the equipment and/or materials will be supplied to the subcontractor.

key dates or milestones for certain parts of the construction work as required.

date of contractual completion.

date of subcontractors' commissioning activities.

Sect. 8 Form of Tender Descriptions

The Project Subcontracts Manager will select the sections of the standard Form of Tender

Descriptions relevant to the chosen price basis and will make, in consultation with the Engineering

Department, any modifications required as a result of modifications to the Form of Tender.

Sect. 9 Form of Tender

The Project Subcontracts Manager will select the sections of the standard Form of Tender relevant

to the chosen price basis and review these sections in consultation with the Engineering

Department who will modify these sections, if required, to suit the specific project needs.

The schedules available are:

Schedule 1 lump sums

Schedule 2 rates for units of work

Schedule 3 rates for units of operation

Schedule 4 rates for units of time

Schedule 5 rates for units of supply


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Schedule 6 spare

Schedule 7 spare

Schedule 8 spare

Schedule 9 subcontract value adjustment

A package for piling further includes:

Schedule 10 subcontractor's rig and pile data

Sect.10 Specification for Site Quality Assurance/Quality Control for Subcontracts

This specification (company standard) defines what is required from Subcontractors concerning site

quality assurance and quality control.

This section should be discussed during a Clarification and/or Pre-award meeting and should become

an integral part of an order.

Sect.11 Equipment Erection Description

This section only to be added with subcontract packages for mechanical work.

It gives detailed description how the equipment and in some cases in which sequence should behandled and erected at site.

This existing format should be prepared and completed by the specialist engineer in coordination

with the Project Construction Manager.

Sect.12 Chain Liability Act Data


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This section (company standard) should be added in subcontract packages for work in The

Netherlands only. This also depends on the type of contract between Company and the Client.

It describes to the subcontractor what Company and Subcontractor have to do to meet therequirements of the Chain Liability Act of 1 July, 1982 and to safeguard that the GAK/SAB and the tax

office can collect premiums and taxes due to them.

During the negotiations with potential subcontractors, Company has to make sure that we achieve

maximum protection at minimum costs therewith satisfying the requirements of the Chain Liability

Act.

The following basic principles to be maintained and where applicable to be discussed with and to

impose on the Subcontractor.:

careful screening and selection of Subcontractors.

withholding from the payments to SUBCONTRACTOR amounts equal to the actual amounts of

premiums and taxes to be paid to SUBCONTRACTOR and paying such amounts directly to the

authorities.

monitoring of SUBCONTRACTOR's actual manhour expenditure.

not assuming the role of SUBCONTRACTOR's tax and/or premiums consultant.


7.1 As soon as the Subcontracts Plan for the Project has been approved, the Project Subcontracts

Manager, in conjunction with the H.O. Manager of Purchasing/Subcontracts and the Project

Construction Manager, will prepare the list of potential bidders based on the ProcurementDepartment's computerized Subcontractors Register.

The potential bidders' quality, past performance on safety, experience, capability, organization,

capacity and financial stability will be investigated by the H.O. Manager of Subcontracts or the

Project Subcontracts Manager and the Project Construction Manager to issuing the subcontract

package for bids (ref 19.5).


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For each individual subcontract the Project Subcontracts Manager will discuss and prepare the

"short list" of bidders about one month prior to going out for bids.

If required, the list will be submitted to the client for review and approval.

7.2 The number of valid bids to be obtained depends on the nature of the subcontract. The

minimum number shall be three valid bids.

8. Bidding Period


Following approval of a subcontract package for bids, the Project Subcontracts Manager will send

the packages with a covering letter to the bidders. The covering letter will be signed by the Project

Subcontracts Manager. His name will be indicated in the Subcontract package as the contact person.

8.2 Expediting of Bids

The Project Subcontracts Manager will ensure that all bidders promptly acknowledge receipt of the

package and timely submit their quotation.

8.3 Questions from Bidders

All communications with the bidders will be through the Project Subcontracts Manager, who will

consult with the relevant departments as required.

