The hard dollar bid is what everyone was talking about at the 7th Contract and Risk Management For Construction and Capital Projects Conference in Houston this week. The speakers and panelist indicate that operating firms are preferring a fixed dollar bid for capital projects as opposed to cost-plus.
I have always wondered, how can anyone accurately bid a $500 million project accurately, without actually doing the work? A retrofit of that magnitude just has too many surprises. So many things can change, for instance, nozzle and line sizes, pump NPSH and differential pressure requirements, and heat exchanger ratings.
Apparently the engineering and construction companies think such estimates are difficult too; hence, the “change order”. The change order is a real zinger for the operating companies. Sometimes, this leads to a law suit because contractor and operator simply cannot see eye to eye on the cost of the project. Very rarely does this ever lead to a court case; however, it is usually settled by arbitration.