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Change management and dispute resolution

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Alex Iskandar
Alex Iskandar

The document discusses best practices for managing changes and minimizing disputes on construction projects. It recommends clearly defining the project scope, risks, and change management process upfront in contracts. It also stresses the importance of properly documenting all changes, including their causes and impacts. Failure to do so can lead to disputes later on. The document also provides guidance on contractor selection, project execution, and contract closeout to help reduce disputes arising from changes throughout the project lifecycle.

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Changes / Variations / Deviations Lesson Learned Minimizing Changes Dispute Resolution Arising from Changes
CHANGES / VARIATIONS /DEVIATIONS Whats Change : Base Assumptions on Scope, Specifications, Environment/Conditions, Social Political, Rules and Regulations, Business Process etc. Existence of Instruction from Owner Cause Effect Entitlement - Damage Business Process : Change Management Change Documentation Change Log / Register Change Notice Change Request Governance : Change Authority Change Control Board Outcome : Change Order / Purchase Order Amendment Change Cost and Schedule
Failure to adequately document the scope expectations of the parties in the contract Owners actions/inactions during the work Contractors failure to understand local conditions Contractors inexperience with technology/type of work Contractors failure to adequately staff/departures of key personnel Owners or Contractors poor contracting strategy Unreasonable contractual allocation of risks Contractors poor subcontract management Financial weakness of Contractor Contractors poor accounting/estimating/control systems Owner/Contractor personality conflicts Contractor management personal/professional conflicts Contractors lowball bid approach cost/schedule Labor issues Failure to understand the contract/law Contract Change Claims Root Causes examples:
Stage-Gate Project-Management Process in the Oil and Gas Industry by G.W. Walkup Jr., SPE, SDG, and J.R. Ligon, SPE, http://www.spe.org/spe-site/spe/spe/jpt/2006/12/Syn102926.pdf
AREAS OF DISCUSSIONS : CONTRACTOR SELECTION Bid Document Preparation Pre Qualification and Stage-1 Technical Bid Commercial Bid CONTRACT AWARD, PREPARATION TO KICK OFF PROJECT EXECUTION CONTRACT CLOSE OUT
BID DOCUMENT PREPARATION BEST PRACTICE: SCOPE OF WORK AND CONTRACT T&Cs Proper Company Supplied Data ( Specifications, drawings, etc.) Concise Company requirement on HSE and Quality, facilities performance, Established Project Management Of Change Defined responsibility and accountability among Company, EPC Contractor, Government Authorities and other parties (i.e. LLI Vendor, etc.) Aligned interfaces among stakeholders Established Warranty requirement No Ambiguity / Contradictive Statements in the Contract (including Exhibits)
PRE QUALIFICATION AND STAGE-1 TECHNICAL BID : BEST PRACTICE : ENSURE CONCISE AND FOCUS CRITERIA Enable screening and selection of Qualified Registrants DO NOT REVIEW AND ASSESS FROM THE SUBMITTED DOCUMENTS ONLY, PROOF THOSE INFORMATION WITH: Scrutiny reviewing Contractor s Proposal (Technical and Commercial) (Stage-1) Interviews Bidder Key Personnel(s), (Stage-1) Site visits to Bidder Main Office and/or Fabrication /Yard (Stage-1) Interview the Bidder (Main Contractor and/ member of Consortium ), (Stage -1) Clarity of Scope, assurance of split Role & Responsibility, and Interface (Main Contractor and/ member of Consortium)
