Advanced training for construction management: CONTRACTS MANAGEMENT part 2 (experiences)

Construction subcontracts management: histories
and experiences……
A. Coladarce

2
Foreword
Despite:
 EACH CONSTRUCTION PROJECT IS UNIQUE
 EVERYONE RECOGNIZE THAT RISKS SHOULD BE
BORN BY THE BEST PARTY ABLE TO HANDLE IT
Every project has its sufference from Claims and there
is a number of Typical Claims generated by
Construction Subcontractors based on:
AAA DELAYS OF DELIVERABLES/DELIVERIES
(whenever unanticipated project events and/or
circumstances extend the project and/or prevent work
from being perfomed as originally planned)
BBB LABOUR PRODUCTIVITIES (loss is when it
takes more labour and equipment to do the same
amount of work, thereby increasing project costs)

3
Common root causes
 There are many common causes for DELAY CLAIMS
and LABOUR PRODUCTIVITY IMPACTS
MISMANAGEMENT AND
MALADMINISTRATION
LABOUR PRODUCTIVITY ISSUES
SITE ACCESS RESTRICTIONS
LABOUR AVAILABILITY,
TURNOVER, REWORK
DIFFERING SITE CONDITIONS TESTING/INSPECTIONS
PERMITS AND APPROVALS OVERTIME AND/OR SHIFT WORK
FINANCIAL PROBLEMS INTERFERENCES
DEFECTIVE PLANS CHANGES IN CONSTRUCTION
MEANS AND METHODS
DEFECTIVE SPEC.S OVERCROWDING
CHANGES IN WORK OUT OF SEQUENCE WORKS AND
INCLEMENT WEATHER

4
The fil rouge of a Subcontractor claim
Repetitive Magic words in the Subcontractors
“Additional Bills”:
 Loss of construction productivity (for
manpower, for staff, for equipment)
 Discontinuity of certain crews and
equipment
 Increased peaks of manpower and Night
shifts (for mob/demob, accommodations,
extra staff, extra for loss of productivity
again)
 Prolongation of schedule effects (for staff,
facilities, equipment, escalation,

5
Factors influencing productivities
¤ Quality and schedule of
deliverables & deliveries.
¤ required changes and timing
when requested
PROJECT EXECUTION
CLIMATIC
FACTORS
¤ Extreme cold/hot, snow, ice,
monson, wind, ..
¤ availability of Protection from. ...
SUPERVISION
¤ Ratio foremen/workers
¤ Qualità dello staff.
TIME MANAGEMENT
¤ Overtime use
¤ Double shift recourse
¤ quality of works schedule
¤ Workers skillnes
¤ “local” economies
¤ construction workloads vs labour
availability ¤ Union - nonUnion
LABOUR MARKET CONDITIONS
PROJECT FEATURES
¤ Complexity.
¤ Size.
¤ Schedule
¤ Revamp/grass roots
¤ Type of contract
¤ Acesses
¤distances from near city
¤ congestion & hazards
¤ permitting
SITE CONDITIONS
CONSTRUCTION EQUIPMENT
& TOOLS
¤availability
¤reliability (repair, maintenance
spare parts, etc.)

6
Hidden factors
List of usual tricks (Subcontractor’side)
 Underestimate of direct manhours at the time
of award
 ->very high all-in hourly rate
 Front-loaded barchart
 Fogging manhours of sub-subcontracted
works
 Unrealistic construction equipment fleet
 Very low foremen/workers incidences

CLIENT XYZW
RAS TANURA FACILITIES AT HYX GAS PLANT
CONTRACT No.: 640002 (OOK)
CONTRACT No.: 640003 (IK)
REQUEST
FOR
COMPENSATION
EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
RAS TANURA FACILITIES AT HYX GAS PLANT - REQUEST FOR COMPENSATION 2 of 94
INDEX
1. PREAMBLE.......................................................................................................... 4
1.1. CHANGES IN THE SECURITY ENVIRONMENT ................................... 5
1.2. PRACTICE AT THE HYX GAS PLANT .................................................... 5
1.3. LATE CHANGE ORDERS........................................................................... 6
1.4. UNITS TURNOVER TO THE COMPANY ................................................ 7
1.5. LACK OF TEAM WORK............................................................................. 7
2. ENGINEERING (OOK CONTRACT) ............................................................... 10
2.1. DELAYS IN PROJECT DOCUMENT REVIEW/APPROVAL................ 10
2.2. INTENTIONALLY DELETED............................................................... 10
2.3. PIPING TIE-IN DESIGN PACKAGES...................................................... 10
2.3.1. New Condensate Recovery Unit (Early Works).................................. 11
2.3.2. Main Works......................................................................................... 12
2.3.3. Salient Figures..................................................................................... 13
3. CONSTRUCTION (IK CONTRACT)................................................................ 16
3.1. SECURITY.................................................................................................. 16
3.1.1. Iraq war in 2003................................................................................... 16
3.1.2. Terrorism acts in the Kingdom............................................................ 17
3.2. NEW CONDENSATE UNIT TURNOVER (EARLY WORKS)............... 18
3.3. GI 8.001 (SCAFFOLDING) REVISION .................................................... 19
3.4. DELAYS IN ID ISSUE............................................................................... 26
3.5. LIMITED ENTRY OF TRANSPORTATION MEANS............................. 27
3.6. DELAYS IN WORK PERMITS/WORK STOPPAGE FOR OPERATING
REASONS................................................................................................... 29
3.7. SCAFFOLDING FOR SRU STACK ERECTION ..................................... 32
3.8. DEMOLISHING OF EXISTING MAINTENANCE BUILDING ............. 32
3.9. LATE CLOSURE OF “E” STREET IN LPDGA AREA............................ 33
3.10. EXISTING FACILITIES ............................................................................ 35
3.10.1. Underground findings.......................................................................... 35
3.10.2. Cable pulling on existing East-West piperack..................................... 38
3.10.3. Tie-in on existing UPS ........................................................................ 40
3.11. CONSTRUCTION PACKAGES ................................................................ 43
3.11.1. Piping Tie-ins construction packages.................................................. 43
3.11.2. Hydrotest Packages ............................................................................. 44
3.12. PRE-COMMISSIONING PACKAGES...................................................... 46
3.12.1. Energization packages ......................................................................... 46
3.12.2. PZV folders ......................................................................................... 48
3.12.3. Loop Folders........................................................................................ 51
3.13. MECHANICAL COMPLETION & UNIT TURNOVERS........................ 52
3.13.1. Delays in Exception Items List submittal............................................ 52

EXECUTIVE SUMMARY
3.13.2. Undue rejection of MC packages ........................................................ 55
3.13.3. Improper punch list items.................................................................... 55
3.13.4. Undue rejection of punch list item closures ........................................ 58
3.13.5. Late issue of the Mechanical Completion Certificate ......................... 58
3.14. ENGINEERING ISSUES FACED DURING THE CONSTRUCTION
PHASE ........................................................................................................ 61
3.15. LATE CHANGE ORDERS......................................................................... 62
4. RECORDED IMPACT ....................................................................................... 63
4.1. SCHEDULE IMPACTS.............................................................................. 63
4.2. COST IMPACTS ON IK CONTRACT...................................................... 69
4.2.1. Cost impacts on construction direct manpower................................... 70
4.2.2. Cost impact on Subcontractors’ indirect manpower and
construction equipment ....................................................................... 74
4.2.3. Cost impact on MAIN CONTRACTOR site organization and field
running costs........................................................................................ 74
4.2.4. Costs directly related to the security issues in the Kingdom............... 77
4.2.5. Compensation for scaffolding GI 8.001 .............................................. 78
4.2.6. Other various requests for compensation ............................................ 81
4.2.7. Financial burdens................................................................................. 82
4.2.8. Overall claimed amount for IK Contract............................................. 84
4.3. COST IMPACTS ON OOK CONTRACT.................................................. 85
4.3.1. Cost impact on design activities.......................................................... 85
4.3.2. OOK costs related to security issues in the Kingdom ......................... 89
4.3.3. Extension of mechanical warranties on equipment and materials....... 91
4.3.4. Various other requests for compensation ............................................ 93
4.3.5. Overall claimed amount for OOK Contract ........................................ 94
5. TECHNICAL EXHIBIT (No. 10 Volumes)
6. IMPACT RECORDED ANNEX (No. 1 Volume)

EXECUTIVE SUMMARY
1. PREAMBLE
The purpose of this Executive Summary is to summarize the reasons which
justify the delays recorded in the Project Completion schedule, as well as the
compensation requested by MAIN CONTRACTOR to cover the consequent
extra costs suffered.
Definitely, additional important factors, unpredictable at the time of project
bidding, have heavily affected Project development, pulling actual progress out
of line with the schedule. The most important factors have been summarised by
MAIN CONTRACTOR Chairman and CEO, Mr. D. Ddddd in the letter dated
January 14, 2005 addressed to CLIENT XYZW Senior Vice President, Mr. S.
Aa-Aaaaaa, (copy is at Para. 1 of the Technical Exhibit). Mainly they are:
 The context in which the Project was developed has drastically changed
due to the security problems in the Kingdom;
 The lengthy acceptance/approval cycle in use at HYX GAS PLANT has
significantly exceeded both Industry standards and MAIN
CONTRACTOR ’s recent experience with live COMPANY plants.
Further to the above, other causes, such as: the continuous review of the
drawings issued for construction made by the COMPANY during erection
development and the extraordinary lengthening of the COMPANY punch list
walkthroughs performed for the plants’ turnover, have also strongly
contributed to delaying the Project schedule rather than provoking a significant
cost impact.
In this paragraph, the mentioned factors/causes are only briefly summarized,
but are developed in detail in the remaining parts of the present Executive
Summary, to which you can refer for further clarifications.
In addition to this Executive Summary, a Technical Exhibit and an Impact
Record Annex have also been prepared, with the purpose of collecting, for easy
reference, the most significant communications exchanged and/or any other
document deemed beneficial for a better understanding of the various issues.
Units SRU 200 and 100 are not included in the present analysis.

