W2_Doyin_Contracting Incentives

    1.   Problem Recognition, Definition and Evaluation:

‘’Incentive Contracting and Project Management in the Oil and Gas Industry of Nigeria, the Contractors Perspective’’

The Objective of the Oil and Gas Companies in Nigeria is to create a cooperative environment. Contract awards and execution of Projects are methodologies that are employed by these companies to achieve their development objectives.  The objective of Contracts should be producing a cooperative organization, aligning the contractors' objectives with the owners.

In the Nigerian oil and gas industry, there are lots of cost overruns due to non compliant with the scheduled date of completion in all of the executed projects .This impacts negatively on the Contractor. For a well defined work activity break down structured project, the longer a project takes the thinner the profit margin and the more resources will be employed by the Contractor.

More also, Nigeria been a developing Nation, Financial resources are scarce for project execution. Contractors access funds at very high interest rates which impacts negatively on the profit margins and overall delivery of the contractor.

  

    2. Development of Feasible Alternatives. Project Management is Time Focused where Incentive and Disincentive strategy is employed.

Time focused alternatives are.

•    Traditional bidding with an Incentive/Disincentive provision.

•     Cost-plus-time (A+B) bidding with an Incentive/disincentive clause

•     Depending on the type of project, Land/Lane rental

•     Design/build contracting,

·         Milestone Payment by the owner to the contractor on timely completion schedules of the contractual agreement.

33.    Development of the outcomes and cash flows for each alternatives.

·         Length of time for Project completions is reduced.

·         Each alternative reduces negative impacts the project will have on the direct beneficiary of the project.

·         These alternatives will encourage technological based processes in Project management.

·         There will be an improved perception of projects from the direct beneficiary of the project.

·         Environmental Impact will be reduced on the locals.

S    4.Selection of Criteria.

For the purpose of this blog,

·         Mile Stone payment alternative.

                       .    Cost-plus-time (A+B) bidding with an Incentive/disincentive clauses 

5.Analysis and comparison of the alternatives.

·         Milestone Payment by the owner to the contractor on timely completion schedules of the   contractual agreement.

             

·         Cost-plus-time (A+B) bidding with an Incentive/disincentive clause, where a bidder

                (rather than the owner) establishes the time of completion. Commonly, this technique is used to achieve on-time or accelerated performance. If the project is late, the

            contractor suffers a loss (the disincentive) and if completed early, the contractor gains      

            through   an incentive.

          

       

66.     Performance Monitoring.

The performance will be measured on Time of Completion.

77 REFERENCES

1.         J. Rodney Turner 2004 Construction Management and Economies volume 22 ,Issue 1,    2004 http://wwwtandfonline.com/doi/abs

                                          

2.        Paul D. Giammalvo 2012 AACE Certification Prep. Course Day 5 page 75 of 93

3.       David N. Sillars, PhD, PE February 2007. ESTABLISHING GUIDELINES FOR    

INCENTIVE/DISINCENTIVE CONTRACTING AT ODOT.

                      http:/www.oregon.gov/ODOT/HWY/ESTIMATING/DOCS