In case a question from a bidder reveals a need for clarification or change of the bid information,

both the question and the answer will be transmitted to all bidders. Extension to the bidding period

may be given in exceptional cases only and requires the approval of the Project Manager and the

Project Subcontracts Manager.


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8.4 Sealed Bids

Sealed bids will be required for reimbursable projects and in those other cases where a sealed bid

requirement may support a timely submission and an accurate quotation.

8.5 Confidentiality

Bid information (bidders lists, minutes of pre-award meetings), bids and bids analyses will be

distributed as per Project Distribution Schedule. Any deviation requires prior approval by the Project

Manager.


9.1 Bids Receival

The Project Subcontracts Manager will receive and keep safe all bids.

9.2 Bids Opening

As soon as practical after the bid closing date, all sealed bids will be opened by the Project

Subcontracts Manager, witnessed by the Project Manager or the Manager of Subcontracts and, if

applicable, by the client.

A bid opening protocol will be filled out by the Project Subcontracts Manager and signed by all

present. Sealed bids received after the closing date will be stored unopened or returned to the

Bidder.

9.3 Subcontract Bids Analysis, Preliminary Issue

Bid evaluation criteria and/or weighing factors agreed upon early in the project in consultation with

Project Manager/Project Construction Manager and/or Client will form the basis for the bid analysis.


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The Project Subcontracts Manager will make a detailed commercial evaluation of the bids. Will

contact bidders to clarify their bids if required, will evaluate commercial alternates if submitted by

the bidders, will prepare the preliminary issue of the subcontract bids analysis (ref.19.10) and will

submit this for review/approval to the appropriate parties.

Clarification may be obtained by telephone. However, for auditing purposes the bidder shall always

be required to confirm the clarification in writing (telex, fax). This correspondence should be

distributed to the engineer involved with the evaluation.

For unit rate subcontracts the Project Subcontracts Manager will prepare a sensitivity study to

establish which bidder may be expected to have the lowest overall price upon completion of thework, taking into account safety, quality and scheduling aspects.

The preliminary issue of the bid analysis includes a recommendation which bidder(s) is/are to be

invited for negotiations. Signatures for approval are to be obtained in accordance with the relevant

authorization list. Executive involvement is required for major subcontracts and in lump sum

contracts if the final estimated costs exceed the budget. Executive involvement should be stated in

the Project Subcontract Plan.

The approved preliminary issue of this bid analysis is the authorization for the Project Subcontracts

Manager to invite the selected bidder(s) for negotiations.

Approval of the preliminary and final bid analysis by the client is limited to subcontracts that are

reimbursed by the client.

9.4 Technical Bid Evaluation

If bidders have submitted technical alternates to their bids, the Engineering Specialist will make a

technical evaluation of such alternates when requested by the Project Subcontracts Manager.

Bids including detail design by the subcontractor will always be completely evaluated by the

Engineering Specialist.


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In all other cases approval of engineering will be required for the recommendation which bidder(s)

will be invited for further clarification meetings. Approval of a technical bid analysis may be required

by the Client.

10. Negotiation and Award of Subcontract


The selected bidder(s) will be called in for final negotiations. The principal purpose of these

meetings is to ensure that the bidder(s) fully understand the scope of work and all technical and

commercial aspects of the subcontract. They also provide an opportunity for Company to clarify any

questions concerning the bidder(s) response to Subcontract Package for Bids. The meeting(s) will be

chaired by the Project Subcontracts Manager, who will make sure that the Subcontract Package

including the detailed construction schedule and the manpower chart/curve are properly marked-up

to reflect any variations agreed to, and that minutes are kept. Samples of a progress curve, a

monthly report, a detailed schedule and a safety plan to use for further clarification to the selected

bidder(s). The handwritten minutes shall be signed by all parties at the end of the meeting. The

Project Procurement Manager as well as the Project Construction Manager shall attend these

meetings.

