Table of Contents

  1. Purpose
  2. Subcontract Responsibility and Management Policy
  3. Responsibilities
  4. Subcontracts Plan
  5. Subcontracts Schedule
  6. Subcontracts Package
  7. Subcontractors List
  8. Bidding Period
  9. Bid Opening and Analysis
  10. Negotiation and Award of Subcontract
  11. Kick-Off Meeting with the Subcontract
  12. Revisions to Subcontract Documents
  13. Variations in Scope and Extra Work
  14. Claims
  15. Issue of Purchase Order Amendments
  16. Progress Payment Certifcates
  17. Payments to Subcontractors
  18. Subcontract Close-Out
  19. References
  20. Responsibility Checklist-Part I
  21. Responsibility Checklist-Part II
  22. Flowchart

1. Purpose

This procedure describes the basic management policy, organization and techniques employed in sub­contracting programs. This procedure applies to orders, placed or intended to be placed, for activities involving site labour. This includes:

  • field labour purchase orders, with or without supply of materials (hereafter referred to as "Subcontracts").
  • erection part of all supply with erection purchase orders. (The erection part hereafter referred to as "Subcontracts")
  • labour part of all purchase orders for field services, including temporary facilities. (The labour part here­after referred to as "Subcontracts")

The supply part of supply and erection purchase orders is handled in accordance with existing Procurement procedures (ref.19.6). For the erection part of such orders, (ref.19.9) to which this Subcon­tracts Procedure applies, the Manager of Subcontracts decides on a case-by-case basis what subcontracting activi­ties and/or documents are required.

This procedure does not apply to orders for engineering services only.

Note: Responsibilities of the various departments or individuals are shown in the Responsibility check­list at the end of the procedure.

2. Subcontract Responsibility and Management Policy

Subcontracting is the responsibility of the Company Procurement Department both during proposal and project execution phases.

For fiscal reasons the functions of formulation, issue, adjudication and the admini­stration of subcontracts are kept strictly separate.

The formulation of Subcontracts is executed in the home office by a Project Subcontracts Manager who will also execute the admini­stration on site. Progress reporting regarding the status of each subcontract to be coordinated with the Project Procurement Manager.

Continuity is assured by the fact that each subcontract is a stand alone document and that there is maximum standardi­zation in subcontract format, layout, contents and text.

2.1 Formulation of Subcontracts

The formulation of subcontracts is performed by a Projec­t Subcontracts Manager who is directly responsible for all subcon­tracting activities in the home office, from preparation up to and including award of the Subcontracts.

The Project Subcontracts Manager as a member of the Project Manage­ment team and reports to the Project Manager, who has ultimate responsibility for all subcontracting activities including client liaison and approvals.

2.2 Administration of Subcontracts

The administration of subcontracts is also performed by the Pro­ject Subcontracts Manager who is directly responsible for all subcontracting and subcontract administration activities on site up to and including subcontract close-out.

The Project Subcontracts Manager is a member of the Site Management team and reports to the Project Construction Manager who has ultimate responsibility for all subcontrac­ting activities on site. Where required he will be supported by the Manager of Subcontracts.

3. Responsibilities

3.1 Manager of Subcontracts

The home office based Manager of Subcontracts has a super­visory and monitoring responsibility for all construction subcon­tracts handled by Company, during proposal and project execu­tion phases. He reports to the Manager of Procurement.

The responsibilities of the Home Office Manager of Subcontracts include:

a. General

  • developing, issuing and maintaining general procedures and policies for subcontracting opera­tions.
  • maintaining the Procurement Department's compu­terized and worldwide Subcontractors Register.

Directing the improvement and standardization of subcontract documents.

b. Individual projects

  • preparing subcontract write-ups at qualification and bidding stages of proposals in consultation with the H.O. Construction Manager.
  • advising the Project Subcontracts Manager in his contribution to the subcontracts plan.
  • advising the Project Subcontracts Manager in the preparation of the Special Conditions of Subcontract for the project
  • ensuring that the subcontract progress and cost control structures have a sound technical, finan­cial and economical basis and that the proper control systems are selected.
  • ensuring that client and Company subcontract requirements for the individual projects are met. Ensuring that specific project procedures are made.
  • ensuring that the following documents will be presented to the Manager of Procurement for his review/approval:
  1. list of qualified bidders
  2. bid analysis
  3. award of subcontract

3.2 Project Subcontracts Manager (Home Office Activities)

The Project Subcontracts Manager has direct responsibility and authority to accomplish the following for the Project(s) he is nominated for:

  • preparing the subcontracts plan.
  • preparing the Special Conditions of Subcontract for the project and for the individual Subcontracts incorporate any deviations, if required.
  • preparing sensitivity studies.
  • coordinating the preparation of subcon­tract packages with the Subcontract Coordinator from Engineering (see 3.5).
  • compiling of subcontract packages; ensuring that they are checked by all disciplines concerned for complete­ness, correctness and clarity before being issued for bids.
  • preparing of subcontract bids analyses.
  • organizing meetings with subcontractors.
  • obtaining safety and quality information, programs and procedures from potential subcontractors for review by the Safety Engineer, and Manager of Quality Assurance and Safety and the Project Construction Manager.
  • participating in project planning and scheduling of work related to Subcontracts, as well as reviewing detailed plans, schedules and manpower loadings sub­mitted by subcontractors.
  • organizing and maintaining a complete file of all prequalification and bid correspondence, subcontract documents, minutes of meetings and correspondence between Company and subcontractors.
  • initiating the order preparation/issue.

