Bases FEED EPC Parte 3vI

PETROPERU S.A. VOLUME 2 TALARA REFINERY MODERNIZATION PROJECT PART C SERVICES & DELIVERABLES - FEED & EPC FEED-EPC CONTRACTOR IFP MASTER JOB SPECIFICATION PAGE 1 OF 1

DATE: 11 DE JULIO DE 2009

PART C SERVICES AND DELIVERABLES

FRONT END ENGINEERING DESIGN - ENGINEERING, PROCUREMENT, AND CONSTRUCTION

(FEED & EPC)

Table of Contents

International Bidding Process N PCI-002-2008-OFP/P ETROPERU

1. Introduction

2. Project Participants 3. General Distinction between FEED and EPC Services, Deliverables,

Performance Expectations and Success Factors

4. Project Instructions

PETROPERU, S.A. VOLUME 2 TALARA REFINERY MODERNIZATION PROJECT PART C SERVICES AND DELIVERABLES - FEED & EPC FEED-EPC CONTRACTOR IFP MASTER JOB SPECIFICATION

PAGE 1 OF 4 DATE: 11 DE JULIO DE 2009


PART C SERVICES AND DELIVERABLES

FEED & EPC

1. Introduction

Part C Services and Deliverables is a section of the MJS for the PETROPERU S.A. Talara Refinery Modernization (TRM) Project FEED-EPC Agreement. It defines the framework of Services and Deliverables expected from the FEED-EPC Contractor.

Part C presents a general description of the FEED-EPC Contractors roles and responsibilities during the FEED-EPC execution and is supplemented with Annexes C1 FEED and C2 EPC, each of which address in a more detailed manner the roles and responsibilities during the reimbursable cost (FEED) and Lump Sum (EPC) phases of the TRM Project. EMPLOYER is depending on the FEED-EPC CONTRACTOR to be conceptualizer, coordinator, optimizer, planner, designer, executer and Commissioning/Start-up/Performance testing CONTRACTOR for the entire TRM Project.

Notwithstanding the definitions in Annex C1 FEED, Annex C2 EPC, and the Agreement, EMPLOYER lets the FEED-EPC CONTRACTOR to take the decision to organize and efficiently manage/execute the following:

All FEED obligations/functions necessary to incorporate Licensors Basic Design Packages (BDP) and FEED CONTRACTORS internally designed Open Art BDPs into an integrated, optimized, cohesive, comprehensive, reliable, CAPEX and OPEX effective, high quality set of FEED phase deliverables including but not limited to complete FEED packages for all units, a +/-10% quality Open Book Estimate (pursuant to rule AACEI RP N 18R-97 Cost Estimate Classification System as applied in Engineering, Procurement, and Construction for the Process Industries), and a definitive EPC Phase Project Execution Plan (PEP).

Responsively develop a mutually acceptable LS Contract Price and Conversion from Reimbursable Cost to Lump Sum through an Open Book Estimate process.

Carry out the EPC phase Date and Price Certain Agreement and related responsibilities developed and agreed to following the FEED phase in accordance with established international performance standards and best practices.

These principles should be used to guide all FEED-EPC Contractor activities and actions throughout the TRM Project.




2. Project Participants

A more detailed description of the principal participants in the TRM Project is presented in Part A Project Perspective of the MJS. PMC obligations as expressed in the MJS are only relevant as between PETROPERU and the PMC and do not affect in any way the FEED-EPC Contractors obligations. An abbreviated summary is included herein for convenience:

PETROPERU S.A. named Owner and Employer for the Talara Modernization Project who has formed the EMPLOYER Project Team (PT) consisting of the EMPLOYER Project Manager and his staff responsible for the Project planning, development and execution. Project Management Consultancy Contractor (PMC) Contractor selected by EMPLOYER to serve as EMPLOYERs Representative and provide TRM project management support services to the PT as well as TRM project principal representation, consulting and oversight services on behalf of EMPLOYER with relations to the activities and performance of the FEED-EPC CONTRACTOR. Delegated authorities and responsibilities between EMPLOYER and the PMC will be documented in advance and shall be approved by EMPLOYER.

FEED-EPC CONTRACTOR CONTRACTOR selected by EMPLOYER shall fulfill the principal Contractor roles and responsibilities outlined above in Section 1 Introduction. FEED responsibilities will be conducted on a reimbursable cost Fixed Fee Mark-Up culminating, among other things, in the development of quality Job Specifications for all Talara Refinery Modernization facilities and a comprehensive and competitively priced Open Book Estimate, supported by a comprehensive Project Execution Plan (PEP). Until Conversion is achieved (Pre-Construction period), detailed engineering and procurement work will proceed on a reimbursable cost basis. Once achieved, subsequent EPC work obligations will be completed on a mutually agreed LS basis and in accordance with a mutually agreed and updated PEP.

Licensors EMPLOYER has selected a set of Licensors of proprietary processes to work collaborate with the FEED-EPC CONTRACTOR in order to provide a fully integrated, cost efficient and environmentally friendly modernization facility for Talara. Said Licensors will cooperate with the FEED-EPC CONTRACTOR and communicate directly on relevant technical matters. In addition, Licensors will provide guides and training for the EMPLOYERs personnel and performance testing support.

Main Automation Sub-Contractor (MAC) FEED-EPC CONTRACTOR will select and with EMPLOYER approval shall contract a Main Automation Sub-Contractor (MAC) to be in charge of the design, procurement and construction activities of the modernized refinery Processes Control Systems. FEED-EPC CONTRACTOR shall be responsible for coordination with the Licensors and the MAC and shall assist MAC in carrying out its obligations and responsibilities in




an efficient, timely manner. The Licensors shall be expected to fully cooperate with the FEED-EPC Contractor and MAC in these efforts. The MAC will be a subcontractor of the FEED-EPC CONTRACTOR

After the project closing out, the MAC and the EMPLOYER with discuss the possibility of entering in a new agreement in order to have operating assistance from the MAC.

3. General Distinction between FEED and EPC Services, Deliverables, Performance Expectations and Success Factors

Specific performance expectations for the FEED-EPC CONTRACTOR with regard to the FEED and EPC Phases of the TRM Project are set forth in Annex C1 FEED and Annex C2 EPC respectively. Before proceeding to the Annexes, the end goals for each of these Phases should be recognized from a more holistic basis. It is EMPLOYERs intent that at the end of the FEED portion of the FEED-EPC CONTRACTORs effort, the facilities for TRM Project be completely defined to where:

An AACEI Class 2 Open Book Cost Estimate (+/-10% accuracy) can be and has been developed, supported by a quality, comprehensive PEP for the EPC Phase.

FEED-EPC CONTRACTOR and EMPLOYER can agree, in the established time, a mutually satisfactory Conversion and proceed without interruption into the LS EPC phase of the project.

FEED-EPC CONTRACTOR can, at EMPLOYERs option, proceed immediately and efficiently into the Pre-Construction transition stage, initiating detailed engineering and procurement activities in accordance with the mutually agreed PEP.

EMPLOYERs expectations at completion of the EPC Phase of the project, if it proceeds as anticipated with the FEED-EPC CONTRACTOR, include acceptance of a smoothly operating Modern Talara Refinery facility, meeting specified quality standards and operating efficiently and reliably, safely producing desired product quantities/quality, with desired operating flexibility, while meeting CAPEX and OPEX objectives in accordance with the Agreement.

