No abstract

Target cost contracts are growing in popularity but concerns remain about the interplay between fee, target, sharing ratios and the final price. This paper offers a fundamental analysis of the principles underpinning target contracts. It shows that there is scope for manipulation of tenders and that suboptimal methods of tender evaluation are in use. The paper analyses both fixed fee and percentage fee contracts. Methods of tender evaluation are proposed that will both reduce the scope for manipulation by tenderers and increase the likelihood of the contract being awarded to the tenderer whose final price will be the lowest. The analysis reveals a strong case for setting the contractor's share of cost overrun or underrun at a value that is not less than 50%. Finally, the paper proposes two simplifications that would reduce the number of variables in target cost contracts of the future. One is for the employer to set the fee and the other requires only that a target be tendered but with the fee built into it.

This paper reports early results of a study of construction contractors and their experiences of the PFI market. Utilizing material from semi‐structured interviews with three categories of construction contractor, small, medium and large, consideration is given to the barriers to entry which contractors face when approaching the PFI market. The paper highlights six barriers of entry: lack of appropriate skills; high participation costs; high project values; high risk; lack of credibility and contacts; and demands on management time. These barriers affect the three categories of construction contractor in different ways. The findings suggest that the larger the contractor, the more able it is to overcome these barriers and to compete in the PFI market. The findings also suggest that certain barriers to entry will decline as the industry matures, whilst others will remain.

The paper begins with a brief history of the New Engineering Contract (NEC) and outlines the response by the NEC Panel to the proposals made in the Latham Report. The main principles adopted for the design of the contract are described and the main procedures which are used to implement the design principles are outlined. Emphasis is given to the way in which the procedures are intended to stimulate good management of contracts. The final section of the paper deals with risk allocation and management in NEC. The way in which the choice of contract strategy influences risk allocation is considered first and this is followed by a discussion of the principles used for the detailed allocation of risks in NEC. Risks which are carried by the employer are described and assessed through a novel procedure in NEC.

This paper details the progress made with the implementation of BP's FIELD OF THE FUTURE program over the past four years. It first describes the approach taken by BP to install real time data infrastructure in many sectors of its operations. To date this infrastructure has included the installation of 1800km of fibre optic cable, the registration of nearly two million real time data tags within a common real time data backbone, and construction of more than twenty Advanced Collaborative Environments supporting production and drilling operations. The paper then describes some of the activities underway in BP's operations, and the associated benefits, including:use of advanced well monitoring technology to manage sand production and other aspects of well performance in 20 fields (1–3% production benefit)examples of full field optimisation/visualisation and associated benefits (1–2% production benefit)the development of a new downhole flow control capability for high rate sand prone wells (resource/reserve benefit)early experience with the application of temperature profile monitoring and of life of field seismic (resource/reserve benefit) Finally, the paper describes the people, process and organisation activity undertaken in several of BP's large operating areas which have directly impacted many of the operational staff working in these areas through an extensive set of change management workshops and similar activity. The lessons learned from these activities over the past four years include the need to:define support and maintenance resources up frontidentify and standardize infrastructure requirements for new projectstake a centralized global approach to planning deployment but a local approach to implementationfully resource change management activity 1. Background to BP's FIELD OF THE FUTURE Program BP's FIELD OF THE FUTURE program (Ref 1) was established in 2003 with an initial focus on engagement and deployment, the objective being to deploy core technologies in a limited number of assets in order to build a track record, to re-affirm the prize and to build a technical and architectural foundation for subsequent 'bigger moves'. These early deployments, conducted over the period from 2003 to 2005, confirmed the potential of the program to add significant value across a broad range of asset types. Since that time the program has evolved to focus on the three areas, as described pictorially below in Figure 1. The common feature of most of the elements of the program is that they are related one way or another to real time data, and are aimed at high rate fields which form a significant part of BP's current and future portfolios. BP is also working on high well count fields onshore in North America where cost effective solutions for optimization of gas well deliquification is the focus. These and other technologies generally impact production, recovery or both. Over the next 10 years or so, it is expected that the program will contribute in excess of 1 billion barrels of recovery and 100 M/bd to BP's E&P segment.