000.350.pp001_03 preparation of proposal & estimation procedure

PROCEDURE

PREPARATION OF PROPOSALS

AND ESTIMATES

Doc No: 000.350.PP001 Rev: 003 Date: 26th May 2011 Page: 1 of 22

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Procedure Preparation of Proposal

& Estimation

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Table of Contents

1.0 Introduction ............................................................................................................................................... 4

2.0 Purpose ...................................................................................................................................................... 4

3.0 Scope ......................................................................................................................................................... 4

4.0 Resources ................................................................................................................................................... 4

4.1 Proposal Manager.................................................................................................................................. 4

4.2 Proposals Engineer ................................................................................................................................ 4

4.3 Proposals Co-ordinator .......................................................................................................................... 5

5.0 Proposals ................................................................................................................................................... 5

5.1 Introduction ........................................................................................................................................... 5

5.2 Project Number ..................................................................................................................................... 5

5.3 Preparation Prior Proposal .................................................................................................................... 5

5.4 Client Supplied Information .................................................................................................................. 5

5.5 Proposal Document ............................................................................................................................... 6

5.6 EPCM Proposal ..................................................................................................................................... 6

5.6.1 Material Take Off (MTO) ................................................................................................................. 6

5.6.2 Requests for Quotation (RFQ) & Request of Information (RFI) ...................................................... 6

5.6.3 Estimate Sheet .................................................................................................................................. 7

5.6.4 Labour Rate Calculator ..................................................................................................................... 7

5.6.5 Mark-up Sheet .................................................................................................................................. 7

5.6.6 Pricing Schedule for Submission ...................................................................................................... 8

5.7 Lump Sum Proposal .............................................................................................................................. 8

5.7.1 Material Take Off (MTO) ................................................................................................................. 9

5.7.2 Requests for Quotation (RFQ) & Request of Information (RFI) ...................................................... 9

5.7.3 Estimate Sheet .................................................................................................................................. 9

5.7.4 Labour Rate Calculator ................................................................................................................... 10

5.7.5 Mark-up Sheet ................................................................................................................................ 10

5.7.6 Pricing Schedule for Submission .................................................................................................... 11

5.8 Unit Rate Proposal .............................................................................................................................. 11

5.8.1 Material Take Off (MTO) ............................................................................................................... 11

5.8.2 Requests for Quotation (RFQ) & Request of Information (RFI) .................................................... 11

5.8.3 Estimate Sheet ................................................................................................................................ 12


5.8.5 Mark-up Sheet ................................................................................................................................ 12


5.9 PMCM Proposal .................................................................................................................................. 13

5.9.1 Material Take Off (MTO) ............................................................................................................... 13

5.9.2 Requests for Quotation (RFQ) & Request of Information (RFI) .................................................... 14

5.9.3 Estimate Sheet ................................................................................................................................ 14

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5.9.5 Mark-up Sheet ................................................................................................................................ 15


6.0 Schedules ................................................................................................................................................. 15

7.0 Manpower Histogram & S Curve ............................................................................................................ 17

7.1 Manpower Histogram .......................................................................................................................... 17

7.2 S Curves .............................................................................................................................................. 17

8.0 Execution Plans ....................................................................................................................................... 19

9.0 HSE Plan ................................................................................................................................................. 20

10.0 Project Quality Plan ................................................................................................................................. 21

11.0 Construction Execution Plans (CEP) ....................................................................................................... 21

12.0 Client Required Information .................................................................................................................... 22

13.0 Final Bid Review ..................................................................................................................................... 22

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Instruction:

Please read this document in conjunction with Estimation & Proposal Flow Chart (Doc No: 000.350. TP003 Rev 1) which contains links on relevant Forms & Templates for individual Estimation task.

1.0 Introduction The policy of the SEPAM GROUP and its subsidiaries is to ensure that the applicable standards, specifications, contractual, commercial administrative requirements and verification arrangements are correctly identified during the preparation of proposals and the requirements of such documents are adhered to by third parties.