10.2 Minutes of "Pre-award" Meetings

The minutes will be numbered and distributed in accordance with the project

numbering/distribution system for such meetings.

The minutes will be numbered in sequential order.

The minutes of the meeting will be distributed (at the end of the meeting) as follows:

subcontractor

client, if applicable

Company : Project Engineer/Project Manager


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Company : Project Construction Manager

10.3 Subcontract Bids Analysis, Final Issue

After the "pre-award" meeting(s) the Project Subcontracts Manager will update and finalize the

subcontract bids analysis, if required (ref.19.11) and submit this for review/approval to the

appropriate parties.

This final issue should clearly indicate the selected subcontractor with the reason(s) for the

selection.

Approval by the Engineering Specialist is required if a technical alternate has been selected or if the

package includes detail design.

In both cases the Engineering Specialist will approve the proposed subcontractor on technical

grounds only.

Approval by the General Manager or an other executive is required if the estimated final cost

exceeds the budget and the project is on a lump sum basis and for those major subcontracts which

are mentioned in the Subcontract Plan.

Approval by the client is required for subcontracts that are reimbursed by the client.

The approved final issue is the authorization for the Project Subcontracts Manager to inform the

successful bidder, in writing, that he has been selected as the subcontractor.

10.4 Updating of Subcontract Package for Purchase

Following the selection of the subcontractor, the Project Subcontracts Manager will update the

subcontract package to reflect all agreements reached with the successful bidder, and shall prepare

the formal Purchase Order.


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The subcontract package "for execution" shall include all relevant sections indicated in 6.1 of this

procedure with the exception of section 1, Instruction to Bidders. The minutes of the "pre-award"

meeting with the successful bidder will be typed and incorporated in the package.

The formal Purchase Order will be presented to the Manager of Purchasing/Subcontracts for

signature.


The Project Subcontracts Manager shall ensure that the subcontractor returns the signed

acknowledgement copy of the purchase order/ subcontract within ten working days after receipt ofthe purchase order.

10.6 Unsuccessful Bidders

After receipt of the signed acknowledgement copy of the order the Project Subcontracts Manager

will advise all other bidders by standard letter that they were not successful.

11. Kick-Off Meeting with the Subcontractor

After Purchase Order issue and before the subcontractor establishes himself at the site, the Project

Construction Manager will hold a kick-off meeting with the subcontractor to ensure a smooth start

of field activities. The Project Construction Manager will inform the Project Manager who will decide

on his or his representative's presence at this meeting.

12. Revisions to Subcontract Documents

12.1 Responsibility and Procedure

The responsibility for the preparation, input, review and approval of revisions to subcontract

documents and the Purchase Order is the same as for the original ones.


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The Project Manager will arrange for all such documents to be sent to the subcontractor either:

through the Project Subcontracts Manager if the subcontractor is not established at the site, who

will forward them directly to the subcontractor's head office.

through the Project Construction Manager if the subcontractor is established at the site, who will

forward them to the subcontractor's field representative. The Company site office shall ensure that

the subcontractor acknowledges receipt of the documents by signing and returning the transmittal

acknowledgement slip.

Formal notification or confirmation of revised contractual documents will always be by the Project

Subcontracts Manager with a purchase order amendment, based on a revised request for purchase

initiated by Engineering.

12.2 Red Flags

As soon as the home office makes significant changes to the subcontract package contents such as

large variations in the quantities or changes to delivery dates of drawings or materials, the Project

Manager will, pending the revision of the subcontract documents, immediately inform the Project

Construction Manager.

13. Variations in Scope and Extra Work

13.1 Definitions

"Variations in scope" or "scope changes" shall mean increases or decreases to the quantities shown

in the Form of Tender as well as additions of items not previously shown in the Form of Tender.

"Extra Work" shall mean modifications or alterations to work in progress or completed which are not

covered by the existing contract.


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13.2 Administration

Variations in scope shall be covered in an update of the Form of Tender.

On a monthly basis the Project Subcontracts Manager will determine if a Form of Tender