EXECUTIVE SUMMARY
1.1. CHANGES IN THE SECURITY ENVIRONMENT
As mentioned, the security context has drastically changed in comparison with
that one considered as the basis of MAIN CONTRACTOR ’s bid.
The second IRAQ war in 2003 and the terrorism escalation in the Kingdom
have provoked an extraordinary increment in security levels.
MAIN CONTRACTOR have been forced to adopt additional major measures
to assure the security of its personnel outside COMPANY boundaries.
As you are very well aware, both the Saudi Government and COMPANY have
increased the checking procedures for entry to the HYX GAS PLANT. This
has delayed enormously the entrance of the thousands of MAIN
CONTRACTOR and SUB-CONTRACTOR workers and equipment to the
HYX GAS PLANT in general and the restricted area in particular. Under the
above circumstances, during the performance of the WORK, MAIN
CONTRACTOR have been facing a situation totally different from what was
either expressly implied in the Contract or, at any event, could have been
anticipated by any experienced contractor.
It is MAIN CONTRACTOR ’s case that MAIN CONTRACTOR were not
allowed to access the site following the COMPANY’s normal security control
and safety procedures as they were entitled to under the Contract (Para. 7.3 of
Schedule A of IK Contract). As further reported below, security controls and
safety procedures became more and more stringent according to the
requirements of the COMPANY and of the Saudi Government, thus preventing
the WORK from being performed in accordance with CONTRACT provisions.
1.2. PRACTICE AT THE HYX GAS PLANT
On the basis of their consolidated experience, MAIN CONTRACTOR were
fully prepared to resolve the technical issues to which a major revamping
project such as this one could give rise and made adequate allocation for cost
contingencies and schedule allowances in their bid, at the tendering phase. The
reality was totally different from any expectation inasmuch as, during the
performance of the WORK, we have suffered extraordinary workloads and
faced approval routing slips that were neither evident in the Contract (including
all applicable standard and design specifications) nor predictable in any way.
This subject has been extensively developed in this Executive Summary, only
the most significant issues that have impacted Project development, thus
jeopardizing MAIN CONTRACTOR and SUB-CONTRACTORS
organizations and disrupting the original schedule being summarized in this
section:

EXECUTIVE SUMMARY
 COMPANY delays in document approval: According to Para. 2.4.3 of
Schedule B of the OOK Contract, approval of drawings and material
requisitions had to be granted or otherwise by the COMPANY within 15
working days. Despite the above, MAIN CONTRACTOR encountered late
approvals of drawings and material requisitions during detail design
development;
 COMPANY delays in interference resolution: The resolution of interference
with the U/G findings (both discovered during the trial digs and during the
excavation foreseen on the IFC drawings) took a huge amount of unjustified
time to be approved by the COMPANY. Such time was not compatible with
the original schedule and therefore not in compliance with the specific
instructions provided by the COMPANY;
 Late closure of “E” street: It was very clear from the IFC plot plans that part
of “E” street should have been closed and demolished to provide room for
several equipment items of the new LPDGA plant, which should have taken
place since the date of the notice to proceed. But, despite the above,
COMPANY released the relevant permits with two months’ delay. This
delay seriously jeopardized the LPDGA schedule and caused the Contractor
to incur additional costs and/or Project delays;
 Late approvals of the tie-in packages: Although fully compliant with
Contract requirements, a huge number of packages were modified after their
approval. As a consequence, besides the modification of the involved
drawings already issued for construction, tie-in execution was heavily
affected, thus causing the CONTRACTOR to incur extra costs and/or
Project delay;
 Energizing Package cycle approval: Even though not foreseen as a
contractual obligation, an energization package was prepared for each
electric load under this Project. These packages introduced an additional
approval cycle not provided for by the Contract, the contractual requirement
being only the signature of a simple “Energization Certificate”. The new
approval cycle was unnecessarily imposed by the COMPANY and delayed
all energizing activities thus putting behind schedule all correlated pre-
commissioning activities and causing the CONTRACTOR additional costs
and/or Project delays.
1.3. LATE CHANGE ORDERS
The Project schedule has been also adversely affected by several Change
Orders issued after the facilities’ Contractual Mechanical Completion dates
and, most of them, at a very late stage in the construction works. The relevant
works reduced the efficiency of the additional resources deployed by MAIN
CONTRACTOR to recover the schedule and, consequently, the actual
Mechanical Completion dates have been further delayed.

EXECUTIVE SUMMARY
1.4. UNITS TURNOVER TO THE COMPANY
The schedule relevant to the activities to be performed to turnover the units to
the COMPANY (walkthrough execution, exception items list preparation, etc.)
was prepared by MAIN CONTRACTOR following the requirements stated in
the applicable specifications, in particular GI 2.710.
Nevertheless, this important phase of Project execution has been characterized
by COMPANY actions, which, very often, were not in compliance with the
mentioned GI prescriptions. In general:
i) the walkthroughs, as well as the preparation (and submittal to MAIN
CONTRACTOR ) of the exception items list were supposed to be
completed in a few days; respectively 3 and 2 days. Despite the above, the
said activities took a very long time and the exception items were
communicated to MAIN CONTRACTOR several weeks after the relevant
walkthrough notification. Consequently, the exception items themselves
started to be processed and cleared with heavy delays;
ii) very often, the punch list items were not the proper ones because they
referred to arrangements agreed during detail design (and implemented in
the IFC drawings) and/or other activities not foreseen in the original scope
of work;
iii) the extremely severe COMPANY evaluation of the exception items was
not justified. By the end of April, the total exception items were around
44,000, out of which about 70% have been deemed YES items for the
Mechanical Completion Certificate signature.
The above, obviously, has reflected negatively on the Project schedule rather
than nullifying - due to their excessive dispersion with consequent loss of
productivity - the additional measures put into effect by MAIN
CONTRACTOR with the purpose of minimizing the disruption faced during
while developing these activities.
It should also be considered that, during the handover phase; the COMPANY
issued numerous Change Orders. This caused additional works to be done
while the project organization was focused on handing over the plants to the
COMPANY as per the original scope of work.
1.5. LACK OF TEAM WORK
At the end of this preamble, we would like to highlight the poor COMPANY
cooperation in resolving the numerous issues faced during facilities erection,
while the same were supposed to be cleared up once all the foreseen
deliverables were issued for construction along with Detail Design
development.

EXECUTIVE SUMMARY
It is easy to understand that continuously requestioning the detail design during
the construction phase generated a huge, absolutely unpredictable, number of
issues to be discussed on a daily basis and forced MAIN CONTRACTOR to
make extraordinary efforts both at site and home office, as well as making a
tremendous impact on construction activities. This impact, duly attributed to
the unpredictability of the mentioned issues, was impossible to evaluate and
schedule in advance and, therefore, resulted in considerable turmoil for both
planned and extraordinary resources foreseen by MAIN CONTRACTOR to
achieve Mechanical Completion.
It must to be recalled that, according to the provisions of the Contract, all
dealings between COMPANY and MAIN CONTRACTOR should have been
managed throughout the respective appointed representatives. In this respect
the COMPANY PMT (on behalf of the COMPANY) was supposed to be in
charge to discuss and/or coordinate and/or resolve the totality of the issues
arising along the Project execution.
During detail design, excluding any mistakes and omissions for which MAIN
CONTRACTOR is not claiming payback, all engineering issues were tackled,
discussed and agreed with the COMPANY PMT. They were consequently
implemented in the IFC drawings, which, for this reason, were the sole
documents used for facilities construction, since they are certified according to
QA/QC requirements. Furthermore, the PMT itself, according to SAEP-303,
had to be the agency in charge of assuring, within the COMPANY, the
suitability of the detail design against Contract requirements and of discussing
and clarifying, with the other COMPANY agencies, the arrangements already
agreed upon and finalized.
Yet this rarely happened. The numerous COMPANY (BGP) agencies
submitted new and unknown requests that re-opened issues or simply rejected
IFC arrangements, even though BGP instruction no. 2000.25 at Para 2.1 states
that:
quote
“….. HYX GAS PLANT personnel shall follow these projects during the
design stages to ensure compatibility within Operation and Maintenance
parameters, to ensure proper interface with existing control schemes and
equipment, and to ensure that all required plant safety issues will be
included….”
unquote

EXECUTIVE SUMMARY
We were, and still we are, absolutely convinced that Teamwork and
cooperation are the “key challenges” for positive completion of any extensive
revamping project, like BI-3022. It is our opinion however that this kind of
COMPANY attitude revealed to be in breach of the provisions of the Contract
that, at Para. 6 of Schedule A of the OOK Contract and Para. 7 of the IK
Contract, clearly states that it is a COMPANY obligation to
quote
“…Perform all other obligations required of it by the terms of this Contract in
such time and manner as to facilitate the orderly prosecution of the WORK…”.
unquote

EXECUTIVE SUMMARY
2. ENGINEERING (OOK CONTRACT)
2.1. DELAYS IN PROJECT DOCUMENT REVIEW/APPROVAL
According to:
 Paras. 2.4.1 and 2.4.2 of Schedule B of the OOK Contract
 2124.000 PP 001 (PEP) prescriptions
all deliverables to be issued under this Project have been submitted to the
COMPANY.
During the schedule preparation, MAIN CONTRACTOR considered the 15
working day period stated in Para. 2.4.3 of Schedule B of the OOK Contract,
for the completion of the COMPANY review. Unfortunately, COMPANY
often took a longer time to return to MAIN CONTRACTOR their comments
and/or, where foreseen, their approval.
As a matter of fact, the delays in document review have affected detail design
completion, material procurement and, as a consequence, facilities
construction.
An analysis of delayed deliverables has been carried out by MAIN
CONTRACTOR , considering the dates recorded in the Project Document
Management Database (AIM). The average delays are summarised in the tables
provided at Para. 2.1 of the Technical Exhibit while their schedule impact is
considered separately in the revised Project Schedule.
2.2. INTENTIONALLY DELETED
2.3. PIPING TIE-IN DESIGN PACKAGES
With reference to Contract requirements (GEN-A-PP-211758), MAIN
CONTRACTOR issued a procedure (2124.000 PP 026.01) to be followed for
piping tie-in design and construction. This procedure has been submitted to the
COMPANY for its review, as well as for the implementation of those BGP
requirements not described in the contractual attachments.
Following the guideline of the mentioned procedure and Para. 6.2.17. of
Schedule B of the OOK Contract, a design package has been prepared for each
piping tie-in to the existing facilities to be provided under this project.

EXECUTIVE SUMMARY
MAIN CONTRACTOR scheduled the period of 15 working days stated in
Para. 2.4.3. of the Schedule B of the OOK Contract, for completion of
COMPANY review. Actually, the time that COMPANY took to review and
approve the packages submitted enormously exceeded that planned, with a
consequent impact on the tie-ins’ design and execution schedule.
Furthermore, during the design packages review, due to operational reasons not
dependent on MAIN CONTRACTOR , the COMPANY changed several tie-in
locations previously agreed upon and used as a basis for detail design as well
as for package assembly. This zero setting forced MAIN CONTRACTOR to
make a new walkthrough, redesign the tie-ins, and prepare and submit a new
package.
It should also be considered that, since finalization of the design packages is a
very important step linked to detail design and material procurement of the
correlated new pipelines; the latter have suffered a consequent delay.
Tie-in design package activity development have been characterized by
numerous issues, which have been the subject of as many communications and
meetings. A list of topics only is provided below, while the collection of the
most important communications is provided in Para. 2.3 of the Technical
Exhibit.
2.3.1. New Condensate Recovery Unit (Early Works)
a) The design packages relevant to the tie-in necessary for the new
Condensate Recovery Unit (Early Works) were submitted for the first time
on July 23, 2002 (ref to letter L-TR/AR-0686 dated July 23, 2002);
b) by the middle of September 2002, COMPANY approval had not yet been
received, so that MAIN CONTRACTOR moved two engineers to BGP in
order to expedite the mentioned approval and, if necessary, to assist the
COMPANY in finalizing the packages (ref to letter L-TR/AR-1001 dated
September 12, 2002). This additional measure was fruitless because the
COMPANY took a long time to process the package. Besides, their review
was not exhaustive, since new comments arose at each submittal (ref to
letter L-TB/AB-0325 dated January 21, 2003);
c) even though BGP approved the package, MAIN CONTRACTOR were
requested to re-submit the package for QPIS signature. This additional
approval step was not foreseen by the Procedure approved by the
COMPANY which, as such, was binding for both COMPANY and MAIN
CONTRACTOR and further delayed the design packages’ final approval.
Para. 2.3 of the Technical Exhibit contains the approval sheets abstract
from the design packages on which it can be noted that the QPIS signing
box has been added by hand.
d) an average overdue of 90 working days was recorded in the approval cycle
for the tie-in design packages for the New Condensate Recovery Unit. A
matrix summarising the dates of each step is provided at Para. 2.3 of the
Technical Exhibit.