It is also the policy of SEPAM GROUP to ensure a smooth auditable flow of information throughout the preparation of the Proposal and to initial a process of continuous improvement in order to gain a reputation in the market pace as the specialist contractor of choice by our clients.

2.0 Purpose To define the methods of documenting and authorizing the issuance of proposals in order to ensure that the services conform to specified requirements and are handled and controlled in a systematic and auditable fashion.

3.0 Scope This procedure is applicable to all proposals issued from all Sepam offices.

4.0 Resources Based on the size and complexity of the inquiry, resources will be allocated based on the requirements. These positions will be continuously reviewed and revised as dictated by the size and complexity of the project being bid.

4.1 Proposal Manager A Proposal Manager will be appointed to be responsible and accountable for the proposal under preparation. The Proposals Manager (PM) will report directly to the SBU Manager and is responsible for the review of all technical, commercial and contractual matters relating to the proposal and the planning and controlling of all the efforts necessary to ensure that a proposal of the required Quality and Accuracy is delivered in a timely manner and at a competitive price by allocating the necessary resources.

4.2 Proposals Engineer Suitably qualified and experienced Engineers based on the proposed Scope of Work will be appointed by the Proposal Manager to assist in the preparation of the technical content of proposals. Under the guidance of the Proposal Manager the proposals engineer is responsible to obtain the prime costs associated with the installation on the project taking into careful consideration the local

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construction standards, client’s requirements and any specific project/site agreements. They are also responsible for keeping a knowledgeable experience of ever changing industry standards and to ensure competitive prices are obtained from manufacturers/subcontractors.

4.3 Proposals Co-ordinator

Under administration direction of the Proposals Manager, the Proposals Co-ordinator is directly responsible for the logging in and issuance of specific project numbers to each inquiry as and when they are received and for the preparation of the proposal documents necessary for submitting to the Client.

5.0 Proposals

5.1 Introduction

It is the policy of SEPAM to offer our clients the most competitive proposal to the correct specification and in a timely manner. SEPAM operates a continuous improvement process actively working with suppliers/Subcontractors in order to streamline the proposal process in order to obtain value for money and offer our clients services at a competitive price.

5.2 Project Number Upon confirmation from Business Development and/or senior Management that the inquiry is to be bid, it is the responsibility of the Proposal Co-ordinator to confirm with Business Development and make sure the receipt of TOF’s, Strategy paper etc. then confirm/request Project Number from Project Controls. Project should not be bid without TOF’s and Project number. The assigned Project Number should be used for all correspondence, RFQs and other documents associated with the particular bid. Standard Project Proposal Folder should be set-up with assigned Project Number.

5.3 Preparation Prior Proposal A Bid Team should be assigned for the proposal; Cost of bidding will then be estimated using Proposal Costing Sheet if required. Proposal Manager would be responsible to assign tasks to each member of the bidding team by accomplish the Responsibility Matrix.

5.4 Client Supplied Information All Client supplied information is to be submitted to Document Control to ensure the correct versions of all documents are stored in the appropriate locations on Contract Manager and in the Project Folder. Once the Request for Proposal / Invitation to Bid is received by Sepam and correctly filed in Document Control the Proposal Manager must review the client supplied information to ensure that all

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required information is provided and at a level of detail and completeness to allow Sepam to prepare a complete and accurate estimate and proposal. Any information not provided but required should be recorded and transmitted to client in the form of Technical or Commercial Clarifications by the Proposal Manager. Clarifications will be included in our proposal to support any decisions or strategies employed by Sepam during the proposal or estimating process.

