FEED Technical & Commercial Evaluation & Validation

It is our view at The Projects Team is that it is critical to implement a 3rd party technical & commercial evaluation & validation of engineering contractor presented FEED Study deliverables before FID review, to:

1. Validate that the presented technical ISBL & OSBL scope proposal(s) have the required level of quality, accuracy & maturity to build the FEED commercial proposal cost estimate.

2. Validate the accuracy of the FEED cost estimate, including the identification of errors and define recommended amendments & optimisation

3. Validate the accuracy of the FEED deliverables compliance with the Project BSoR and commercial model

4. Give a full understanding of all Project assumptions, gaps, technical risks, commercial risks & challenges

The resulting findings & recommendations report & cost estimate validation delivers an unbiased assurance that the FEED Study definition is sufficiently mature and accurate to request the budget needed to implement and deliver the project from the board at Final Investment Decision. 

The Projects Team Overall Approach

The Projects Team utilise our proven structured approach to interrogate the challenging aspects of the associated project deliverables. This is achieved by implementing the following key activities:

1. Evaluate the Engineering workflow and tasks to validate the cost estimate

2. Verify & validate 3rd party supply

3. Validate that a secure project execution plan has been derived from a sound plant design basis

4. Identify & highlight any need for further evolution to achieve the required level of project definition maturity

TPTL SMEs are assigned to undertake & deliver all required activities needed to apply the methodologies to evaluate and validate the presented Engineering Contractor FEED study proposal. 

The review team typically reviews all presented Engineering Contractor FEED study deliverables to validate the project scope, design, equipment and material requirements which makes up the OSBL & ISBL SoW, which is key to attaining overall maturity assurance of the Engineering Contractor presented cost estimate & EPC or EPCm or variant commercial bid.

The review team will attain a full understanding of the full project scope that may be outside the Engineering Contractor FEED Study scope, which will be addressed by either the client project team or by site operations personnel, and shall verify all scope has been captured and associated estimated costs are incorporated within the overall project cost estimates. 

The review will also capture all comments, clarifications as well as validate the FEED Study Deliverables & presented Cost Estimate, to achieve this the following or similar staged process should be utilised:

Technical & Commercial Validation Scope (Stage 1)

The review team should, as a minimum, implement a review of the FEED study generated deliverables, typically outlined in the below list: 

• Project BSoR

• Project SoR

• Project Execution Strategy

• Project Execution Plan

• Project Implementation & Delivery Schedule

• HSSEQ Plan

• EPC(m) Phase Level 3 Schedule

• Strategic Assessment & Risks Review

• Pre-Design Hazard Review

• Heat & Mass Balance (H&MB) and Process Flow Diagram (PFD)

• Utility Flow Diagrams & Balances

• P&ID’s & IPL

• Plot plans & Critical Equipment Layouts

• Process & Utility Flow Diagrams

• HAZOP, Process Safety & Operability Studies

• Equipment List, datasheets & Specs

• Apply Value Improving Practices (VIPs)

• Material take-offs (MTOs)

• Piling and Foundation Layouts

• Installation & Handling Studies

• Mechanical Maintenance handling methodology

• Commissioning & Start-up Plans

• Process Hazards Analysis Report

• Cost Estimate

The review will also capture all comments, clarifications as well as validate the FEED Study deliverables & presented cost estimate. To achieve this the following or similar staged process should be utilised:

1. Third-party spend (services, equipment, materials and fees)

2. The validation of completed detailed engineering and coarse HAZOP

3. A probabilistic cost and schedule risk analysis (CSRA) and Monte Carlo assessments

4. Validation of the 3D model

Evaluation (Stage 2)

During this stage, the review team should attain a full understanding of the cost estimate methodology through the review of Engineering Contractor’s records and processes. This will involve a level of information exchange, and incremental pricing updates, applicable as the maturity of design and market engagement progresses.

Scope Definition Evaluation (Stage 3)

During this stage, the review team should verify the level of scope definition, understand the completeness of the engineering deliverables and identify all inconsistencies. Also, attain a full understanding of all cost drivers, establish target cost and validate unit rates.

Assurance Evaluation (stage 4) 

During this stage, the review team should attain and validate quality assurance of the estimated costs, especially the Key factors to be considered which includes the maturity of design, cost drivers, rates, labour norms and productivity, allowances, cost escalation, risk and contingencies, benchmarking and scope.

Risk Evaluation (Stage 5)

During this stage, the review team should apply proven and industry recognised risk analysis process & share ranges, allocate the relevant apportionment of risk, i.e. the associated party who should be managing the risk (This is critical as the correct allocation of risk increases the certainty of out-turn costs and ensures maximum value for money and incentivisation). Also, an assessment should be undertaken to verify, and capture risks, opportunities. Then set contingency allowances which are proportional to the maturity of design, the basis of estimate and schedule.

Benchmark (stage 6)

During this stage, the review team should utilise historical learning data attained from implementing and delivering similar types of industrial projects and their final nett costs. The review team should define all areas of concern. A benchmarking evaluation should be implemented between the estimated project cost and schedule against similar historical projects.

When benchmarking some of the items, activities and services (not an exhaustive list), that should be considered are:

1. Major equipment items

2. Construction & transportation strategy

3. Sparing, manufacturing & constructability strategy

4. Buildings & steelwork structures including platforms, handrails and roofing materials

5. Equipment Installation

6. Piping materials, fittings, valves, supports

7. Utilities

8. Design and engineering

9. Commissioning & insurance spares (excluding OpEx start-up costs)

10. Start-up

The resulting FEED Cost Estimates are key to the FID governance structure. Critical to attaining accuracy within the needed governance parameters, to be delivered in a transparent and timely manner, with full audit traceability, to enable the project leadership & board to make an informed technical & commercial decision to either sanction, recycle, shelve or cancel the project entirely.