project execution model

Aker Kvaerner Common PEM

User Guide

AKER KVAERNER COMMON PEM USER GUIDE Page 2

CONTENTS

Page 1.0 Introduction to the Project Execution Model Initiative 3 2.0 PEM Planning and Control Structure 7

Strategic Level

Control Level Control Level Key Activities

Project Tendering Project Execution Project Management

Execution Level

3.0 Project Organisation 14 4.0 Description of the PEM Strategic Level PHASES 15 5.0 Description of the PEM Control Level STAGES 17 6.0 PEM Glossary of Terms and Abbreviations 23 Appendix A Control Level Milestone Requirements PROJECT TENDERING Appendix B Control Level Milestone Requirements PROJECT EXECUTION Appendix C Control Level Milestone Requirements PROJECT MANAGEMENT


1.0 INTRODUCTION TO THE PROJECT EXECUTION MODEL INITIATIVE Aker Kvaerner (AK) is a major contractor to the offshore and onshore

industries, providing contract management, services, products and integrated solutions spanning the complete life cycle value chain across a wide variety of business sectors.

For the purpose of successful execution and delivery, and not least as a

result of the last few decades demand for engineering, procurement and construction (EPC) deliveries coupled with the industrys requirement for control of costs, delivery time and quality, Kvaerner developed and documented an approach to project execution. In addition the merger of Aker Maritime and Kvaerner has contributed to a further improvement of this execution methodology and forms the basis for the Project Execution Model initiative in Aker Kvaerner (AK).

This document is an introduction and summary of the AK approach for

controlled execution of our projects. A model that is being rolled out across AK corporately for implementation by all business streams and their adaptation of the methodology to the requirements of the local contracting environment.

The Project Execution Model (PEM) is the most important business initiative

within AK and forms the basis for standardising our project execution methodology across our diverse business. It will also enable more consistent and improved performance towards satisfying our customers expectations as well as envisaged sustainable business presence in the markets we are currently participating.

The foundation of the methodology is many years of experience with offshore

and onshore industry projects from all over the world and not least the recent execution of several major EPC projects. A significant experience in this context is the knowledge of the actual project costs, how these are distributed and relate to the various activities over time and the processes influencing the end cost of the product.

The figure below illustrates typical costs experienced with major Harsh

Environment projects. As seen, half of the cost lies with procurement, some 30-40% with construction and only some 10% with engineering. However, at the same time investigations show that the influence of engineering over the end cost of the product is 90%, whilst the similar influencing power for procurement, construction and installation is around 5%, 3% and 2% respectively.

From this it is evident that although the expenditures of costs are much larger

in later phases, the possibility to influence the end (product) cost during the late phases is very limited.


A similar picture emerges from the Construction Industry Institutes gathering

of information from 700 major projects in North America, where the ability to influence the end cost was plotted against time, identifying the period during concept & system definition, i.e. prior to committing to major purchases, as the Critical Performance Period during which end cost could be influenced significantly.


The Harsh Environment and the North America figures give the same message it is the depth and quality of the project definition work during the early phases that decide success or failure. This is especially so for the cost aspect discussed here, but experience shows that other areas such as safety, project schedule and product quality very often follow a similar pattern.

The main lesson is therefore: Invest in the period prior to the heavy

investment in the form of time & man-hours (i.e. in project definition) and harvest the benefits at the tail end of the project.

Translating this learning into practical application is a challenge AK has taken

on when developing a systematic approach to the execution of projects. In this methodology AK has captured the need for giving focus to the early phases, in parallel with understanding the need for a continuous focus towards the end product as well as constantly ensuring that engineering is fit for construction, commissioning and operations. Further it should be noted that the methodology is equally adaptable to all project activities as the methodology outlines the path followed by most projects.

To take on the challenge of giving sufficient focus and attention to the early

phases, coupled with the required focus towards the end product, including construction and operational requirements, AK has subdivided the project life cycle into 6 execution phases.

The objective of this project execution model (PEM) and the breakdown into

these six phases is to improve quality, timely delivery and profitability, by

Providing management attention to critical activities and emphasis vs. the end result and timely delivery, throughout the project duration.

Subdividing the project into phases controlled by milestones. Specify strict quality requirements for each milestone, which

eliminates the transfer of work from one phase to the next Focus on inter-discipline dependencies to ensure quality in all parts of

the project Optimise the transfer of information from one project participant to

another


Specific attention to systems throughout the project life cycle When appropriate, dividing the product in part (sub) projects with clear

objectives and scope of work definition. Organising multidiscipline teams, for the individual phases and Sub-

projects respectively, accountable for budget adherence, timely delivery and quality.

Empowerment of teams Standardisation and reuse of solutions, products and execution

processes, Providing a sound basis for experience transfer.

AK PEM Introduction9th April 03 Page 33

PEM improvement processPEM Phase

& StageDescriptions

ImprovedPEM

Descriptions Recommendation by Business Area PEM Champion

Approval byAK PEM Network/ Steering

Committee

Project 1 Project 2 Project 3

Business Area PEM Champion


2.0 PEM PLANNING AND CONTROL STRUCTURE The link between the different work processes on a project is ensured through

the PEM. The PEM provides linkage between different disciplines and the different phases of the model and is broken down into three levels, Strategic, Control and Execution as indicated in the figure below.

Strategic Level The highest level in the PEM is the phase arrow, which is termed the

Strategic Level. Every project master schedule will reflect this level of the model.

Control Level The next level in the model is termed the Control Level in which the Strategic

Level Phases are further sub-divided into stages. There are mandatory milestones for each stage. Main interfaces to internal and external entities are also included in this level. The Control Level describes the sequence and completion level of multitasks through;

The major stage milestones within each phase Quality Levels and key deliverables for each stage

The Control Level is also reflected in the project schedule in the form of

allocated milestone dates and gate reviews.

AK PEM Introduction9th April 03 Page 13

Aker Kvaerner PEM

FEASIBILITY &CONCEPT

SYSTEMDEFINITION

DETAILING &FABRICATION

TENDER

& KICK-OFF

SYSTEMCOMPLETION

ASSEMBLY/ERECTION

STRATEGIC

EXECUTION

CONTROL

Specific work processes,systems & procedures

Corporate

Business Areas

Projects

Control level:

Major Milestones

Strategic level:

Execution level:SYSTEM DEFINITION PHASE - STAGE 3

MaterialQuantity

SimulationLevel 3

Update MTO/(MaterialQuantityBudget) Level 3

Call Off

Specifyremaining

Special Items

P&ID Level 3

UpdatePiping

DatabaseLevel 3

RequisitionPiping

&Valves

Review issueP&ID Level 3

Technicalinput POremaining

Special Items

WeightControl

Vendor Info.Inline

Instruments

Weight andCOG Piping

Level 3

3.3

3.3

L10

3.3

L14

3.3

L16

3.3

L17

3.3

L11

3.3

L12

3.3

L15

GlobalIntegration

ModelReviewLevel 3

PartProductPhase

ModelReviewLevel 2

EquipmentModellingLevel 3

Piping Design Level 3&

Clash Check

ProduceSystem

Isometric(RelevantSystems)

Piping &Layout

Review P&IDLevel 3

Pipe SupportDesignLevel 3

IssueStress ISO

StressCalculation

NO

YES

Input toStructural

To Stress ISOReport in Part

ProductPhase

Freeze Infoall

Equipment>=1tonn

Operational &Maintenance

ReviewLevel 3

HSEVerification

Level 3

3.3

L01

3.3

L02

3.3

L05

3.3

L06

3.3

L03

3.3

L04

3.3

L07

3.3 L13

CriticalLine

3.2

Prepare TestDefinition

DetailedPiping

FabricationMethod

Planning

CommissioningLimits (P&ID &

Line List)

3.3

L08

3.3

L09

Overall Methodfor Installation/

Pre-fab.

Execution level:


Key Activities

Key activities are major work tasks carried out throughout the project lifecycle.

The control level defines the quality requirement for each of the key activities (deliverables) for each PEM milestone. The key activities are presented in three Modules Project Tendering; Project Execution and Project Management.

Project Tendering Applying the PEM approach to the tendering process will deliver a well

defined and clearly understood project scope. The Tendering and Kick-Off phase has its own set of Key Activities covering

both Project Execution and Project Management Activity. This reflects the smaller, multi-discipline teams which will normally be involved in the tendering process.

The stages and milestones within the Tender and Kick-Off Phase reflect the

mandatory requirements of Group Policy 3.1 Tendering and Project Contract Risk. Progress through the Tender and Kick-Off Phase is controlled through Aker Kvaerners web based support tool the Risk Dashboard.

The control level Project Tendering Key Activities and milestone requirements

are as displayed in the following Champagne Diagram:

FEA S IB IL ITY &C O N C EPT

SY STEMD EFIN IT IO N

D ETA IL IN G &FA B R IC A TIO N

TEN D E R

& K IC K -O FF

S YSTEMC O M P LETIO N

A SSE M B LY/ER EC TIO N

M ilestones:C O N C EPT C O M PLETE

M 1D

G LO B A L D ESIG N C O M PLETE

M 2C M 3C

PR EA SSEM B LIES R EA D Y FO R

SH IPM EN TM 4C

M EC H A N IC A LC O M PLETE

M 5D

C LIEN T TA K EO V ER

SU B M ITTEN D ER

K IC K -O FF C O M PLETE

Phase and stage transfer th rougholl gates?having stric t requ irem ents w .r.t. quality ,schedule and cost


Project Tendering Control Level Milestone Requirements / Quality Levels DM Risk Policy Decision Milestone (DM1) (DM2) (DM3) (DM4 (DM5)


Project Execution The control level Project Execution key activities quality requirements are

displayed in the following Champagne Diagram PROJECT EXECUTION Control Level Milestone Requirements / Quality Levels


Project Management Module The Project Management Module comprises those project activities

associated with organising, monitoring and controlling the delivery of the work scope.

Again, the Key Activities reflect multidiscipline activities to be delivered in a

co-ordinated way in the correct sequence. Thus, the work of several disciplines / departments / work processes will be required to achieve the milestone requirements for any particular Key Activity.

The Project Management Control Level Key Activities and Milestone Requirements are displayed in the following Champagne Diagram. PROJECT MANAGEMENT Control Level Milestone Requirements / Quality Levels


The project management will on a continuous basis follow up, review and check the activities of the project. To facilitate this process the appropriate tools and systems are available to report status, events and project future development, to evaluate deviations from original plan and to make and take decisions that need to be implemented.

Project Management.

Interface Control

Quality

Decision

Proj Schedules

Budget/Cost

Change Control

Event/Risk Reports

Economy

Progress

Tools for control and monitoring: Management evaluationof deviation and risk:

Management Decision:


Execution Level The content of the Execution Level reflects the individual business and is thus

not common. The Execution Level is the third level in the PEM. The execution level

encompasses multifunctional work processes with flow sheets as well as milestone activity descriptions, check lists and quality requirements. Activities are smaller work tasks and related deliverables that make up a key activity. The activity descriptions reside within the activity flowcharts and detail the input and output, checklist and procedural definition of the activity and tools required to perform it. The Execution Level is the basis for the development of the network in the project programme.

A typical structure for the execution level is indicated here:

AK PEM Introduction

Stage Objectives

Concept Execution

DETAILING& FABRICATION

SYSTEM COMPLETION

FEASIBILITY &CONCEPT

SYSTEM DEFINITION

ASSEMBLY/ERECTIONKey Activities

Phases

M1B M1C M1D M2C M5DM4CM3A M3CM3BM1A M2A

QL1

QL1

QL2

QL1

QL1

QL3QL1 QL2

M2B

QL2

QL2

QL1 QL2

QL1

QL2

QL2

QL3

QL3

QL3

QL2 QL3 QL4

QL3

QL7

QL4

QL7

QL6QL4 QL6

QL4 Q5

QL1 QL2 QL3 QL4

Procurement 1st priority Equipment2nd priority Equipment3rd priority EquipmentBulk Material/MTO

System EngineeringP&ID,Line List & MELEIT Databases& registers

HSE in Design

Layout and 3D Model

Fabrication/Construction

Completion

Sub Contracting1st priority subcontracts2nd priority subcontracts

QL4 QL5

M4A M4B M5A M5B M5C

QL5 QL5QL1

QL1

QL2QL2 QL3

QL3 QL4

QL4

QL5

QL2 QL3 QL3QL5

QL5

QL4

QL1 QL2

QL3

QL6 QL7

QL5

QL5 QL6

QL5QL5

QL6

QL5

QL1

QL5

QL5

QL4 QL4 QL4

Key Activities

Action List

Gate ReviewReport

Control LevelExecution Level

Process

Structural

HVAC

Architectual

Instrument

Mechanical

Civil

Electrical

Piping

Activity Descriptions

Flow Charts

Control Object checklists

Existing Procedures orDiscipline knowledge base or Governing documentation

Work Processes

Quality Level descriptions

MilestoneRequirements

Key ActivityM

ilest

one

Discipline Gate Review

Summary Reports

D i s c i p l i n e G a t e R e v i e w S u m m a r y R e p o r t P r o j e c t N a m e :P r o j e c t N o . :

C l i e n t :

D i s c i p l i n e :S t a g e M i l e s t o n e :

P r e p a r e d b y ( L e a d . e n g . )R e v i e w e d b y ( D e p t . M g r . )

N o . S u b j e c t C o m p l i a n c e1 I s t h e s t a t u s o f a l l a c t i v i t ie s / c o n t r o l o b je c t s c o m p l ia n t w i t h t h e

d i s c i p l i n e s t a g e o b je c t i v e s ?

2 A r e a l l d e v i a t i o n s / h o l d s s u m m a r i z e d a n d r is k s in d i c a t e d i n t h e a t t a c h e d " s u m m a r y o f d e v i a t i o n s , h o l d s a n d r i s k s " ?

3 A r e t h e i n p u t s r e c e i v e d o f t h e c o r r e c t s t a t u s a n d u s e d f o r t h e a c t iv it y a s p e r a p p l i c a b le f l o w c h a r t

4 A r e " H o l d s " , a s a p p l i c a b l e , in d i c a t e d o n t h e i s s u e d / r e l e a s e d d o c u m e n t s ?

5 A l l a p p l i c a b l e a c t iv i t y c h e c k li s t s c o m p l e t e d a n d d e v i a t io n s / h o l d s l i s t e d ?

6 H a v e i n d e p e n d e n t s p o t - c h e c k s b e e n e x e c u t e d o n t h e A c t i v i t y c h e c k l i s t s ?

7 V a l i d a t i o n a n d c h e c k i n g p r o c e d u r e ( C P 2 2 1 . 0 0 4 ( Z o e t e r m e e r ) C P 3 1 2 8 ( S o le n t ) + E N G 0 0 5 , E N G 0 0 6 , E N G 0 0 7 , E n g 0 1 2 ( S t o c k t o n ) ) i m p l e m e n t e d : - C h e c k p r i n t s - A p p r o v a l s o f i s s u e d d o c u m e n t s ( s i g n e d o f f ) - I n t e r d i s c i p l i n e r e v i e w ( K e y D o c u m e n t R e v i e w s , in t e r s q u a d s , e t c ) - I m p l e m e n t a t i o n o f c l i e n t c o m m e n t s

8 A n y c r i t ic a l d e la y s o f t h e a c t u a l w o r k c o m p a r e d t o t h e l e v e l 3 / 4 s c h e d u l e s ?

9 D i s c i p l i n e g a t e r e v ie w c h e c k l i s t c o m p l e t e d a s a p p l ic a b l e ?

1 0 A n y k e y le a r n i n g t h a t n e e d s t o b e c o m m u n i c a t e d w i t h i n E & C ( e . g . v i a P r o je c t s , L e s s o n s L e a r n e d s y s t e m s , P r o c e d u r e s e t c . ) ?

D i s t r i b u t i o n : P r o j e c t m a n a g e r

L e a d e n g in e e r D is c i p l i n e m a n a g e r

P E M G a t e R e v ie w t e a m Q A m a n a g e r

A t t a c h m e n t s :S u m m a r y o f D i s c i p li n e G a t e R e v ie w C h e c k L i s t , d e v i a t io n s , h o l d s a n d r i s k s

T h e t e c h n ic a l s p e c ia l is t / d e p a r t m e n t m a n a g e r i s r e s p o n s ib l e t o c h e c k t h e s u b je c t s b e l o w a n d c o m p le t e t h e f o r m , t o b e c o m p le t e d a n d i s s u e d m in 3 w o r k i n g d a y s b e f o r e g a t e r e v i e w


C l i e n t :D i s c i p l i n e :

S t a g e M i l e s t o n e :


N o . S u b j e c t C o m p l i a n c e1 I s t h e s t a t u s o f a l l a c t i v i t ie s / c o n t r o l o b j e c t s c o m p l ia n t w i t h t h e


2 A r e a l l d e v i a t i o n s / h o l d s s u m m a r i z e d a n d r is k s in d i c a t e d i n t h e a t t a c h e d " s u m m a r y o f d e v i a t i o n s , h o ld s a n d r i s k s " ?

3 A r e t h e i n p u t s r e c e iv e d o f t h e c o r r e c t s t a t u s a n d u s e d f o r t h e a c t iv i t y a s p e r a p p l ic a b le f l o w c h a r t

4 A r e " H o l d s " , a s a p p l i c a b l e , i n d i c a t e d o n t h e i s s u e d / r e l e a s e d d o c u m e n t s ?

5 A l l a p p l i c a b l e a c t iv i t y c h e c k l i s t s c o m p l e t e d a n d d e v i a t i o n s / h o l d s l i s t e d ?

6 H a v e i n d e p e n d e n t s p o t - c h e c k s b e e n e x e c u t e d o n t h e A c t i v i t y c h e c k l is t s ?

7 V a l i d a t i o n a n d c h e c k i n g p r o c e d u r e ( C P 2 2 1 . 0 0 4 ( Z o e t e r m e e r ) C P 3 1 2 8 ( S o le n t ) + E N G 0 0 5 , E N G 0 0 6 , E N G 0 0 7 , E n g 0 1 2 ( S t o c k t o n ) ) i m p l e m e n t e d : - C h e c k p r i n t s - A p p r o v a l s o f i s s u e d d o c u m e n t s ( s i g n e d o f f ) - I n t e r d i s c i p l i n e r e v i e w ( K e y D o c u m e n t R e v i e w s , in t e r s q u a d s , e t c ) - I m p le m e n t a t i o n o f c l i e n t c o m m e n t s


9 D i s c i p l i n e g a t e r e v ie w c h e c k l i s t c o m p l e t e d a s a p p l i c a b l e ?

1 0 A n y k e y l e a r n i n g t h a t n e e d s t o b e c o m m u n i c a t e d w i t h i n E & C ( e . g . v i a P r o je c t s , L e s s o n s L e a r n e d s y s t e m s , P r o c e d u r e s e t c . ) ?


L e a d e n g in e e r D i s c i p l i n e m a n a g e r


A t t a c h m e n t s :S u m m a r y o f D is c i p l i n e G a t e R e v ie w C h e c k L i s t , d e v i a t io n s , h o l d s a n d r i s k s

T h e t e c h n ic a l s p e c i a l is t / d e p a r t m e n t m a n a g e r is r e s p o n s i b l e t o c h e c k t h e s u b j e c t s b e lo w a n d c o m p le t e t h e f o r m , t o b e c o m p le t e d a n d i s s u e d m in 3 w o r k i n g d a y s b e f o r e g a t e r e v i e w

D i s c i p l i n e G a t e R e v i e w S u m m a r y R e p o r t P r o j e c t N a m e :

P r o j e c t N o . :



P r e p a r e d b y ( L e a d . e n g . )

R e v i e w e d b y ( D e p t . M g r . )

N o . S u b j e c t C o m p l i a n c e1 I s t h e s t a t u s o f a l l a c t i v i t ie s / c o n t r o l o b j e c t s c o m p l ia n t w i t h t h e



3 A r e t h e i n p u t s r e c e iv e d o f t h e c o r r e c t s t a t u s a n d u s e d f o r t h e a c t iv it y a s p e r a p p l ic a b le f l o w c h a r t

4 A r e " H o l d s " , a s a p p l i c a b l e , i n d i c a t e d o n t h e i s s u e d / r e l e a s e d d o c u m e n t s ?

5 A ll a p p l i c a b l e a c t iv i t y c h e c k li s t s c o m p l e t e d a n d d e v i a t i o n s / h o l d s l i s t e d ?


7 V a l i d a t i o n a n d c h e c k i n g p r o c e d u r e ( C P 2 2 1 . 0 0 4 ( Z o e t e r m e e r ) C P 3 1 2 8 ( S o le n t ) + E N G 0 0 5 , E N G 0 0 6 , E N G 0 0 7 , E n g 0 1 2 ( S t o c k t o n ) ) i m p l e m e n t e d : - C h e c k p r i n t s - A p p r o v a l s o f i s s u e d d o c u m e n t s ( s i g n e d o f f ) - I n t e r d i s c i p l i n e r e v i e w ( K e y D o c u m e n t R e v i e w s , in t e r s q u a d s , e t c ) - I m p le m e n t a t i o n o f c l i e n t c o m m e n t s


9 D i s c i p l i n e g a t e r e v ie w c h e c k l i s t c o m p l e t e d a s a p p l i c a b l e ?

1 0 A n y k e y l e a r n i n g t h a t n e e d s t o b e c o m m u n i c a t e d w i t h i n E & C ( e . g . v i a P r o je c t s , L e s s o n s L e a r n e d s y s t e m s , P r o c e d u r e s e t c . ) ?


L e a d e n g in e e r D i s c i p l i n e m a n a g e r


A t t a c h m e n t s :S u m m a r y o f D is c i p li n e G a t e R e v ie w C h e c k L i s t , d e v i a t io n s , h o l d s a n d r i s k s

T h e t e c h n ic a l s p e c i a l is t / d e p a r t m e n t m a n a g e r is r e s p o n s i b l e t o c h e c k t h e s u b j e c t s b e lo w a n d c o m p le t e t h e f o r m , t o b e c o m p le t e d a n d i s s u e d m in 3 w o r k i n g d a y s b e f o r e g a t e r e v i e w





N o . S u b j e c t C o m p l i a n c e1 I s t h e s t a t u s o f a l l a c t i v i t i e s / c o n t r o l o b je c t s c o m p l ia n t w i t h t h e



3 A r e t h e i n p u t s r e c e iv e d o f t h e c o r r e c t s t a t u s a n d u s e d f o r t h e a c t i v i t y a s p e r a p p l ic a b le f l o w c h a r t

4 A r e " H o l d s " , a s a p p l i c a b l e , in d i c a t e d o n t h e i s s u e d / r e l e a s e d d o c u m e n t s ?

5 A l l a p p l i c a b l e a c t iv i t y c h e c k l i s t s c o m p l e t e d a n d d e v i a t io n s / h o l d s l i s t e d ?


7 V a l i d a t i o n a n d c h e c k i n g p r o c e d u r e ( C P 2 2 1 . 0 0 4 ( Z o e t e r m e e r ) C P 3 1 2 8 ( S o le n t ) + E N G 0 0 5 , E N G 0 0 6 , E N G 0 0 7 , E n g 0 1 2 ( S t o c k t o n ) ) i m p l e m e n t e d : - C h e c k p r i n t s - A p p r o v a l s o f i s s u e d d o c u m e n t s ( s i g n e d o f f ) - I n t e r d i s c i p l i n e r e v i e w ( K e y D o c u m e n t R e v i e w s , i n t e r s q u a d s , e t c ) - I m p le m e n t a t i o n o f c l i e n t c o m m e n t s


9 D i s c i p l i n e g a t e r e v ie w c h e c k l i s t c o m p l e t e d a s a p p l ic a b l e ?

1 0 A n y k e y le a r n i n g t h a t n e e d s t o b e c o m m u n i c a t e d w i t h i n E & C ( e . g . v i a P r o j e c t s , L e s s o n s L e a r n e d s y s t e m s , P r o c e d u r e s e t c . ) ?


L e a d e n g i n e e r D is c i p l i n e m a n a g e r


A t t a c h m e n t s :S u m m a r y o f D is c i p l i n e G a t e R e v i e w C h e c k L i s t , d e v i a t io n s , h o l d s a n d r i s k s

T h e t e c h n ic a l s p e c ia l is t / d e p a r t m e n t m a n a g e r is r e s p o n s ib l e t o c h e c k t h e s u b je c t s b e lo w a n d c o m p le t e t h e f o r m , t o b e c o m p l e t e d a n d i s s u e d m in 3 w o r k i n g d a y s b e f o r e g a t e r e v i e w


3.0 PROJECT ORGANISATION

The PEM is a product, sequence and phase-oriented model. Hence the tasks to be performed vary throughout the execution, responding to the requirements of the respective phases. This implies that the project organisation must be dynamic and be adjusted to suit the requirements within each phase.

The project management functions covered by the management team and key management personnel remain intact throughout all project phases in order to provide continuity and keep full focus on the final product. However, the teams physical composition, location, organisational structure and emphasis will reflect the phase, scope of supply, business strategies and associated challenges.

The project organisation will complete work meeting respective PEM

milestone and quality requirements before or at the end of each PEM stage. Further the organisational structure and composition will again reflect the scope of work to be performed, the phase in question as well as the overall business strategies in place.

The project management will on a continuous basis follow up, review and check the activities of the project. To facilitate this process the appropriate tools and systems are available to report status, events and project future development, to evaluate deviations from original plan and to make and take decisions that need to be implemented. One of the important elements of project management & control which PEM brings is the requirement to identify where the PEM milestones will occur on the project and to check & verify progress at these milestones prior to proceeding further. This check & verification process is referred to as a PEM Gate Review. Projects are required to establish at the outset a PEM Strategy which will set out when & how Gate Reviews will be organised. Consideration will be given to the significance of individual milestones to determine an appropriate level of scrutiny and who should conduct the review.

The capabilities of the project organisation are very important for the

successful outcome of the project execution. The attitudes and cultural elements are therefore given high visibility in the training of AK personnel and during project execution. Integral to the AK approach is to:

Focus on the totality (end product) rather than sub-optimisation Be solution oriented Be proactive rather than reactive Keep a hands on attitude, at the same time as ensuring that tasks and

decisions are performed on the most appropriate level Focus on actions required to solve and overcome challenges Solve problems now rather than wait until it may be too late Be accountable through delegation of complete tasks and

accompanying authority


SECTION 4.0

DESCRIPTION OF THE PEM

STRATEGIC LEVEL PHASES


PEM STRATEGIC LEVEL The top level Strategic is divided into several phases. The phases in the strategic level represent how a general project progresses from start towards the end result. There are 5 sequential phases as follows: Phase 1 Feasibility and Concept. Phase 2 System Definition. Phase 3 Detailing and Fabrication. Phase 4 Assembly/Erection. Phase 5 System Completion. Aker Kvaerner may be involved in some or all of these phases dependent on the individual project. In addition there is the Tender and Kick-Off Phase. This phase is mandatory for all projects, irrespective of which sequential phase (1-5) the actual project execution starts from. The strategic level is shown simply in the diagram below:


SECTION 5.0

DESCRIPTION OF THE PEM

CONTROL LEVEL STAGES


PEM Control Level - Tender & Kick-Off

Description

Pre-qualify for all targeted projects and thereafter prepare a winning tender with an acceptable risk exposure and profit potential. Provide firm schedules, technical and commercial basis for start up of the project in accordance with established Aker Kvaerner methods and procedures.

Evaluate, decide and obtain approval to bid. Pending a positive decision to bid, prepare tender documentation and get the required approvals. Review and identify design basis maturity vs Aker Kvaerner Project Execution Model (AKPEM) and shape scope accordingly. Submit tender to the client. Negotiate and sign contract for the work tendered. Hand-over to the project execution team, including:

start up and mobilisation plans

project execution strategy and organisation descriptions

project financing plans

project risk assessment

project baseline schedules and budgets

The phase includes Kick-Off of the project based on administrative and technical start-up packages.

Complete design basis to the nearest milestone of the Aker Kvaerner Project Execution Model (AKPEM). From this milestone onwards the project follows the standard phases of the AKPEM.

Key Stage Objectives

Receipt of (ITT)Invitation to Tender

Key Stage ObjectivesProject Execution Concept/Feed/Design Maturity CheckProject Management ITT review Tender cost, schedule

and budget Update KT Analysis Check Winning strategy

& cost vs Client objectives/ budget

Initial project execution strategy

Update risk register Nominate Tender Team Bid/No Bid

Key Stage ObjectivesProject Execution Verify/Develop Scope of

Work for Project ExecutionProject Management Mobilise tender team &

Kick-off Tender Execution Strategy,

budget and plan Project Execution Strategy

&t Schedule HSE program Estimating/Weight & Cost Define Org. / Nominate Key

Project Personnel Pricing/Compensation

strategy & Formats Tender clarific./ qualifics Risk Analysis Draft Tender

Key Stage ObjectivesProject Execution SOW Verified and Project

Execution approvedProject Management Tender Document Review &

Management Approvals Project Execution Strategy,

Organisation & Project Team Cost estimate & Cash flow Schedule / Manpower

Projection Plan Contract: Terms & Conditions Sub-Contracts: Terms &

Conditions Negotiation Mandate and

Team Risk Management

Risk Register Contingency determination

Price/compensation formats Group Risk Committee review

(if required by policy)

ASSESS

TENDERPHASE START SUBMIT TENDER

Stage TA

PREPAREStage TB

MTA MTB

TENDER & KICK OFFTender phase

Stage TD NEGOTIATE

Key Stage ObjectivesProject Execution Bid Clarifications Project Management Negotiations Bid clarifications Update:

- Key data- Price- Contingency- Risk Analysis- Execution Plan

Management approval

Contract ready forsignature

Prepare Hand-over toProject Team

SIGN CONTRACT

MTE

APPROVEStage TC Stage TE

KICK-OFF

MTDMTC

KICK-OFF COMPLETE

Key Stage ObjectivesProject Execution Tender Team Hand-over Scope of Work Start-up Plan Design Basis AlignmentProject Management Mobilise Project team Tender Team Hand-over Client Kick-off Meeting(s) Project Start-up Plan (Mgmt) Internal Kick-off meetings Teambuilding

DRAFT TENDERBID / NO BID

POSITIONING

Key Stage Objectives Business Development Prospect ID & Screening Perform KT Analysis Check Core Capability &

Strategy Profile (CCSP) Client Contact/Objectives Winning Strategy Partners & Scope Identify Tender

Accountable Prequalification

Receipt of (ITT)Invitation to Tender

Key Stage ObjectivesProject Execution Concept/Feed/Design Maturity CheckProject Management ITT review Tender cost, schedule

and budget Update KT Analysis Check Winning strategy

& cost vs Client objectives/ budget

Initial project execution strategy

Update risk register Nominate Tender Team Bid/No Bid

Key Stage ObjectivesProject Execution Verify/Develop Scope of

Work for Project ExecutionProject Management Mobilise tender team &

Kick-off Tender Execution Strategy,

budget and plan Project Execution Strategy

&t Schedule HSE program Estimating/Weight & Cost Define Org. / Nominate Key

Project Personnel Pricing/Compensation

strategy & Formats Tender clarific./ qualifics Risk Analysis Draft Tender

Key Stage ObjectivesProject Execution SOW Verified and Project

Execution approvedProject Management Tender Document Review &

Management Approvals Project Execution Strategy,

Organisation & Project Team Cost estimate & Cash flow Schedule / Manpower

Projection Plan Contract: Terms & Conditions Sub-Contracts: Terms &

Conditions Negotiation Mandate and

Team Risk Management

Risk Register Contingency determination

Price/compensation formats Group Risk Committee review

(if required by policy)

ASSESS

TENDERPHASE START SUBMIT TENDER

Stage TA

PREPAREStage TB

MTAMTA MTBMTB

TENDER & KICK OFFTender phase

Stage TD NEGOTIATE

Key Stage ObjectivesProject Execution Bid Clarifications Project Management Negotiations Bid clarifications Update:

- Key data- Price- Contingency- Risk Analysis- Execution Plan

Management approval

Contract ready forsignature

Prepare Hand-over toProject Team

SIGN CONTRACT

MTEMTE

APPROVEStage TC Stage TE

KICK-OFF

MTDMTDMTCMTC

KICK-OFF COMPLETE

Key Stage ObjectivesProject Execution Tender Team Hand-over Scope of Work Start-up Plan Design Basis AlignmentProject Management Mobilise Project team Tender Team Hand-over Client Kick-off Meeting(s) Project Start-up Plan (Mgmt) Internal Kick-off meetings Teambuilding

DRAFT TENDERBID / NO BID

POSITIONING

Key Stage Objectives Business Development Prospect ID & Screening Perform KT Analysis Check Core Capability &

Strategy Profile (CCSP) Client Contact/Objectives Winning Strategy Partners & Scope Identify Tender

Accountable Prequalification


PEM Control Level - Feasibility & Concept

Description - Phase 1

Develop the best possible business case and winning solution for the client. The phase is also referred to as the value-engineering phase. The concept to be used is selected in this phase and thereby the project CAPEX and OPEX levels are defined (+/- 50 to 20 %), which then can be compared to the product income levels.