5.5 Proposal Document The Proposal Document is prepared by the Proposal Manager with assistance from the relevant Engineering, Technical and Commercial Functions Co-ordinator under the guidance of the Engineer/s and is laid out in line with the Client’s requirements and may contain such information as:

1. Cover Letter 2. Pricing Breakdown / Summary - Sepam Mark Up Sheet 3. Commercial Clarifications – Sample Commercial Clarifications 4. Technical Clarifications – Sample Technical Clarifications 5. Major Milestone Schedule 6. Project Organisation Chart 7. Manpower Histograms 8. Project “S” Curve 9. Execution Plans – Use Standard Sepam Templates 10. HSE Plan – Sample HSE Plan 11. Quality Plan – Sample Quality Plan 12. Project / Client Specific Information

5.6 EPCM Proposal A complete proposal for Engineering, Procurement, Construction & Management based on the client requirements / documents for the project. Bid Calculations and considerations can be derived from the following sheets:

5.6.1 Material Take Off (MTO)

The Bill of Quantities/Material Take Off (BOQ/MTO) is a form which provides the team with an efficient method of laying down all project requirements. The BOQ’s will be generated by the Proposal Engineer/s or supplied directly by the client as part of the Inquiry documents and will contain detailed breakdowns of the main components of the proposal generally as outlined below:

1. Materials 2. Subcontracts 3. Labour / Man-hours requirements

5.6.2 Requests for Quotation (RFQ) & Request of Information (RFI) Upon preparation/receipt of the BOQ/s and after checking its contents, the Proposal Engineers are then responsible for the RFQ and the bid list development. A minimum of three reputable bids shall be obtained for all major materials, with the exception of approved company pre-selected vendors.

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An RFQ is drawn up to accompany the BOQ’s in order to invite vendors to submit offers for project requirements.

The Engineers will screen bids for conformance to the specifications, terms and conditions, quality requirements, and any other information that may be missing or unclear. Missing information may be requested by phone, but must always be confirmed in writing by the bidder. Request of Information and Clarification from client should be proposed in standard RFI format, and each RFI issued should be logged into RFI Register, with current status and regularly updated with Client’s reply.

5.6.3 Estimate Sheet The Estimate Sheet is an MS computer-generated form, which provides the team with an efficient method of laying down all project requirements and will contain the following information:

1. Project title and location.

2. Project number.

3. Date of quotation and any applicable revisions/updates.

4. Brief description of equipment or material.

5. Unit cost of Materials for each item.

6. Unit Cost of subcontracts for each item.

7. Unit Norm (Man-hours) for each item.

8. Totals for each of the line items mentioned in 5, 6 and 7 above.

9. Labour, Subcontracts &Material Multiplier

Cypher 1 as estimation software is used during estimation process, it has a material database, which provides material unit norms, material class, and labour class for each item. For detailed instruction for Cypher 1 software, please refer to Cypher 1 Estimating. BOQ could be imported to Cypher 1 in a specific Excel format, please refer to Import Excel BOQ to SEC Procedure for detailed procedure.

5.6.4 Labour Rate Calculator Labour Rate Calculator is an MS computer generated from which enables the proposal team to come up with a overall unit cost of Indirect Man Hours depending on the location of the project, local laws & regulations, Indirect cost incurred (Visa, mobilisation ,recruitment charges, R&R etc). The Labour Rate Calculator is maintained and held by the SBU Manager and the Estimating Department. Please click on link here for current Estimating Department LRC copy: LRC

5.6.5 Mark-up Sheet The Mark up Sheet is prepared taking the main information collated in the Estimate sheet:

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1. Design & Engineering Cost 2. Material & Equipment Cost 3. Labour Cost 4. Construction Cost ( Labour, Small Tools, Safety Equipment, transportation,

Consumables, Expendables, Scaffolding and other High elevation Access) 5. Project Management Cost 6. Prelims & General ( Site Facilities, Office Equipment, Site Services, Production

Equipment, Direct & Third Party Testing Cost, Head Office Cost) 7. Commissioning Cost 8. Total Subcontract Cost 9. Escalation Cost 10. Project Cost 11. Contingency Cost 12. Management Fee 13. Joint Venture Cost 14. Agent fee 15. Nominal Ledger 16. Change Orders/Variation Cost