EXECUTIVE SUMMARY
2.3.2. Main Works
The schedule of the activities foreseen to achieve final approval of the design
packages relevant to the Main Works has been heavily altered since the first
step, which was the walkthrough, to be performed jointly with the involved
COMPANY agencies prior to design package assembly. As a matter of fact,
due to poor coordination among the COMPANY agencies and/or lack of
available COMPANY personnel, not only did the original schedule fail but
subsequent attempts to perform the site surveys were also affected for the same
reasons.
In detail:
a) On November 19, 2002, MAIN CONTRACTOR provided the schedule
relevant to the walkthroughs and to design package issuance (ref to letter L-
TR/AR-1400);
b) As scheduled, the MAIN CONTRACTOR team arrived at BGP on
December 10, 2004, but COMPANY requested that all tie-ins should be
marked before the walkthrough execution. This request was not foreseen by
the Procedure agreed which, as such, was binding for both COMPANY and
MAIN CONTRACTOR and caused schedule failure owing to the additional
time required to procure the man-lifts, the relevant operators (all tie-in points
were elevated) and to obtain the required work permits. A recovery plan was
promptly prepared by MAIN CONTRACTOR so as not to further
jeopardize walkthrough activities. The plan was based on three teams
instead of the one previously foreseen (ref to letter L-TR/AR-1836 dated
February 14, 2003);
c) The three teams were mobilized according to the schedule attached to our
mentioned letter 1836. Yet, the scheduled tie-ins were not respected due to
the non-availability of COMPANY personnel. Below are summarized the
additional delays to the walkthroughs (against the rescheduled dates):
Rescheduled Actual
Start Finish Start Finish
Team 1 Feb. 02, ‘03 Mar. 06, ‘03 Feb. 05, ‘03 Apr. 06, ‘03
Team 2 Mar. 06, ‘03 Mar. 06, ‘03 Mar. 23, ‘03 Mar. 26, ‘03
Team 3 Mar. 06, ‘03 Mar. 20, ‘03 Mar. 02, ‘03 June 03, ‘03
No. 48 tie-ins were changed by the COMPANY in hot-tap, so that the
presence of one the teams was extended to attend the meetings for the tie-
ins’ definition and to perform the relevant new walkthroughs and package
preparation:
Rescheduled
Start Finish
Team 1 May. 10, ‘03 May. 17, ‘03

EXECUTIVE SUMMARY
(ref letters L-TB/AB-0462 dated March 9, 2003; L-TB/AB-0489 dated
March 17, 2003; L-TB/AB-0501 dated March 23, 2003 and L-TB/AB-
0749 dated June 3, 2003);
d) On May 28, 2003, the COMPANY directed MAIN CONTRACTOR to
revise the “Procedure for Design and Construction of tie-ins” adding the
additional box for QPIS signature. This direction stretched the approval
cycle, which was already affected by heavy delays due to the mentioned
COMPANY deficiencies. Furthermore it should also be considered that, at
that time, the majority of the design packages had already been assembled
(ref to. letter BGPFD/IK/L-1893-03 dated May 28, 2003);
e) On June 3, 20003, MAIN CONTRACTOR highlighted to the COMPANY
the additional delays recorded on the walkthrough schedule and that
approval time was very long. Also in the same letter we advised the
COMPANY that the above was provoking both schedule and cost impacts
(refer to letter L-TB/AB-0749 dated June 3, 2003);
f) MAIN CONTRACTOR ’s concerns were reiterated in letter L-TB/AB-
1018 dated July 20, 2003. In this letter MAIN CONTRACTOR also
claimed that several packages were affected by the change in the tie-in
locations or typology and that others had not yet been defined by the
COMPANY;
g) No. 107 approved design packages were subsequently changed by the
COMPANY. A matrix summarising the changes tie-in by tie-in is provided
in Para. 2.3 of the Technical Exhibit ;
h) An average time of 67 working days was recorded in the approval cycle of
the tie-in design packages for the Main Works. Para. 2.3 of the Technical
Exhibit provides a matrix summarising, tie-in by tie-in, the dates and
overdue time.
2.3.3. Salient Figures
For a better understanding of the magnitude of this issue, a list of salient
figures is provided below:
 No. 640 total tie-in Design Packages were provided under this Project (445
foreseen by the COMPANY’s-Provided Basic Design);
 No 107 tie-in locations and/or typologies have been changed by the
COMPANY;
 About 3.5 months of delay is recorded on walkthrough execution;
 An overdue average of 90 working days is recorded for the approval of the
Early Works tie-in design packages;
 No tie-in design package has been approved within the contractual time;
 The percentages recorded for the approval of the Main Works tie-in design
packages is:
- 6% of the packages: up to 30 days
- 8% of the packages: between 31 and 40 days

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
Furthermore, for clarity’s sake, we would like to draw your attention to the
following facts:
- The tie-in index (GEN-A-PP-211746) and Tie-Ins Location Plans supplied
along with the COMPANY-Provided Basic Design have been used as a
basis to determine the various tie-in typologies, such as: line shutdown,
unit shutdown, general shutdown, hot tap, etc. The tie-in typologies are
supposed to have been already agreed between the COMPANY PMT and
BGP (especially for those requiring line or plant shutdown) and only minor
comments were expected during detail design;
- the package was supposed to be a collection of stand alone documents,
such as isometric drawings, P&IDs, bills of material, QCP forms, etc.,
which had already been approved separately, since subject to dedicated
reviews;
- the walkthrough made jointly with the COMPANY should have speeded
up the subsequent steps but COMPANY approval of the packages came
very late;
- MAIN CONTRACTOR requested the COMPANY to adopt the formula
“approved with comments”, in order to speed up activities and avoid
additional submittals of design packages, which would have to be re-
submitted anyway as “construction packages”. However, the COMPANY
requested re-submission of the design package for review resulting in
additional time loss.
Definitely, the tie-in design package schedule was extraordinarily disrupted by
the COMPANY, and the original personnel organization was also heavily
jeopardized due to the numerous attempts that MAIN CONTRACTOR have
been forced to make to try to minimize the recorded delays.

EXECUTIVE SUMMARY
3. CONSTRUCTION (IK CONTRACT)
3.1. SECURITY
According to Para. 6.1 of Schedule A of the IK Contract, by countersigning the
Contract, MAIN CONTRACTOR acknowledged all the general and local
conditions affecting the work “…including, but not limited to: transportation
and access to the WORK site…”.
Unfortunately, several serious unpredictable political events radically changed
the conditions under which, thereafter, the Project was developed. MAIN
CONTRACTOR immediately reacted putting into operation all possible and
reasonable efforts to face the security issues which were resolvable from its
end but, definitively, the ones that depended on the Saudi Government and/or
COMPANY Security Management were out of MAIN CONTRACTOR ’s
control. Meanwhile, following the requirement stated at Para. 6.2 of Schedule
A of the IK Contract, MAIN CONTRACTOR notified the COMPANY, along
with several communications, that the new scenarios were affecting Project
execution, impacting both schedule and budget.
The mentioned events are summarized below in two different paragraphs:
- Iraq war in 2003
- terrorism acts in the Kingdom
in which specific additional clarifications are provided.
3.1.1. Iraq war in 2003
After the second war in Iraq broke out in 2003, to protect the sensitive
industrial installations, the Saudi Government and the COMPANY increased
security controls. In particular, additional and extremely careful checks were
introduced at the BGP entrance (south gate) as well as for access to the
restricted area.
The checks were double because they were performed by ISF and COMPANY
separately.
The mentioned additional checks took a huge time to clear while thousands of
workers and hundreds of vehicles queued every day at the plant gates.
Consequently, working time and efficiency were significantly jeopardised.
Furthermore, permits for car entry inside the computer fence was drastically
reduced to only six cars, then to 9 (refer to MAIN CONTRACTOR letters L-
TB/AB-0607 and 0770 dated respectively May 24 and June 7, 2003 and
COMPANY letter BGPFD/IK/L-1926-03 dated June 3, 2003).

EXECUTIVE SUMMARY
This seriously hampered activities (please consider that at that time about 1,400
workers were working on the BI-3022 project in BGP).
It must also be highlighted that, at that time, the BI-3022 project curve was at a
critical point and, further to the mobilization of the forecast manpower and
means, a recovery plan of the slight delay previously accumulated was also
successfully in progress. Both these activities were heavily penalized.
Along with letter L-TB/AB-0897 dated June 30, 2003, MAIN CONTRACTOR
submitted to the COMPANY the analysis of progress delay, with details of
these very important issues.
Further, with letter L-TR/AB-0302 dated August 1, 2003, our Middle East &
South West Asia CEO Mr. N. Uccelletti, while committing MAIN
CONTRACTOR not to spare any effort to minimize impacts, notified also that
the schedule was suffering from the time-consuming issues arising from
security controls.
A copy of the referenced communications is given at Para. 3.1.1 of the
Technical Exhibit.
3.1.2. Terrorism acts in the Kingdom
The outrage at the Al-Oasis compound in Al-Khobar at the end of May 2004
was the climax of the escalating terrorism acts, recorded in the Kingdom since
the middle of 2003.
Mr. Dkiuhyt, MAIN CONTRACTOR Chairman, in a letter dated May 31,
2004, addressed to the COMPANY Chairman Mr. M. AlXYZWY, advised the
COMPANY that terrorist acts had increased anxiety among MAIN
CONTRACTOR staff, subcontractor and vendor personnel.
Actually, since the expatriates, especially the westerners, were the main targets
of these outrages, many of them (both MAIN CONTRACTOR and vendors),
left the Kingdom immediately (refer to letter L-TB/AB-3342 dated May 31,
2004 and Construction Weekly Meeting nos. 87 and 88 MOM’s) or did not
travel to Saudi Arabia at all. This sudden shortage of personnel affected the
normal execution of construction activities, which proceeded slowly due to the
consequent lack of coordination/supervision.
Extraordinary measures were also adopted by MAIN CONTRACTOR to
guarantee the security as well as to incentivate the permanence of personnel
remaining in Saudi Arabia, such as (but not limited to):
 A security officer deployed at BGP on a permanent basis to coordinate
security issues both among MAIN CONTRACTOR personnel and
between MAIN CONTRACTOR and COMPANY and/or the Saudi
Government;