Annex C1 FEED and Annex C2 EPC will provide more extensive definition of the services, deliverables and expectations for the FEED and EPC phases of the project respectively. In spite of the split between the FEED and EPC phases of the project, the FEED-EPC CONTRACTOR is expected to think entirely of these two phases and be prepared to develop the EPC phase in a highly timely and cost effective manner.




4. Project Instructions

The following are Project Instructions (PI) for the FEED-EPC CONTRACTOR. These PIs define a number of administration and communications minimum requirements between EMPLOYER/PMC and the FEED-EPC CONTRACTOR during the course of the project. It is expected that the selected Bidder will use these PIs as a basis for developing, in an extensive and specific manner, its Coordination Procedures for the TRM Project. For the most part, PIs are the same for both the FEED and EPC phases of the project, except where otherwise annotated.

PETROPERU S.A. VOLUME 2 TALARA REFINERY MODERNIZATION PROJECT PROJECT INSTRUCTIONS TO PART C FEED-EPC CONTRACTOR IFP SERVICES AND DELIVERABLES - FEED & EPC

MASTER JOB SPECIFICATIONS PAGE 1 OF 1

DATE: JULY 16, 2009


PROJECT INSTRUCTIONS

TABLE OF CONTENTS

Tab # Title

1. Correspondence 2. Time Management 3. Cost Management 4. Quality Management 5. Procurement 6. Material Control 7. Document Control 8. Change Control 9. Project Specificactions 10. Finance and Insurance 11. Responsibility for Other Contract 12. Overall Construction Plan 13. Site Health, Safety, Security and

Environmental

14. Monthly Progress Reporting 15. Measurement of Percentage Completion 16. Mechanical Completion and Facilities

Turnover

17. Models 18. Compilation of Project Data 19. Companys Reviews, Agreements,

Approvals & Authorizations

20. Protection of Proprietary/Confidential Information



DATE: JULY 10, 2009

1. CORRESPONDENCE


I. OBJECTIVE

This Instruction addresses issuance and distribution requirements for all project related correspondence and communications.

II. GENERAL REQUIREMENTS

All Project communications are to be provided in both the Spanish and English language with, in case of conflict, the Spanish version will prevail.

Project participant addresses are presented in Exhibit 1-1, while the requirements for EMPLOYER-originated and CONTRACTOR-originated correspondence are detailed in Exhibits 1-2 and 1-3, respectively. (CONTRACTOR shall note that Exhibit 1-3, as presented, displays only a tabulation of those documents it and the Supervised Contractors, vendors, and subcontractors under its control shall produce and issue for the project. Therefore, CONTRACTOR shall submit, at the Agreement Signature, for EMPLOYERs review and approval, Exhibit 1-3 upgraded to a matrix format and included as Exhibit 1-4.)

A. Mail and Email Correspondence

1. CONTRACTOR-originated project correspondence shall be addressed to EMPLOYERs Project Manager (or Representative at Site appointed by the EMPLOYER) using appropriate alphanumeric sequential numbering systems to identify correspondence. Copies and distribution of said correspondence shall be in accordance with Exhibit 1-4.

2. All EMPLOYER-originated correspondence to CONTRACTOR shall be in accordance with Exhibit 1-2 and addressed to Contractor's Project Manager or Construction Manager.

3. All hardy copy mailings shall use the most time/cost effective class of postal and courier services and shall accommodate, if appropriate, requirements of customs clearance or other applicable considerations. To further expedite delivery, larger mailings (or emails as applicable) shall be subdivided into smaller packages (or files for emails or other electronic transmissions) which shall be clearly identified as components of a larger multiple package (e.g., 1 of 6).

4. Facsimile transmission or emailing of letters and other items may be used when feasible but critical items such as notices, approvals, etc. shall be confirmed by hard copy originals mailed to the party.

5. Alternate means (e.g., air or motor freight) may be employed for those items not purely correspondence in nature such as catalogs, manuals, etc.



DATE: JULY 10, 2009

1. CORRESPONDENCE


B. Telephone or Email Communication - Immediate, written confirmation of all queries, agreements, and instructions transmitted via telephone or email shall be mandatory. Should said confirmation require distribution, copies of such written confirmation shall be distributed in accordance with Exhibits 1-1, 1-2, and 1-3.

C. Vendor Documents and Data - CONTRACTOR shall note that "Vendor Documents and Data" is defined to include all drawings, specifications, calculations, and other data requiring CONTRACTOR or EMPLOYER approval as produced by Vendors, Sub-Vendors, Supervised Contractors, and subcontractors under CONTRACTOR's control. Distribution by CONTRACTOR of said material shall be consistent with the development status of the information contained, e.g., raw, reviewed, resubmitted, or certified.

D. SUPPORTING INFORMATION CONTRACTOR shall design a system that permits to have electronic copies of all the documents and data generated during the Project execution with the security elements and appropriate access that have to be approved by the EMPLOYER; this system shall be always updated and maintained by the CONTRACTOR, with access to the EMPLOYER or EMPLOYERs Representative.



EXHIBIT 1-1 PAGE 1 of 2

DATE: JULY 10, 2009

1. CORRESPONDENCE


EXHIBIT 1-11

PARTICIPANT ADDRESSES

EMPLOYERs Authorized Representatives

(Name of EMPLOYERs Project Manager) (Street Address) (Mail Address) (Telephone) (Cell Phone) (Fax) (Email Address)

(Name of EMPLOYERs Representative at Site) (Street Address) (Mail Address) (Telephone) (Cell Phone) (Fax) (Email Address)

1 EMPLOYER shall insert names of appropriate EMPLOYERs PT representatives and PMC

representatives.




DATE: JULY 10, 2009

1. CORRESPONDENCE


CONTRACTORs Authorized Representatives

(Name of CONTRACTORs Project Manager) (Street Address) (Mail Address) (Telephone) (Cell Phone) (Fax) (Email Address)

(Name of CONTRACTORs Construction Manager)

(Street Address) (Mail Address) (Telephone) (Cell Phone) (Fax) (Email Address)

Other:Additional names, addresses, functions, and organizations will be provided at the Agreement Signature.




DATE: JULY 10, 2009 1. CORRESPONDENCE


EXHIBIT 1-2

EMPLOYER-ORIGINATED CORRESPONDENCEDOCUMENT DISTRIBUTION

Requirements as to Originator, Number of Copies, etc. to be established.2

A. General

B. Contractual

C. Job Specification-Initial

D. Job Specification-Revisions

E. Change Proposal Requests

F. Change Authorizations

G. Cost Estimates

H. Cost Reports

I. Procurement

Vendor/Subcontractor Acceptability

Purchasing

Expediting

Subcontracting

Traffic

Spare Parts

J. Progress Reports

2 EMPLOYER shall develop this item prior to Agreement Signature.




DATE: JULY 10, 2009 1. CORRESPONDENCE


K. Quality Management

Home Office (NPTA)

Shop Inspection

Field (Site Inspection)