A commercial review should be carried out by Proposals Manager with the Management team prior the application of the associated cost. Once Management approved the Mark-up sheet, Associated Cost of the project can then be brought back to the estimate. The Mark up sheet is maintained by each SBU Manager and their Estimators for each project. Please click on link here for standard Mark-up Sheet: Mark-up Sheet_Rev.02 (26-MAY-11).xlsx

5.6.6 Pricing Schedule for Submission A Pricing Schedule as per Client‘s required format should be generated from the Cypher 1 estimate sheet after Management approved mark-up assigned to the project estimate. Once the associated costs have been assigned to the project it is then the responsibility of the Proposals Manager along with the Engineer/s to present this information to the Company Directors for approval.

5.7 Lump Sum Proposal A complete proposal for construction / installation which consist of a single sum of money based on the client requirements / documents for the project. Bid Calculations and considerations can be derived from the following sheets;

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1. Project title and location. 2. Project number. 3. Date of quotation and any applicable revisions/updates. 4. Brief description of equipment or material. 5. Unit cost of Materials for each item. 6. Unit Cost of subcontracts for each item. 7. Unit Norm (Man-hours) for each item. 8. Totals for each of the line items mentioned in 5, 6 and 7 above. 9. Labour, Subcontracts &Material Multiplier


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5.7.4 Labour Rate Calculator Labour Rate Calculator is an MS computer generated form which enables the proposal team to come up with a overall unit cost of Indirect Man Hours depending on the location of the project, local laws & regulations, Indirect cost incurred (Visa, mobilisation ,recruitment charges, R&R etc). The Labour Rate Calculator is maintained and held by the SBU Manager and the Estimating Department. Please click on link here for current Estimating Department LRC copy: LRC


1. Design & Engineering Cost 2. Material & Equipment Cost 3. Labour Cost 4. Construction Cost ( Labour, Small Tools, Safety Equipment,

transportation, Consumables, Expendables, Scaffolding and other High elevation Access)

5. Project Management Cost 6. Prelims & General ( Site Facilities, Office Equipment, Site Services,

Production Equipment, Direct & Third Party Testing Cost, Head Office Cost)

7. Commissioning Cost 8. Total Subcontract Cost 9. Escalation Cost 10. Project Cost 11. Contingency Cost 12. Management Fee 13. Joint Venture Cost 14. Agent fee 15. Nominal Ledger 16. Change Orders/Variation Cost


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5.8 Unit Rate Proposal A complete proposal consisting amount of a charge or payment relative to each work line item based on the client requirements / documents for the project. Bid Calculations can be derived from the following sheets:







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Consumables, Expendables, Scaffolding and other High elevation Access) 5. Project Management Cost 6. Prelims & General ( Site Facilities, Office Equipment, Site Services,

Production Equipment, Direct & Third Party Testing Cost, Head Office Cost) 7. Commissioning Cost 8. Total Subcontract Cost

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9. Escalation Cost 10. Project Cost 11. Contingency Cost 12. Management Fee 13. Joint Venture Cost 14. Agent fee 15. Nominal Ledger 16. Change Orders/Variation Cost



5.9 PMCM Proposal A complete proposal for Procurement, Construction & Management based on the client requirements / documents for the project. Bid Calculations and considerations can be derived from the following sheets:



1. Materials 2. Subcontracts 3. Labour / Man-hours requirements 4.

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Consumables, Expendables, Scaffolding and other High elevation Access) 5. Project Management Cost 6. Prelims & General ( Site Facilities, Office Equipment, Site Services,

Production Equipment, Direct & Third Party Testing Cost, Head Office Cost) 7. Commissioning Cost 8. Total Subcontract Cost 9. Escalation Cost 10. Project Cost 11. Contingency Cost 12. Management Fee 13. Joint Venture Cost 14. Agent fee 15. Nominal Ledger 16. Change Orders/Variation Cost



6.0 Schedules During the proposal process our client may request the submittal of a variety of different schedules to support our proposal and demonstrate that we have an adequate understanding of the overall project schedule and most effective and efficient schedule for our planned scope of work.

