Chemical Engineering November 2021 - 33

the lowest amount of resources from
their perspective in following up
the project.
Unfortunately, experience has
shown that, typically, most of these
" advantages " are illusory at best, at
least in pilot plants. Any changes -
and there will always be changes -
are going to be costly.
Any unknowns that result in deFIGURE
4. The owner must come to an agreement
early in the contracting period to avoid overstaffing
of the project, which can lead to inefficiencies and
spurious costs
advantages. It allows a fast comparison
between competing proposals
and gives a defined cost and schedule.
It puts the onus of doing the work
efficiently on the contractor, meaning
that the contractor appears to incur
most of the risk for unknowns. It allows
the owner to take a hands-off attitude
towards the work and usually requires
sign revisions or equipment issues
will mean more expensive selections.
Also adding to the owner's costs are
any new information that requires a
different process approach, as well
as other similar issues endemic to
pilot plants. Some of this cost markup
is reasonable, including: the
need to track, estimate and price
the change; develop the design to
address the change; and follow up
the work to have it done safely and
effectively. However, some considerations
of the mark-up may not
have as much merit - be aware
of contractors loading the change
with extra overhead, spurious arguments
as to the effect of the change,
overestimates of the time involved,
capitalizing on the fact that the organization
has no viable alternative
and so on. Sadly, many contractors
make their profit from change
orders. No matter how well-defined
the pilot plant is, changes will be unavoidable.
Whether they involve new
information requiring a design modification
or unexpected corrosion behind
a wall, such issues eventually
end up adding to the owner's costs.
If you think you can transfer all this
uncertainty to the contractor, you
are wrong. Either they will price the
job accordingly with an excessively
large contingency, or you will end up
in conflict after the event where they
may argue that you tried to take advantage
of them. In either case, you
will pay.
Additionally, in the lump-sum contract,
safety becomes solely the
contractor's responsibility. While this
may sound advantageous on the
surface, it actually means that the
owner will have little influence over
how the contractor addresses it.
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Chemical Engineering November 2021

Table of Contents for the Digital Edition of Chemical Engineering November 2021