The Project Subcontracts Manager informs the Project Manager, the Project Construction Manager and the Manager of Purchasing/ Subcontracts promptly about major problems with regard to subcon­tract activities.

3.3 Project Subcontracts Manager (Site Activities)

The Project Subcontracts Manager has direct responsibility and authority to accomplish the following:

  • administering the subcontracts including scope and commercial matters.
  • acting as the single point contact for the subcontractor.
  • controls subcontractors' manpower and progress.
  • controls, trends and forecasts the costs of the subcontractors.
  • handling of scope changes.
  • handling of extra work.
  • handling of claims, within the given limits.
  • closing out of the subcontracts.
  • preparation of subcontractor performance reports.

3.4 Project Construction Manager/Construction Coordinator

The Project Construction Manager participates in home office subcontracting activities until he leaves for the site. Prior to his assignment the Project Construction Manager is represented in the home office by a Construction Coordinator.

The Project Construction Manager is responsible for the project construction operations and thus has ultimate responsibility for all site subcontracting and subcontract administration activities including client liaison and approvals.

3.5 Subcontract Coordinator

The Project Manager will assign a coordinator for each subcontract early in the project.

The subcontract coordinators will ensure that drawings and free issue materials arrive in time and that quantities are kept up-to-date and trended.

The information must be channelled through the Subcontracts Manager.

4. Subcontracts Plan

4.1 Subcontract Strategy

As early as practical the Project Subcontracts Manager will consult with the Project Manager and the Project Construc­tion Manager and the H.O. Manager of Subcontracts, to establish the subcontract strategy, taking into account the specific requirements of the project, such as the contract with the client, country where the construc­tion work is to be done and location of the site, specific site conditions and experience with subcontractors in the area. This strategy will be laid down in the Subcontracts Plan. The Subcontract Plan will be issued as per Project Procedure and Execution Manual (ref.19.8).

In case an initial subcontract plan has been prepared during the proposal phase then this will be further developed as described above.

The subcontract plan should be updated regularly to implement any changes in the strategy, estimated quantities, subcontract schedules etc.

4.2 Basic Items to be Addressed in the Subcontracts Plan (ref.19.7)

  • requirements for client's participation and approval.
  • bidding procedure.
  • number and type of subcontracts. (Subcontract specification).
  • pre-qualification requirements.
  • preferred price basis and the quantification require­ments of each subcontract related to the expected state of design engineering at the time of the request for bids. (Subcontract specification).
  • listing of anticipated supply with erection orders. (Subcontract specification).
  • subcontracting requirements related to the erection part of supply with erection orders.
  • subcontracts which require a pre-bid or bid clarification meeting.
  • content and status of subcontract documents.
  • special requirements by country with regard to the selection of subcontractors and/or administration of the subcontracts. (Subcontract strategy)
  • subcontract schedule with key dates and manpower histograms.
  • a listing of estimated quantities (Quantity status summary).
  • listing of anticipated free issue materials per type of subcontracts.

5. Subcontracts Schedule

The Project Subcontracts Manager will prepare together with the Planning Engineer, the Subcontracts Barchart Schedule based on the Subcontracts Plan and the overall requirements of the Project Summary Schedule, in consul­tation with the Project Manager and the Project Construction Manager.

The Subcontracts Schedule indicates the individual subcon­tracts and defines for each subcontract:

  • the period of preparing the subcontract package for bids.
  • the bidding period.
  • the evaluation period ending in award of the subcon­tract.
  • start on site date.
  • documents complete.
  • mechanical completion date.
  • start-up/commissioning date.

The Subcontracts Schedule will be monitored by the Projec­t Subcontracts Manager who will initiate corrective action whenever there is a risk of any activity falling behind schedule.

6. Subcontract Package

The subcontract package "for bids" comprises all technical, commercial and scheduling information to provide the qualified bidders with a sound basis for their bids.