L. Mechanical Completion and Turnover

M. Start-Up




DATE: JULY 10, 2009

CORRESPONDENCEEXHIBIT 1-3

CONTRACTOR ORIGINATED CORRESPONDENCEDOCUMENT DISTRIBUTION


A. General

1. Contractual

2. Contractual Correspondence

3. Job Procedures

4. Contractor Invoices

5. Code of Accounts

6. Insurance

7. Conference Notes/Minutes of Meeting (General)

8. Follow Up Notes

B. Supervised Contracts

1. Correspondence

2. Invoices

3. Conference Notes/Minutes of Meeting

C. Project Control

1. Monthly Progress Report

2. Project Schedules

3. Progress Curves

4. Staffing and Labor Profiles/Productivity

5. Earned Value (EV) Weekly Updates

6. Shutdown Planning Conference Notes

7. Time Management Effort Appraisals

8. Monthly Cost Reports (SPCL)

9. Cost Estimates

10. Control Estimate/Control Budget

11. Cost Forecasts

12. Cost Control Conference Notes

13. Change Proposals

14. Change Orders

15. Field Change Orders

16. Change Order Summary

17. Bulk Material Summaries

18. Material Requisition Status (MRS) Report

19. Purchase Order Report (POR)

20. Material/Equipment Status and Expediting Report

21. Master Subcontracting Plan




DATE: JULY 10, 2009




22. Specification Index

23. Drawing Index

24. Vendor Print Log

25. Spare Parts Control Log

26. Overall Construction Plan

D. Procurement

1. Vendor/Subcontractor Correspondence

2. Vendor/Subcontractor Conference and Minutes of Meeting Notes

3. Vendor/Subcontractor Lists

4. Material Requisition (MRs)

5. Inquiry Documents/Specifications

6. Inquiry Release

7. Bids

8. Bid Tabulations/Recommendations

9. Purchase Orders/Attachments

10. Purchase Orders/Attachments (Field)

11. Expediting Reports

12. Project Subcontracting Specifications

13. Subcontract Inquiry Documents

14. Subcontract Inquiry Release

15. Subcontract Bids/Fair Price Estimates

16. Subcontract Bid Tabulations/ Recommendation

17. Subcontracts

18. Subcontracts (Field)

19. Subcontract Log

20. Subcontract Status (Pre-Award)

21. Subcontract Schedule (Pre- Award)

22. Subcontract Invoice/Payment Summaries

23. Recommended Spare Parts Summaries

E. Traffic

1. Freight Forwarding Agent Correspondence

2. Customs Agent Correspondence

3. Conference Notes/Minutes of Meetings

4. Pro Forma Invoice

5. Vendor's Commercial Invoice and Certificate of Origin



EXHIBIT 1-3 PAGE 3 OF 12

DATE: JULY 10, 2009




6. Vendor's Packing List

7. Export Declaration

8. Consular Certification

9. Ocean Bill of Lading

10. Ship's or Plane's Manifest

11. Stowage Plan

12. Air Waybill

13. Insurance Declaration

14. Notice of Claim

15. Overage, Shortage or Damage (OSD) Report

16. Container Content List

17. Master Voyage Summary Report

18. Weekly Shipping Schedule

19. Various Communications

F. Quality Management

1. Engineering Technical Audits

2. Shop Inspection Reports and Notices, including Non-Conformance Reports and Corrective Action Reports

3. Field Reports, including Non-Conformance Reports and Corrective Action Reports

G. Project Data

1. Project Record Books

2. Equipment Reference File

3. Operating Instructions

H. Contractor Drawings

1. General

a. Flow Diagrams

b. P&ID's

c. Maps, Plot Plans, and arrangements

d. Line Classification Sheets

e. Line or Pump Calculation Sheets

2. Mechanical Equipment (Ref. Exit 5-1 for detailed itemization)

a. Atmospheric Tankage - Appurtenances List

b. Blowers and Fans - Data Sheets

c. Compressors - Data Sheets

d. Forming, Packaging, and Proportioning Equipment - Data Sheets




DATE: JULY 10, 2009




e. Heaters and Stacks - Data Sheets

f. Heat Exchange Equipment - Data

g. Marine Technical Equipment - Data Sheets

h. Mechanical Drivers - Data Sheets

i. Mechanical Handling Equipment - Data Sheets and Conveyor Drawings

j. Packaged Process Equipment - All Drawings and Data Sheets

k. Pressure Vessels - All Drawings/Tray Data Sheets

l. Contractor Drawings

m. Pumps - Data Sheets

n. Separating and Mixing Equipment - Data Sheets

o. Special Plants - All Drawings and Data Sheets

p. Waste Treatment Equipment - Data Sheets

q. Water Treatment Equipment - Data Sheets

r. Vacuum Equipment - Data Sheets

3. Electrical Equipment/Materials

a. One-Line Diagrams and Area Classification

b. Grounding

c. Power and Lighting

d. Electronic Instrument Control Loops and Instrument and Control Circuits

e. Data Sheets (Ref. Exhibit 5-1 for detailed itemization)

4. Instrumentation Equipment/ Materials (including DCS)

a. Control Panels

b. Instrument Location Plans

c. Installation Details

d. Data Sheets (Ref. Exhibit 5-1 for detailed itemization)

e. Installation Distribution

5. Insulation and Lining Materials

a. Thermal Insulation Distribution and Details

b. Fireproofing Distribution and Details

6. Pipe and Piping Materials

a. Drawings/Model Cuts

b. Isometrics




DATE: JULY 10, 2009




c. Material Summary

d. Pipe Support Details

e. Pipe Support Materials

7. Painting

a. Paint Distribution

8. Buildings (Excluding Foundations)

a. Architectural Drawings

b. Architectural Drawing Details

c. Plumbing, Heating and Ventilating

9. Furniture Distribution

a. Structures (All Excluding Buildings)

b. Structures, Platforms

c. Steel Details, and Material Summary

d. Pipeway and Instrument Supports

10. Foundations

a. Piling and Foundations

b. Building Foundations

11. Site Development

a. Paving, Pathways, Roads, etc.

b. Underground Service Piping

I. Contractor Specifications

1. Basic Design Specifications

2. Construction Specifications

3. General Engineering Specifications

a. Atmospheric Tankage

b. Blowers, Fans, and Compressors

c. Forming, Packaging, and Proportioning Equipment

d. Heaters and Stacks

e. Heat Exchange Equipment

f. Marine Technical Equipment

g. Mechanical Drivers

h. Mechanical Handling Equipment

i. Packaged Process Equipment

j. Pressure Vessels

k. Pumps

l. Separate and Mixing Equipment

m. Special Plants




DATE: JULY 10, 2009




n. Waste Treatment Equipment

o. Vacuum Equipment

p. Electrical Equipment/Materials

q. Instrumentation Equipment/ Materials

r. Thermal Insulation and fireproofing Materials

s. Pipe and Piping Materials

t. Painting

u. Buildings (Excluding Foundations)

v. Structures and Foundations

w. Site Development

x. Welding and Thermal Processing

y. Catalysts, Chemicals, etc.

J. Vendor Data

1. Atmospheric Tankage

a. Dimensions Drawing with Foundation Data

b. Welding Procedures

c. Material Specifications

d. Drawing Index and Distribution

e. Erection/Placement Drawings

f. Shop Details

g. Field Erected Details

2. Blowers, Fans and Compressors


b. Cross Section with Parts List

c. Completed Data Sheet

d. Welding Procedures

e. Material Specifications

f. Drawing Index and Distribution

g. Calculations - Mechanical

h. Efficiency Data/Curves

i. Lubricant Data Sheet

j. Allowable Nozzle Effort Data

k. Wiring Control Data

l. Electrical Terminal Design

m. Arrangement and Connections

n. Piping Layout




DATE: JULY 10, 2009




o. Dimensions Drawing

p. Lube and Seal Oil Flow Diagram

q. Seal Assembly

r. Seal Cross Section

s. Code Certification Documentation

t. Priced Recommended Spare Parts List (PRSPL)

u. Operating and Maintenance Instructions

v. Composite Instruction Manual

w. Shop Details

3. Forming, Packaging and Proportioning Equipment



c. Wiring and Control Data

d. Erection Drawings

e. Operating and Maintenance Instructions

f. Shop Details

g. Drawing Index and Distribution

h. Priced Recommended Spare Parts List (PRSPL)

4. Heaters and Stacks


b. Cross Sections with Parts List





g. Calculations - Mechanical

h. Efficiency Data/Curves

i. Allowable Nozzle Effort Data

j. Wiring and Control Diagram

k. Erection/Placement Drawings

l. Arrangement Drawings

m. Piping and Instrumentation

n. Burner Assembly

o. Pilot or Ignition Systems

p. Soot Blowers

q. Dry Out Procedure




DATE: JULY 10, 2009




r. Code Certification Documentation

s. Operating and Maintenance

t. Shop Details

u. Priced Recommended Spare Parts List (PRSPL)

5. Heat Exchange Equipment



c. Completed Data Sheets

d. Wiring Procedures


f. Efficiency Data/Curves

g. Allowable Nozzle Effort Data

h. Erection/Placement Drawings

i. Piping and Instrumentation Diagram

j. Vibration Switch

k. Code Certification Documentation

l. Priced Recommended Spare Parts List (PRSPL)

m. Operating and Maintenance Instructions

n. Shop Details

o. Drawing Index and Details

6. Marine Technical Equipment (Same as Forming, Packaging, and Proportioning Equipment, as applicable)

7. Mechanical Drivers (Same as Blowers, Fans, and Compressors, as applicable)

8. Mechanical Handling Equipment (Same as Forming, Packaging, and Proportioning Equipment, as applicable)

9. Packaged Process Equipment



c. Operating and Maintenance Instructions with PRSPL

d. Drawing Index and Schedule

10. Pressure Vessels

a. Vessel Under Pressure Dimensions with Foundation Data

b. Vessel Welding Procedures

c. Vessel Calculations Mechanical




DATE: JULY 10, 2009




d. Vessel General Assembly and Drawing Index

e. Vessel Code Certification and Supporting Documentation

f. Vessel Shop Details

g. Vessel Mechanical Efforts Program and Data

h. Tray/Internals Completed Data Sheets

i. Tray/Internals Calculations

j. Tray/Internals Overall Arrangement

k. Tray/Internals Arrangement Diagrams and Instructions

l. Tray/Internals Shipping and Material List

m. Tray/Internals Shop Details

n. Tray/Internals Drawing Index and Distribution

11. Pumps




d. Wiring Procedures



g. Efficiency Data/Curves

h. Lubricant Data Sheet

i. Allowable Nozzle Efforts Data

j. Arrangement/Connection Drawings

k. Lube and Control Oil Diagram

l. Gland Sealing Diagram

m. Code Certification and Supporting Documentation

n. Priced Recommended Spare Parts List (PRSPL)

o. Operating and Maintenance Instructions

p. Shop Details

12. Separating and Mixing Equipment (Same as Forming, Packaging, and Proportioning Equipment, as applicable)

13. Special Plants (Same as Packaged Process Equip, supplemented by applicable component requirements)

14. Waste Treatment Equipment (Same as Special Plants)




DATE: JULY 10, 2009




15. Water Treatment Equipment (Same as Special Plants)

16. Vacuum Equipment

a. Dimensions Drawings



d. Material Specification

e. Efficiency Data/Curves

f. Arrangement Drawings

g. Assembly Diagram


i. Operating and Maintenance Instructions

j. Drawing Index and Distribution

17. Electrical Equipment/Materials





e. Wiring Diagrams

f. Priced Recommended Spare Parts List (PRSPL)

g. Operating and Maintenance Instructions

h. Shop Details/Pipe Supports

18. Instrumentation Equipment/ Materials (including DCS)

a. Dimensions Drawings with Cutouts and Supports




e. Calculations and Calibration Curves

f. Wiring and Control Diagram

g. Electrical Terminal Designation

h. Panel Layout with Major Dimensions

i. Back Panel Layouts

j. Typical Panel Cross Section

k. Pneumatic Diagrams

l. Priced Recommended Spare Parts List (PRSPL)




DATE: JULY 10, 2009




m. Composite Instruction Manuals

n. Photo Negatives and Prints

o. Color Samples

p. Shop Details

q. Drawing Index and Distribution

19. Pipe and Piping Materials

a. Dimension Drawing with Foundation Data

b. Cross-Sections with Parts List





g. Code Certification and Supporting Documentation


i. Operating and Maintenance Instructions

j. Shop Details/Pipe Supports

20. Buildings (Ex Foundations)



c. Calculations - Structural

d. Efficiency Data/Curves

e. Wiring and Control Diagram

f. Erection Drawings

g. Piping and Instrumentation Diagram

h. Vendor Field Fabricated Items

i. Shop Details

j. Drawing Index and Distribution

21. Structures and Foundations


b. Drawing Index and Distribution

c. Structural Calculations

d. Structural Erection Drawings

e. Structural Shop Details/Pipe Supports

f. Structural Painting Specification

g. Foundation Erection/Placement Drawings

h. Foundation Reinforcing Cutting/Bending List




DATE: JULY 10, 2009




i. Drawing Index and Distribution

22. Site Development

a. Property Survey

b. Topographic Survey

c. Hydrographic Survey

d. Fencing Details

e. Field Compaction Report

f. Soils Report

g. Shop Details

h. Drawing Index and Distribution

K. Field Construction

1. Superintendent's Daily Report with Force and Construction Equipment Lists

2. Weekly Worksheets

3. Field Action Memoranda

4. Material/Equipment Receiving Reports

5. Accident Reports

6. Site Safety/Security, and Sanitation Conference Notes

L. Mechanical Completion and Facilities Turnover

1. Schematic Testing Diagrams

2. Requests for Inspection

3. Punch Lists

4. Notices of Mechanical Completion




DATE: JULY 10, 2009

CORRESPONDENCE


EXHIBIT 1-4

DOCUMENT DISTRIBUTION MATRIX

EMPLOYER-ORIGINATED CORRESPONDENCE

(To be provided)



DATE: JULY 10, 2009

2. TIME MANAGEMENT


I. OBJECTIVE

This Instruction addresses requirements of Contractor's time management functions.


A. Philosophy

Contractor shall employ time management principles to effectively direct and control the TRM Project in its entirety. Accordingly, CONTRACTOR's planning and scheduling efforts shall critically address and monitor those activities and components whose potentially deficient performance could adversely impact overall performance. CONTRACTOR shall limit itself to execution of contractual work items specifically to those which have been previously identified, planned, scheduled, and approved.

B. Responsibility

Responsibility for time management optimization rests with Contractor and includes not only the activities of CONTRACTOR, but those of project participants (subcontractors, Supervised Contractors, vendors, etc.) under Contractor control. Additionally, CONTRACTOR shall organize related EMPLOYER activities and requirements. In satisfactorily discharging this responsibility, CONTRACTOR shall:

1. Define the scope and depth of planning/scheduling efforts.

2. Establish the plan and schedule format consistent with time management optimization.

3. Provide overall coordination.

4. Maintain all plans and schedules.

5. Perform analyses and develop recommendations.

6. Undertake requisite reporting activities.

III. SPECIFIC REQUIREMENTS

A. Time Management Procedures

CONTRACTOR's fundamental procedural document shall be the detailed work schedule submitted with its proposal and upgraded within sixty (60) days thereafter. CONTRACTOR shall issue this document as part of its Job Procedures, maintain it accordingly, and update it to define the conduct of its Time Management function.



DATE: JULY 10, 2009

2. TIME MANAGEMENT


B. Techniques and Systems

Contractor shall utilize techniques of logic network diagramming within approved systems capable of utilizing such techniques (Primavera, MS Project, PERT Master, etc.) The specific approach - CPM, PERT, Precedence, etc. -- may be selected by Contractor subject to EMPLOYER approval. However, level of detail and description must be consistent with all work breakdown structuring and earned value reporting requirements (See Project Instruction N 15).

CONTRACTOR shall translate requirements and conditions of network diagrams into more manageable control mechanisms for its home office and field construction activities, e.g., daily or weekly worksheets and/or look-ahead schedules. Said mechanisms shall develop finite engineering (EWP) and construction (CWP) work packages and establish interim milestone dates for each major activity. Contractor shall review and amend these mechanisms weekly to ensure they accurately reflect material, personnel and equipment requirements and status. Schedule reports shall be provided to EMPLOYER Project Manager (or their designee) in hard copy and electronic (native file) formats.

C. Schedule Designations and Specifications

The time management function includes three (3) primary schedule designations relating to three (3) distinct phases of control schedule evolution/development, and three (3) secondary designations to denote significant transition points. These are identified as follows:

SD-1 Initial Project Management Plan (Level 1) SD-2 Design Specification Plan (Level 2) SD-3 Definitive Plan (Level 3) SD-3FC Field Construction Plan SD-3MC Mechanical Completion Plan SD-3S Start-Up Plan

With each successive designation (primary or secondary) Contractor shall amplify level of detail and functional scope of the project schedule's supporting logic network diagrams to reflect available project definition and developing execution strategy. Timing and specifications for these designations are presented in Exhibits 2-1, 2-2, and 2-3. Said criteria however, represent minimum requirements of Contractor's effort. Accordingly, CONTRACTOR shall expand them as EMPLOYERs Project Manager deems necessary to achieve the most effective coordination, surveillance, and control program to specific project circumstances. (Schedule requirements for shutdown or revamp situations are addressed in Section III.I of this Instruction.)



DATE: JULY 10, 2009

2. TIME MANAGEMENT


D. Schedule Development

CONTRACTOR shall produce progressively-developed project schedules at the appropriate stages of project evolution in accordance with the General Provisions; the criteria of Exhibits 2-1, 2-2, and 2-3; and the following requirements:

1. Should CONTRACTOR determine that the need exists to rework a schedule previously approved by EMPLOYER and issued by CONTRACTOR, Contractor shall not undertake said rework without EMPLOYER's prior approval.

2. CONTRACTOR shall submit all schedules to EMPLOYERs Project Manager for review and approval and shall not release any schedule without EMPLOYER's prior approval.

E. Control and Maintenance

Contractor shall update the project schedule each month, or more often if required by EMPLOYERs Project Manager. Schedule analysis and reconciliation shall be included in Monthly Progress Reports (See Project Instruction N 14) and shall highlight:

1. Summary of previous report and corrective/preventive measures taken,

2. Significant status changes during the present reporting period,

3. Measures proposed or initiated by Contractor for schedule adherence or time deficit recovery,

4. Summary projections of activities commencing and completing during the next reporting period,

5. Identification (by name) of those individuals charged with the responsibility for resolving present delays and potential problems, and timing for implementation of said actions.

F. Progress Reporting

In addition to monthly schedule status reports in Section III.E of this instruction, Contractor shall be required to provide EMPLOYERs Project Manager with the following:

1. Individual progress and performance indices curves for engineering, procurement, and field construction for the entire project. The curves shall present projected and actual progress and be supported by similar curves for engineering discipline, each field construction direct craft, and each



DATE: JULY 10, 2009

2. TIME MANAGEMENT


subcontractor by unit or work area. (Development and maintenance of said curves shall be in strict accordance with work breakdown structure and earned value requirements of Project Instruction N 15 Measurement of Percentage Completion).

2. Staffing profiles and Labor burden to support monthly progress projections including "recovery" situations. Representation of staffing requirements shall be consistent with curve development (i.e., by engineering, procurement, and field construction) as above.

3. Evidence that all available steps have been taken to maintain or better the Target Completion Date. This shall be repeated whenever any events that may jeopardize the schedule have taken place. CONTRACTOR shall take timely action to maintain predicted project schedule dates or to minimize delay including revision of work priorities, planned overtime, payment of premiums, and other means.

G. Performance Monitoring/Data Access

EMPLOYERs Project Manager will require access to Contractor's field productivity data in order to be able to effectively monitor the execution of all phases of the project. These data include such information as budget hour and physical quantity estimates and adjustments, actual hours or work units expended and physical quantities installed, details of percent physical completion, estimated and actual unit productivitys for each physical parameter used, productivity graphs and trend curves, and a complete explanation by CONTRACTOR of how CONTRACTOR compiles and uses the productivity data on a timely basis. CONTRACTOR will give EMPLOYERs Project Manager access to all such data.

H. Time Management Effort Appraisal

CONTRACTOR shall conduct comprehensive appraisals of its time management effort via formal monthly and quarterly reviews of project status. The reviews shall be chaired by the Contractor's representative charged with the time management responsibilities for the project. In preparing for each review, this representative shall undertake a complete assessment of the schedule. This assessment will note problems (and their resolution), changes, accomplishments, strategy modification, etc. during the period since the last update. Following are typical relevant topics or areas to be addressed:

1. CONTRACTOR/ EMPLOYER/third party interfaces and relationships,

2. Input data relevance and validity,

3. Timeliness and quality of output data,



DATE: JULY 10, 2009

2. TIME MANAGEMENT


4. Information gathering and dissemination,

5. Contingency planning and required development time for same,

6. Time deficit recovery planning and reaction time,

7. Trending and analysis,

8. Project status updating,

9. Schedule risk analysis program.

I. Shutdown Scheduling (if applicable)

1. CONTRACTOR shall appoint a Shutdown Coordinator whose responsibilities are to include all phases of shutdown program as discussed herein. He/she is to serve as direct point of contact with designated personnel regarding all considerations pertaining to shutdown planning and execution. No other work assigned to Shutdown Coordinator shall take priority over shutdown-related work.

