A B Rhead

1
A B Rhead Associates a part of The Rhead Group

• Case Study of Pipeline Project
• A new generation Alliancing contract based on the
  NEC

2
The Client National Utility Company

• National Gas and HV Electric Transmission Owner/
  Operator
• Required through Legislation to provide a Safe
  and Cost Efficient Gas Transmission System
• Highly Regulated
• Focused on Delivering World Class Safety
  Environmental Performance
• NEC Contracting Strategy

3
Background

• Contractor resource base stretched for 2008 build
  programme
• Historically unpredictable out turn costs
  Typically 30-100 above contract award
• Large number of projects ending in dispute
• Contractors aspiration to contract under reduced
  risk strategy
• Client aspiration to explore new ways of
  contracting

4
Critical Path Programme
Project Delivery Timescale - 34 months
Final Negotiation of Stage 2 contract price
March 2007
April 2006
April 2008
Dec 2005
Nov 2005
EIA/DTi Consent 8 m - 12m
Construction 6m
EIA Surveys and Submission
1st October 2008
Stage 1 Prelim Design
Auction Signals
Stage 2 Detailed Design /Procure
Tender/Award For Main Works Contract 3 months
Land Consents and CPO Process
5
The Project

• 21km Cross Country Steel Welded Pipeline
• 85 barg Design Pressure
• Construction of 3 AGIs (Above Ground
  Installations)
• 25 Nr Trenchless Road Crossings
• 3 Nr Rail Crossings
• 5 HDDs (Horizontal Directional Drills)
• Construction of 3rd Party MOCs (Minimum Offtake
• Connections)
• Crossing of Two Highly Sensitive Environmental
  sites
• (RAMSAR)
• Design Uncertainty Changes in Scope
• Environmental Constraints - Protected Species

6
Existing Contracting Strategy

• Two Stage Contract With Option to Terminate at
  the end of Stage One
• Stage One Design, Site Investigation, Consents
  and Land Acquisition
• Stage Two Detailed Design and Construct
• NEC Options C with Activity Schedules
• Amended through Z Clauses
• Competitively Tendered through QVD
• Sanctioned Budget
• Employer Owned Risk Pot
• Employer Managed Project Cost Elements

7
Proposed Alliancing Strategy

• Two Stage Contract
• Stage One Design, Site Investigation, Consents,
  Land Acquisition and jointly develop and agree
  the Stage Two Target Cost
• Stage Two Detailed Design and Construct
• Works Contract NEC Options C with Activity
  Schedules
• Over aching Tri-Party Alliance Agreement
• Target Cost Inclusive of all project costs able
  to be influenced by the Alliance
• Target Cost includes jointly owned Risk Pot
• KPIs against Pain/ Gain

8
Why an Alliance?

• Consistent with Construction Drivers for Change
• Promote best practice in project delivery through
  optimisation of relationships
• Improve Supply Chain Performance and Management
• Reduce project processes and interfaces
• Improve sub-contracting relationships
• Development of a win-win culture
• Manage increasing environmental requirements
  impacting on project delivery timescales

9
Client Key Drivers

• Safety - continuous improvement to safety through
  improved design, use of safer techniques and
  technologies
• Quality - right first time every time
• Design - consistent, repeatable and efficient
• Delivery - guaranteed
• Resources - use of professional and skilled
  resources, improving efficiency by designing for
  productivity
• Environment recognition of corporate and social
  responsibilities in delivering business
  requirements
• Values - demonstrating the right behaviours and
  establishing longer term relationships with
  culturally aligned sub-contractors

10
Alliance Objectives

• Focus on mutual goals and mutual common
  objectives
• Developing the optimum vehicle to deliver project
  activities
• Single management structure and culture
• Identification of opportunities for process
  improvement and increased efficiency
• Joint approach to project risks
• Equitable risk and reward mechanism
• Removal of duplication (no man/man marking!)
• Alignment of individuals and roles, organisations
  and tasks joint contribution of resources based
  on best individual for the role and
  multi-disciplined teams

11
Culture and VisionWorking with partner(s) to
ensure value and delivery
12
Existing Contractor Organisation
Project Manager
H/O Support Services