  A bid package includes the following sections: Ref.
0 Cover Sheet + Contents (CSC)  
1 Instructions to Bidders (ITB)  
2 General Conditions of Subcontract (GCS) 19.2
3 Special Conditions of Subcontract, if required (SCS)  
4

Safety, Health, Welfare and Environmental Policy
Safety Rules and Site Regulations (SPSR)

19.3
5 Requisition (REQ)  
6 List of Applicable Documents (LAD)  
7 Key-date Schedule (KDS)  
8 Form of Tender Descriptions (FOTD)  
9 Form of Tender (FOT)  
10 Specification for Site Quality Assurance/
Quality Control for Subcontracts (QAM)
19.4
11 Other special documents, if required, specifications,
not forming part of the technical documents as per list
of applicable documents.
 
  A package for mechanical work further includes:  
12 Equipment Erection Description (EED)  
  Packages for work in The Netherlands may further include (depending on the contract between client and Company):  
13 Subcontracting Under the Chain Liability Act Data 19.1

Sect. 1 Instructions to Bidders

This document comprises the following:

a. The introduction, definitions, bidder's qualifications and general bid conditions (para. 1 through 5). This text is standard and will be used unaltered for all bidding.

b. Special bid information, example tender statement and complete bid (para. 6 and further). This text will be reviewed by the Project Sub­contracts Manager and modified and/or extended, if required, to suit specific project needs. It should also contain the requirements with regard to safety and quality to be submitted with the quotation.

Sect. 2 General Conditions of Subcontract

This document is a company standard comprising the standard condi­tions that apply to all subcontracts.

This document will neither be changed, nor given a job number. Any deviations will be included in Special Condi­tions of Subcontract.

Sect. 3 Special Conditions of Subcontract

Special Conditions of Subcontract are written by the Project Subcontracts Manager if and when the main contract with the client or the country of operation requires conditions deviating from or in addition to the General Conditions.

The (draft) Special Conditions of Subcontract will be sent to the Law Department, the H.O. Manager of Subcontracts and the Project Manager for their review and approval.

The evaluation of specific country requirements will be made by the Project Subcontracts Manager and the Manager of Subcontracts, in conjunction with the Project Construction Manager.

Sect. 4 Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Regulations

As a rule the client's safety policy and site regulations are applicable.

This document will be reviewed by the Project Construction Manager and by the home office construction Safety Manager. Any additional requirements will be incorporated in Company's "Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Regulations" (SE 00 SPSR).

The SPSR will be checked by the Project Subcontracts Manager for consistency with the subcontract package and edited as required.

If there is no client document available the Project Construction Manager will use the company standard "Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Requirements" (ref.19.3).

Sect. 5 Requisition

The requisition of which typical subcontract-formats are available within the Procurement Department will be modified by the Engineering Department in consultation with the Project Subcontracts Manager to suit the specific project needs. The requisition will be issued with a request for quotation/purchase.

Sect. 6 List of Applicable Documents

The List of Applicable Documents shows all technical docu­ments that (may) have a bearing on the pricing.

The Engineering Specialist will identify these documents and submit a draft list including document name, document number, issue status and number of sheets per document to the Project Subcontracts Manager for processing.

The completed list will be reviewed by the Project Manager or his delegate.

As the list shows documents that relate to pricing, it will not be updated to show current revisions of documents unless those revisions have been submitted to the bidders.

The Subcontracts Coordinator will arrange for printing the documents shown in the List of Applicable Documents and will submit the necessary number of complete and checked sets of these documents to the Project Subcontracts Manager.

Sect. 7 Key-Date Schedule

For each subcontract the Project Subcontracts Manager with the Planning Engineer will prepare a key-date schedule defining sufficient key-dates and periods to enable bidders to schedule construction activities, manpower, equipment, materials, supplies etc.

  • the key-date schedule will include:
  • start date of construction.
  • periods during which the technical documents will be supplied to the subcontractor.
  • periods during which the equipment and/or materials will be supplied to the subcontractor.
  • key dates or milestones for certain parts of the construction work as required.
  • date of contractual completion.
  • date of subcontractors' commissioning activities.

Sect. 8 Form of Tender Descriptions

The Project Subcontracts Manager will select the sections of the standard Form of Tender Descriptions relevant to the chosen price basis and will make, in consultation with the Engi­neering Department, any modifications required as a result of modifications to the Form of Tender.

Sect. 9 Form of Tender

The Project Subcontracts Manager will select the sections of the standard Form of Tender relevant to the chosen price basis and review these sections in consultation with the Engi­neering Department who will modify these sections, if required, to suit the specific project needs.

The schedules available are:

Schedule 1 lump sums
Schedule 2 rates for units of work
Schedule 3 rates for units of operation
Schedule 4 rates for units of time
Schedule 5 rates for units of supply
Schedule 6 spare
Schedule 7 spare
Schedule 8 spare
Schedule 9 subcontract value adjustment

A package for piling further includes:

Schedule 10 subcontractor's rig and pile data

Sect.10 Specification for Site Quality Assurance/Quality Control for Subcontracts

This specification (company standard) defines what is required from Subcontractors concerning site quality assurance and quality control.