2. CONTRACTOR shall prepare a detailed plan and schedule for each planned shutdown. Said plan and schedule shall be prepared in close cooperation with EMPLOYER's designated personnel, and shall be completed and submitted for EMPLOYER's review and approval three months in advance of the planned shutdown date. EMPLOYER will specify planned shutdown dates and shutdown durations for scheduling purposes. Scope of shutdown plan and schedule shall cover all shutdown work on the facility involved whether such work is anticipated to be performed by CONTRACTOR, by EMPLOYER, or by others. Schedule shall be in a format (arrow diagrams, bar charts, combo, etc.) agreed by EMPLOYER and shall show downtime work program by shifts and in hourly increments. Level of detail of work breakdown shall be consistent with the foregoing increments. Shutdown plan shall include the following:

a. Itemization and timing of all pre-shutdown work required to achieve minimum downtime

b. Itemization of timing of all work required to be accomplished during downtime

c. Division of responsibilities

d. Resource and other requirements for each item plus any additional "common" resources or other requirements. Resource and other requirements would include:



DATE: JULY 10, 2009

2. TIME MANAGEMENT


Construction drawings

Construction tools and equipment

Construction supplies

Labor (by craft) Materials

Supervision

Temporary facilities

Communications

Etc.

e. Time line summary of all resource and other requirements

f. Identification of schedule risk areas together with an appropriate contingencies plan to minimize adverse impact on downtime.

3. Shutdown reporting, beyond what is required elsewhere in this instruction shall begin as soon as EMPLOYER has agreed with Contractor's detailed shutdown plan and schedule. Contractor shall continuously maintain current master copy mark-up of shutdown plan and schedule. Reporting shall be primarily accomplished by weekly or daily shutdown planning meetings at Site, attended by designated EMPLOYER and CONTRACTOR personnel and others if required.

a. Prior to shutdown, weekly planning meetings will be held. Contractor will present the master copy mark-up for review and will identify any item whose status is unsatisfactory. At the conclusion of the meeting, Contractor will immediately issue an "Exceptions List" specifying corrective action responsible person, and required timing.

b. During shutdown, daily planning meeting will be held to review CONTRACTOR's master schedule mark-up, identify problem areas, and agree on following day's work program (including corrective action). At the conclusion of meeting, CONTRACTOR will immediately prepare and issue detailed work program for next day reflecting any agreed on correction action.

c. CONTRACTOR will immediately advise EMPLOYER of any situation that might prevent shutdown objectives from being met.

PETR

OPER

U S.

A.

VOLU

ME 2

TALA

RA R

EFIN

ERY

MODE

RNIZ

ATIO

N PR

OJEC

T PR

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T IN

STRU

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O PA

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FE

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- FEE

D &

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MAST

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PA

GE 7

OF 12

EX

HIBI

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1 PA

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OF 2

DATE

: JUL

Y 10

, 200

9

EXH

IBIT

2-1

PR

OJE

CT S

CHED

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DESI

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NS

Inte

rnatio

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iddi

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ss N

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ESCR

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RES

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PRES

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SD-1

Initi

al P

rojec

t M

anag

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Plan

For

RC

Projec

ts, to

be

pr

epa

red

by

Cont

ract

or

with

in ti

me pe

riod

spec

ified

in M

JS.

Pr

ese

nte

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ork

fo

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ale

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Se

rves

as

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iew

to

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entif

y: Pr

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n im

plica

tions

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de

prim

ary

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terd

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es and

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rna

l/ext

ern

al r

est

rain

ts. Ac

tiviti

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of a

ll pr

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ticip

ants

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mpa

ny,

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ntra

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G

ove

rnm

enta

l Aut

horit

ies,

an

d oth

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and

requ

ired

timin

g of

th

ese a

ctiv

ities.

SD-2

Desi

gn

Spec

ificat

ion

Plan

To be

pre

pare

d by

Co

ntra

ctor

for

each

Ba

sic

Des

ign

Pack

age

(for

whi

ch

deta

iled

engi

ne

erin

g is

less

th

an 15

%

com

plet

e) co

nsi

sten

t with

SD

-1

logi

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dura

tions

. (S

ee

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hibi

t 2-2

for

timin

g.)

D

evelo

ped

util

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g an

app

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d lo

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di

agra

mm

ing

tech

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-by

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m ba

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ign

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SD-3

D

efin

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an

To be

pre

pare

d by

Co

ntra

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base

d on S

D-2

deve

lopm

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ith S

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util

izes

an a

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ork

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ram

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(60 da

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ed

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plan

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n of w

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) for

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SD-2

s vi

sibi

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contro

l phi

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and,

in a

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phas

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the

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d pr

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rem

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PETR

OPER

U S.

A.

VOLU

ME 2

TALA

RA R

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ERY

MODE

RNIZ

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T PR

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T IN

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O PA

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FE

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P SE

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- FEE

D &

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MAST

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PA

GE 8

OF 12

EX

HIBI

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1 PA

GE 2

OF 2

DATE

: JUL

Y 10

, 200

9

EXH

IBIT

2-1

PR

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DESI

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Inte

rnatio

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ss N

PCI

-00

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SD-3F

C Fi

eld

Cons

truct

ion

To be

pre

pare

d by

Co

ntra

ctor

prio

r to

30%

com

plet

ion p

oin

t of d

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led

engi

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d/or

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ctive

field

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initi

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n.

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ith S

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an a

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ram

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g te

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eth

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s vi

sibi

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l phi

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a

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field

co

nst

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ence

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ssin

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rst 5

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SD-3

MC

Mec

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cal

Com

pletio

n

Plan

To be

pre

pare

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ntra

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prio

r to

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t of d

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main

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nce b

y ED

P m

eth

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Co

ntin

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-2

s vis

ibilit

y/co

ntro

l phi

loso

phy.

Al

so be

gins

tra

nsi

tion to

sta

rt-up

emph

asis

by

hi

ghlig

htin

g la

st 50

% fi

eld

act

iviti

es

and

deve

lopi

ng

conce

ntra

tion

upo

n p

roce

ss sy

stem

s

SD-3

S St

art-u

p Pl

an

To be

pre

pare

d joi

ntly

by

EMPL

OYE

R a

nd

CON

TRAC

TOR

prio

r to

75%

com

plet

ion po

int o

f fie

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D

urin

g Pr

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com

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g,

CON

TRAC

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sh

all p

artic

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start-

up

meetin

gs.

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ith S

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izes

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logi

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ork

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ram

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g te

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for

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eth

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s vi

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and

fully

co

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etes

tra

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to s

tart-

up

stage

beg

un w

ith SD

PETR

OPER

U S.

A.

VOLU

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TALA

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ERY

MODE

RNIZ

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N PR

OJEC

T PR

OJEC

T IN

STRU

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NS T

O PA

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FE

ED-E

PC C

ONTR

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P SE

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ND D

ELIV

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- FEE

D &

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ER JO

B SP

ECIF

ICAT

IONS

PA

GE 9

OF 12

EX

HIBI

T 2-

2 PA

GE 1

OF 2

DATE

: JUL

Y 10

, 200

9

TIM

E M

ANAG

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EXH

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2-2

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S FO

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PCI

-00

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PER

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FUNC

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ACTI

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D

ISTR

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(AS

A PE

RCE

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GE

OF

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TO

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DES

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SD-1

(Initi

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lan)

250

RC:

With

in A

gre

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ent-

spec

ified

time pe

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40

35

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(Desi

gn

Spec

ificat

ion P

lan)

1200

Pr

ior t

o 15

% co

mpl

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poin

t of d

etaile

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gineerin

g 50

25

20

5

SD-3

(Defin

itive

Pla

n)

1200

Pr

ior t

o 15

% co

mpl

etio

n

poin

t of d

etaile

d en

gineerin

g 50

25

20

5

SD-3F

C

(Fie

ld Co

nstru

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n

Plan

) 24

00

Prio

r to 30

% co

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poin

t of d

etaile

d en

gineerin

g 30

25

40

5

PETR

OPER

U S.

A.

