Proven Effective Contracting Strategy to Enhance Brownfield Capital Projects Execution
Authors: Ibrahim Mohamed Walid A. , Yousaf Syed Ali 
Published: October 2022

Long Term Agreement (LTA) contracting strategy is a new developed strategy for capital projects that has holistic objective of not only eliminating the Cons of traditional heavily implemented contracting strategies; Lump Sum TurnKey (LSTK) and Lump Sum Procure and Build (LSPB) but more importantly to increase the domestic dependency on manpower and manufacturing. LTA is a hybrid strategy between LSTK and Work Unit Rate/ Time Unit Rate (WUR/TUR). For a fixed period of time and specific work zone, contractor is granted LSTK contracts for an agreed upon WUR. In this paper, the development of this new strategy will be discussed, its Pros and what advantages it achieved after implementation.

Existing processing facilities consistently need upgrades that is business driven hence, need to be executed on an expedited mode while the projects budgets are relatively low (less than $100 million US dollars). These projects need to be executed while the existing facility is on stream, producing and within a specific schedule and pre-determined aggressive milestones. Hence, the implementation of LTA contracting strategy for oil and gas capital projects in brown fields can reduce contracting phase period by up to 70 %. This paper research work is focused on the implementation of LTA contracting strategy in brown field projects specifically in gas processing facilities construction projects with budget less than $100 milion US dollars/ project department. The evaluation compares the current recommended LSTK contracting strategy verses LTA contracting strategy proposed. The two strategies are assessed on the bases of time efficiency and effectiveness of cost control during the project execution life cycle. The comparison was done on realistic time utilizing decision tools analysis approach. The time frames are extracted from processes mandated by "Company" Engineering procedures "SAEP". The two awarding strategies are furthered analyzed using lean tools and methods.

Furthermore, a comparison between the three contracting strategies; LSTK, LSPB, and LTA is conducted. In 2019, the author has published a paper with the same comparison between LSTK and LSPB for capital projects with budgets $100 million US dollars or less under specific conditions. Four (4) sets of assessments were conducted with one variable effect is assessed at a time and the remaining are finalized in order to develop recommendation for which contracting strategy to be used when. In the current paper, the author(s) chose to conduct a similar assessment with minor modifications on the conditions but with the introduction of the LTA as a third contracting option. New set of recommendations are developed and graph distribution will be displayed.

It can be shown that the newly introduced contracting strategy LTA has significant advantages and positive impact on both the company and stockholders. For instance, it will improve the Overall performance of Oil & Gas (O&G) brownfield upgrade projects execution to align with Industry Benchmark through the following focused benefits; improving the contracting cycle time by 70% hence optimizing the procurement cycle. It will allow contractors to allocate dedicated construction resources which will create a strong potential for cost and schedule optimization and effective planning/execution for bottleneck activities like Tie-ins and shutdown related scope. Availability of high-quality skilled manpower will most definitely improve job site quality and safety related issues. In addition, a demand on local manufacturing industry will increase. Therefore, there will be an increase in the Local jobs offering and strong support for the government In Kingdom Total Value-Added program (IKTVA) aimed at development and retaining of local manpower and Saudi resources.