EXECUTIVE SUMMARY
 Significant improvement were implemented at the Desert Palm and
Rezayat compounds, where the MAIN CONTRACTOR personnel were
hosted;
 Unarmed patrol squads were provided on a 24-hour basis inside the same
compounds;
 Personnel assignment conditions adapted to the prevailing situation in
Kingdom (such as incentives to MAIN CONTRACTOR and Vendors
personnel);
 Living accommodation for COMPANY frontier guards was arranged at the
Rezayat Compound.
A Change Order Request (COR) was presented to the COMPANY to cover the
listed additional measures (refer to letter L-TB/AB-6238 dated February 10,
2005) but no answer has been recorded so far.
Further to the above, as happened during the Iraq war in 2003, security checks
at the plant entrance became more stringent.
In addition, for security reasons, we were forced to remove door identification
numbers on MAIN CONTRACTOR cars, except no. 8 of them that, thereafter,
were the only ones allowed to enter the restricted areas. Meanwhile, on June 9,
2004, along with letter L-TB/AB-3430, MAIN CONTRACTOR requested
waiving the requirement of mandatory door numbers to access the restricted
areas, which was accepted by the COMPANY on August 15, 2004 (refer to
letter BGPFD/IK/L-5858-04). Up that date, only the mentioned 8 cars could be
used in the restricted area.
It has to be considered that more than 3,500 people were working on the BI-
3022 Project in HYX at that time. Therefore it was the time-consuming
checkpoint clearing and consequent loss of efficiency, rather than increased
difficulties in coordinating activities inside the restricted areas due to the
mentioned shortage of personnel (sudden leaves and/or refusal to travel) and
vehicles, that strongly affected the project schedule in a negative way
A copy of the referenced communications is found at Para. 3.1.2 of the
Technical Exhibit.
3.2. NEW CONDENSATE UNIT TURNOVER (EARLY WORKS)
From the very beginning of the Early Works, MAIN CONTRACTOR drew
the attention of the COMPANY to problems causing disruptions to the project
schedule: refer to MAIN CONTRACTOR letter L-TB/AB-0165 dated
November 4, 2002, L-TB/AB-0356 dated January 29, 2003.
Despite the above, unfortunately MAIN CONTRACTOR Project records
reveal that the erection of steam condenser (476-E-0046) was delayed due to

EXECUTIVE SUMMARY
comments made by COMPANY Inspection Department, which eventually
resulted groundless and therefore caused only disruptions and delays to the
schedule (refer to MAIN CONTRACTOR letters L-TB/AB-0389 dated
February 13, 2003, L-TB/AB-0484 dated March 18, 2003, L-TB/AB-0490
dated March 18, 2003, L-TB/AB-1383 dated September 25, 2003, L-TB/AB-
1528 dated October 20, 2003).
To mitigate/recover the effects of the above, MAIN CONTRACTOR together
with its Subcontractors was forced to mobilize additional manpower and
equipment.
3.3. GI 8.001 (SCAFFOLDING) REVISION
Due to the revision of scaffolding specifications (G.I, and Scaffold Safety
Handbook) issued by COMPANY as of July 1, 2003 (i.e. after the date of the
award of the Contract), the scaffolding costs were extensively increased. The
cost presumed at the bidding stage was based on MAIN CONTRACTOR
experience at the JEDDAH FACILITIES SRL/UTL Project. Please note that:
 On December 13, 2002 (ref. BGPD/OOK/L-1499/02), COMPANY
informed Contractor that, effective as from July 1, 2003, all requirements
foreseen by GI 8.001 Revision dated March 5, 2002, should have been
fulfilled.
 MAIN CONTRACTOR required COMPANY to issue a Change Order to
compensate MAIN CONTRACTOR and its Subcontractor for the
additional costs and to recognize the schedule impact provoked by
enforcing the observance of the GI 8.001 revision.
The request was reiterated several times (ref. to L-TR/AR-1655 dated
January 14, 2003; L-TB/AB-0538 dated April 7, 2003; L-TB/AB-1518
dated October 18, 2003; L-TB/AB-2169 dated February 10, 2004; L-
TB/AB-2542 dated March 29, 2004; L-TB/AB-3842 dated July 14, 2004)
all attached for reference.
 COMPANY answered with letters BGPD/OOK/L-0071/03 dated January
17, 2003; BGPD/OOK/L-00709/03 dated April 1, 2003; BGFD/IK/L-
01770/03 dated May 31, 2003; BGFD/IK/L-02073/03 dated June 21, 2003;
BGFD/IK/L-03876/04 dated January 6, 2004; BGFD/IK/L-04414/04 dated
February 25, 2004. All letters are also attached for reference.
 On September 15, a Technical Clarification Meeting was conducted at
Dhahran between COMPANY (PMT and LPD), MAIN CONTRACTOR
and KKKKKK (MAIN CONTRACTOR ’s Main Subcontractor) aimed at
clarifying the Technical issues involved in the said revision (ref. to
BGPFD/IK/L-6334-04) hereto attached.
There are two main reason for the increase in scaffolding costs:

EXECUTIVE SUMMARY
1. The disruptions faced during the Project, which reduced the productivity of
our workers and resulted in an increase in the duration and quantity of
scaffolding.
2. The increase in unit prices of the Scaffolding Erector Companies was due
to revised scaffolding specifications.

EXECUTIVE SUMMARY
The first cost item is already included in paragraph 4.1 Schedule Impacts.
However, the additional cost of the second item is analyzed as follows:
Definitions:
SSH: Scaffolding Safety Handbook
GI: General Instruction Manual 8.001
Introduction: This study analyses the reasons for the increase in the cost of
Scaffolding Works, and the connection of this increase to the changes in the
Scaffolding GI and SSH for the RAS TANURA Facilities at the BGP Project.
A table comparing the change in specifications is found in the attachments.
Changed Items in Aramco GI & SSH & effects of these changes
1) Supervision
a. Certification Requirements
b. Biweekly Inspections
2) Material Changes
a. Certification Requirements
b. Embossing Requirements – Changes to all Scaffolding Tubes
c. Certification from lumber-grading agencies (“Proof Tested Scaffolding
Plank” stamp) – Changes to all scaffolding planks
3) Spacing
a. Embossed materials (reduced span)
b. Non-embossed materials (extra-reduced span)
4) Limited Number of Specialized Scaffolding Erector Companies
5) Definition of Special Scaffolding (all piperack scaffolding have become
“special”)
6) Use of Shock Absorbing Lanyard

EXECUTIVE SUMMARY
Details:
1) Supervision: The impact relating to the brand new supervisor and
inspector certification requirement does not arise from the cost of
certification alone. The major impact of the new certification requirements
is the scarcity of certified personnel on the market. The certified
supervisors of specialized scaffolding erector companies were scarce due to
huge demand by all COMPANY projects Kingdom-wide: Especially, the
fact that all nominees for certification must have a good command of
English and an educational background to clearly understand the GI and the
SSH and be able to answer the questions asked during the examination,
disqualifies most of the previous scaffolding supervisors. Furthermore, the
new requirement for bi-weekly inspections for all scaffolding has increased
demand, with the result that few of them are available on the market. Not
only contractors, but also the specialized scaffolding erector companies had
to outsource such staff. Consequently, the cost of outsourcing the said
personnel increased overall costs considerably both for contractors and
specialized scaffolding erector companies. This issue also had a significant
impact on the construction schedule.
2) Material Changes: The impact of the change in material specifications and
the whole embossing and stamping issue is the most important. As per the
new SSH, all tubes, couplers and planks had to be changed. As per the
previous specification, the availability of a mill certificate for a batch of
materials was sufficient. Although the cost of manufacturing scaffolding
components is considerably affected by the new obligation of embossing
materials every 50 cm. using the low-stress rolling die method, this increase
was relatively modest when compared with the changes in market
conditions due to the change in material specifications. As per the new
requirements, all COMPANY contractors and scaffolding companies had to
purchase new materials at the same time. This massive demand increased
prices drastically. Most of the materials used were recently purchased at
this time and therefore their very high initial depreciation costs are reflected
in the scaffolding companies’ unit prices. If this change had not been
implemented, the scaffolding companies would have used materials from
their stocks, the purchase of which dated back to the ‘80’s, which were
therefore literally free of depreciation costs.

EXECUTIVE SUMMARY
3) Spacing: The new SSH amends Chapter 9 of the old Construction Safety
Manual. Within this revision, regardless of the unchanged safety factor of
four, COMPANY has reduced the allowed post spacing for Light and
Medium Duty scaffolding and cancelled Heavy Duty scaffolding. Even if
embossed materials are used, there is a reduction and this reduction in post
spacing has increased both material usage and workmanship. When
alternative non-embossed materials are used, post spacing is reduced so
much that the quantities of materials for the same size scaffolding are
almost doubled when compared to the requirements of the old GI. See the
following table which analyses the increase in the amount of materials for a
specific scaffolding assembly. On the other hand, in order to use the
unchanged safety factor of four, currently, all contractors have to prepare
structural calculations and scaffolding plans, the approval period for which
is also defined in the GI as 4 weeks. Definitely, the cost of structural
analysis and scaffolding plan preparation for each and every individual
scaffolding is so huge that (3,500 SR x no of scaffoldings) making use of
alternative common scaffolding is impossible. When it is considered that a
comment received from ALPD and/or CSD requires re-submittal and
necessitates an approval period of another 4 weeks on the original
submittal, it is obvious that all planning at site is impaired. This clause in
the GI is obviously intended for use in bulk-sized scaffolding. Therefore,
since the costs of both of the above methods have increased unpredictably,
the previously expensive alternative of using System Scaffolding has
become feasible and practical. Therefore, currently almost all the
scaffolding companies prefer to use System Scaffolds for non-suspending-
type scaffolding. Previously they used very cheap tube and coupler
scaffolding hence, their unit prices reflect the cost of using this relatively
expensive method .
Old Requirement New Requirement
(Const. Safety manual p176) (Scaf. Safety Handbook p42)
Light Duty (Non-Embossed) 3.05m x 1.82m 1) 2.3m x 1.0m or
2) 1.8m x 1.2m
1) Considering 30m x 20m x 6m scaffolding, number of posts increases from 132 to 294, an
increase of 2.22 times.
Medium Duty (Non-Embossed) 2.4m x 1.82m Not Permitted
Light Duty (Embossed) 3.05m x 1.82m 1) 2.7m x 1.0m or
2) 2.4m x 1.2m
Medium Duty (Embossed) 2.4m x 1.82m 1.8m x 1.2m
Considering 30m x 20m x 6m scaffolding, number of posts increases from 168 to 324, an increase of
1.9 times.