VOLU

ME 2

TALA

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ERY

MODE

RNIZ

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N PR

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PC C

ONTR

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- FEE

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MAST

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PA

GE 10

OF

12

EXHI

BIT

2-2

PAGE

2 OF

2 DA

TE: J

ULY

10, 2

009

TIM

E M

ANAG

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T

EXH

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2-2

SP

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S FO

R A

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LEVE

LSPR

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ACTI

VITY

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AND

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NAL

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N

Inte

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-00

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ETRO

PER

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C

(Mech

anic

al

Com

plet

ion Pl

an)

2800

Prio

r to 85

% co

mpl

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n

poin

t of d

etaile

d en

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g and/

or

app

roxi

mate

ly 50

%

com

plet

ion o

f fie

ld

Cons

truct

ion

20

20

53

7

SD-3S

(Sta

rt-Up

Pla

n)

3100

Pr

ior t

o 75

% co

mpl

etio

n

poin

t of d

etaile

d en

gineerin

g 18

18

50

14

NOTE

S:

1.

Ref

er to

Ex

hibi

t 2-3

fo

r Pr

ojec

t Sch

edul

e Ac

tivity

Sp

ecific

atio

ns.

2.

Activ

ity to

tals

exclu

de re

stra

ints

bet

ween w

ork

ite

ms.

(R

est

rain

t tot

als

shou

ld h

alf t

he act

ivity

to

tal).

3.

Activ

ity to

tals

and

funct

ional d

istrib

utio

n ca

rry

a +

10

% ra

nge

of a

ccept

abi

lity.




DATE: JULY 10, 2009

TIME MANAGEMENT

EXHIBIT 2-3 PROJECT SCHEDULE ACTIVITY SPECIFICATIONS


All SD-1 schedules shall satisfy the following criteria in order to comply with the requirements of Exhibit 2-2, "Specifications for Activity Levels":

1. The activities (and timing thereof) for each major participant of the project shall be identified and the interfaces/dependencies clearly described.

2. With respect to detailed engineering activities, approximately half of these shall highlight the interdisciplinary relationships and interfaces which exist.

3. All activities in both detailed engineering and procurement must comply with the work breakdown structure and the required sequence of field construction and startup.

4. For equipment and material deliveries of a critical or long lead nature, the associated detailed engineering and procurement activities (including execution strategy) shall be clearly defined

5. All critical path sequences and float calculations must be completely identified.

All SD-2, SD-3, SD-3FC, SD-3MC, SD-3S schedules shall satisfy the following criteria in order to comply with requirements of Exhibit 2-2, Specifications for Activity Levels:

1. Scope of activity coverage and distribution should be consistent with areas of risk exposure as identified.

2. All activities must possess the characteristics of being finite, definable and measurable (i.e., consistent with the work breakdown structure.) They must be appropriately resourced and leveled.

3. Coverage of critical and sub-critical (three months of critical path) activities shall be at least twice that provided for non-critical activities.

4. Where phased task completions are required, they must be properly identified.

5. The following specific requirements apply:

Detailed Engineering

- 85% of the activities shall be between 5 and 20 project time units in duration.

- 80% (approximate) of the activities shall be distributed consistent with the breakdown by engineering man-hours by discipline and subdiscipline.




DATE: JULY 10, 2009

TIME MANAGEMENT

EXHIBIT 2-3 PROJECT SCHEDULE ACTIVITY SPECIFICATIONS


Procurement

- Distribution of activities should be on the basis of 60% major equipment and 40% bulk materials.


Field Construction


- 85% of the activities shall be distributed consistently with the breakdown by field labor man-hours by construction craft and discipline.

Startup

- 80% of the activities for SD-3MC and SD-3S schedules should be between 1 and 5 project time units in duration.



DATE: JULY 11, 2009

3. COST MANAGEMENT


I. OBJECTIVE

This instruction covers Contractor's requirements for effective management of costs relating to the Agreement. Contractor's cost management activities are a significant part of a comprehensive, totally integrated project control program which Contractor must develop and implement for execution of the Work. Refer to Time Management (Project Instruction N 2) and Quality Management (Project Instruction N 4) for other significant components of the control program.

It should also be noted that EMPLOYER intends to convert the contractual arrangement from a Reimbursable Cost (RC) structure to a Lump Sum (LS) arrangements at some point (Conversion) following completion of the Scope Definition, but prior to the start of Construction activities. Once this Conversion from RC to LS has been effected, the requirements of this Instruction shall be superceded and the requirements of Project Instruction N 2 Time Management, Instruction N 8 Change Control, Instruction N 14 Monthly Progress Reporting and Instruction N 15 Measurement of Percentage Completion shall be the primary Project Controls requirements by which Contractor must abide.


CONTRACTOR shall submit, at the Contract signature, for EMPLOYER review and comment the proposed organizational and procedural details defining its cost management program for the project. These details will be included in the Project Execution Plan and will be subject to modification as EMPLOYER's Project Manager deems necessary to satisfy in a deeper way:

Cost Control

Estimating

Non-Recoverable Costs

III. SPECIFIC REQUIREMENTS

A. Cost Control

In conjunction with requirements of Section III.C (Non-Recoverable Costs) of this instruction and Project Instruction N 8 (Change Control), CONTRACTOR shall conduct a cost control program throughout the life of the project to attain established financial goals per Section III.B (Estimating) of this instruction. Specific requirements of said program are presented in the following paragraphs.



DATE: JULY 11, 2009

3. COST MANAGEMENT


1. Procedures and Organization

Contractor shall submit, at the Agreement Signature, as in II above, the following information relevant to the Cost Management procedures and organization:

a. A work flow diagram describing structure and formal communication link between all cost management organizational elements (both project and corporate) from the Contractor's Project Manager to all subordinate work production units whose performance is involved in data collection, status evaluation, and forecasting process. Manual and electronic-generated forms and other documents which are to convey cost information (including performance data and corrective action) from one organizational unit to another and to and from external parties such as subcontractors and vendors shall be identified on appropriate flow paths of this diagram.

b. Contractor shall include a copy of each identified document along with information describing its purpose, intended application, responsibility for preparation, and frequency of issue. Instructions for each form shall also be included.

c. An organization chart identifying individuals responsible for each organizational unit of the cost management structure and a description of duties.

d. Description of surveillance/control procedures and the application limits to be employed in effectively executing the following cost management functions:

Estimating

Cost Analysis and Forecasting

Preventive and Corrective Action

Non-Recoverable Costs.

e. Description of the interaction and coordination between the cost management, project management, and time management functions.

2. Functions

Subsequent to EMPLOYERs review of CONTRACTOR's procedures and organization as above, Contractor shall execute the following cost management functions:



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a. Estimating (Section III.B)

b. Non-Recoverable Costs (Section III.C)

c. Change Control (Project Instruction 8)

d. Cost Analysis and Forecasting

Contractor shall make daily cost analyses and summarize the results in its Monthly Cost Report. Contractor shall employ sampling techniques for said analysis to identify and correct at an early stage of project evolution unfavorable trends in such areas as:

- Home office hours/expenses

- Engineered equipment purchase order prices

- Bulk material quantities

- Field labor productivity

- Design basis changes

CONTRACTOR shall undertake forecasts weekly, bi-weekly, and monthly as project conditions dictate and EMPLOYER's Project Manager deems necessary for effective project control. CONTRACTOR shall include in its Monthly Cost Report (or more frequently as EMPLOYER's Project Manager determines) results of said forecasts, which results shall represent its best projection of cost to complete for the entire project, irrespective of the amounts included in the Control Budgets (FEED Services and Projected TIC).

e. Cost Reporting

Contractor shall prepare a Monthly Cost Report, which shall contain as a minimum the following components:

- Tabulation of Control Budget line items, authorized changes, and a summation of the two to form adjusted Control Budget

- Tabulation by Control Budget line item of actual, recorded expenditures as provided by Contractor's accounting group

- A similar tabulation of committed funds (e.g., purchase orders, purchase authorizations, etc.)