This section should be discussed during a Clarification and/or Pre-award meeting and should become an integral part of an order.

Sect.11 Equipment Erection Description

This section only to be added with subcontract packages for mechanical work.

It gives detailed description how the equipment and in some cases in which sequence should be handled and erected at site.

This existing format should be prepared and completed by the specialist engineer in coordination with the Project Construction Manager.

Sect.12 Chain Liability Act Data

This section (company standard) should be added in subcontract packages for work in The Netherlands only. This also depends on the type of contract between Company and the Client.

It describes to the subcontractor what Company and Subcontractor have to do to meet the requirements of the Chain Liability Act of 1 July, 1982 and to safeguard that the GAK/SAB and the tax office can collect premiums and taxes due to them.

During the negotiations with potential subcontractors, Company has to make sure that we achieve maximum protection at minimum costs therewith satisfying the requirements of the Chain Liability Act.

The following basic principles to be maintained and where applicable to be discussed with and to impose on the Subcontractor.:

  1. careful screening and selection of Subcontractors.
  2. withholding from the payments to SUBCONTRACTOR amounts equal to the actual amounts of premiums and taxes to be paid to SUBCONTRACTOR and paying such amounts directly to the authorities.
  3. monitoring of SUBCONTRACTOR's actual manhour expenditure.
  4. not assuming the role of SUBCONTRACTOR's tax and/or premiums consultant.

7. Subcontractors List

7.1 As soon as the Subcontracts Plan for the Project has been approved, the Project Subcontracts Manager, in conjunction with the H.O. Manager of Purchasing/Subcontracts and the Project Construction Manager, will prepare the list of potential bidders based on the Procurement Department's computerized Subcon­tractors Register.

The potential bidders' quality, past perfor­mance on safety, experience, capability, organization, capacity and financial stability will be investigated by the H.O. Manager of Subcontracts or the Project Subcontracts Manager and the Project Construction Manager to issuing the subcontract package for bids (ref 19.5).

For each individual subcontract the Project Subcontracts Manager will discuss and prepare the "short list" of bidders about one month prior to going out for bids.

If required, the list will be submitted to the client for review and approval.

7.2 The number of valid bids to be obtained depends on the nature of the subcontract. The minimum number shall be three valid bids.

8. Bidding Period

8.1 Invitation to Bid

Following approval of a subcontract package for bids, the Project Subcontracts Manager will send the packages with a covering letter to the bidders. The covering letter will be signed by the Project Subcontracts Manager. His name will be indicated in the Subcontract package as the contact person.

8.2 Expediting of Bids

The Project Subcontracts Manager will ensure that all bidders promptly acknowledge receipt of the package and timely submit their quotation.

8.3 Questions from Bidders

All communications with the bidders will be through the Project Subcontracts Manager, who will consult with the relevant departments as required.

In case a question from a bidder reveals a need for clarifi­cation or change of the bid information, both the question and the answer will be transmitted to all bidders. Extension to the bidding period may be given in exceptional cases only and requires the approval of the Project Manager and the Project Subcontracts Manager.

8.4 Sealed Bids

Sealed bids will be required for reimbursable projects and in those other cases where a sealed bid requirement may support a timely submission and an accurate quotation.

8.5 Confidentiality

Bid information (bidders lists, minutes of pre-award meetings), bids and bids analyses will be distributed as per Project Distribution Schedule. Any deviation requires prior approval by the Project Manager.

9. Bid Opening and Analysis

9.1 Bids Receival

The Project Subcontracts Manager will receive and keep safe all bids.

9.2 Bids Opening

As soon as practical after the bid closing date, all sealed bids will be opened by the Project Subcontracts Manager, witnessed by the Project Manager or the Manager of Subcontracts and, if applicable, by the client.

A bid opening protocol will be filled out by the Project Subcontracts Manager and signed by all present. Sealed bids received after the closing date will be stored unopened or returned to the Bidder.

9.3 Subcontract Bids Analysis, Preliminary Issue

Bid evaluation criteria and/or weighing factors agreed upon early in the project in consultation with Project Manager/Project Construction Manager and/or Client will form the basis for the bid analysis.

The Project Subcontracts Manager will make a detailed commercial evaluation of the bids. Will contact bidders to clarify their bids if required, will evaluate commercial alternates if submitted by the bidders, will prepare the preliminary issue of the subcontract bids analysis (ref.19.10) and will submit this for review/approval to the appropriate parties.

Clarification may be obtained by telephone. However, for auditing purposes the bidder shall always be required to confirm the clarification in writing (telex, fax). This correspondence should be distributed to the engineer involved with the evaluation.

For unit rate subcontracts the Project Subcontracts Manager will prepare a sensitivity study to establish which bidder may be expected to have the lowest overall price upon completion of the work, taking into account safety, quality and scheduling aspects.

