Understand the important lessons learned and common pitfalls to avoid in contract formation and contract execution through this presentation told from a fabricator’s point of view. This presentation covers a discussion on contracting model, contracting strategy and project organization setup.

1. Onshore Modules Construction – A Fabricator’s View
Lessons Learnt and Pitfalls to
Avoid in:
Contract Formation
Contract Execution
© 2012 McDermott. All Rights Reserved.

2. Summary Findings
 Early involvement of fabricators/contractors is key to the process
 Greatest positive impact comes from early definition on engineering,
material selection, constructability, completions, optimized
commissioning, load-out philosophies and sea-fastening
 This is probably the single biggest lesson learnt

3. Lessons Learnt- Contract Formation
Contracting Model - Owner, EPCM Contractor and Fabricator(s)
 Definition of roles and responsibilities – Clarity in documents and processes
 Fabricator’s relationship with EPCM Contractor and Owner – Single point
responsibility is key
 Warranty obligations and remedial work executed off SE Asia – Need for
rationalization
 Governing Law, Dispute resolution provisions etc – Adapt to SE Asia
 Is this the only sustainable contracting model? (EPC, EPCM and Supplier)

4. Lessons Learnt- Contract Formation
Contracting Strategy
 Fabrication on unit rates based on
approximate quantities (BOAQ)- Good
definition is key
 Long bidding cycle due to continuous
changes in design – Awareness of resources
and commitment
 BOAQ and models not mature enough for
bidding – Risk sharing and qualifications
 Materials – Fabricator’s supply usually
restricted to bulks – Extent of definition and
scope split
 Commissioning requirements, Load-out
requirements etc – Early definition and
planning

5. Lessons Learnt- Contract Formation
Australian Requirements
 AQIS or higher – Definition, acceptance criteria and
specifications usually evolving throughout the
project.
 Electrical equipment and installation competency –
Australian certification requirements and workers
licenses for work executed in SE Asia.
 Australian Industry Participation (AIP) requirements
– levels of participation, early identification of
potential and allowance in overall schedule.
Materials Specifications
 Top-up not readily available in SE Asia, especially
exotics and other issues such as weld procedures
qualified previously or on contract material.

6. Lessons Learnt- Contract Formation
Awareness of Fabricator’s Risks – Different
from Owner or EPCM Risks
 Mix of work type – Balanced to reflect the work content
 Materials selection and specifications
 Quantity variations
 Module layouts, foot-print, equipment location
 Construction sequence
 ROS dates for Long Lead equipment
 Connection details – stiffeners, joint connections, weld
details
 Space requirements
 Testing regimes
 Acceptance criteria
Early involvement ensures better definition of scope split, and mitigation of the risks.
Results in a better contracting arrangement, improved schedule certainty and
possibly lower costs, to all parties.

7. Lessons Learnt- Contract Execution
Constructability Studies Early – Impact on
productivity, cost, quarantine and
schedule.
 Structural design to cater to fabricator’s build
sequence E.g. Pancakes Vs Roll-up
 Section sizes and grades to suit existing weld
procedures, joint configurations and competencies
 Standardization of components such as stiffeners,
supports etc or proprietary supporting systems.
 Standardization of sections and grades to allow bulk
buying and interchangeability
 Design for construction - access requirements, water
traps etc.
 Load-out philosophy and sea-fastening to reduce
vessel standby time

8. Lessons Learnt- Contract Execution
Project Organization Set-up
 Adequate level of resourcing specific to each Contract – One size does not fit all
 Clearly defined communication lines and roles – internally and between parties
 Open and healthy relationship between parties – awareness of each other’s drivers
Engineering and Procurement Interfaces
 Dovetail engineering deliverables to suit fabrication requirements rather than
progress
 Material deliveries to suit fabricator’s build sequence.
 Allow sufficient time for checking inconsistencies in design etc.
 Use of tools like PDMS to reduce fabricator’s engineering interfaces
 Integrated change management process to mitigate impact of design changes on
fabrication

9. Lessons Learnt in Execution
Yard Layout and selection process
 Space constraints and workshop capacity – Volume driven pre-fabrication work
with large requirement for space for assembly.
 Load- out philosophy to be firmed up early – by Trailers, by lifting etc and whether
side load-out or front load-out.
 As shipping is largely driven by requirement and sequencing in the final location
(LNG plant), module layouts should allow for change in priorities and shipping
sequences.

10. Lessons Learnt in Execution
Quarantine & Build Clean Philosophy
 Quarantine requirements such as proximity to vegetation, seasonal impacts from
local flora and fauna, rainwater stagnation etc to be considered early.
 Can be difficult to meet requirements in the tropics without being carefully
managed.
 Can be a larger issue than the fabrication itself – early planning and dove-tailing
into execution plan a must.
 Designs and supplied equipment are not always quarantine sufficient/compliant.
 Philosophy of build clean starts at design and procurement and not in the
fabrication yard.

11. Lessons Learnt in Execution
Insulation Philosophy
 Material & process selection for insulation including cryogenic insulation to
minimize damage.
 Avoid congestion on assembled modules by insulating more on ground.
 Increase pre-fabrication to remove insulation from critical path and reduce costs.
 Minimize interfaces between proprietary supports and insulation.

12. Lessons Learnt in Execution
Construction Completion & Testing
 Tolerance levels up to 1mm – onerous and far more stringent than normal offshore
modules specifications
 SWHU (Single Weld Hook Up) - Preparation for a global regime??
 Advantages and disadvantages of testing as a train versus testing individual modules
to be concluded early.
 Testing - stored energy versus absolute pressure rating as a basis for exclusion zones.
 Load-out & sea fastening plan to be developed early and standardized.
 Internal sea-fastening is often delayed until the MWS has inspected the modules just
prior to sail-away.

13. Summary
 Clear contracting model.
 Early definition of detailed requirements and specifications.
 Clarity of commercial arrangements and pricing philosophy.
 Early engagement with contractors to incorporate Lessons
Learned into Design phase.
 Design for construction and completion.
Plan Early and Engage Early to Reap benefits

14. Our Delivery Locations in SE Asia
Batam
60,000MT per annum
110 hectares
Qingdao McDermott Wuchuan
30,000MT per annum
43 hectares