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- Similar tabulation of pending changes

- Forecast of cost to complete for each line item

- Summation of each item's expenditures, commitments, pending changes, and forecasts to develop predicted final Contract Price

- Comparison of adjusted Control Budget and predicted final Contract Price for each line item, and an analysis of overruns/underruns with explanation for each.

To maintain consistency with Contractor responsibilities and forecasts, Control Budget scope shall be amended only by authorized changes.

f. Preventive/Corrective Action

Subject to prior agreement with EMPLOYER'S Project Manager as to frequency, Contractor's Project Manager shall hold regular cost control meetings with the project cost engineer and responsible supervisors to address the following:

- Review and analysis of the latest Monthly Cost Report in conjunction with input from Contractor's home office and field cost control functions

- Assessment of corrective efforts previously initiated to counter actual or potential overruns

- Identification of additional overruns or undesirable trends

- Initiation of new preventive and corrective measures

EMPLOYER's Project Manager and/or designated representatives shall participate in said meetings as EMPLOYER's Project Manager deems necessary.

In addition to surveillance effected at regular cost control meetings, Contractor shall continuously and accurately monitor and report all trends, initiating corrective/ preventive action as needed and optimizing costs in already acceptable performance areas.

B. Estimating

1. Estimate Designations

In addition to the Control Estimate (discussed in detail in III.B.3 below), Contractor shall prepare cost estimates at EMPLOYER's direction at any point



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in the evolution of the project. CONTRACTOR shall submit all estimates to EMPLOYER's Project Manager for review and approval and shall not release any estimate without EMPLOYER's prior approval.

When approved by EMPLOYER, each successive estimate shall become Contractor's current baseline project cost parameter. Should CONTRACTOR determine that the need exists to rework an estimate previously approved by EMPLOYER and issued by CONTRACTOR, CONTRACTOR shall not undertake said rework without EMPLOYER's prior approval.

Contractor's estimate shall reflect at each successive evolution point:

Available project definition and cost data

Development execution strategy

An accuracy range consistent with the quality of these items and estimating technique employed

Estimates shall also be consistent with the particular schedule designations and levels of detail specified in Project Instruction N 2 as well as EMPLOYER quality objectives. They shall include a detailed reconciliation with each previous estimate.

Representative estimate designations with accuracy ranges, and corresponding schedule designations, follow:

EstimateDesignation (ED)

EstimateTitle

AccuracyRange

ScheduleDesignation (SD)

ED-000 Conceptual Undefined *

ED-00 Modular-Process 50% *

ED-0 Modular-Operating Unit Factors (Curve) 50% *

ED-1 Major Equipment (Factored) 15% SD-1

ED-2 ** Control 10% SD-2/SD-3

ED-3 Upgraded Control (Pre-Construction) 5% SD-3FC

(Upgraded) *Schedule consistent with estimate data. **ED-2 is to be considered equivalent to AACEI Class 2 Cost Estimate designation.



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2. Supplementary Estimates

CONTRACTOR shall exercise cost control throughout the period of early estimate development, to prevent cost "blackouts" during those phases when EMPLOYER may be making significant changes in scope, such as often occur during FEED Phase. Accordingly and as directed by EMPLOYER's Project Manager, CONTRACTOR shall prepare supplementary or transitional estimates to cover the progression from one established baseline to another. Such estimates will include a detailed reconciliation with each previous estimate.

3. Control Estimate (ED-2)

CONTRACTOR shall prepare a Control Estimate (ED-2) which, when mutually approved by EMPLOYER and CONTRACTOR at Conversion, shall become the Contract Price for the project. Said Contract Price shall reflect Contractor's scope of work and shall provide the only mechanism by which Contractor may execute contractual commitments, except those covered in Section III.C of this Instruction.

CONTRACTOR shall progressively develop the ED-2 in discrete portions throughout the FEED Phase, reflecting the scope of Work in a particular Unit FEED Package. When approved byEMPLOYER, each ED-2 portion will become part of the TIC Control Budget. Subsequent to EMPLOYER's approval of the final portion, CONTRACTOR shall produce the composite TIC Control Budget which shall reflect adjustments for all EMPLOYERs approved changes to each ED-2 portion after its original approval/release.

Following are the requirements of the ED-2 with respect to development, bases, and documentation:

a. Developmental Requirements

CONTRACTOR shall not begin ED-2 developmental activities until EMPLOYER has released Contractor to proceed. The mechanism for this release shall be provided by a joint meeting between CONTRACTOR and EMPLOYER's Project Managers to review and confirm the various components of the estimate development as follows:

Developmental Cost and Personnel

CONTRACTOR shall prepare for EMPLOYER approval an estimate of costs and personnel associated with developing each ED-2 portion and the composite TIC Control Budget.



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Developmental Timing

Contractor shall prepare a schedule of release for each ED-2 portion and the composite TIC Control Budget which shall acknowledge:

- Release of the ED-2 portion no later than thirty (30) days after release of the particular Unit FEED Package

- Release of the composite ED-2 TIC Control Budget no later than thirty (30) days after release of the last Unit FEED Package

- Continuing EMPLOYER review during development as well as final review and approval prior to release of the respective ED-2 portion and the composite TIC Control Budget.

b. Estimate Technical Basis

Contractor's technical basis for the ED-2 shall be limited to completed Unit FEED Packages, excluding any impact of anticipated scope changes or input from preliminary detailed engineering.

c. Estimate Cost and Scope Basis

Contractor shall address for EMPLOYER consideration, review and approval, representative cost and scope basis elements such as:

Wage rates, productivity factors, and attendant source reliability for home office and field

Engineered equipment cost data sources

Bulk material quantities, unit costs, labor units, and source reliability for all

Escalation due to schedule considerations and source reliability for same

Implications of shutdown or revamp work

Impact of anticipated currency devaluation/revaluation

Definition of allowances, contingencies, and other factors

Qualifications or exclusions from estimate scope



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d. Estimate Content and Documentation

Contractor's completed ED-2 portion shall satisfy following requirements with respect to content and documentation:

Estimate shall be completely compatible with Contractors cost control system for the project.

Estimate details shall be entirely consistent with CONTRACTOR's standard accounting codes (Project Instruction 10, Section II.A), Project Schedule (Project Instruction 2), and all Work Breakdown Structuring and Earned Value reporting requirements (Project Instruction 15).

CONTRACTOR shall provide for review by EMPLOYER's Project Manager all supporting estimate development documentation (Estimate Basis Memorandum EBM prior to preparation of the Estimate. Following Estimate preparation, documentation of the techniques, factors, data sources, allowances, assumptions, etc. shall be provided as backup to the Estimate). The extent of said supporting documentation shall be established during the above noted estimate development meeting at which time a typical Contractor estimate and supporting documentation shall be reviewed.