With the new ‘normal’ level of commodity prices and lower level of capital investment the resources industry requires every dollar of investment to stretch further and the need has arisen for more cost effective, efficient and simpler project delivery.
Clients have been forced to cut back their operational and projects teams and reduced manning levels have required them to look at traditional delivery models. By allocating the project control and risk back to the contractor, clients are able to engage a ‘one stop’ solution or as we refer to it in the industry a design and construct turnkey delivery or ‘D&C’ solution.
It has been talked about as the ‘new way’ our industry ‘should’ be operating but the truth is that true D&C has only been recently re-invigorated by the industry, looking for change.
It is at this point, that I will qualify that there have been horror stories about D&C projects out there that have gone wrong… and I mean really wrong. However that is the case across all types of delivery models if they are set up wrong or have the wrong engagement process.
If a client puts together a well-defined scope of works, understands their drivers and selects a competent EPC contractor, then the benefits can well outweigh the negatives. Let’s be clear, companies have been delivering turnkey design and construct solutions since the dawn of time and there should be no reason not to continue down that same path.
Here are 3 important factors when determining whether design and construct is the contracting model you should choose:
Owning the process of design
Not only does this force contractors to be more careful and calculated in what is offered, it has also given a licence to innovate, design and deliver for cost. After all contractors should know where the money is in project delivery and how to save it. Issues with design from a third party can cause interface issues, delays, variations and disruption but under the D&C model the onus is back on the contractor to own the design, cost and schedule.
Definition is the key
Understanding and defining the key project drivers is critical to the D&C model. If the offer and tender are not clearly defined there will always be arguments over what was included, excluded and what is paid. This can happen in any type of contract, the key component to ensuring as a client that you are getting what you want is to provide a clear set of project deliverables for the contractor to submit a D&C offer.
Establish the operational parameters
Too often project operational objectives are not clearly defined and the required outcomes are not established to enable measurable success. In the resource industry, processing warranties and guarantees can be established quite easily, so there is no real reason why assessment parameters cannot be established for all types of projects.
As a short take-away the benefits of design and construct turnkey delivery can be summed as:
+ Reduce owner’s costs
+ Encourage innovative design
+ Reduce margin on margin
+ Reduce interface issues
+ Shift the risk
+ Control the outcome
When determining your preferred contracting strategy in the future, challenge your own team and drive your project partners or contractors to deliver the best solution for your project needs. Design & construct turnkey delivery is making a real resurgence and will no doubt once again become the delivery method of choice in our industry.
Primero Group deliver turnkey design, construction and commissioning solutions for the resources sector.