PRE QUALIFICATION AND STAGE-1 TECHNICAL BID: (contd) BEST PRACTICE : ENSURE BIDDER (Main Contractor / Consortium) FULLY UNDERSTAND THE SCOPE, REQUIREMENTS, AND LIABILITIES Conduct Technical Bid Clarifications scrutiny, including Bidder HSE-MS and Quality Assurance/Control, Business Ethics, etc. ENSURE BIDDER (Main Contractor / Consortium) FINANCIALLY CAPABLE TO PERFORM THE WORK CONTINUOUSLY AND ON TIMELY BASIS. Proper Financial Due Diligence
COMMERCIAL BID: BEST PRACTICE: EVALUATE THE SUBMITTED COMMERCIAL BID, Assurance of Capability to Perform the Contract ESTABLISHED WORK INSTRUCTION AND CRITERIA FOR NEGOTIATION PROCESS, WHEN REQUIRED: As per PTK 007, If all the Bid prices is above than EE, then requires negotiation to all bidders started from 1st rank to the last rank. The Objectives is to have prices near to the Company EE. If the result is lower than Company EE, then re-assess the proposal RED FLAG
BEST PRACTICE: Contract Effective Date: LOI Date is the basis. Kick Off Meeting Set-up series of meetings: HSE, project management, project control, procurement, contract, discipline engineering, quality assurance/control, construction. Ensure all Contractor Key persons is mobilized and all changes of Key Personnel require Company approval.
BEST PRACTICE: Establishment of an agreed Project Master Schedule at the earliest stage: Clear and realistic milestone targets. Constructability Review and Site Verification before AFC Scheduled periodic-assessment of Contractor Performance Availability of Qualified HAZOP Facilitator Establish Procurement Management System at the earliest stage: Assurance of Contractors personnel capability in managing procurement Proper control and monitoring, include maintain updated register MASTER LIST preparation at the earliest stage: Assurance of Contractors personnel capability in managing logistic/formalities Proper control and monitoring Master List and Custom Clearance process.
BEST PRACTICE: Shutdown and Tie-In Preparation: Assurance of Contractors personnel capability in execution of SIMOPS (Simultaneously Operations) Set-up detail plan, check list, joint walk through Implement Project Management of Change Proper control and monitoring level Sufficient early discussion prior to issuance and execution Maintain updated register Settlement of claims to avoid dispute at contract close-out Mechanical Completion, Pre-Comm. & Commissioning Assurance of Contractors personnel capability for Pre-Comm., clearing of punch-lists prior to Facilities Mechanical Acceptance & Hand-over Sufficient Contractors experienced personnel to assist commissioning activities . Set-up Company PMT and Discipline Engineers with sufficient competencies and experiences to support lack of experiences / incompetence of Contractors Personnel(s
OBJECTIVES : Proper Close-out documentation to support Project and AFE Close-out BEST PRACTICE: As Built Documentation Scheduled sufficient time for site verification (i.e. joint walk through) Release of Leans Overall Final Documentation completion
Make all reasonable efforts to resolve disputes by negotiation for mutual consent : Justifiable, Accountable, Auditable Proper documentation Open and timely disclosure of relevant facts, information and documentation without prejudice Outcome : Justifiable compensable Justifiable non compensable Non justifiable
Litigation Non Litigation : Negotiation Consultation Mediation Conciliation Arbitration Ref. : Undang-Undang No. 30, 1999:

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Change management and dispute resolution

  • 1. Changes / Variations / Deviations Lesson Learned Minimizing Changes Dispute Resolution Arising from Changes
  • 2. CHANGES / VARIATIONS /DEVIATIONS Whats Change : Base Assumptions on Scope, Specifications, Environment/Conditions, Social Political, Rules and Regulations, Business Process etc. Existence of Instruction from Owner Cause Effect Entitlement - Damage Business Process : Change Management Change Documentation Change Log / Register Change Notice Change Request Governance : Change Authority Change Control Board Outcome : Change Order / Purchase Order Amendment Change Cost and Schedule
  • 3. Failure to adequately document the scope expectations of the parties in the contract Owners actions/inactions during the work Contractors failure to understand local conditions Contractors inexperience with technology/type of work Contractors failure to adequately staff/departures of key personnel Owners or Contractors poor contracting strategy Unreasonable contractual allocation of risks Contractors poor subcontract management Financial weakness of Contractor Contractors poor accounting/estimating/control systems Owner/Contractor personality conflicts Contractor management personal/professional conflicts Contractors lowball bid approach cost/schedule Labor issues Failure to understand the contract/law Contract Change Claims Root Causes examples:
  • 4. Stage-Gate Project-Management Process in the Oil and Gas Industry by G.W. Walkup Jr., SPE, SDG, and J.R. Ligon, SPE, http://www.spe.org/spe-site/spe/spe/jpt/2006/12/Syn102926.pdf
  • 5. AREAS OF DISCUSSIONS : CONTRACTOR SELECTION Bid Document Preparation Pre Qualification and Stage-1 Technical Bid Commercial Bid CONTRACT AWARD, PREPARATION TO KICK OFF PROJECT EXECUTION CONTRACT CLOSE OUT
  • 6. BID DOCUMENT PREPARATION BEST PRACTICE: SCOPE OF WORK AND CONTRACT T&Cs Proper Company Supplied Data ( Specifications, drawings, etc.) Concise Company requirement on HSE and Quality, facilities performance, Established Project Management Of Change Defined responsibility and accountability among Company, EPC Contractor, Government Authorities and other parties (i.e. LLI Vendor, etc.) Aligned interfaces among stakeholders Established Warranty requirement No Ambiguity / Contradictive Statements in the Contract (including Exhibits)
  • 7. PRE QUALIFICATION AND STAGE-1 TECHNICAL BID : BEST PRACTICE : ENSURE CONCISE AND FOCUS CRITERIA Enable screening and selection of Qualified Registrants DO NOT REVIEW AND ASSESS FROM THE SUBMITTED DOCUMENTS ONLY, PROOF THOSE INFORMATION WITH: Scrutiny reviewing Contractor s Proposal (Technical and Commercial) (Stage-1) Interviews Bidder Key Personnel(s), (Stage-1) Site visits to Bidder Main Office and/or Fabrication /Yard (Stage-1) Interview the Bidder (Main Contractor and/ member of Consortium ), (Stage -1) Clarity of Scope, assurance of split Role & Responsibility, and Interface (Main Contractor and/ member of Consortium)
  • 8. PRE QUALIFICATION AND STAGE-1 TECHNICAL BID: (contd) BEST PRACTICE : ENSURE BIDDER (Main Contractor / Consortium) FULLY UNDERSTAND THE SCOPE, REQUIREMENTS, AND LIABILITIES Conduct Technical Bid Clarifications scrutiny, including Bidder HSE-MS and Quality Assurance/Control, Business Ethics, etc. ENSURE BIDDER (Main Contractor / Consortium) FINANCIALLY CAPABLE TO PERFORM THE WORK CONTINUOUSLY AND ON TIMELY BASIS. Proper Financial Due Diligence
  • 9. COMMERCIAL BID: BEST PRACTICE: EVALUATE THE SUBMITTED COMMERCIAL BID, Assurance of Capability to Perform the Contract ESTABLISHED WORK INSTRUCTION AND CRITERIA FOR NEGOTIATION PROCESS, WHEN REQUIRED: As per PTK 007, If all the Bid prices is above than EE, then requires negotiation to all bidders started from 1st rank to the last rank. The Objectives is to have prices near to the Company EE. If the result is lower than Company EE, then re-assess the proposal RED FLAG
  • 10. BEST PRACTICE: Contract Effective Date: LOI Date is the basis. Kick Off Meeting Set-up series of meetings: HSE, project management, project control, procurement, contract, discipline engineering, quality assurance/control, construction. Ensure all Contractor Key persons is mobilized and all changes of Key Personnel require Company approval.
  • 11. BEST PRACTICE: Establishment of an agreed Project Master Schedule at the earliest stage: Clear and realistic milestone targets. Constructability Review and Site Verification before AFC Scheduled periodic-assessment of Contractor Performance Availability of Qualified HAZOP Facilitator Establish Procurement Management System at the earliest stage: Assurance of Contractors personnel capability in managing procurement Proper control and monitoring, include maintain updated register MASTER LIST preparation at the earliest stage: Assurance of Contractors personnel capability in managing logistic/formalities Proper control and monitoring Master List and Custom Clearance process.
  • 12. BEST PRACTICE: Shutdown and Tie-In Preparation: Assurance of Contractors personnel capability in execution of SIMOPS (Simultaneously Operations) Set-up detail plan, check list, joint walk through Implement Project Management of Change Proper control and monitoring level Sufficient early discussion prior to issuance and execution Maintain updated register Settlement of claims to avoid dispute at contract close-out Mechanical Completion, Pre-Comm. & Commissioning Assurance of Contractors personnel capability for Pre-Comm., clearing of punch-lists prior to Facilities Mechanical Acceptance & Hand-over Sufficient Contractors experienced personnel to assist commissioning activities . Set-up Company PMT and Discipline Engineers with sufficient competencies and experiences to support lack of experiences / incompetence of Contractors Personnel(s
  • 13. OBJECTIVES : Proper Close-out documentation to support Project and AFE Close-out BEST PRACTICE: As Built Documentation Scheduled sufficient time for site verification (i.e. joint walk through) Release of Leans Overall Final Documentation completion
  • 14. Make all reasonable efforts to resolve disputes by negotiation for mutual consent : Justifiable, Accountable, Auditable Proper documentation Open and timely disclosure of relevant facts, information and documentation without prejudice Outcome : Justifiable compensable Justifiable non compensable Non justifiable
  • 15. Litigation Non Litigation : Negotiation Consultation Mediation Conciliation Arbitration Ref. : Undang-Undang No. 30, 1999: