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  1. Opportunities Related to EPC Initiatives Support Services Management - NWC

  2. Outline • Rationale for choosing EPC methodology • Objectives and criteria for the selection of EPC contractors • Key success factors for EPC • Ongoing improvement initiatives at NWC • Investment Forecast in RIYADH and JEDDAH (CAPEX)

  3. Features of EPC Methodology • EPC methodology is about Lead-Time, Quality and Ability to Execute • EPC methodology is Generic, Objective, Transparent and Time Based • EPC proven benefits include: • Streamlined tendering and selection process • Better integration of design, procurement and construction • Higher accountability for the success and failure of the project • More flexibility to contractors • Lower project costs • The process is multi-stage to allow for a variety of levels of complexity

  4. Selection of EPC Vendors – Our Views • The two most important value determining factors in any competition are the quality of the specification and the bidders who are invited to participate • Increasing scrutiny of procurement means organizations are putting a lot more emphasis on who is a vendor • New issues have risen up the agenda: health and safety, environmental care, corporate responsibility, climate change • Increased fear amongst buyers of the impact of using inappropriate vendors: financial risks, publicity, reputation damage Engineer • Allowing inappropriate vendors to bid will have a negative effect on the competition, is wasteful to the buyer and the sellers and causes increased time delays Construct Procure

  5. Selection of EPC Vendors – Our Objectives • To find a range of EPC vendors who wish to provide a particular service • To reduce that number to a list of vendors who wish and are capable of providing the service • To select people who wish to provide the service and are capable of doing so and can do so whist being ethical, credible and stable • Finally to then choose (if the numbers justify) not only those who wish to provide, are capable and ethically suitable but who are the best EPC vendors available

  6. Selection of EPC Vendors – Our Selection Criteria • Experience • Quality and timeliness of past performance • Reliability and responsibility • Compliance with equal employment requirements • Compliance with wage and other fair labor standards • Subcontractors used by the Firm • Integrity of the Firm and its key personnel • Financial status and operations

  7. Key Success Factors for EPC Projects • Higher degree of owner involvement: a move away from comprehensive lump-sum turnkey projects toward alternate structures • Better partnering and relationship-building with EPC Contractors: build longer term, mutually beneficial relationships with their key EPC suppliers • Front-loading, especially for the engineering and design phase • Thorough risk identification and clear allocation: such as the use of specified cost indices to manage volatility and price increases for commodities and labor • Effective project management, including detailed scheduling, constructability reviews, progress reporting, and overall performance measurement

  8. Our Ongoing Improvement Initiatives • Human Capabilities: recruitment of specialists in asset management/ design/procurement and transfer of knowledge from management contract operators • Procurement and Tendering: clear scope of work in RFPs, optimized prequalification and selection criteria, limited number of bidders, implementation of FIDIC standards • Project Management: hiring the best consultants to supervise projects, developing a competent internal team, and reengineering of project management processes and systems • Financial Support: advance payments to cash strapped contractors and claim resolutions facilitation prior to end of contracts • Technical Support: supporting contractors in coordination with Ministries and ensuring that contractor counterparts have a strong engineering background (design and construction)

  9. As of Today • We have 32 qualified international companies and 28 international companies with local JV • We have awarded over 265 projects worth of SR 3.6 billion • 15% of projects were awarded directly to international contractors • 45% of projects were awarded to international JV

  10. INVESTMENT FORECAST IN RIYADH AND JEDDAH (CAPEX) in Billion SAR • Anticipated Investment required SR 34 Billion by 2014 in the other targeted Cities