The preliminary issue of the bid analysis includes a recommendation which bidder(s) is/are to be invited for negotiations. Signatures for approval are to be obtained in accordance with the relevant authorization list. Executive involvement is required for major subcontracts and in lump sum contracts if the final estimated costs exceed the budget. Executive involvement should be stated in the Project Subcontract Plan.

The approved preliminary issue of this bid analysis is the authorization for the Project Subcontracts Manager to invite the selected bidder(s) for negotiations.

Approval of the preliminary and final bid analysis by the client is limited to subcontracts that are reimbursed by the client.

9.4 Technical Bid Evaluation

If bidders have submitted technical alternates to their bids, the Engineering Specialist will make a technical evaluation of such alternates when requested by the Projec­t Subcontracts Manager.

Bids including detail design by the subcontractor will always be completely evaluated by the Engineering Specia­list.

In all other cases approval of engineering will be required for the recommendation which bidder(s) will be invited for further clarification meetings. Approval of a technical bid analysis may be required by the Client.

10. Negotiation and Award of Subcontract

10.1 Bid Clarification Meetings

The selected bidder(s) will be called in for final nego­tiations. The principal purpose of these meetings is to ensure that the bidder(s) fully understand the scope of work and all technical and commercial aspects of the subcontract. They also provide an opportunity for Company to clarify any questions concerning the bidder(s) response to Subcontract Package for Bids. The meeting(s) will be chaired by the Project Subcontracts Manager, who will make sure that the Subcontract Package including the detailed construction schedule and the manpower chart/curve are properly marked-up to reflect any variations agreed to, and that minutes are kept. Samples of a progress curve, a monthly report, a detailed schedule and a safety plan to use for further clarification to the selected bidder(s). The handwritten minutes shall be signed by all parties at the end of the meeting. The Project Procurement Manager as well as the Project Construction Manager shall attend these meetings.

10.2 Minutes of "Pre-award" Meetings

The minutes will be numbered and distributed in accordance with the project numbering/distribution system for such meetings.

The minutes will be numbered in sequential order.

The minutes of the meeting will be distributed (at the end of the meeting) as follows:

  • subcontractor
  • client, if applicable
  • Company : Project Engineer/Project Manager
  • Company : Project Construction Manager

10.3 Subcontract Bids Analysis, Final Issue

After the "pre-award" meeting(s) the Project Subcontracts Manager will update and finalize the subcontract bids analysis, if required (ref.19.11) and submit this for review/approval to the appropriate parties.

This final issue should clearly indicate the selected subcontractor with the reason(s) for the selection.

Approval by the Engineering Specialist is required if a technical alternate has been selected or if the package includes detail design.

In both cases the Engineering Specialist will approve the proposed subcontractor on technical grounds only.

Approval by the General Manager or an other executive is required if the estimated final cost exceeds the budget and the project is on a lump sum basis and for those major subcontracts which are mentioned in the Subcontract Plan.

Approval by the client is required for subcontracts that are reimbursed by the client.

The approved final issue is the authorization for the Project Subcontracts Manager to inform the successful bidder, in writing, that he has been selected as the subcontractor.

10.4 Updating of Subcontract Package for Purchase

Following the selection of the subcontractor, the Projec­t Subcontracts Manager will update the subcontract package to reflect all agreements reached with the successful bidder, and shall prepare the formal Purchase Order.

The subcontract package "for execution" shall include all relevant sec­tions indicated in 6.1 of this procedure with the exception of section 1, Instruction to Bidders. The minutes of the "pre-award" meeting with the successful bidder will be typed and incorporated in the package.

The formal Purchase Order will be presented to the Manager of Purchasing/Subcontracts for signature.

10.5 Purchase Order Acknowledgement

The Project Subcontracts Manager shall ensure that the subcontractor returns the signed acknowledgement copy of the purchase order/ subcontract within ten working days after receipt of the purchase order.

10.6 Unsuccessful Bidders

After receipt of the signed acknowledgement copy of the order the Project Subcontracts Manager will advise all other bidders by standard letter that they were not successful.

11. Kick-Off Meeting with the Subcontractor

After Purchase Order issue and before the subcontractor establishes himself at the site, the Project Construction Manager will hold a kick-off meeting with the subcontractor to ensure a smooth start of field activities. The Project Construction Manager will inform the Project Manager who will decide on his or his representative's presence at this meeting.

12. Revisions to Subcontract Documents

12.1 Responsibility and Procedure

The responsibility for the preparation, input, review and appro­val of revisions to subcontract documents and the Purchase Order is the same as for the original ones.

The Project Manager will arrange for all such documents to be sent to the subcontractor either:

through the Project Subcontracts Manager if the subcontractor is not established at the site, who will forward them directly to the subcontractor's head office.

through the Project Construction Manager if the subcon­tractor is established at the site, who will forward them to the subcontractor's field representative. The Company site office shall ensure that the subcontractor acknow­ledges receipt of the documents by signing and retur­ning the transmittal acknowledgement slip.

Formal notification or confirmation of revised contractual documents will always be by the Project Subcontracts Manager with a purchase order amendment, based on a revised request for purchase initiated by Engineering.

12.2 Red Flags

As soon as the home office makes significant changes to the subcontract package contents such as large variations in the quantities or changes to delivery dates of drawings or materials, the Project Manager will, pending the revision of the subcontract documents, immediately inform the Project Construction Manager.

13. Variations in Scope and Extra Work

13.1 Definitions

"Variations in scope" or "scope changes" shall mean increa­ses or decreases to the quantities shown in the Form of Tender as well as additions of items not previously shown in the Form of Tender.

"Extra Work" shall mean modifications or alterations to work in progress or completed which are not covered by the existing contract.

13.2 Administration

Variations in scope shall be covered in an update of the Form of Tender.

On a monthly basis the Project Subcontracts Manager will determine if a Form of Tender update is required. A Form of Tender update is not required unless there is an apparent overrun in the overall commitment of the Purchase Order or if overruns in specific pay-items are so great that there is concern for the overall commitment. If the Project Subcontracts Manager recommends a Form of Tender update for a specific subcontract, the Project Manager's approval is required.

Extra work shall be covered by Extra Work Authorizations (EWA's), which describe the work to be performed by the subcontractor.

13.3 Pricing

The Project Subcontracts Manager will prepare the required documents, will review these with the Project Construction Manager for cost and schedule effects, and will agree with the subcontractor lump sums or additional unit rates as required. After approval by the Project Construction Mana­ger, the Project Subcontracts Manager will advise the subcontractor accordingly.

13.4 Updating of the Purchase Order

The Project Subcontracts Manager will issue a purchase order amendment to formally incorporate into the subcontract all variations in scope and the approved extra work (see 15.0).

14. Claims

14.1 Definition

"Claim" shall mean a demand for payment by one party which is disputed by the other party.

14.2 Handling of Claims from Subcontractors

All claims from the subcontractor will be submitted through the Project Construction Manager to the Project Subcontracts Manager for handling. With the assistance of all Company parties involved the Project Subcontracts Manager will investigate if the claim is legitimate and if it can be countered by claims from Company to the subcontractor.

After review with and approval by the Project Construction Manager the Project Subcontracts Manager will negotiate the claim with the subcontractor within the limits set by the Project Construction Manager.

The Project Manager and the Manager of Purchasing/Subcontracts will be kept informed by the Project Construction Manager of all claims submitted by/to the subcontractor and of all procee­dings and settlement.

All claims outside the limits of the Project Construction Manager's authority as well as all claims handled at site and remaining unresolved will be handled by the Manager of Purchasing/Subcontracts or his delegate.

14.3 Company Claims Against Subcontractors and Vendors

If a subcontractor fails to meet its contractual obligations Company will examine the possibility of a claim against that subcontractor.

Action will be taken with the approval of the Manager Construction.

Recoveries from vendors are usually referred to as "back-charges" and should be dealt with as outlined in the Con­struction Field Manual.

15. Issue of Purchase Order Amendments

Purchase Order Amendments will be issued to formally in­corporate in the subcontract:

  • all changes to subcontract documents
  • all approved Extra Work Authorization Reports (EWAR's)
  • all settled claims

Amendments will be prepared by the Project Subcontracts Manager or the Project Procurement Manager after a Purchase Order Amendment Request (P.O.A.R.) initiated by the Project Subcontracts Manager has been approved by the Project Manager/Client.

16. Progress Payment Certificates

At the end of each month and upon establishing and approval of the actual progress achieved, the subcontractor is issued a Monthly Progress Certificate stating the values of approved invoices and EWA's. The Progress Payment Certificate will be prepared by the Project Subcontracts Manager and will be approved by the Project Construction Manager and the Client for reimbursable projects and countersigned by the Subcontractor.

This means that all checking has been done and agreement on the amount to be paid to the subcontractor has been reached before the invoice is submitted to Company.

The certificate further serves as the back-up to the invoice and must be attached thereto.

17. Payments to Subcontractors

Payments to subcontractors will be made in accordance with the agreed payment conditions including retention and will only be made after receipt of a correct invoice with the Monthly Progress Certificate attached.

Invoices are usually paid by the Project Accountant follo­wing processing by the Field.

Payment may be made by the Client or by Company site per­sonnel dependent upon the contract and the project proce­dures.

When payment is by the Company site personnel a periodic audit will be carried out by the Project Accountant.

Final payment can only be made after receipt of the final payment certificate signed by the Project Construction Manager.

18. Subcontract Close-Out

18.1 Release of Liens

As soon as acceptance of subcontractor's work has been given by Company and where applicable the Client and after settlement of all claims the subcontractor will sign a "Release of Liens" or an equivalent document, established by Company in conformity with any applicable National Laws, Client requirements and approved by the Company Law Department.

A sample of release of liens or an equivalent document will be provided by the Project Subcontracts Manager. The signed Release of Liens to be sent in together with Subcontractors' final invoice.

18.2 Bank Guarantee

Company will, upon request from the subcontractor and if all above mentioned conditions are met, arrange release of the retention monies in exchange for a Bank Guarantee. Such a Bank Guarantee shall remain in force until the expiry of the Guarantee Period as defined in the subcontract.

18.3 Subcontractor Performance Report

For future reference the Project Subcontracts Manager, in conjunction with the Site Engineer and the Project Construc­tion Manager, will record the performance of the subcon­tractor on a performance report, which will be included in the final construction report and recorded in the Procurement Vendor Information system (P.C.S.).

18.4 Storage of the Subcontract File after Close-out

18.4.1 For Lump Sum Contracts

Upon completion of his work the Project Subcontracts Manager will submit his complete subcontract files to the Manager of Subcontracts for indefinite storage and future reference.

18.4.2 For Reimbursable Contracts

After subcontract close-out the Project Subcontracts Manager will submit the complete subcontract files to the Project Manager for storage and future reference or submission to his Client.

19. References

  Document Number Title Level
19.1 BN-W-UP001 Subcontracting Under the Chain Liability Act
4
19.2 BN-S-UP103 (SE00GCS) General Conditions of Subcontract
5
19.3 BN-S-UC002 (SC00SPSR) Safety, Health, Welfare and Environmental Policy, Safety Rules and Site Regulations
5
19.4 BN-SP-UK001 (SE00QAM) Specification of Site Quality Assurance/Quality Control Requirements for Subcontracts
5
19.5 CM-PE-710 Procedure for the Assessment of Construction Capabilities of Subcontractors.
2
19.6 CM-PE-708 Purchasing Procedure
2
19.7 CM-PE-312 Planning and Quantification of Subcontracts
2
19.8 CM-PE-303 Project Procedure and Execution Manual
2
19.9 BN-CO-109 Subcontracts
3
19.10 BN-UC-107 E1 Subcontract Bid Analysis (preliminary)
5
19.11 BN-UC-107 E2 Subcontract Bid Analysis (final)
5

 

20. Responsibility Checklist - Part I

Part I of this checklist shows the responsibilities for subcontracts preparation up to and including award.

Legend: MS = (Home Office) Manager of Purchasing/Subcontracts
PM = Project Manager
PSM = Project Subcontracts Manager
ES = Engineering Specialist
PL = Planning Engineer
PCM = Project Construction Manager
PPM = Project Procurement Manager
SC = Subcontract Coordinator
Note: 1 = Law Department
2 = Manager of Construction
3 = Manager of Procurement
4 = Client (if applicable)
5 = Manager QA & Safety

 

Reference
Section
 
MS
PM
PSM
ES
PL
PCM
PPM
SC
Note
4.2 GENERAL

Subcontracts Plan
-Preparation by:    
x
           
-Input
x
x
 
x
 
x
   
4
-Check by:          
x
   
4
- Approval (initial/sign)  
x
             
5.0 Subcontracts Schedule
-Preparation by:    
x
           
-Input  
x
 
x
x
x
     
-Check by:          
x
     
-Approval (initial sign)  
x
             
7.1

List of Qualified Bidders

-Preparation by:    
x
           
-Input
x
 
x
   
x
     
-Review
x
             
3/4
-Approval (sign)  
x
             
6.0

SUBCONTRACT PACKAGE

Cover Sheet and Contents

-Preparation    
x
           
-Check by:
x
               
-Approval (sign)  
x
             
                     
6.1

Instructions to Bidders

-Preparation by:    
x
           
-Input      
x
x
x
     
-Approval (sign)    
x
           
                     
6.2

General Conditions of Subcontract(Company Standard)

6.3

Special Conditions of Subcontract

-Preparation by:    
x
           
-Input
x
 
x
   
x
   
1/4
-Check by:
x
             
1
-Approval (sign)    
x
           
6.4

Safety, Health, Welfare and
Environmental Policy, Safety
Rules and Site Regulations
(if company standard needs update)

-Preparation by:          
x
     
-Review    
x
           
-Approval          
x
     
6.5

Requisition

-Preparation      
x
         
-Input      
x
     
x
 
-Review    
x
           
-Approval              
x
 
6.6

List of Applicable Documents

-Preparation    
x
           
-Input      
x
     
x
 
-Review  
x
or
x
       
x
 
-Approval (sign)              
x
 
Expedite documents              
x
 
Compile sets              
x
 
6.7

Key Dat Schedule

-Preparation  
x
   
x
       
-Input  
x
x
 
x
x
 
x
 
-Review          
x
     
-Approval (sign)  
x
             
6.8

Form of Tender Descriptions

-Preparation    
x
           
-Input      
x
         
-Review              
x
 
-Approval (sign)    
x
           
6.9

Form of Tender

-Preparation    
x
           
-Input      
x
     
x
 
-Input quantities      
x
         
-Review              
x
 
-Approval (sign)    
x
           
10

Specification of Site Quality Assurance/Quality Control Requirements for Subcontracts(Company Standard)

11

Equipment Erection Description

-Preparation by:      
x
         
-Input          
x
     
-Approval (sign)    
x
           
12

Chain Liability Act Distribution(Company Standard)

                   
6.0

Total S/C Package with Transmittal Letter

-Checking    
x
           
-Approval (sign)
x
               
                   
                   
8.0

7.1

BIDDING PERIOD


Shortlist of Bidders
  - Action    
x
           
  - Approval (sign)  
x
     
x
   
4
8.1

Invitation to Bid

-Action    
x
           
-Signature    
x
           
8.2 Bids
-Expediting    
x
           
-Receipt, distribution and safekeeping    
x
           
8.3

Questions from Bidders

                 
- Handling    
x
           
  BIDS EVALUATION PERIOD
9.2 Bids Opening                  
-Action    
x
           
-Witnessing (sign)
xor
x
x
           
9.3 Bids Evaluation
1. Commercial
-Action    
x
           
-Review  
x
             
9.4 2. Technical Evaluation
-Action      
x
         
-Review  
x
x
   
x
 
x
 
Bid Analysis Preliminary Issue
-Preparation    
x
           
-Approval (sign)
x
x
     
x
 
x
3(1)
4
10.1 Bid Clarification Meetings
-Action    
x
           
-Participation  
x
x
   
x
x
x
4/5
-Participation as required/on call      
x
         
10.3 Bid Analysis, Final Issue
-Preparation    
x
           
-Review  
x
     
x
 
x
 
-Approval(sign)
x
x
 
x
 
x
   
3(1)
4
10.4 Update of S/C Package for Execution
-Preparation    
x
           
-Review              
x
 
-Approval (sign)
x
               
10.4 Purchase Order                  
  -Preparation    
x
           
  -Approval
x
       
x(2)
   
3(1)
10.5 Purchase Order Acknowledgement
  -Action    
x
           
                     

(1) will sign together with MS in case > US$ 1 million or equivalent
(2) at site by Construction Manager provided authorization letter has been issued

21. Responsibility Checklist - Part II

Part II of this checklist shows the responsibilities for subcontracts administration up to and including close-out.

Legend: MS = (Home Office) Manager of Subcontracts
PM = Project Manager
PCM = Project Construction Manager
ES = Engineering Specialist
PPM = Project Procurement Manager
PSM = Project Subcontracts Manager
SI = Site Engineer
SC = Subcontract Coordinator
   
Note: 3 = Manager of Procurement
4 = Accountant
   

 

Reference
Section
 
MS
PM
PSM
ES
PCM
PPM
SI
SC
Note
11. Kick-off Meeting with
Subcontractor
-Action        
x
       
Final Drawing Quantity Take-off
-Preparation      
x
     
x
 
-Review    
x
           
-Transmit to Subcontractor    
x
           
Form of Tendere Update
-Decision to implement  
x
x
           
-Preparation    
x
           
-Forecast of Quantities      
x
     
x
 
-Review    
x
       
x
 
-Approval        
x
       
-Implementation    
x
           
13.2 Extra Work Authorization -
Specific Job Procedure
-Prepartion    
x
           
-Input    
x
 
x
 
x
   
-Review        
x
       
-Approval (sign)    
x
 
x
       
14.0 Claims and Backcharges
-Preparation    
x
           
-Input      
x
x
 
x
   
-Review        
x
       
-Approval  
x
   
x
       
-Processing    
x
           
16.0 Progress Payment Certificates
-Preparation    
x
           
-Input            
x
   
-Review        
x
    x  
-Approval        
x
       
17.0 Payment to Subcontractors
  -Approval    
x
 
x
       
  -Action                
4
12.0 Revision to S/C Documents
  -Approval  
x
   
x
       
  -Processing    
x
           
15.0 Issue of P.O. Amendments
  -P.O.A.R.    
x
           
  -Approval (sign)
x
x
   
x
     
3
4
  -Action    
x
           
18.0 Subcontract Close-Out
  -Preparation    
x
           
  -Input            
x
   
  -Review  
x
   
x
       
  -Approval  
x
   
x
       
  -Final P.O. amendment    
x
           

22 Flowchart

Image A-D

 

Image A

 

Image B

 

Image C

 

Image D