Qualitative Survey Questionnaire

| June 10, 2016

Question
Dissertation Title:

“How do Project Managers use forecasting trends and variable cost strategies in order to mitigate the impact of cost increases within the Oil & Gas industry ”

Thank you for taking part in my dissertation survey. Please note that all responses are confidential, so you can feel free to be as specific and candid as you like with your comments.

The overall objective of this research project is to identify techniques to minimise the impact of labour and material cost escalation of total projects costs. The particular purpose of this survey is to:

· Strategies to minimise local labour costs and imported construction labour which can be influenced by inflation, security issues, supply and demand economics and even welfare and subsistence arrangements whilst in the country.

· Strategies for volatility of raw material prices and its availability which are inevitably driven by demand.

· Identify forecasting trends of currency, controlling variable costs and mitigating the impact of cost increases.

SECTION 1

Introduction

SECTION 1 is to give me a better understanding of the average Project Manager or project professional that has completed this Questionnaire. It is designed so that I can better understand your background and present workload. It is not designed to record any personnel information that could identify you.

If your work involves running Advisory or Consultant services or Engineering Studies at your Home Office location, you should complete SECTION 2.

If your work involves preparing cost estimates for projects (including the costs associated with construction labour and the material/equipment costs), you should complete SECTION 3.

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SECTION 1

Information about You

Your Details:

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SECTION 2

Engineering at the Home Office

For companies that carry out the Engineering in the Oil & Gas industry, the workforce is international and has a high level of mobility. Not only can employment be cyclical and insecure, personnel can relocate from country to country, as every new projects starts and old projects finish.

One of the factors that contribute to this feature of the industry is that many people work to the same or similar standards, and selection of personnel can be driven by the cost to employ, just as much as having the required skill set.

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Workforce

Question

1. What is the makeup of the workforce at your location?

§ % of locally recruited staff

§ % of internationally recruited staff (European/American)

§ % of internationally recruited staff (other)

§ .png”>Any other

++++++++++++++++++++++++++++++

Question

2. Where you have internationally recruited staff, what have been the reasons for using them in preference to locally recruited staff?

§ Restricted availability of suitably skilled personnel

§ Skilled personnel available internationally

§ Ready availability

§ Employment packages at the Home Office location are attractive to new recruits

§ Government regulation on employment of indigenous staff

§ Government fees and levies on the use of non-local labour

§ Security issues

§ .png”>Any other

++++++++++++++++++++++++++++++

Question

3. Employment costs rise and fall regularly in the short term but the overall trend appears for them to rise at a predictable rate. Which of the following, in order, do you consider pose the greatest risk to your labour costs rising in the future?

Cost of living increases
Cost of living increases at the home of internationally recruited staff
Exchange rate variations between currencies at the project location
Changes in Government labour restrictions
Changes in the security situation at the project location
Restricted availability of specific skills
New project work competing for a fixed pool of labour and increasing wages
§ .png”>Any other

++++++++++++++++++++++++++++++

Direct costs that vary over time

Question

4. Some of the direct labour costs vary over time and can significantly affect the daily rates paid to engineering personnel. Some can be predicted but others cannot.

§ Cost of living increases

§ Exchange rate variations

§ Changes in Government labour restrictions

§ Changes in the security situation at the project location

§ .png”>Any other

++++++++++++++++++++++++++++++

Indirect Costs that varying over time

Question

5. Some of the indirect labour costs vary over time and can significantly affect the daily rates paid to engineering personnel. Some can be predicted but others cannot.

§ Changes in accommodation costs

o Buildings

o Cost of support services

§ Increase of In-Country transportation costs

§ Increase of Administration costs over the course of the project

§ .png”>Any other

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Strategies to Minimise Engineering Costs

There are two strategies to manage or reduce engineering costs:

§ Reduce the man hours for each deliverable (operate efficiently)

§ Reduce the effective overall cost of the man hours (reduce costs)

In many cases the management may attempt both strategies at the same time.

++++++++++++++++++++++++++++++

Question

6. To reduce the man hours, a number of tactics can be considered.

§ Increased/improved management and supervision

§ Work more efficiently and reward good performance

§ Work more efficiently and punish poor performance

§ Employ higher quality/more experienced supervisors

§ .png”>Any other

++++++++++++++++++++++++++++++

Question

7. To reduce the cost of the man hours, a number of tactics can be considered.

§ Employ cheaper personnel

§ Reduce office overheads

§ Offshore the engineering to a location with a lower labour cost

§ Sub-contract work to specialist contractors

§ Sub-contract work to a contractor with lower overheads

§ .png”>Any other

++++++++++++++++++++++++++++++

Question

8. Sub-contracting work out to third parties always carries a degree of risk. What do you consider to be the greatest risk?

§ Schedule

§ Cost

§ Quality

§ Client confidence

§ .png”>Any other

Strategies to Minimise Overall Project Costs

The influence on overall project costs can be dramatically affected by the design philosophies adopted during the design process.