EXECUTIVE SUMMARY
4) Limited Number of Specialized Scaffolding Erector Companies: As per
the new SSH, contractors are not allowed to construct scaffolding higher
than 12.2 meters and/or special scaffolding. (The definition of Special
Scaffolding has also been changed: see item 5 below.) They have to
subcontract to Specialized Scaffolding Erector Companies indicated on the
Bid Slate. There are only four companies in the Kingdom included into this
list who are SGB, Gulf Allied, Abu Bushait and Suwaidi Scaffold Services.
As per the new requirements, all scaffolding higher than 12.2 meters and/or
special scaffolds on Aramco premises within the Kingdom are being
erected by these four companies, who are consequently overloaded.
According to these recent changes in market conditions, they have
increased their unit prices since contractors have no other choice but to
work with them owing to the new regulations. As evidence of their work
overload, it should be noted that, in the early stages of the Mechanical
Works on the RAS TANURA Facilities at the HYX GAS PLANT Project,
MAIN CONTRACTOR ’s subcontractors collected quotations from all of
them and selected to work with two out of four companies with unit rental
rates, which were increased 3 to 5 times. They did their best to serve but
were unable to provide the adequate amount of manpower and materials
required by the new GI for this relatively large project since they also had
previous commitments in other COMPANY projects.
5) The definition of Special Scaffolding has changed. When, Article 10 of
Chapter 9 in the previous Construction Safety Manual which defines
Special Scaffolding is compared to the definition of Special scaffolding in
the new SSH, it can be easily seen that the previous requirement has been
more stringently revised. All suspended piperack platforms, of which we
have many on site, became special scaffolding.
6) Double Shock Absorbing Lanyard usage is imposed on all scaffolding
erectors working on non-tagged scaffolding. Previously, ordinary single
lanyards were allowed. The unit price of a shock absorbing lanyard is 220
SR/ea while a regular lanyard can be purchased for 30 SR/ea.
Special Note: As can be seen in the attached minutes of the scaffolding
meeting, COMPANY’s main point of objection was that the new spacing
requirements are intended for implementation with the already specified safety
factor of four. COMPANY stated in this meeting that the Scaffolding Spacing
given in previous scaffolding specifications (i.e. the relevant section of the
Construction Safety Manual”) did not conform to the safety factor of four.
However please note that:
a. As per page 3, paragraph 1, of OSHA 3150, “Each scaffold and scaffold
component must support without failure its own weight and at least four
times the maximum intended load applied or transmitted to it.” That is, the
safety factor requirement for OSHA is 4, the same as COMPANY’s
previous and current specifications.

EXECUTIVE SUMMARY
b. As per page 52, paragraph (b), of OSHA 3150, the spacing requirements
for Light Duty (25 psf) tube and coupler scaffolding are as given on the
attached sheet. When these values are compared with previous COMPANY
scaffolding requirements as given in Chapter 9, Page 176, TABLE II.3 of
the contractual “Construction Safety Manual”, it can be seen that they are
the same.
c. Therefore, according to OSHA 3150, COMPANY’s previous scaffolding
specification fulfills the requirement of the safety factor of four. This is the
ultimate proof that COMPANY’s current and more stringent requirements
which further reduce spacing requirements, have a higher safety factor.
d. In the light of the above, COMPANY’s declaration at the meeting held on
September 15, 2004, the minutes of which are hereto attached, regarding
the reason for reduced spacing of scaffolding tubes (i.e., that narrower
spacing requirements are needed to ensure the safety factor of four) fails.
Therefore, our request is valid and the changes in the specifications are
additional.
Conclusion: Due to the reasons mentioned above, the scaffolding erector
companies have increased their unit prices considerably. In particular, the
rental rates for scaffolding components on this project have increased 3 to 5
times when compared to the agreements we established for the Hawiyah Gas
Plant project. Reference is made to the Table provided in the Impact Recorded
Exhibit supporting para 4.2.5, which compares the unit prices of scaffolding
contractors before and after the scaffolding specification change for
Mechanical Works. As mentioned above, a meeting was held between LPD,
PMT and MAIN CONTRACTOR at COMPANY’s Dhahran premises for the
technical aspects of the revision of the specifications. The unsigned minutes of
meeting are hereto attached. The currently accrued additional cost is at least 18
Millions SR which is documented in paragraph 4.2.5.
It should be mentioned that the Technical Meeting held at Dhahran on
September 15, 2004 neither solved nor clarified the very core of the issue,
which was and still is economic and commercial. On the contrary, in MAIN
CONTRACTOR s opinion, the consistency of the basis of MAIN
CONTRACTOR ’s claim has been confirmed. In fact:
 MAIN CONTRACTOR does not question the COMPANY’s right to
implement or improve any measure aimed at Safety, which is a priority also
for MAIN CONTRACTOR . MAIN CONTRACTOR is currently claiming
acknowledgment of the fact that implementation of the GI 8.001 has
provoked a sudden perturbation on the market and consequently a scarcity
of personnel and materials suitable for fulfilling GI requirements.
Significant cost and schedule impacts have resulted.

EXECUTIVE SUMMARY
 Furthermore, COMPANY admitted that the previous issue of GI 8.001
(1992 edition) was affected by “some ambiguities”.
 It should be recalled that MAIN CONTRACTOR ’s bid for the Contract
was based, as far as the IK Scope, on the requirements contained in Para.
4.3 of Schedule B of IK Contract, whereby it is expressly indicated June
30, 2001 as cut-off date for the reference COMPANY documentation.
 Furthermore, it should be highlighted that, despite the fact that the
COMPANY has already agreed to at least some of the issues (minor,
indeed) related to the GI revision, namely: Use of shock absorbing
lanyards, additional supervision, certification costs and additional Scaffold
Plans, the relevant COR has not been issued so far.
The followings are provided in the Technical Exhibit:
1. Comparison Table for Changes in Specifications,
2. Minutes of Scaffolding Meeting,
3. Relevant pages of OSHA 3150
4. Relevant pages of Construction Safety Manual.
3.4. DELAYS IN ID ISSUE
The best efforts in manpower and equipment mobilization provided by MAIN
CONTRACTOR and its Subcontractors during the Project have been
hampered by the delay in getting COMPANY IDs.
MAIN CONTRACTOR has highlighted this critical issue from the beginning
of the Project: please refer to MAIN CONTRACTOR letter L-TB/AB-0266
dated December 27, 2002.
Unfortunately, the extremely negative effects of implementing multiple
revisions in issue procedures for IDs and stickers were underrated by the
COMPANY and affected the progress, with a consequent delay on
mobilization at site of manpower and equipment.
Project records reveal that:
 more than twenty (20) days were necessary after application for the
processing of IDs by the COMPANY; and
 only two (2) pickups of MAIN CONTRACTOR Subcontractors were
allowed to enter through the gates for transportation of material and
supervisory personnel to support more than 1,000 workers (refer to letter
BGPFD/IK/L-1298-03 dated May 13, 2003).

EXECUTIVE SUMMARY
In conjunction with this problem, the three (3) day only duration of temporary
passes was definitely not an efficient solution to the issue. In fact, all personnel
spent a lot of time at the gates to have their temporary IDs processed (refer to
the following letters from Subcontractors: L-GB/TB-0468 dated November 30,
2002, L-GB/TB-1670 dated May 29, 2003, L-GB/TB-2934 dated December
11, 2003, L-GB/TB-2949 dated December 13, 2003).
The picture as depicted above also affected project development in 2004: refer
to MAIN CONTRACTOR letters L-TB/AB-5043 dated November 3, 2004
and L-TB/AB-5080 dated November 6, 2004.
Due to the security concerns of COMPANY management, MAIN
CONTRACTOR was also requested to reduce the number of vehicles
accessing BGP (both south and computer gates) and was informed that the
issue of temporary ID’s would be stopped.
Through letters L-TB/AB-4402 dated August 31, 2004 and L-TB/AB-4746
dated October 3, 2004, MAIN CONTRACTOR expressed its concerns on
schedule impact due to the above requests.
3.5. LIMITED ENTRY OF TRANSPORTATION MEANS
It was a MAIN CONTRACTOR obligation to tune construction activities in
accordance with requirements stated at Para. 6.1 of the Schedule A of the IK
Contract, dealing with “…General and local conditions affecting the WORK,
including, but not limited to: transportation and access to the WORK site…”
During Project development, material and manpower transportation was
hampered due to the limitation on entries at both south and computer gates.
Just as a sample for materials entering through the computer gate, refer to
MAIN CONTRACTOR letters L-TB/AB-0413 dated February 23, 2003, L-
TB/AB-0463 dated March 9, 2003, L-TB/AB-0480 dated March 15, 2003, L-
TB/AB-0720 dated May 28, 2003, L-TB/AB-1139 dated August 10, 2003, L-
TB/AB-2580 dated April 1, 2004 and L-TB/AB-3347 dated June 1, 2004.
Entrance through the south and computer gates, which even normally are really
crowded, was more strictly limited because of police control due to the terrorist
attacks in the Kingdom, with a consequent loss of efficiency: please refer also
to Subcontractor letters L-GB/TB-1614 dated May 15, 2003 and L-GB/TB-
1619 dated May 18, 2003.
MAIN CONTRACTOR and its Subcontractors have suffered lost manpower
and equipment hours.

EXECUTIVE SUMMARY
In addition to the above, the limitation on the entry and exit of dump trucks and
other heavy equipment through the south gate had a negative impact on the
project schedule and caused additional costs for MAIN CONTRACTOR : refer
to MAIN CONTRACTOR letters L-TB/AB-0414 dated February 23, 2003, L-
TB/AB-0692 dated May 21, 2003 and L-TB/AB-3376 dated June 3, 2004,
Subcontractor letter L-GB/TB-0920 dated February 17, 2003.
Moreover, Gate 5 services, which are very important since none of the larger
vehicles such as trailers, water and diesel tankers are able to pass through
computer gate, were limited by COMPANY despite MAIN CONTRACTOR ’s
request to use it until the end of Project by letters L-TB/AB-0075 dated August
29,
, 2002 and L-TB/AB-0248 dated December 18, 2002.
The late opening of Gate 5 was not the sole problem causing delay and
additional costs for MAIN CONTRACTOR as per letter L-TB/AB-0402 dated
February 20, 2003.
In fact Gate 5 was closed on June 4, 2003 as announced by COMPANY, but
simultaneously, the access gate (opposite Gate 5) to the facultative ponds area,
was also closed (refer to Subcontractor letter L-GB/TB-1720 dated June 4,
2003).
Although MAIN CONTRACTOR highlighted the above situation through
letters L-TB/AB-0958 dated July 10, 2003 and L-TB/AB-1601 dated
November 1, 2003, MAIN CONTRACTOR and its Subcontractors were
forced to use Gate 14 at the sulfur storage tanks area for transportation of
manpower and equipments, but the taking out of material such as RTR pipes
had not been allowed with the current gate passes by COMPANY. MAIN
CONTRACTOR and its Subcontractors consequently had to travel 29 km to
reach the ponds and off-site underground pipes area via the south gate,
suffering additional cost and delay.
The entry of materials through Gate 5 on Fridays was also forbidden despite
MAIN CONTRACTOR ’s correspondence on this subject: L-TB/AB-0424
dated February 25, 2003, L-TB/AB-0505 dated March 25, 2003 and L-TB/AB-
517 dated March 31, 2003.
All the above represents a serious breach of the Contract by COMPANY, since
Paras. 7.3 and 7.6 of Schedule A of IK Contact. (CLIENT XYZW
OBLIGATIONS) state that COMPANY has to allow CONTRACTOR access
to the WORK site and has to perform any action, under the terms of the
Contract, to facilitate the orderly prosecution of WORK.