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The common types of schedule requested at this stage of the process would be:

Major Milestone Schedule - The milestone schedule is a summary level schedule that allows the project manager to review and identify all of the significant and major project related milestones that may exist in the course of a project, and can be proven helpful in making sure that nothing falls behind schedule of off the radar entirely.

Critical Path Schedule (CPM) – This is a schedule which comprises the following elements:

1) A list of all activities required to complete the project (also known as Work breakdown structure)

2) The time (duration) that each activity will take to completion 3) The dependencies between the activities.

Using these values, CPM calculates the longest path of planned activities to the end of the project, and the earliest and latest that each activity can start and finish without making the project longer. This process determines which activities are "critical" (i.e., on the longest path) and which have "total float" (i.e., can be delayed without making the project longer). In project management, a critical path is the sequence of activities which add up to the longest overall duration. This determines the shortest time possible to complete the project. Any delay of an activity on the critical path directly impacts the planned project completion date (i.e. there is no float on the critical path). A project can have several, parallel, near critical paths.

Mobilisation Schedule – the proposed schedule to mobilise a project team, facilities and equipment to a project location.

Construction Schedule – planned durations, and sequence of the proposed construction activities required to complete a Scope of Work.

Procurement & Subcontracts Schedule – Where the selection of vendors and subcontractors and subsequent award of contracts or placement of Purchase Orders for Long Lead items is deemed to be critical to project success then our clients may request the submittal of procurement and subcontracting schedules with our proposals.

Please refer to Schedule Planning Flow Chart for Scheduling procedures.

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7.0 Manpower Histogram & S Curve

7.1 Manpower Histogram Manpower histograms are used to demonstrate to clients our effective and efficient planning of labour resources. The histograms are also used to achieve uniform distributions of labour by moving activities that are not on critical path.

Typical Manpower Histogram

7.2 S Curves The S Curve is a well known project management tool and it consists in "a display of cumulative costs, labour hours or other quantities plotted against time”. The name derives from the S-like shape of the curve, flatter at the beginning and end and steeper in the middle, because this is the way most of the projects look like. The S curve can be considered as an indicator and it's used for many applications related to project management such as: target, baseline, cost, time etc. That's why there is a variety of S Curves such as: -Cost versus Time S Curve ;( Appropriate for projects that contain labour and non-labour tasks). -Target S Curve;(This S Curve reflects the ideal progress of the project if all tasks are completed as currently scheduled) -Value and Percentage S Curves;(Percentage S Curves are useful for calculating the project's actual percentage complete) -Actual S Curve;(This S Curve reflects the actual progress of the project to date)

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In order to be able to generate a S Curve, A Baseline and Production Schedule are necessary because they contain important information for each task: -the Baseline - contains information about Actual Start date and finish date. -The Baseline - can also contain information about Man Hours and costs. -The Production Schedule contains information about the actual percentage complete.

Sample project S Curve

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8.0 Execution Plans Purpose: The PEP is the core document for the management of a project. It is a statement of policies and procedures defined by the project director, although usually developed by the project manager for the project sponsor/project director's approval. It sets out in a structured format the project scope, objectives and relative priorities. The Project Execution Plan will:

Include plans, procedures and control processes for project implementation and for monitoring and reporting progress?

Defines the roles and responsibilities of all project participants, and is a means of ensuring that everyone understands, accepts and carries out their responsibilities?

Set out the mechanisms for audit, review and feedback, by defining the reporting and meeting requirements, and, where appropriate, the criteria for independent external review?

Suggested contents: Sepam utilise a standard PEP for all projects but this will need to be modified to meet the particular circumstances of each project. A typical PEP might cover the items listed below, although some may appear under a number of headings with a cross reference system employed to avoid duplication:

Project definition and brief; Project Objectives Roles, responsibilities and authorities; Project cost plan and cost management procedures; Risk management; Programme management; Contracting and procurement; Administrative systems and procedures; Safety and environmental issues, such as the construction design

and management regulations; Quality assurance; Commissioning; and Post project evaluation.

