Contract Strategies for Major Projects

Introduction: What This Book Is About

When a manufacturer or resource development company wants to build a new facility or refurbish an old one, the owner personnel put together the business case for the new project, develop a scope for the project, and assemble the preliminary design. If the facilities require a good deal of exacting engineering, an engineering contractor usually performs the final stage of preparation on the engineering side, while owner personnel put together the execution plan. Few companies in the process industries¹ maintain the people resources needed to engineer the final stage of preparation on their own. After owner authorization, a contractor will be required to execute the detailed engineering, and that contractor will also usually procure all of the major equipment and the engineered materials for the project. The owner will require a construction contractor to build the facility. Contractors may or may not be involved in the commissioning and startup of the facilities depending on the skills and preferences of the owner.

The process of figuring out how the contractors will be selected, how they will be paid, how much work any one contractor will do on the project, and the legal framework under which the work will be done (the contract terms and conditions) is what we call contracting strategy. For reasons that will become obvious, the owner must form the contracting strategy for a project early in project development or the contracting decisions ...