• QA/QC
• Safety
• Environmental
• Industrial Relations
• Commercial

Deputy Project Manager
Quality Manager
SHE Manager
Construction Manager
Design Manager
Environmental Manager
Commercial Manager
Ecology
Quality Engineer
Design Coordinator
Senior Cost Controller
Planner
Community Liaison
Archaeology
Cost Controller
Routing
Design and Project Services Geotechnical (Humber
Crossing)
AGIs
Document Controller
Geotechnical
Geotechnical
CAD
Services
Planning
13
Existing Client Organisation
14
Rhead Group Role Existing

• Provide Contract Administration to Client
• Procured under NEC Professional Services Contract
• Project Management, HSE, Technical and Quality
  Management of MWC
• Commercial management and administration of
  project and NEC MWC
• Administration of land budget
• Management of Consultants

15
Alliance Organisation Structure
16
Rhead Group Role Alliance

• Undertake key roles within the alliance delivery
  team
• Commercial management for the alliance
• Commercial administration of the NEC MWC
• Procured under NEC Professional Services Contract
• Share in the pain/ gain against the alliance
  target cost
• Provide a balanced view within the alliance

17
Alliances - What are they..? What are
they not..?

• Integrated collaborative delivery teams
• Joint project incentivisation with shared risks
  and rewards
• Way of developing longer term relationships based
  on certainty of delivery
• Vehicle for continuous improvement with
  innovative approach
• Performance driven based on continuous
  measurement and performance management
• Single project culture

• A means of outsourcing
• A them and us delivery approach
• Built on adversarial relationships
• Solely price focused/driven
• An excuse for failure
• Supplement for own resources
• Dominated by one partner

18
Contractual Structure Target Cost/Actual Cost
based on Fixed Fee Principle
Fee
Fee
Gainshare
Target Cost
Risk
Actual Cost
Fee
Risk
Management
Management
Base Cost (Labour, Plant, Material Services)
Base Cost (Labour, Plant, Material Services)
Savings () Opportunity
19
Alliance Agreement

• Provides the contract to bind the partners
• Establishes the Alliance Target Cost
• Establishes the Roles Responsibilities of the
  partners
• Establishes the Supervisory Board
• Establishes voting procedures
• Provides the dispute resolution mechanism

20
Supervisory Board

• Made up of senior representatives from the
  partners
• Appoints the Alliance Manager and Commercial
  Manager of the Integrated Project team
• Meets monthly to review the project
• Provides direction to the Integrated Project team
• Resolves dispute within the Integrated Project
  team
• Open and transparent
• Makes decisions on variation and change

21
Integrated Project team

• The Integrated Project team is appointed from
  representatives of the partners
• Deliver the works to schedule and budget
• To maintain contractual governance some roles sit
  with the employer and the contractor
• All other roles are best person for the role

22
Project Alliance Performance

• Forecast outturn cost within 3 of Target Cost
• Completion forecast on schedule
• No disputes
• Fully integrated delivery team
• Client satisfaction

23
Key Success Requirements/ Lessons Learned

• Requires sign on from all the Partners senior
  management
• Support from the Supervisory Board
• Absolute Openness and Honesty
• Conviction to answer/turn the doubters
• Ability to Share/Learn/Develop
• Support of the cultural development
• Internal health checks

24
Rhead Group Contact Details

• Tony Nixon Director SA Middle East
• e-mail tonynixon_at_abrhead.com
• SA Office 27 (0)11 287 9770
• SA Mobile [phone]
• UK Mobile [phone]
• Chris Barron Head of Operations
• e-mail chrisbarron_at_abrhead.com
• Office 44 1204 380682
• Mobile [phone]

25
Corporate Overview
26
Who We Are.

• A leading practice offering services
  encompassing
• Project Services
• Risk Management
• Health Safety
• Environmental Services
• Planning Services
• Dispute Resolution
• A company known for
• Commitment to customer satisfaction
• Skills and experience of its people
• Outstanding record of performance
• Dedication and commitment
• A reliable, friendly partner who
• Respects the ideas and needs of its clients
• Tailors solutions to its clients business
  objectives
• Delivers quality results

27
Who We Are.
Snapshot of the Rhead Group
Committed

• Founded in 1985
• 250 dedicated employees
• Serving the global oil, gas, electrical, water,
  cable, petrochemical, energy, civil engineering
  and heavy engineering industries
• Committed to our industry, our clients and our
  staff by providing a comprehensive range of
  services that complement our clients needs
• On-going commitment to staff training
  development