Notes: The PEP will change as a project progresses through its design and construction stages. It should be a dynamic document regularly updated and referred to as a communication tool, as well as a control reference. The Proposal Manager is responsible for the preparation of the Project Execution Plan.

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9.0 HSE Plan A preliminary or typical HSE Plan is often required for proposals prepared by Sepam to demonstrate to our clients that we have an effective approach and awareness of the regulations and requirements for managing HSE related risks on site. It is a working document, which will be changed and modified upon award and throughout the duration of the project, by the HSE Manager The workmanship, systems of work employed, health and safety standards and materials utilised etc, will be documented and recorded. The plan will contain the following information:

Names and responsibilities of the project team Overview of the project Other activities on site Activities with particular risks to safety and health General safety arrangement on site Information for sub-contractors Ongoing communications and co-operation on site Accident and emergency procedures and reporting Welfare arrangements Information and Training Safety file information Project review and monitoring

The HSE Manager is responsible for the preparation of HSE Plans for Project proposals.

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10.0 Project Quality Plan Purpose The purpose of the Project Quality Plan is to define how Sepam intends to deliver a service or facility meet the customer's quality expectations and the supplier's quality standards. The Project Quality Plan should

Clearly define ways in which the client’s quality expectations will be met? Define the methods and procedures to achieve the required quality? Define Quality Responsibilities of all project personnel. Conform to the corporate quality policy?

Composition: Sepam utilise a standard Project Quality Plan which will be modified as required with project specific information: The Project Quality Plan should contain:

Customer quality expectations / objectives Acceptance criteria, a prioritised list of criteria for the final product(s) that must be met before

the customer will accept the final product(s). Quality responsibilities, who is responsible for each of the aspect of quality of the final

product(s) Reference to any standards that need to be met The quality-control and audit processes to be applied to project management Subcontractor and Vendor Quality Management Inspection & Test Planning Quality Records Engineering & Design Quality Management Commissioning and Turnover Any tools to be used to ensure quality. Organisational or programme quality management system and standards

The Project Quality Plan will need to take account of any internal or external standards that are applicable to the project, e.g. ISO standards The Quality Manager is responsible for the generation of all Project Quality Plans.

11.0 Construction Execution Plans (CEP) Sepam will produce a Construction Execution Plan for all projects with Construction or Construction Management scope. An effective CEP ensures that Safety, Quality, Project Costs, and Schedule deliverables are achieved. The CEP will outline the subcontract structures, resourcing, negotiations, management, coordination, quality surveillance associated with the all direct field labour. The CEP will outline plans for mobilisation, temporary facilities, the work site and offsite fabrication yards, modularisation, structural steel, conveyors, and equipment will ensure that construction activities are not delayed by fabricated items.

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12.0 Client Required Information In most cases client requires answers or information in response to specific questions or queries. A review of the RFP should be conducted by the Proposal Manager and a list of supplementary information required must be generated which also outlines who will be responsible for providing this information and when this information will be required. It is imperative that sufficient time is provided for the provision and review of the required information.

13.0 Final Bid Review A project proposal is an extremely important and confidential document and must not be issued to clients or other parties without the appropriate level of review and sign off by Senior Management. The Review of all proposals must be scheduled and leave adequate time to conduct the review and make any comments, corrections or additions as necessary. Therefore in advance of planned submission dates a Proposal Review Team should be assembled and a review session scheduled and the Proposal Manager should ensure that all relevant information is assembled and available for review. The Review Team should include Project Sponsor - optional SBSM Manager Proposal Manager SBU Commercial Manager Proposal Engineers Group QHSE Manager Finance Manager – as required Proposed Project / Construction Managers A copy of the document is stored with the rest of the documents pertaining to the inquiry for future reference / discussions with the client.

000.350.pp001_03 preparation of proposal & estimation procedure

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