Abstract
The execution of oil and gas projects typically involves a multi-stage process, starting from Assess, Select, Define, and moving through Execute, Operate, and Decommission. In recent years, many projects have increasingly focused on brownfield activities (modification of existing facilities) and debottlenecking, often with minimal greenfield development (new facilities), driven by strategic short- and long-term business plans.
Typically, the Oil and Gas Projects are executed based on the Front-End Engineering Design (FEED) developed by a FEED Consultant upon conclusion of the Assess and Select stages. Once the FEED is finalized, multiple bidders participate in a competitive Engineering, Procurement, and Construction (EPC) bidding process. After a competitive bidding process which involves, pre-bid clarification with the client / FEED consultant, vendor inputs for the major packages and equipment, execution plans, post-bid clarifications, cost and / or schedule negotiations, bidder's exceptions, and qualifications meetings, etc, an EPC contractor is selected to execute the project. In such a strategy, the EPC contractor has extremely limited options for any possible optimization as the EPC Contractor needs to follow the FEED design and has to comply with the company specifications / standards. Any optimization is possible only when the design is to be further concluded upon vendor inputs during the EPC Stage (e.g. number of Pressure Safety Valves, Control Valves, Trains in a Custody Transfer Metering Skid, etc.) or it is specifically asked to be further evaluated.
The Design Competition (FEED+EPC Bid) strategy has become an innovative approach adopted by oil and gas operating companies in recent years. This contracting model combines Front-End Engineering Design (FEED) and EPC bidding into a competitive framework where multiple EPC contractors are invited to develop both the FEED and EPC bids concurrently. Upon completion, the client evaluates each contractor's proposal, selecting the one that best meets their objectives in terms of design efficiency, cost, and schedule. Contractors that are not selected to continue with the project are compensated for their investment and efforts in developing the FEED and EPC proposals. This is a fair practice that acknowledges the time and resources expended by these contractors in the competitive process.
From the client perspective, the Design Competition (FEED+EPC Bid) provides a more efficient and optimized design as compared to the typical FEED and EPC Bidding in terms of cost and schedule efficiency, enhanced design optimization, reduced project risks, more competitive and "fit-for-purpose" designs.
The elimination of a separate EPC bidding process reduces the overall project timeline. This strategy is particularly effective for projects with extremely tight schedules, as it streamlines the process from FEED to execution.
The competition also encourages EPC contractors to propose more cost-effective designs, knowing that both design and execution are being judged together. In this model, EPC contractors are encouraged to propose fit-for-purpose designs that are competitive and optimized for the client's specific requirements. EPC contractors competing in the design competition are incentivized to leverage their expertise, understanding of client specifications, and industry experience to propose optimized solutions that better align with the client's objectives. Contractors can take a more holistic approach to design and execution, which typically results in more innovative and efficient project outcomes. Since the contractors will also be responsible for executing the design they develop, they are more likely to propose solutions that are practical, efficient, and within budget, ultimately minimizing risks during execution.
The selected EPC contractor assumes complete ownership of the FEED that they developed during the design competition. This increases accountability and reduces risks related to cost overruns or delays since the contractor is intimately familiar with the design they must execute. By merging FEED and EPC responsibilities, there is less room for misalignment between the design phase and execution, resulting in smoother project implementation.
Since the selected EPC contractor has already developed the FEED, they are fully accountable for the execution, reducing the likelihood of costly modifications or schedule delays. The transition from design to construction is more seamless because the contractor fully understands the project from its early stages, eliminating potential handover issues that can arise in traditional contracting models.
Throughout the design competition, pre-bid clarifications and meetings between the client, select-stage consultants, and competing contractors ensure that all parties are aligned on project requirements and strategies. This fosters better communication and allows for adjustments early in the process, leading to more refined proposals and fewer surprises during execution.
Another project execution strategy is an Open Book Cost Estimate. In this strategy, the contract is converted into an EPC lump sum contract as per the terms and conditions of the tendering process. All project cost, contingency, margins, and the contractor's profit are all very well known to the client. In this strategy, the contractor proceeds to the main EPC Stage without interruption. However, the drawback is that the design competition option from various EPC Contractors is not available. The client will have to execute the project only with a single EPC contractor for any design developments, alternative design and configuration etc. until it is fully converted to EPC Phase.
Direct EPC execution strategy also exists, and it is typically suitable for very small-scale projects or minimal brownfield activity is involved. Client in-house engineering team or third-party consultant engages the contractors as per frame agreement for the execution. This strategy provides best schedule, provided the design is well defined without any vendor complex / major packages, and there is no / limited chance of any variation.
An EPC Contractor was involved in the Design competition (FEED+EPC Lumpsum Bid) of multiple Oil & Gas projects. The project scope for a project was to verify the existing facility design (brownfield) and design a new facility (greenfield). In this project, well fluid production was increased from various reservoir fields as per the business plan, and the existing facility was inadequate to handle surplus associated gas and produced water. The project involved significant Brownfield and Greenfield activities. This paper highlights some of the key observations based on the EPC Contractor's experience of participating in a design competition followed by EPC execution of a project for which, extensive efforts were put into during the EPC Stage with changes in the process configuration associated with cost and / or schedule impact.
