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(CSC-2157) Effective Lump Sum Contracting Project Control on Major Capital Projects

Primary Author: Moses Y. Nkuah, CCP EVP
Co-Author(s): Charles Mensah, CCP

Audience Focus: Intermediate
Application Type: Practice
Venue: 2016 AACE International Annual Meeting, Toronto, ON, Canada

Abstract: The oil and gas industry in Alberta has witnessed a boom in major capital projects over the past decade. The majority of these projects are undertaken under a cost-reimbursable / cost-plus contract format where the contractor is compensated for costs it incurs plus some fee. Recently, lump sum or fixed price contracts are becoming more prevalent contractual formats. Under this type of contract, payment to the contractor for performance of work is a fixed amount of money. It is important that contractors undertaking such projects be fully aware of their contractual obligations and that the contractor guarantees a defined outcome for a fixed price. In today’s depressed market, many capital project owners would prefer their projects to be awarded on a lump sum basis. However, the monitoring and control of costs and schedules for construction of this type of contract is a major concern for project management. This paper will discuss the project control needs of a construction project undertaken under a lump sum contracting strategy in the oil and gas industry.