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Table 4 - Evaluation of alternatives for the split in packages and SoW Alternative

TABLE 4 %A B C

o Market availability of bidders and competitive bidding

The higher the split in packages, the higher will be the possibility to COMPANY of finding in the market motivated contractors, technically capable and with the balance sheet capacity
to accept, and financially bond, the risks associated to those packages.

o Risk sharing

The higher the split in packages, the higher will be the COMPANY’s non-dependence on the prerogatives of a single contractor.

o Uniformity of design and Interfaces

The higher the split in packages, the higher will be the possibility of non-homogeneity among the design implemented by each contractor. The lower the split in packages (and the
higher is the optimization of the interfaces), the smoother will be the potential impact of unforeseeable external factors, and the lower will be the misalignment among contractors
and other third parties.

o PMC’s responsibilities

The lower the split in packages, the lower will be the PMC’s contract administration burden in terms of supervision, management, coordination and evaluation of the performance
by several contractors of their obligations.

o COMPANY’s effort

The lower the split in packages, the lower will be the COMPANY’s contract administration burden in terms of coordination and evaluation of the performance by several contractors
of their obligations.

o Single Point of Responsibility

In case of default of any of the contractors’ obligations under the relevant contracts, the lower the split in packages, the clearer and easier will be for COMPANY to act/claim the
relevant remedies to cover potential execution risks, delay risks and potential losses. Moreover, the lower the split in packages, the higher will be the size of the packages, and the
higher will be the probability that the contractual remedies, being linked to the size of the packages, cover a significant portion of potential COMPANY’s losses.

o Schedule management

The higher the split in packages, the lower will be the probability that contractors timely and simultaneously respect the performances under each contract, and lower will be the
COMPANY’s ability to coordinate the contractors so as to achieve his construction targets.

o Availability of financing

On one side, the higher the split in packages, the smaller will be the size of the packages, the lower will be the risk transfer to the contractors, the higher will be the potential pool of
contractors and the easier will be to find financing for a single package.

On the other side however, the higher the split in packages, the lower may be the COMPANY’s ability to coordinate the contractors so as to achieve his construction targets.

Table 5 - Evaluation of alternatives for the split in packages and SoW

o Market availability of bidders

The wider the SoW, the harder will be to find in the market motivated contractors, technically capable (in terms of know-how, resources and experience) and with the balance sheet
capacity to accept, and financially bond, the risks associated to that SoW. The nature of the contracts has also to be taken into consideration.

o Interfaces

Subject to the number of packages, the higher the number of contracts the COMPANY has to place directly, the higher the number of interfaces the COMPANY will have to deal with.
The number of interfaces is of particular importance when problems arise (e.g. disruption claims, property and works damage claims, and/or other claims for extra time and money).

o Availability of financing

The standard forms of contract, conventionally known in the industry for major construction projects, particularly those being project financed, are prepared considering all the engi-
neering, procurement and construction works on lump sum basis. Variations to said standard forms so as to deal with variations in the SoW and/or with a different risk allocation may
have a potential impact and/or delay on the bankability of the project.

o Contractual remedies

Contractual remedies to recover potential COMPANY’s losses in case of default of any of the contractors’ obligations are normally commensurate with the SoW entrusted to the
contractor.

o Contract prices

The higher the extend/complexity of the SoW’s responsibility that COMPANY intends to put on the contractors, the harder will be for the COMPANY to assess the reasonableness of the

bidder’s premium (including contingencies, profit and mark-up) that he will add so as to cover the risks associated to said SoW, and thus the higher will be the possibility of receiving
high quotes from bidders. Finally yet importantly, it is to be noted however that, for a given SoW, the contractual compensation method may strongly impact the risk allocation and

the price that will be quoted by bidders.

o Delay and cost overun risk

The higher the number of contracts the COMPANY has to place directly and the lighter the SoW of the contractor, the harder will be the alignment of interests between said parties
Thus the lighter the SoW entrusted to a contractor, the lower may be the incentives for him to actively participate and cooperate with the other parties involved so as to respect the
overall project’s time completion.

o Replacement of contractor in case of default

As a rule thumb, the higher the extend/complexity of the SoW’s responsibility that COMPANY intends to put on the contractors, the harder will be for the COMPANY to replace the
contractor in case of default, and the higher will be termination’s cost and time implications for the COMPANY.

o Risk transfer

The higher the number of contracts the COMPANY has to place directly and the lighter the SoW of the contractor, the lower is the completion risk that is placed on the contractors.

o Burden of proving fault and neglect

The higher the number of contracts the COMPANY has to place directly and the lighter the SoW of the contractor, when problems arise the higher will be COMPANY’s burden of proving
fault and neglect (i.e. costly disputes and recourse difficulties will be increased by arguments within the supply chain as to who may be at fault), and the harder it will be COMPANY’s
entitlement to compensation by one and/or more contractors.

o PMC/COMPANY’s effort

The higher the number of contracts the COMPANY has to place directly, the stronger will be the necessity for COMPANY of having large and experienced in-house teams to deal with
the management and administration of all contracts and with its internal scope of work.

52 Impiantistica Italiana - Maggio-Giugno 2015