EXECUTIVE SUMMARY
3.6. DELAYS IN WORK PERMITS/WORK STOPPAGE FOR OPERATING
REASONS
MAIN CONTRACTOR construction schedule was based considering 10
working hours per day and six working days per week (refer to Para 2.8 of
Schedule B of IK Contact). Despite the above one of the major disruption
which adversely affected the construction activities was the reduced work
duration from 10 to 7 hours per day. This was mainly due to delay in issue of
work permits which have never been released before 7:30 a.m. while the hot
permits were closed at 4:30 p.m.
MAIN CONTRACTOR raised on numerous occasions and brought to the
attention of COMPANY the following issues:
 late issue of work permits and/or their non-issuance (whether or not
connected to the shortage of COMPANY permit issuers);
 work stoppages;
 vagueness of the procedures for excavation permits;
 huge number of hours spent for trial digs requested by COMPANY.
Relevant details are reported in the official correspondence listed herein
below:
MAIN
CONTRACTOR
Letter
(L-TB/AB)
DATE DESCRIPTION
0364 02-Feb-2003 Work Permit
0381 08-Feb-2003 Trial digs and excavation permits
0384 10-Feb-2003 Work Permit: SRU-300 Hand excavation / 470 New
Propane refrigeration facilities/Mechanical Excavation
0419 24-Feb-2003 Propane area – Permit for excavation
0421 24-Feb-2003 Work permit: sulfur pit 500, excavation by machine
0507 25-Mar-2003 Hand excavation work permit – ref. SA letter no. 1413-
03
0823 15-Jun-2003 Permit Control – BGP segregated areas
0828 16-Jun-2003 Various GAMA correspondence – Late receipt of
permits
0908 02-Jul-2003 Work permit procedures
0939 08-Jul-2003 Work permits facultative ponds area
0960 10-Jul-2003 Work stoppage structural steel erection SRU 300
1024 21-Jul-2003 Work stoppage structural steel erection SRU 300
1110 04-Aug-2003 Work permit on 115 kV roots
2122 04-Feb-2004 LPDGA – Road closure permit
2508 25-Mar-2004 C70 New feed gas compressor area, work stoppage due
to gas leak
2648 07-Apr-2004 Inlet facilities work permit
2682 12-Apr-2004 North south pipe rack

EXECUTIVE SUMMARY
MAIN
CONTRACTOR
Letter
(L-TB/AB)
DATE DESCRIPTION
2783 21-Apr-2004 Rework due to Aramco permit issuer request in area B70
2816 22-Apr-2004 Work permit interruption for piping works
2887 27-Apr-2004 Work permit propane area B70
2974 04-May-2004 Arbitrary permit cancellation at site
3167 17-May-2004 Disruption of work due to steam leakage on tie in 210 in
the 60 psig steal line (header A), east west pipe rack
3195 18-May-2004 Disruption of work due to steam leakage on tie in 210 in
the 60 psig steal line (header A), east west pipe rack
3290 26-May-2004 Rejected work permit in inlet facilities area
3308 05-Jun-2004 Work permit difficulties
3377 03-Jun-2004 Disruption of repair work of tie in 316 weld joint due to
steam leakage in utility area on the 60 psig steam line
(header A)
3378 03-Jun-2004 Hold on permit to work by BGP in utility area, for tie-in
580&582
3389 05-Jun-2004 Non issuance of permits for night shift in sump pit 474-
S-610
3563 24-Jun-2004 Late issue of work permits
3567 24-Jun-2004 Disruption of work due to breakdown of the hot tap
machine during the drilling of tie in 291 in utility area
3568 24-Jun-2004 Disruption of work due to non issuance of permit for the
hot tap drilling of tie-in 259 in chiller area unit 470
3569 24-Jun-2004 Disruption of work due to air leakage on tie-in 324 in
utility area
3630 29-Jun-2004 Delayed erection of deaereator
3666 03-Jul-2004 Late issue of work permits
3886 22-Jul-2004 Idle manpower due to non issue of permit to remove
empty cable trays at EW pipe rack for erecting hot tap
sticker 192
3912 19-Jul-2004 Idle hours for cold cutting crew due to non issuance of
permit
4027 28-Jul-2004 Non issuance of the work permit around the cooling
tower 475-E-425
4163 09-Aug-2004 Idling manpower due to non issuance of permit for
cutting new 36” line clashing with hot tapping 192
located on east west pipe rack
4246 15-Aug-2004 Idle manpower due to non issuance of permit for tie-in
031 located in area flare & blow down unit 470
4289 18-Aug-2004 Standby of MAIN CONTRACTOR and Petcon
personnel due to hold on work permit – August 17, 2004
4330 23-Aug-2004 Idle manpower due to non issuance of permit for tie-in
198 located in east west pipe rack unit 474
5194 18-Nov-2004 Work permits at revamp areas
5725 27-Dec-2004 R68 revamping pond A, stoppage of work

EXECUTIVE SUMMARY
MAIN
CONTRACTOR
Letter
(L-TB/AB)
DATE DESCRIPTION
6449 21-Feb-2005 Stoppage in LPDGA paving activities
6583 06-Mar-2005 Shutdown activity for SRU-200, not permitted by issuer
6905 06-Apr-2005 Stoppage in LPDGA paving activities

EXECUTIVE SUMMARY
The above, together with the details provided under Para. 4 of this Executive
Summary, gives a clear evidence of the significant schedule disruption and loss
of efficiency which have been suffered by MAIN CONTRACTOR and which
resulted in cost and time impact.
3.7. SCAFFOLDING FOR SRU STACK ERECTION
To complete the stack erection (aluminum windshield application) dedicated
scaffolding had to be provided around the lower 36 meters of stack height.
MAIN CONTRACTOR selected a COMPANY-approved scaffolding sub-
contractor who, according to Contract requirements, submitted the relevant
calculations for COMPANY approval. The approval routing took more than
three months (refer to letter BGPFD/IK/L-6487-04 dated November 7, 2004)
with multiple comments submitted to MAIN CONTRACTOR in several steps
(refer to MAIN CONTRACTOR letter L-TB/AB-4996 dated October 30,
2004). Further, most of the comments received focused on extreme details and,
furthermore, most of them reveal to be inappropriate and groundless.
A copy of the reference documentation is given at Para. 3.7 of the Technical
Exhibit.
3.8. DEMOLISHING OF EXISTING MAINTENANCE BUILDING
To room the new LPDGA Unit, the existing SRU 300 Maintenance Building
had to be demolished.
On the basis of the constraints well-known at the time of Contract award, the
demolition of the SRU300 Maintenance Building was scheduled to start on
October 19, 2002 and to finish on November 21, 2002.
On the contrary, on August 20, 2002 (refer to letter BGPD/OOK/L-674/02)
COMPANY instructed MAIN CONTRACTOR to proceed with the
demolition of the SRU300 Maintenance Building only upon the completion of
the temporary buildings. This implied, for MAIN CONTRACTOR , an
additional constraint coming from the link originated by the mentioned
COMPANY instruction, which was unpredictable at the time of schedule
preparation.
In the light of the foregoing, demolition activities started on May 1, 2003 and
were completed on July 11, 2003. This had a tremendous impact on the
erection of the LPDGA air cooler steel structure as the construction of which
could start only after the said demolition completion.

EXECUTIVE SUMMARY
In view thereof, foundation activities were completed on September 30, 2003
against scheduled April 26, 2003 and the steel structures activities were
completed on January 28, 2004 against scheduled August 12, 2003. The above,
together with the details provided under Para. 4 of this Executive Summary,
gives a clear evidence of the significant schedule disruption and loss of
efficiency which have been suffered by MAIN CONTRACTOR and which
resulted in cost and time impact.
3.9. LATE CLOSURE OF “E” STREET IN LPDGA AREA
The COMPANY-Provided Basic clearly indicates that the portion of “E” street,
parallel to the East-West piperack, should be decommissioned to make room
for several equipment items of the LPDGA unit, making the remaining part a
dead-end road (refer to BI-3022-A-PP-232103.001 rev E).
MAIN CONTRACTOR expressed very early its concern about the above
along with Q/A no. 39 issued to the COMPANY on April 2, 2002. From then
on, MAIN CONTRACTOR proposed several alternatives (refer to letters L-
TR/AR-0143 dated May 13, 2002; L-TR/AR-0351 dated June 10, 2002 and L-
TR/AR-0441 dated June 20, 2002) to avoid the dead-end road.
On June 25, 2002 COMPANY directed MAIN CONTRACTOR not to pursue
any modification to the COMPANY-Provided Basic Design Plot Plan
(submitted as engineering drawing no. RA-348915 rev. A) that had been issued
in the meantime.
Furthermore, it has to be considered that the Plot Plan is a Key drawing and, as
such, has to be approved (signed-up) by the COMPANY. Further, according to
Para. 6.6 – Schedule A of OOK Contract, it has been reviewed by all the
COMPANY agencies (including the HYX GAS PLANT and Loss Prevention)
during the 40% and 80% design reviews.
According to the above, soon after the notice to proceed, the “E” street had to
be closed by the COMPANY and the relevant area had to be made available for
erection of the LPDGA unit. On the contrary, COMPANY did not proceed
accordingly, thus upsetting the MAIN CONTRACTOR mobilization
scheduled for the LPDGA unit.

EXECUTIVE SUMMARY
In order to minimize the delay, MAIN CONTRACTOR mobilized the
resources anyway and proceeded on every single available work front in the
LPDGA unit. In such a way, even though a loss of efficiency was suffered due
to the unplanned dispersion of the work, MAIN CONTRACTOR achieved the
result of postponing activities in the involved area as far as possible. However,
when the construction schedule began to be seriously affected, the work permit
was requested with growing insistency (refer to letter L-TB/AB-1717 dated
November 19, 2003, letter L-TB/AB-1814 dated December 14, 2003 and letter
L-TB/AB-2077 dated January 26, 2004). At that time, COMPANY was also
notified that the end of December 2003 was the very latest date to start work
and avoid a heavy schedule impact. Consequently, the COMPANY
subordinated the road closure, which (we repeat) was due, to approval of a plan
which, practically, was a duplicate of the Plot Plan issued for construction
already approved many months before (refer to letter BGPFD/IK/L-3680-03
dated December 7, 2003) and to some additional measures to be implemented
(refer to letter BGPFD/IK/L-4185-03 dated February 8, 2004).
Again, on February 4, 2004, with letter L-TB/AB-2122, MAIN
CONTRACTOR notified the COMPANY that numerous activities in the
LPDGA unit had been put on hold because of the non-closure of the said street.
Finally, in the middle of February 2004, the road was closed and immediately
afterwards the excavation started.
In view of the above, since the COMPANY was very well aware that the road
in question had to be demolished to allow for LPDGA unit erection, its
reluctance regarding to road closure was definitely unjustified and resulted an
additional element preventing MAIN CONTRACTOR from performing its
duties according to the Contract provisions.
As a matter of fact, besides the mentioned loss of productivity, MAIN
CONTRACTOR suffered 1.5 months of delay on the following works:
 foundation of piperack alignments PR/AA and PR/AB
 foundation of air cooler structures alignment SB/AA
 foundation of 474-D-601
 foundation of 474-D-603 A/B
 foundation of 474-D-604 A/B
 foundation of 474-D-608
 foundation of pumps 474-G-602 A/B
 amine sump 474-S-601
 reclaimer sump 474-S-602
 piping sleeperway
 underground piping
 paving of area