Scope: Selection of an optimal concept solution based on frozen and proven functional requirements, leading up an agreed and firm design basis Perform technical/economic optimisation of the selected concept to achieve a best for purpose technology, price and delivery time Identify a project execution strategy & plan based on the common AKPEM including a strategy for procurement & subcontracts Establish a cost budget and ensure a manageable execution risk for all parties Key Stage Objectives

OPPORTUNITY APPRAISAL

Key Stage ObjectivesProject Execution Define HSE Requirements Identify product, markets Establish possible process solutions Identify infrastructure requirements Identify environmental requirements Identify key process/ product

interfacesProject Management Evaluate business opportunity Establish first cost estimate

FEASIBLE CONCEPTS SELECTED

Stage 1A

FEASIBILITY STUDIESStage 1B

ALTERNATIVESGENERATED

M1A M1B

Phase 1

Key Stage ObjectivesProject Execution Define HSE goals Perform preliminary simulation & flow

diagrams Size Key equipment Layout block model and unit

arrangements Define preliminary construction

methods Identify major completion aspects

affecting the concept selectionProject Management Establish general execution

philosophy Define screening criteria Update cost estimate Rank alternatives Perform Risk assessment

CONCEPT SELECTIONKey Stage ObjectivesProject Execution Perform HSE studies to verify the

concepts and Environmental Impact assessment for permitting

Consolidate the final design basis. Optimize Process/System simulation

and flow diagrams Size remaining equipment and add to

equipment list Optimize overall layout including safety

assessment Update Constr. and Compl. methods Evaluate Local requirements Define Site enabling preparation criteria Project Management Develop overall execution schedule Establish preliminary Project Execution

Strategy Update cost estimate Determine Sourcing categories and

scenarios Update Risk assessment, concepts

Stage 1C

CONCEPT DEFINITIONStage 1D

Key Stage ObjectivesProject Execution Update HSE Studies and analyses and

prepare Environmental impact report Freeze functional requirements, design basis,

overall system description and layout Update Equipment list, flow diagrams Prepare electrical Single Line Diagram

Prepare preliminary P&IDs Inquire 1st priority equipment POs Finalize Overall Layout and unit arrangement Update Construction and Completion methods Site enabling subcontract package complete &

awarded Define Local requirementsProject Management Pre-qualify Main Sub-Contractors Finalise Project Execution Strategy Establish cost estimate Update Risk assessment Prepare preliminary detailed project schedule

CONCEPT SELECTED

M1C

CONCEPT COMPLETE

M1D

FEASIBILITY & CONCEPT

OPPORTUNITY APPRAISAL

Key Stage ObjectivesProject Execution Define HSE Requirements Identify product, markets Establish possible process solutions Identify infrastructure requirements Identify environmental requirements Identify key process/ product

interfacesProject Management Evaluate business opportunity Establish first cost estimate

FEASIBLE CONCEPTS SELECTED

Stage 1A

FEASIBILITY STUDIESStage 1B

ALTERNATIVESGENERATED

M1AM1A M1BM1B

Phase 1

Key Stage ObjectivesProject Execution Define HSE goals Perform preliminary simulation & flow

diagrams Size Key equipment Layout block model and unit

arrangements Define preliminary construction

methods Identify major completion aspects

affecting the concept selectionProject Management Establish general execution

philosophy Define screening criteria Update cost estimate Rank alternatives Perform Risk assessment

CONCEPT SELECTIONKey Stage ObjectivesProject Execution Perform HSE studies to verify the

concepts and Environmental Impact assessment for permitting

Consolidate the final design basis. Optimize Process/System simulation

and flow diagrams Size remaining equipment and add to

equipment list Optimize overall layout including safety

assessment Update Constr. and Compl. methods Evaluate Local requirements Define Site enabling preparation criteria Project Management Develop overall execution schedule Establish preliminary Project Execution

Strategy Update cost estimate Determine Sourcing categories and

scenarios Update Risk assessment, concepts

Stage 1C

CONCEPT DEFINITIONStage 1D

Key Stage ObjectivesProject Execution Update HSE Studies and analyses and

prepare Environmental impact report Freeze functional requirements, design basis,

overall system description and layout Update Equipment list, flow diagrams Prepare electrical Single Line Diagram

Prepare preliminary P&IDs Inquire 1st priority equipment POs Finalize Overall Layout and unit arrangement Update Construction and Completion methods Site enabling subcontract package complete &

awarded Define Local requirementsProject Management Pre-qualify Main Sub-Contractors Finalise Project Execution Strategy Establish cost estimate Update Risk assessment Prepare preliminary detailed project schedule

CONCEPT SELECTED

M1CM1C

CONCEPT COMPLETE

M1DM1D

FEASIBILITY & CONCEPT


PEM Control Level - System Definition


The main objective of the System Definition Phase is to detail the concept and freeze system design, implement vendor information and complete the area design to a level where the interfaces between the systems and various areas are frozen. Procurement activities including order placement and vendor follow-up performed according to technical input and project requirements to enable freezing the design. All external interfaces with design impact shall have been included in the design and confirmed frozen by the other party. Subsequently, by end of this phase, the layout is frozen and "clash free, final detail engineering can proceed independently for the respective areas and fabrication and assembly/erection documentation can be prepared.

System design with focus on operability and maintainability with all safety aspects analysed and mitigating measures incorporated in the design shall have been performed . Working environment analyses, reviews and inspections to achieve arrangements for a safe and worker friendly environment done. Equipment and bulk materials sufficient to meet engineering supplier information and site need requirements procured. All requirements for subcontracting, manufacturing or temporary facilities shall have been included. Establish Methods for fabrication, assembly/erection and completion established and method requirements implemented in the design. Boundaries established and frozen and management of interfaces towards subcontractors and other contractors identified. Weight and cost budgets verified and likewise for contract milestones and detailed construction schedules.


M1D Milestone M2ACritical POs Awarded Milestone M2B

Layout and Main Structure FrozenMilestone M2C

Global Design Complete

Phase 2: System Definition Stage 2A:

SYSTEM DEFINITION Stage 2B: SYSTEM DESIGN & LAYOUT DEVELOPMENT

Stage 2C: GLOBAL DESIGN

Key Stage Objectives Work Scope

HSE and safety risk assessment, preliminary

First vendor information for 1 Priority POs implemented in

System Engineering

P&IDs, Line List , MEL , EIT registers/databases and 3D model

Procurement

1st priority Equipment POs awarded

Subcontracting plan & strategy complete

Fabrication/Construction methods and draft plan

Completion established and draft preparations


HSE and safety risk assessment checked First vendor information for 2nd Priority POs implemented in System Engineering P&IDs , MEL, EIT registers/databases and 3D model Procurement; 2nd and 3rd priority equipment POs awarded, First bulk material orders out Subcontracting; 1st priority subcontract issued, 2nd priority subcontracts draft


HSE and safety risk assessment frozen Frozen vendor information for all POs implemented in System Engineering P&IDs, Line List, MEL, EIT registers/databases and 3D model Procurement; All equipment POs awarded, all bulk materials orders placed Layout and 3D model are Clash free, Ready to outfitting details, All major interfaces frozen Subcontracting; 1st priority subcontracts awarded, 2nd priority subcontracts issued


Subcontracting; 1st priority subcontracts awarded, 2nd priority subcontracts issued Completion preparation substantially complete

Project Management

Prepare and verify project schedule and cost estimate

QA plan established

Quantity and weight baseline & trending program

Project Management Prepare Detailed Deliverable Schedule and update current cost estimate HSE program for engineering and procurement in place

Project Management Verify Contract Milestones and Detailed Construction Schedule and update current cost estimate HSE program for construction in place


PEM Control Level - Detailing & Fabrication


The main objective of this phase is to complete detail design, prepare fabrication and construction documentation and fabricate and finalise part assemblies and modules Mechanical Complete.

Finalise detail design with all vendor information implemented and material take off done. Perform and issue work preparation documentation. Perform fabrication activities according to established methods. Mechanical complete product(s) ready for assembly/erection, including equipment packages. Verify the detailed schedules for the assembly/erection phase and ensure that all relevant site activities are documented MC complete.