Question

9. Do you actively consider any of the following when designing new process plant or utilities?

§ Pre-fabrication and the use of Pre-Assembled Modules

§ Reduce the dependence on specialist construction personnel, equipment or procedures(i.e. don’t use FOC if standard instrument cables are a lower cost option).

§ Reduce the dependence on exotic materials if possible (i.e. duplex steels require specialist skills to weld)

§ Simplify the design to reduce the construction man hours

§ Simplify the design to reduce the volume of materials

§ Continuously evaluate to refine the design and optimise (cheaper construction offset by increased engineering cost)

§ Our principal role is to maximise the engineering content and profitability, overall project economies are a secondary issue

§ .png”>Any other

SECTION 3

Preparing Cost Estimates

All projects have cost estimates prepared at different stages to confirm financial viability and obtain financial approval. Preparing these cost estimates are a critical part of the project development.

This part of the Questionnaire consists of two parts that are bot important when developing a cost estimate. Part A concerns the labour costs associated with the construction phases of the projects. Part B concerns the material and equipment procurement costs.

Cost Estimates – Part A

Construction Labour

Direct cost of employment

Question

1. There are many factors that influence the direct cost of employment of the construction labour force. What order would you place the following influences?

Direct Costs

§ Restricted availability of suitably skilled labour

§ Government restrictions on importing labour

§ Government fees and levies on the use of non-local labour

§ Security costs at the project location

§ Security issues affecting availability of labour

§ .png”>Any other

++++++++++++++++++++++++++++++

Direct costs that vary over time

2. Some of the direct labour costs vary over time and can significantly affect the overall labour costs to complete the construction. Some can be predicted but others cannot.

§ Cost of living increases

§ Exchange rate variations

§ Changes in Government labour restrictions

§ Changes in the security situation at the project location

§ .png”>Any other

++++++++++++++++++++++++++++++

Construction Labour

Indirect cost of employment

Question

3. There are many factors that influence the indirect cost of employment of the construction labour force. What order would you place the following influences?

· Accommodation costs

o Buildings

o Cost of support services

· Relocation costs from country of recruitment to project location

· In-Country transportation costs

· Local fees and costs (recruitment costs)

· Administration costs (HR/Welfare/PRO etc.)

· .png”>Any other

++++++++++++++++++++++++++++++

Indirect Costs that varying over time

Question

4. Some of the indirect labour costs vary over time and can significantly affect the overall labour costs to complete the construction. Some can be predicted but others cannot.

· Changes in accommodation costs

o Buildings

o Cost of support services

· Increase of In-Country transportation costs

· Increase of Administration costs over the course of the project

· .png”>Any other

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Cost Estimates – Part B

Material & Equipment Costs

Question

5. When preparing a cost estimate, material and equipment costs are frequently based on current quotations from Vendors or historical data. But there are other ways of producing cost estimates. Select those that you use:

Equipment Costs

§ Quotations from Equipment Suppliers for major capital plant only with “Best guess” assumptions based on previous experience for Balance of Plant

§ Quotations from Equipment Suppliers for all bought in items

§ .png”>Any other

++++++++++++++++++++++++++++++

Question

6. Material Costs

§ Budget prices from material suppliers

§ Historical database of costs

§ “Best guess” assumptions based on previous experience

§ Mix of the above

§ .png”>Any other

++++++++++++++++++++++++++++++

Question

7. If you have historical databases of costs, are these:

§ Continuously maintained internally by dedicated staff

§ Updated as required by engineers and commercial staff

§ Provided by an external (3rd party) source

§ Provided by a proprietary software package

§ Adjusted for currency exchange rate to a common baseline

§ .png”>Any other

++++++++++++++++++++++++++++++

Question

8. Prices generally rise over time for a variety of reasons: These can be generally referred to as “Inflation”. Which of the reasons below do you generally consider the biggest risk to the accuracy your budget estimates?

§ Exchange rate fluctuations

§ Commodity price rises driven by world prices and high demand

§ Previous/current dips in market demand

§ Specialist nature of supplier/commodity means that premium prices can be demanded

§ .png”>Any other

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Question

9. When you prepare cost estimates, do you make allowances for future variations in material and equipment costs (i.e. inflation)?

§ Yes

§ No

++++++++++++++++++++++++++++++

Question

10. If YES to Question 09, how do you make these adjustments to the current/historical costs?

Equipment

§ On an item by item basis for major capital plant (X% per year)

§ Using a number of different “inflation factors”

§ A single “inflation factor”, applied on a yearly basis for the duration of the project

§ Using a global contingency that is not time based

++++++++++++++++++++++++++++++

Materials

§ Using a number of different “inflation factors”

§ A single “inflation factor”, applied on a yearly basis for the duration of the project

§ Using a global contingency

++++++++++++++++++++++++++++++

Question

11. If NO to Question 09, why do you not make these adjustments to the current/historical costs?

§ No anticipated “inflation” over the life of the project

§ Short duration of project means “inflation” not a serious concern

§ Low capital value means that “inflation” not a serious concern

§ “Inflationary” elements only a small part of overall costs

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