EXECUTIVE SUMMARY
It is obvious that this delay reflected on subsequent activities such as
equipment erection, steel structure erections, piping erection, electrical and
instrumentation installations.
A copy of the referenced communications is provided at Para. 3.9 of the
Technical Exhibit.
3.10. EXISTING FACILITIES
3.10.1. Underground findings
According to the guidelines given along with the COMPANY-Provided Basic
Design (refer to Volume II book BG11 – Early Works), MAIN
CONTRACTOR performed extensive trial digs around the perimeter of the
areas where the new units were foreseen, in order to detect all obstacles that
might prevent the relevant erection activities. The obstacles encountered were
recorded and transmitted to the COMPANY on dedicated drawings issued for
this purpose.
However, even though the trial digs gave a complete picture of the status at the
new plant boundaries, they did not give any information regarding the routing
of the same obstacles (pipes and/or cables) inside the perimeters excavated, nor
about those obstacles that remained confined in the areas without crossing the
mentioned perimeter (and therefore not detected). Consequently, during
excavations inside the new areas, a huge number of underground obstacles was
found at the location of the facilities to be provided under the BI-3022 Project.
Resolution of the mentioned interferences was widely discussed with the
COMPANY at the time of the excavations relevant to the Propane
Refrigeration Area (Unit B70). Several letters were also sent to the
COMPANY (refer to our letters L-TB/AB-0162, L-TB/AB-0174 and L-
TB/AB-0220 respectively dated November 4, November 11 and November 30,
2002) and meetings were attended by the involved parties.
Finally the COMPANY, with letter BGPD/IK/L-0737-02 dated December 9,
2002, instructed MAIN CONTRACTOR to proceed as follows:
QUOTE
 Feed Gas Compressor, due to the relatively small area involved and the
numerous obstructions entering and leaving the area at various angles,
totally excavate this location and layout the foundations, any obstruction
that can be removed shall be, any that can not be removed shall be
reviewed by SAPMT/BGP/MAIN CONTRACTOR with the intent to
sleeve and incorporate in the foundation. Please note that any obstructions

EXECUTIVE SUMMARY
that can be clearly identified as redundant shall be removed by MAIN
CONTRACTOR .
 Other locations excavate for foundations, should any obstructions be
visible contact SAPMT immediately, at that time a joint inspection will be
done and a decision made to enlarge the excavation for further
investigation or to sleeve the obstruction and incorporate it in the
foundation.
UNQUOTE
The mentioned instruction, which appeared so clear to MAIN CONTRACTOR
, was not complied with by the COMPANY since, instead of proceeding
accordingly, MAIN CONTRACTOR was requested to perform additional
steps:
 an official letter to notify the obstacle was requested by the COMPANY
(instead of “contact immediately SAPMT” and of making a site “joint
inspection” to resolve the issue immediately);
 often, work permits were issued for the execution of additional trial digs
(instead of “excavate directly for foundations”);
 a Method Statement was requested, for the majority of the obstacles to be
relocated, to be reviewed and approved by the COMPANY (instead of
making “a decision to enlarge the excavation or to sleeve the obstruction
and incorporate it in the foundation”);
As a matter of fact, these new and unpredictable steps were not considered in
the original schedule and lengthened the time necessary for resolving the
interferences which, as a consequence, created a serious impact on the
construction schedule of the involved facilities.
Furthermore, the COMPANY’s decision about the proposed resolutions came
very late in comparison with the 15 working days foreseen in Para. 2.6.3. –
Schedule B of the IK Contract.
Since a complete description of every single issue linked to the underground
findings would go beyond the scope of this Executive Summary, only the items
which most affected the construction schedule are dealt with below:
Relocation of a duct bank in New Propane Refrigeration (B70)
An existing communication duct bank had to be relocated to allow for the
erection of the piperack, the sump pit and some other equipment.
 MAIN CONTRACTOR proposed two options for the relocation of the
duct bank (refer to letter L-TB/AB-0532 dated April 5, 2003);
 Upon COMPANY’s request, a third option was proposed along with letter
L-TB/AB-0570 dated April 14, 2003);

EXECUTIVE SUMMARY
 On May 7, 2003 the COMPANY communicated that the options proposed
were under evaluation and asked for additional information (refer to letter
BGPFD/IK/L-1775-03);
 Finally, on June 11, 2003, COMPANY provided the approved package for
work execution (refer to letter BGPFD/IK/L-1990-03).
Actually, the work in the involved area re-started with 1.5 month delay
(COMPANY approval took more than two months).
Relocation of cables in New Propane Refrigeration (B70)
Several existing cables, enclosed in PVC conduits, had to be relocated to allow
for the erection of the sump pit and some other oily sewer facilities.
 MAIN CONTRACTOR proposed the relocation of the duct bank with
transmittal T-TB/AB-138 dated April 14, 2003;
 On May 18, 2003 COMPANY rejected the proposal because it was
submitted as an engineering memo (not Method Statement) and other
minor issues (refer to letter BGPFD/IK/L-1808-03);
 MAIN CONTRACTOR re-submitted the proposal as a Method Statement
with transmittal T-TB/AB-174 dated May 25, 2003;
 On June 10, 2003 COMPANY provided the comments, but requested re-
submission of the Method Statement incorporating the comments (refer to
letter BGPFD/IK/L-1943-03);
 MAIN CONTRACTOR promptly replied to the comments and re-
submitted the Method Statement (refer to Letter L-TB/AB-0816 and
transmittal T-TB/AB-199 both dated June 14, 2003);
 On July 19, 2004, with letter BGPFD/IK/L-2288-03, COMPANY provided
further comments regarding the existing duck bank demolition, which had
been already approved (refer to: our letter L-TB/AB-0588 dated April 26,
2003; COMPANY letter BGPFD/IK/L-1733-03 dated April 28, 2003; our
letter L-TB/AB-1081 dated July 30, 2003).
Actually, the work in the involved areas re-started with 2.5 months delay
(COMPANY approval took more than 3 months).
Interference with electrical cables in SRU400 (D75)
The interference among some existing 13.8 kV cables and the new piperack
foundations stopped the relevant works.
 MAIN CONTRACTOR investigated with the involved COMPANY
agencies about how the interference should be resolved and it was decided
to proceed following the directions given by letter BGPD/IK/L-0737-02.
Accordingly, by letter L-TB/AB-0807 dated June 11, 2003, we proposed to
sleeve and encase the cables inside the foundations;

EXECUTIVE SUMMARY
 On July 15, 2003, COMPANY rejected the proposal even though, as
explained, it was in accordance with an its own previous direction and
asked for a Method Statement (refer to letter BGPFD/IK/L-2298-03 and L-
TB/AB-1078 dated July 29, 2003);
 MAIN CONTRACTOR submitted the Method Statement with transmittal
T-TB/AB-0245 dated July 20, 2003;
 Finally, with letter BGPFD/IK/L-2399-03 dated July 26, 2003,
COMPANY approved (with comments) the Method Statement.
Actually, the work in the involved areas restarted with 1 month delay
(COMPANY approval took more than 1.5 months).
Interference with duck bank in SRU500 (E75)
An existing duct bank interfered with numerous equipment foundations in
SRU500 and, consequently, stopped the relevant works.
 MAIN CONTRACTOR , with letter L-TB/AB-0531 dated April 5, 2003,
proposed that the duct bank be dismantled because it was abandoned;
 COMPANY replied positively on May 17, 2003 with letter BGPFD/IK/L-
1794-03.
Actually, the work in the involved areas restarted with 1 month delay
(COMPANY approval took more than 1.5 months).
Returning to the Method Statement we would like to highlight that 130 Method
Statements have been issued so far and that the same, besides being requested
very often by the COMPANY for very simple issues, also introduced yet
another approval cycle that further extended the time necessary to close issues.
While we deem that the spirit of the letter BGPD/IK/L-0737-02 (which we
believe is in accordance with Para. 7.6 of Schedule A of the IK Contract) was
to facilitate interference resolution in order to speed up the work relevant to the
involved new facilities.
It was understood that any work had to be done according to COMPANY
(BGP) and safety prescriptions about which the MAIN CONTRACTOR
construction, QC and HSE staffs were fully aware.
A copy of the Method Statement Logbook as well as the referenced
communications is provided at Para. 3.10.1 of the Technical Exhibit.
3.10.2. Cable pulling on existing East-West piperack
The main east-west piperack was elevated to make room for the new pipelines
and electrical/instrumentation cables foreseen under the BI-3022 project scope
of work. The additional storeys erected were tied-in to the new steel members
on the existing columns. Unfortunately, during the erection of the new portion,

EXECUTIVE SUMMARY
a huge number of modifications was necessary to rectify the existing piperack
column elevation which was found to be slightly different from the relevant
drawings.
The mentioned elevation adjustments were necessary to provide proper
leveling for the pipelines which rested on the transversal beam, while the same
was neither necessary nor required for the beams that support the cable trays.
In view of the above, during weekly construction meeting no. 93 held on July
26, 2004, MAIN CONTRACTOR notified that cable pulling on the east-west
piperack have been stopped for 3 days because of the different elevation of
some transversal beams. Subsequently several meetings and communications
were exchanged on this issue. In detail:
 MAIN CONTRACTOR was requested to contact the vendor to confirm
that cable tray installation was suitable (refer to the MOM no. 93 dated
July 26/27, 2004);
 MAIN CONTRACTOR submitted to the COMPANY the vendor’s
concurrence along letter L-TB/AB-4016 dated July 27, 2004;
 Despite MAIN CONTRACTOR ’s having provided the requested
concurrence, COMPANY rejected the installation and asked for additional
supports to correct the different elevation (refer to letter BGPFD/IK/L-
5772-04 dated July 31, 2004);
 Another meeting was held with COMPANY, at which MAIN
CONTRACTOR was notified that, definitively, work permit issuance was
subordinated to steel structure modification. Immediately after the
meeting, MAIN CONTRACTOR proceeded with the cable tray supports
modification, which lasted 3 weeks (refer to our letter L-TB/AB-4159
dated August 8, 2004).
In addition, it should also be clarified that the present (rejected) arrangement
did not violate any applicable standard and was well-known by the
COMPANY since MAIN CONTRACTOR notified the status of the east-west
piperack modification by letter L-TB/AB-1784 dated December 7, 2003, which
was never replied to by the COMPANY.
Furthermore, in order to minimize the delay accumulated on cable pulling,
MAIN CONTRACTOR proposed to work night shifts to carry out the support
modification, but this was refused by the COMPANY (refer to weekly
construction meeting MOM nos. 99 and 100 dated respectively September 6
and 13, 2004).
To conclude, the COMPANY’s request to modify the cable tray supports,
besides not being supported by any applicable contractual document, came
very late, since the actual status was notified by MAIN CONTRACTOR 8
months before (letter 1784). Consequently, 1.5 months’ delay were suffered,