Key Stage ObjectivesProject Execution Engineering databases complete All fabrication Bulk Material delivered Shop engineering detailing and work preparation for fabrication Pipe spools, Steel sections and Concrete sections prefabricated. Deep/major foundations & trenches completed. Construction site temporary facilities completed Hook-up/Commissioning Subcontracts awardedProject Management Update cost, schedule & risk program

Key Stage ObjectivesProject Execution Layout and 3D Model as build mark up of part

assemblies/modules All Bulk Material available to support the

Assembly / Erection sequence Part assemblies and modules/package units

fabricated and mechanically complete Commissioning commenced on selected

systemsProject Management Update cost, schedule & risk program

DETAIL DESIGN & SUBCONTRACTING

Key Stage ObjectivesProject Execution HSE risk assessment complete Close out HAZOP action items Final vendor information from all POs incorporated in System Engineering and layout / 3D model System Engineering & Layout / 3D model documentation issued for construction Material take off finalised and bulk material top up orders placed 2nd priority FC Subcontracts awarded Hook-up/Commissioning Subcontracts inquired Completion requirement incorporated in fabrication documentation Issue P& IDs IFC Issue Isometrics IFCProject Management Milestones and Detailed Construction Schedule verified. HSE program for construction and completion in place

M2C

Stage 3A

PRE FABRICATION &MANUFACTURING COMPLETE

Stage 3B

DETAIL DESIGN COMPLETE & SUBCONTRACTS AWARDED

M3A M3CM3B

DETAILING & FABRICATIONPhase 3

Stage 3C FABRICATION

PRE FABRICATION &MANUFACTURING

PREASSEMBLIESREADY FOR SHIPMENT

Key Stage ObjectivesProject Execution Engineering databases complete All fabrication Bulk Material delivered Shop engineering detailing and work preparation for fabrication Pipe spools, Steel sections and Concrete sections prefabricated. Deep/major foundations & trenches completed. Construction site temporary facilities completed Hook-up/Commissioning Subcontracts awardedProject Management Update cost, schedule & risk program

Key Stage ObjectivesProject Execution Layout and 3D Model as build mark up of part

assemblies/modules All Bulk Material available to support the

Assembly / Erection sequence Part assemblies and modules/package units

fabricated and mechanically complete Commissioning commenced on selected

systemsProject Management Update cost, schedule & risk program

DETAIL DESIGN & SUBCONTRACTING

Key Stage ObjectivesProject Execution HSE risk assessment complete Close out HAZOP action items Final vendor information from all POs incorporated in System Engineering and layout / 3D model System Engineering & Layout / 3D model documentation issued for construction Material take off finalised and bulk material top up orders placed 2nd priority FC Subcontracts awarded Hook-up/Commissioning Subcontracts inquired Completion requirement incorporated in fabrication documentation Issue P& IDs IFC Issue Isometrics IFCProject Management Milestones and Detailed Construction Schedule verified. HSE program for construction and completion in place

M2C

Stage 3A

PRE FABRICATION &MANUFACTURING COMPLETE

Stage 3B

DETAIL DESIGN COMPLETE & SUBCONTRACTS AWARDED

M3AM3A M3CM3CM3B

DETAILING & FABRICATIONPhase 3

Stage 3C FABRICATION

PRE FABRICATION &MANUFACTURING

PREASSEMBLIESREADY FOR SHIPMENT


PEM Control Level - Assembly/Erection


The objective of this phase is to assemble the various parts products to a complete facility/product. Major equipment, pre- assemblies and modules are transported to site and installed. The construction work is MC complete & quality records available. Final insulation done and labelling & identification complete. All systems shall be ready for commissioning and commissioning can commence on selected systems. Surplus material definition and realisation started. Detailed schedules for the completion phase verified.


TRANSPORT & POSITIONING

M3C

ALL ASSEMBLY WORK COMPLETED

Stage 4A Stage 4B Stage 4C

ALL PREASSEMBLIESPOSITIONED

M4B M4C

MECHANICALCOMPLETION

MECHANICALCOMPLETE

Key Stage ObjectivesProject Execution Relevant as built mark-up complete Construction work mechanical complete & quality records available. Categorised Punch lists for all systems. All systems ready for commissioning and commenced in accordance with system completion schedule Final Insulation, Labelling & Identification complete.Project Management Update baseline and current cost estimate Establish HSE program for system completion phase

ASSEMBLY

Key Stage ObjectivesProject Execution Major equipment, Pre- assemblies & modules assembly installed. Install Balance of Plant Equipment and interconnecting piping systems. Minor structures, E& I installation and Main insulation complete. Final Labelling & Identification started. Operation & Maintenance Manuals available.Project Management Update baseline and current cost estimate and System Hand-over Schedule Implement HSE requirements

M4A

ASSEMBLY / ERECTIONPhase 4

Key Stage ObjectivesProject Execution Temporary Services & Power Distribution in place and Site roads complete up to sub-base. Major equipment, Pre- assemblies & modules transported to site and final positioned. On site fabrication and erection of major vessels and process equipment. Main Structures & Bridges CompleteProject Management Update baseline and current cost estimate Establish HSE requirements for Assembly & MC stages

TRANSPORT & POSITIONING

M3C

ALL ASSEMBLY WORK COMPLETED

Stage 4A Stage 4B Stage 4C

ALL PREASSEMBLIESPOSITIONED

M4BM4B M4CM4C

MECHANICALCOMPLETION

MECHANICALCOMPLETE

Key Stage ObjectivesProject Execution Relevant as built mark-up complete Construction work mechanical complete & quality records available. Categorised Punch lists for all systems. All systems ready for commissioning and commenced in accordance with system completion schedule Final Insulation, Labelling & Identification complete.Project Management Update baseline and current cost estimate Establish HSE program for system completion phase

ASSEMBLY

Key Stage ObjectivesProject Execution Major equipment, Pre- assemblies & modules assembly installed. Install Balance of Plant Equipment and interconnecting piping systems. Minor structures, E& I installation and Main insulation complete. Final Labelling & Identification started. Operation & Maintenance Manuals available.Project Management Update baseline and current cost estimate and System Hand-over Schedule Implement HSE requirements

M4AM4A

ASSEMBLY / ERECTIONPhase 4

Key Stage ObjectivesProject Execution Temporary Services & Power Distribution in place and Site roads complete up to sub-base. Major equipment, Pre- assemblies & modules transported to site and final positioned. On site fabrication and erection of major vessels and process equipment. Main Structures & Bridges CompleteProject Management Update baseline and current cost estimate Establish HSE requirements for Assembly & MC stages


PEM Control Level - System Completion


The objective of this phase is complete the Contract Object in accordance with agreed schedule, quality and budget. Perform and finalise all commissioning activities. Ensure that any temporary items are removed and update relevant documents with as commissioned information. Perform the required preparations for start-up. Formalise the Operational responsibilities and start production and performance testing. Complete hand-over documentation, verify warranties and guaranties and sign-off on Acceptance Certificate

Establish experience data with Project Execution plan as built with lessons learned and relevant metrics for quantity/weight & productivity


M4

Stage 5A Stage 5C

SYSTEMSCOMMISSIONED

M5A

Phase 5

M5D

COMMISSIONING

START-UPCOMPLETE

Key Stage ObjectivesProject Execution Perform and finalise all commissioning activities. Preparations for start-up Temporary items removed. Relevant documents updated with as commissioned information Punch List cleared for start-upProject Management Update baseline and current cost estimate Implement HSE requirements

TAKE-OVER Key Stage Objectives Project Execution All work completed Update relevant documentation (as built) Complete hand-over documentation Punch lists clearedProject Management Warranties and guaranties sign-off on Acceptance Certificates Project Execution plan as built with lessons learned Metrics for quantity/weight & productivity Total HSE program implemented

Stage 5D

START-UPKey Stage ObjectivesProject Execution Operational Responsibilities formalised. Introduction of feedstock Start production Performance testingProject Management Implement HSE requirements

M5C

TAKEOVER COMPLETE

OFFSHORE INSTALLATION COMPLETE

M5B

Stage 5B (Offshore Projects) OFFSHORE

INSTALLATIONKey Stage ObjectivesProject Execution Preparation for sail away Perform tow out Complete installation of substructure / moorings / tethers Complete installation of the production facility Document offshore installation/hook-up work MC complete Offshore commissioningProject Management Update baseline and current cost estimate Implement HSE requirements

SYSTEM COMPLETION

M4

Stage 5A Stage 5C

SYSTEMSCOMMISSIONED

M5AM5A

Phase 5

M5DM5D

COMMISSIONING

START-UPCOMPLETE

Key Stage ObjectivesProject Execution Perform and finalise all commissioning activities. Preparations for start-up Temporary items removed. Relevant documents updated with as commissioned information Punch List cleared for start-upProject Management Update baseline and current cost estimate Implement HSE requirements

TAKE-OVER Key Stage Objectives Project Execution All work completed Update relevant documentation (as built) Complete hand-over documentation Punch lists clearedProject Management Warranties and guaranties sign-off on Acceptance Certificates Project Execution plan as built with lessons learned Metrics for quantity/weight & productivity Total HSE program implemented

Stage 5D

START-UPKey Stage ObjectivesProject Execution Operational Responsibilities formalised. Introduction of feedstock Start production Performance testingProject Management Implement HSE requirements

M5CM5C

TAKEOVER COMPLETE

OFFSHORE INSTALLATION COMPLETE

M5BM5B

Stage 5B (Offshore Projects) OFFSHORE

INSTALLATIONKey Stage ObjectivesProject Execution Preparation for sail away Perform tow out Complete installation of substructure / moorings / tethers Complete installation of the production facility Document offshore installation/hook-up work MC complete Offshore commissioningProject Management Update baseline and current cost estimate Implement HSE requirements

SYSTEM COMPLETION


SECTION 6.0

PEM GLOSSARY

OF

TERMS AND ABBREVIATIONS


PEM TERMS 1. Strategic Level

PEM: Project Execution Model Phase: The Project execution is divided into stages with Milestones at regular intervals Stage: Further work breakdown of a Phase, represented by key events or objectives in a

projects lifecycle. The Stage is characterised by the activities prior to reaching its milestone.