28
Who We Are.
Industry Accreditations
Committed

• ISO 9001
• ISO 14001
• Health Safety
• Investor in People

29
Who We Are.
Committed
Corporate Memberships
30
Bid Team
Commercial
Some of the teams will be specific to one
Business Unit however many of our support teams
would be interchangeable across the divisions
Project
Risk
Safety
Schedule
31
Comprehensive
What we Do.
32
What we do....
Comprehensive
A Comprehensive range of services focused across
six key areas
Project Services
Dispute Resolution
Environmental Services
Health Safety
Risk Management
Planning Services
Whatever Wherever the project we can help you
to control it more effectively and profitably
33
What we do....
Comprehensive

• Project Methodology
• Over 20 years corporate experience
• Management of project team
• Ensure interchange of activities across team
• Establish effective reliable communication
• mechanisms and controls across geographic
• boundaries
• Process of financial data and accurate reporting
• Project schedules including management and
• reporting

Project Management
34
What we do....
Comprehensive

• ..with a proven track record in
• Quantity Surveying/Cost Consultancy Services
• Providing Quantity Surveyors of all levels to
  fulfill
• all roles required during Pre Post
  contract
• stages of a project and
• Providing those Quantity Surveyors within in a
• tailored framework specific to client
  requirements
• Project Estimating
• Detailed true value estimates
• Project Auditing
• Cost management review
• Full audit procedures
• Report on findings and recommendations

Commercial Management
35
What we do....
Comprehensive

• for specific areas within your company through
  to total On Off Site commercial
  administration of your project with a proven
  track record in
• Effective budget preparation
• Preparation of invitation to tender
• Tender evaluation
• Sub Contract Management
• Post contract administration including planning
• Resolution of commercial issues including cause
  and effect planning analysis

Contract Administration
36
What we do....
Comprehensive

• . across three main target areas
• Safety Management
• Business Risk Management
• Project Risk Management
• Including all stages of a project from
  feasibility
• studies to settlement of final accounts
  involving
• Facilitating Risk Workshops
• Qualitative Risk Analysis
• Quantitative Risk Analysis
• Developing Mitigation Strategies
• Strategic Decision Management

Risk Management
37
What we do....
Comprehensive
Health Safety Environmental

• with the provision of practical and
  professional expertise to co-ordinate manage
  key environmental, health safety considerations
  affecting clients at project and business
  organisational levels by
• Being a Member of British Safety Council
• Being a Member of HSE Direct
• Providing Planning Supervision services in
  accordance
  with CDM Regulations
• Providing Contract Support tender evaluations
• Assessment of competency
• Providing Project specific health safety
  management
• Hazard identification risk register
  development
• Risk management and mitigation
• Performance compliance monitoring, inspections
  and audits

Project Management
38
What we do....
Comprehensive

• .planning and programme management are
  fundamental to the development and full life
  cycle of any project. Our planning and programme
  management provides
• Accurate monitoring of each component of a
  project
• Inter-relationships
• State-of-the-art software systems
• Hierarchical programming structures
• Critical path analysis
• Combined programme cost resource management

Planning
39
What we do....
Comprehensive

• .with a proven track record that results in our
  clients receiving their fair and reasonable
  entitlement in an environment of mutual trust and
  co-operation involving
• Identification and compilation of entitlements
• Critical path analysis
• Cause and effect planning analysis
• Cause and effect quantitative analysis
• Provision of Expert Witness role
• Support to Litigation, Adjudication and ADR
  procedures
• Negotiation and facilitation of settlements

Dispute Resolution
40
How We Do It....
Complementary
Strategy for success
41
How We Do It....
How we do it ....
Market Client Needs
Complementary
Technology Advantages
Our Expertise
Strategic Partnerships
42
How We Do It....
How we do it....
We understand the dynamics of the changing market
environment
Complementary
Market Client Needs
We participate in industry initiatives and work
with our partners to bring to the market the most
effective solutions
Our Expertise
Technology Advantages
Our consultants are amongst the best in the
industry
Strategic Partnerships
43
We work with our clients to build effective
relationships and long term strategic
partnerships . . .
Complementary
Strategic Partnership / Alliance
Limited Partnership
Preferred Suppliers
Volume
Transaction relationship
44
Complementary

Whatever Wherever the project we can help you
to control it more effectively and profitably