EXECUTIVE SUMMARY
for reasons attributable to COMPANY, on cable pulling on the east-west
piperack and also on all linked activities such us (but not limited to):
- electrical cable to substation no.5
- electrical cable to Feed Gas Compressor
- electrical cables to new Chillers unit
- instrument cables for all units (except the inlet facilities)
A copy of the abstract of the weekly construction MOM’s and of all the
referenced communication is provided at Para. 3.10.2 of the Technical Exhibit.
3.10.3. Tie-in on existing UPS
During detail design development, it was agreed that the DCS relevant to the
following units:
- A74 – LPDGA
- A76 – NEW FEED WATER AND DEAREATOR
- B76 – INSTRUMENT AIR AND COOLING WATER
would have been connected to the existing UPS1 in SS#3.
By letters L-TR/AR-1807 and L-TR/AB-0271 (dated respectively February 12
and July 25, 2003), MAIN CONTRACTOR provided the COMPANY with
the overall study relevant to both new and existing UPS’s which had been
verified at site in two dedicated site surveys (January and February 2003)
when, at the presence of PMT, the actual loads on the existing UPS were
measured as well.
Within the calculations, MAIN CONTRACTOR considered that the peak
values were according to the applicable standards and simultaneously
according to normal engineering practice (85%).
COMPANY approved the proposal submitted with letter BGPFD/IK/L-3094-
03 dated October 6, 2003 and the detail design was developed accordingly.
Despite the above, COMPANY reversed its decision and directed MAIN
CONTRACTOR to proceed with a new UPS instead of tying-in the new loads
on the existing UPS1 in SS#3.
In order to make the issue as clear as possible, the main steps are listed below
with the relevant reference correspondence (significant dates are underlined).
a) On September 11, 2004, the electrical tie-in package was submitted to the
COMPANY with transmittal T-TB/AB-1029. On the transmittal it was
remarked (as a note) that it was in accordance with the site survey

EXECUTIVE SUMMARY
performed on the previous September 6, and witnessed by the
COMPANY’s agencies (including BGP);
b) Despite the above, the package was rejected on September 20, 2004;
c) On September 22, 2004, a meeting was held to discuss this subject. At the
same meeting MAIN CONTRACTOR requested the COMPANY (BGP)
to take measures to determine the load to be considered (refer to letter L-
TB/AB-4751 dated September 23, 2004);
d) By letter L-TB/AB-4693 dated September 28, 2004, MAIN
CONTRACTOR made a proposal, complete with related calculations, to
energize the DCS and perform the SAT;
e) MAIN CONTRACTOR , with letter L-TB/AB-4743 dated October 2,
2004, expressed to the COMPANY its great concern at the delay in
obtaining authorization to power up the instrumentation loads installed in
CPIB from the existing UPS in SS3
f) With letter BGPFD/IK/L-6293 received on October 19, COMPANY
communicated that the tie-in package was not approved because the
calculations provided were not accurate, since they referred to a scenario
that was not realistic. MAIN CONTRACTOR replied that three site
surveys had been conducted with COMPANY on the existing UPS and that
the measurements recorded were also consistent with each other;
g) With letter BGPFD/IK/L-6319 received on October 20, COMPANY did
not approve MAIN CONTRACTOR ’s proposal to energize the DCS and
proceed with the SAT (refer to the mentioned letter no. L-TB/AB-4693)
and gave notice that a COR would shortly be issued for the procurement of
a new UPS (later on received along with letter BGPFD/IK/L-6455 dated
November 6, 2004);
h) MAIN CONTRACTOR proposed, with letter L-TB/AB-4781 dated
October 7, to connect the DCS to the utility power and proceed with the
SAT. COMPANY did not guarantee the quality of the utility power as
requested by Honeywell and, consequently, the SAT was started only on
December 10 (after that a feeder and transformer were provided by the
COMPANY);
i) MAIN CONTRACTOR proceeded with procurement of the new UPS.
Meanwhile, to minimize the delivery time, a similar one was recovered
from the HDT Project (Riyadh);
j) The new UPS arrived at site on January 7, 2005.
In addition to the above, other issues further delayed the installation and
energizing of the mentioned new UPS, such as:
- lack of COMPANY inspector (refer to letter L-TB/AB-5994 dated January
16, 2005);
- after their erection had been completed, the COMPANY rejected the
battery arrangement, although the same was approved by the COMPANY
with letter BGPFD/IK/L-6226 dated February 6, 2005. Nevertheless,
MAIN CONTRACTOR prepared a new arrangement according to the

EXECUTIVE SUMMARY
additional COMPANY requests (refer to letter L-TB/AB-6234 dated
February 7, 2005), which was completed by the end of February;
- immediately after battery erection, MAIN CONTRACTOR again
submitted the energization packages (refer to transmittal T-TB/AB-1487
dated March 8, 2005);
- at the pressing request of the COMPANY, MAIN CONTRACTOR had
mobilized the vendor specialist since February 23, but since the UPS was
not energized, he remained inactive for a long time (refer to letter T-
TB/AB-6636 dated March 12, 2005);
- COMPANY signed the “Authorization to Energize” on March 13, 2005;

EXECUTIVE SUMMARY
- even though the certificate was fully signed-up, company still didn’t allow
energization because of the additional requests for battery alignment and
lock washers. MAIN CONTRACTOR clarified that the gap was not
uniform because of the battery’s own shape and, therefore, not recoverable.
Further, we clarified that the vendor did not recommend the use of wash
lockers (refer to letter L-TB/AB-6703 dated March 17, 2005). The
energization was further delayed by 3 days;
It should also be considered that, since no power was available, in order to
proceed with the SAT, MAIN CONTRACTOR was forced to rewire the
cabinets relative to units 474 and 476 on the cabinet relative to unit 470 (the
only one available). Once the new UPS was energized, two new cabinets were
procured (under COR89) and further rewiring was consequently necessary. To
achieve the above, two cut-over procedures (refer to letters L-TB/AB-6720 and
6819 dated respectively March 19 and 26, 2005, never replied to by the
COMPANY).
In the end, the cable switchover was performed on April 12, 2005 (COMPANY
was witness).
Notwithstanding MAIN CONTRACTOR was entitled to energize the involved
loads since 15 working days after the tie-in package submittal, COMPANY
prevented MAIN CONTRACTOR from complying with its contractual duties,
by putting forward unjustified additional requests and/or technical reviews,
which caused a delay of more than 6 month in the activities linked to the tie-in
to the existing UPS (tie-in package first submittal was on September 11, 2004
while the switchover was performed on April 12, 2005).
A copy of the reference documentation is indicated at Para. 3.10.3 of the
Technical Exhibit.
3.11. CONSTRUCTION PACKAGES
3.11.1. Piping Tie-ins construction packages
Prior to the piping tie-ins execution, the approved “Design Packages” were
further processed by the MAIN CONTRACTOR /SUB-CONTRACTOR
Construction and QC staffs, before being re-submitted to the COMPANY as
“Construction Packages”.
To achieve the above, MAIN CONTRACTOR deployed the resources
requested to prepare the Construction Packages in accordance with the
“Procedure for the Design and Construction of Tie-ins” (2124.000 PP 026.01)
approved by the COMPANY; while, according to Para. 2.6.3 of Schedule B of
the IK Contract, the time scheduled for COMPANY review and approval was
15 working days.

EXECUTIVE SUMMARY
Nevertheless, the Construction Packages, which were supposed to be a
collection of essential engineering documents (already approved with separate
and dedicated reviews) and QC construction forms (subject to other project
procedures), assembled for convenience to give the involved BGP agencies a
tool to release the permits to proceed with the relevant works, became huge
folders and, consequently, their completion required additional MAIN
CONTRACTOR and SUB-CONTRACTOR efforts.
Furthermore, similarly to what happen during the design phase, the
COMPANY took a very long time to review the Construction Packages. Also,
again due to operational reasons not depending on MAIN CONTRACTOR ,
the COMPANY revised several packages, already approved, in a very late
stage of the schedule (refer to Para. 3.11.1 of the Technical Exhibit).
For a better understanding of the magnitude of the issue, a list of salient figures
is provided hereinafter:
- no. 478 total Tie-in Construction Packages have been provided under this
project (it was agreed that the 162 tie-ins of SRU100 and 200 would have
been executed directly with the relevant approved Design Packages);
- each Construction Package, after the addition of numerous new sheets and
forms requested by the COMPANY and not foreseen by the approved
procedure comprised more than 90 pages with about 50 signatures for
approval plus 350 for inspection. A copy of a Piping Tie-in Package is
provided for convenience at Para. 3.11.1 of the Technical Exhibit;
- an average time of 32 working days was recorded in the approval cycle for
the tie-in Construction Packages. A matrix summarising, tie-in by tie-in,
the dates and approval time is provided at Para. 3.11.1 of the Technical
Exhibit.
- no. 23 construction packages, approved during the design phase, were
modified by COMPANY during review to obtain approval for execution;
- no. 20 Construction Packages were modified by the COMPANY after
approval for execution was obtained;
Due to the above, for piping tie-in execution, in addition to the delays suffered
by MAIN CONTRACTOR to obtain the approval of the “Design Packages”,
which are described in detail at Para. 2.3 of this Executive Summary, those
recorded during the “Construction Packages” approval cycle must be added.
3.11.2. Hydrotest Packages
MAIN CONTRACTOR prepared the Hydrotest Packages according to Para.
4.2.1. of Attachment 5 of the “Project Specification for Mechanical
Completion and Acceptance” (GEN-A-PP-211651), which is part of
COMPANY-Provided Basic Design.

EXECUTIVE SUMMARY
A sample of the hydrotest package was submitted to the COMPANY for
approval along with letter L-TB/AB-0285 dated January 9, 2003. This letter
was never replied to by the COMPANY. However, the packages relevant to the
Early Works were prepared accordingly and accepted by the COMPANY as
well.
The content of the packages was agreed with the COMPANY when performing
the Early Works. Nevertheless, for the Main Works, with letter BGPFD/IK/L-
4569-04 dated March 15, 2004, COMPANY departed from the said agreement
and requested additional drawings (i.e. Hydrostatic Diagrams), and tracking
sheets to be included with the Hydrotest Packages.
MAIN CONTRACTOR clarified that:
 According to MAIN CONTRACTOR procedure (adopted also for other
ARAMCO projects), all information required for performing hydrotest
activities was already marked on the IFC drawings. Therefore, provision of
further deliverables was not necessary and not foreseen in the scope of
work. For this reason, MAIN CONTRACTOR requested a COR that have
not been issued by the COMPANY so far (refer to letter L-TB/AB-2248
dated February 21, 2004);
 The tracking sheets would introduce 21 additional signatures to each
package that would cause unnecessary hold-ups and time losses and
unavoidably jeopardize the project schedule (refer to letter L-TB/AB-2458
dated March 20, 2004).
Nevertheless, COMPANY considered the meeting of the mentioned requests as
mandatory to process the hydrotest packages. Therefore more than 800
drawings and additional tracking sheets were prepared and enclosed with the
hydrotest packages.
Further to the time losses mentioned above, an extraordinary long time was
also spent on managing the packages up to completion of pipeline. From an
analysis of about 400 hydrotest packages (out of 848), the following average
durations have been detected (in working days):
 line check 23 days
 punch activity 7 days
 final reinstatement 10 days
This resulted, excluding the time necessary for the physical handover of the
packages for any submittal (which is also significant), in a total average
duration of 40 days for each hydrotest circuit, which, not only has no precedent
in MAIN CONTRACTOR ’s experience, but also affected the construction
schedule still further for reasons not attributable to MAIN CONTRACTOR .

Advanced training for construction management: CONTRACTS MANAGEMENT part 2 (experiences)

Advanced training for construction management: CONTRACTS MANAGEMENT part 2 (experiences)

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