Milestones: Start and end of each stage within the Phase. A milestone is characterised by its multidiscipline nature. Milestones are measuring points where the combined effort from all the underlying activities meets the predefined milestone requirement..

2. Control Level

Key Activities: Deliverables grouped into a number of Key Activities for both Management & Discipline execution.

Quality Level: Defined grade of completeness for a Key Activity. A quality level chain is defined with description of grade of completeness for each quality level. Each quality level shall be achieved at certain major milestones.

3. Execution Level

Flow Chart: Flow chart diagram that describes the work flow within a discipline or management environment. The flow charts has input requirement & output data shown. The flow chart contains activity boxes. The activities are grouped in CTRs (Cost Time Resources) and has an Activity Description defined for each activity.

Cost Time Resources (CTR): DA group of Activities collected in a database for processing & planning of activities with man-hours and personnel categories linked to the activity. Also includes a summary of scope of work and deliverables.

Activity Description: Description of each activity with name and no. Detailed description of scope of work to be performed and list of deliverables for each activity.

Governing Documentation: Procedures, Work Instructions & Guidelines supporting the Flow charts work processes.

Quality Level (QL) Description: Defined grade of completeness for a Key Activity deliverable. A quality level chain is defined with description of grade of completeness for each quality level. Each quality level is normally achieved at a certain major milestone.

Control Objects: Each Key Activity deliverable is divided into several Control Objects that acts as information carrier (a set of information is linked to a control object) in a database or as a document or drawing.

Status Level: Defines grade of completeness for a control object defined by the Quality Level (QL) Description. A status level chain is defined with description of grade of completeness for each status level.

o S1 Preliminary. o S2 Released for Verification/ICD. o S3 Frozen. o S4 Detail Design Completed. o S5 Fabrication and Commissioning Information Added. o S6 Part Product As-Built Information Implemented. o S7 Product As-Built Information Implemented.

Check Lists: Gives the requirements at each Status Level for each Control Object. Key items is interface information to be used by other disciplines or customers.


PEM Abbreviations To be further developed. CCE Current Cost Estimate COG Centre of Gravity CTR Cost Time Resource DFO Documentation for Operation DM Decision Milestone EIT Electrical, Instrument and Telecommunications FEED Front End Engineering Design GRC Group Risk Committee HVAC Heating, Ventilation and Air Conditioning ITT Invitation to Tender LCI Life Cycle Information MC Mechanical Completion MEL Master Equipment List OEM Operation, Engineering and Maintenance Manual PCS Plant Completion System PVC/PSV Pressure Control Valve/Pressure Safety Valve P & ID Piping and Instrument Diagram PO Purchase Order RDG Risk Decision Gate


APPENDIX A

CONTROL LEVEL MILESTONE REQUIREMENTS

PROJECT TENDERING


PROJECT TENDERING Control Level Milestone Requirements / Quality Levels


PROJECT TENDERING MILESTONE MTA Key Activity: Engineering

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Engineering identified Functional and Technical requirements reviewed/identified Concept/FEED/Design maturity assessed against PEM requirements for all relevant

engineering disciplines First Safety Assessment done Clarifications identified

Key Activity: Procurement

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Procurement identified Supplier Contract conditions and preferred Suppliers reviewed and identified Sourcing level estimated Clarifications identified

Key Activity: Sub-Contracting

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Subcontracting identified Draft Subcontracting Strategy established Clarifications identified

Key Activity: Fabrication/Construction

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Fabrication/Construction identified Draft Fabrication/Construction method established Clarifications identified

Key Activity: Completion

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Completion identified System Design Maturity with respect to completion assessed Clarifications identified


Key Activity: Tender Management and Administration

Quality Level 1

ITT and Scope of Work reviewed Client administrative requirements for this Tender identified Receipt of ITT acknowledged Tender cost and budget established Tender strategy and schedule established Tender Manager & Tender Team nominated Project Risk Profile checked including Core capability & Strategy profile and Business norms Bid evaluation performed Bid/No Bid Decision, DM 2, made (ref. Risk Policy Appendix 4)

Key Activity: Project Execution Strategy

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Project Execution identified Establish Initial Project Execution strategy Update Key Target Analyses (KTA) and assess winning strategy & project attractiveness (Ref.

Core capability & Strategy Profile) Check winning strategy & cost versus clients objectives/budgets Confirm agreements with strategic stakeholders, partners and sub-contractors

Key Activity: Project Team Alignment/HR

Quality Level 1

Key Activity: HSE Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for HSE (Health, Safety and Environment) identified

Key Activity: Cost Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Cost Estimating identified Compensation formats reviewed Tender cost estimate established Compensation strategy and format established


Key Activity: Planning/Scheduling

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Planning/Scheduling identified Initial Project Execution Strategy reviewed Schedule proposal established Long Lead Item impact identified

Key Activity: Risk Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Risk Management identified Contract, Milestones and Schedule etc. reviewed Risk Analyses prepared and risks and opportunities identified Risk Register updated for:

o External ( country, political, social) o Novelty ( technology, market, client) o Contractual & hand-over ( terms&conditions, claims, acceptance) o Financial ( cashflow, payment terms) o Contracting parties & terms ( client, consortium, major suppliers, subcontractors) o Health,Safety and Environmental (HSE) o Organisation and Human Resources o Construction/Siteworks o Scope and Project Execution capacity

Key Activity: Contract Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Contracts identified;

o Contractual Terms & Conditions (T's & C's) o Price Formats

Contracting strategy and possible partners and JV's (Joint Ventures) identified

Key Activity: Quantity & Weight Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Weight & Quantity Management identified Weight Management Strategy established Master Equipment List (MEL) available

Key Activity: Information Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Information Handling identified Information Strategy initiated


Key Activity: Quality Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Quality Management identified Quality Management Plan & Strategy initiated

Key Activity: Continuous Improvement

Quality Level 1

Need for improvement within project identified Opportunities for improvement within project identified

Key Activity: Change Management

Quality Level 1

ITT and Scope of Work reviewed Client requirements for Change Management identified Change Management Strategy initiated Client change conditions identified


PROJECT TENDERING MILESTONE MTB

Key Activity: Engineering

Quality Level 2

SOW for Project Execution defined and described for all engineering disciplines System and Area Design solutions reviewed Relevant Technical documentation updated

o Functional and Technical requirements o Design and Layout documentation o Analyses and estimates

Material take-off/estimates performed Input to organisation charts and MPP done


Quality Level 2

Pricing strategy incorporated Procurement strategy established and competitive actions planned Supplier and Sub-Contractor checks and agreements performed Long Lead delivery times identified Strategic sourcing completed Input to organisation charts and MPP done


Quality Level 2

Sub-Contracting Scope of Work defined Site Facilities cost estimated Rate assumptions established Input to organisation charts and MPP done Facility description established


Quality Level 2

Fabrication/Construction Scope of Work defined Site Facility cost estimated Rate assumptions established Input to organisation charts and MPP done Facility description established


Quality Level 2

Project Completion Scope of Work defined Draft completion organisation charts established for all phases Input to project organisation charts and MPP done



Quality Level 2

Tender execution strategy & schedule established Tender budget and schedule follow up Tender Team mobilised and tender Kick-off held Project key personnel nominated Project organisation charts prepared MPP (Manpower Projection Plan) established Sales strategy and success criteria established (ref. KTA) Project Risk Profile checked including Core capability & Strategy profile and

Business norms Major Milestone review frequency decided Bid evaluation performed Tender clarification and notification administration established Tender compiled for approval


Quality Level 2

Project execution strategy established including: o Engineering o Procurement o Contract & subcontracting strategies o HSE Programs o Fabrication & Construction o Completion o Schedule & milestones o Pricing/Compensation o Risk & Change Management o Work & Cost breakdown structure


Quality Level 2

Tender team alignment workshop(s) executed Project Management execution resources identified and part of tender & kick off

team


Quality Level 2

HSE Program established



Quality Level 2

Project cost estimate done Project pricing and compensation formats defined Sensitivity analyses performed Pricing assumptions finalised Compensation formats finalised Risk/reward scheme identified Cash flow developed

Key Activity: Planning/Scheduling

Quality Level 2

Project Schedule completed including: o Key Activity Schedule o Procurement Schedule and Long Lead items o Contract Milestone Schedule o Mobilisation Schedule


Quality Level 2

Contractual qualifications identified and determined Risk analyses performed and Project Risk Profile established Risk Register including response planning updated Risk reporting prepared


Quality Level 2

Contract and Sub-Contract Terms and Conditions (T's & C's) reviewed Contracting strategy with partners & JV's chosen Contractual exceptions and clarifications identified Pricing formats complete


Quality Level 2

Weight Management Strategy complete; o Weight quantity breakdown defined o Weight and quantity allowances and contingencies identified

Weight Estimates performed Weight Management decided


Quality Level 2

Information Management Strategy completed o IT/IS structure and plan defined o LCI (Life Cycle Information) draft defined o DFO (Documentation for Operation) draft defined



Quality Level 2

Quality Management Strategy complete Quality Plan draft established


Quality Level 2

Continuous Improvement theme selected Continuous Improvement targets quantified Strategy for reaching targets identified Strategy for involving client identified Resources required to achieve targets identified


Quality Level 2

Change Management Strategy complete o Project change procedure outlined o Basis for Change Control established


PROJECT TENDERING MILESTONE MTC Key Activity: Engineering

Quality Level 3

Scope of Work verified against engineering requirements and Project Execution approved


Quality Level 3

Scope of Work verified Project Procurement Strategy approved Project Sourcing Strategy approved


Quality Level 3

Rate assumptions verified Scope of Work verified and Project Sub-Contracting Strategy approved


Quality Level 3

Site facility cost verified Rate assumptions verified Scope of Work verified and Project Fabrication / Construction Strategy & Cost approved


Quality Level 3

Scope of Work verified and Project Completion Strategy & Cost approved Draft part system catalogue established


Quality Level 3

Tender & documentation reviewed, DM 3, by management and approved for submission, DM 4 (ref.Risk Policy Appendices 2, 5, 6, 7 and 8)

Group Risk Committee (GRC) meeting held as required Risk Classification completed (Low, Medium, High or Maximum Risk Project) Success criteria evaluated Negotiation mandate established Project organisation structure, chart, key Personnel and MPP approved Formal approval of tender and tender documentation complete


Quality Level 3

Project Execution Strategy and Plan approved and ready for implementation



Quality Level 3


Quality Level 3

HSE Program approved


Quality Level 3

Cost estimate approved Cash flow approved Pricing assumptions & Pricing approved Contingency and Profit level determined Risk/reward scheme approved Compensation format completed

Key Activity: Planning & Scheduling

Quality Level 3

All relevant Project Schedules approved


Quality Level 3

Contingency determined based on identified exposure Risk Register including response planning approved Risk reporting approved


Quality Level 3

Contract: o Contracting strategy approved o Terms and Conditions (T's & C's) approved o Qualifications approved

Subcontracts: o Terms and Conditions (T's & C's) approved o Critical subcontractor commitments made


Quality Level 3

Weight and weight breakdown approved, including weight allowances and contingencies



Quality Level 3

Information Management Strategy approved o IT/IS structure and plan o LCI (Life Cycle Information) draft o DFO (Documentation for Operation) draft


Quality Level 3

Quality Plan approved


Quality Level 3

Revised CI strategy, resources and targets


Quality Level 3

Project Change Management approved Basis for Change Control approved


PROJECT TENDERING MILESTONE MTD Key Activity: Engineering

Quality Level 4

Bid clarifications concluded and all relevant documentation updated and approved


Quality Level 4

Bid Clarification concluded and all relevant documentation updated and approved


Quality Level 4

Bid Clarifications concluded and all relevant documentation updated and approved


Quality Level 4

Bid Clarification concluded and all relevant documentation updated and approved


Quality Level 4

Bid Clarifications concluded and all relevant documentation updated and approved


Quality Level 4

Negotiation Team selected Bid clarifications concluded/settled Negotiations concluded Risk Classification verified Contract document complete and ready for approval, DM 5. (ref. Risk Policy Appendices 7, 9

and 10 ) Contract ready for handover to project team


Quality Level 4

Project Execution Strategy and Execution Plans adjusted for clarifications and negotiations Updated Project Execution Strategy approved


Quality Level 4



Quality Level 4

HSE program updated as required based on bid clarifications and contract negotiations


Quality Level 4

Price and contingency updated based on clarifications and negotiations Price and contingency approved by management


Quality Level 4

All Project Schedules affected by clarifications and negotiations updated and approved


Quality Level 4

Risk documentation updated and reassessed based on deviations from submitted tender in bid clarifications and negotiations;

o Risk analyses and Project Risk Profile o Risk Register o Risk Report

Updates approved by management


Quality Level 4

Contract and Subcontract documentation updated with exceptions and clarifications Contract and Subcontract documentation approved by management


Quality Level 4

Weight and weight breakdown updated as per Scope of Work update Weight and weight breakdown update approved by management


Quality Level 4

Information Management documentation updated as required and management approval obtained


Quality Level 4

Quality Plan updated as relevant



Quality Level 4

Revised CI strategy, resources and targets Presentations made to client (as required)


Quality Level 4

Basis for Change Control updated as relevant


PROJECT TENDERING MILESTONE MTE

Key Activity: Engineering

Quality Level 5

Technical and administrative handover completed Scope of Work start-up plan initiated Initiate design basis review Enable design basis alignment


Quality Level 5

Commercial and administrative handover completed


Quality Level 5

Technical, commercial and administrative handover completed


Quality Level 5

Technical and administrative handover completed


Quality Level 5

Technical and administrative handover completed


Quality Level 5

Technical, commercial and administrative handover completed Project team mobilisation as scheduled Tender team demobilised Client kick-off meeting performed Start-up plans implemented for

o Scope of Work o Administration & Management

Project kick-off meetings as scheduled


Quality Level 5

Project Execution Strategy and Execution Plans handover completed Draft milestone Status Checklist established Project Milestone Plan implemented in draft Project audit and verification activities



Quality Level 5

Project Management team and Project Board aligned Key consortium issues clarified Kick off meeting with customer executed Kick off meetings in project with mobilised personnel executed


Quality Level 5

HSE Management handover completed Project HSE Program established


Quality Level 5

Draft Control Budget established and cost breakdown structure implemented Commercial handover completed Commercial awareness program initiated


Quality Level 5

Completed handover of; o Key Activity Schedule o Procurement Schedule and Long Lead Items o Contract Milestone Schedule o Mobilisation Schedule o Deliverables o Manhour loading


Quality Level 5

Project Risk Model, Risk Register and Risk Report handover completed


Quality Level 5

Contract and Subcontract handover completed


Quality Level 5

Weight and Quantity Management and Weight Report handover completed



Quality Level 5

Information management handover completed IT/IS available in project


Quality Level 5

Quality Management handover completed Project Quality Plan established


Quality Level 5

CI strategy, resources and targets communicated to client, project, Business Unit and Business Area


Quality Level 5

Change Management handover completed Project Change Control Procedure established


APPENDIX B

CONTROL LEVEL MILESTONE REQUIREMENTS

PROJECT EXECUTION


PROJECT EXECUTION Control Level Milestone Requirements / Quality Levels


PROJECT EXECUTION MILESTONE 1A Key Activity : Concept Execution Activity : Concept Execution Quality Level 1 HSE Requirements established. Identify product and market. Establish possible process solutions infrastructure identified. Establish environmental requirements. Key process and product interfaces defined.

AKER KVAERNER COMMON PEM USE

project execution model

Documents

project execution methodology

project execution model

project organisation

recent execution

controlled execution

pem control level stages

actual project costs

control of costs