Capital Project Management System

Document Number: 99-PM-GDL-0005-G

Guide

C&P Organisation Design & Resource Planning

Project Guide 05g

Revision: 2.0
Date: 20/12/2012
Document Status: Issued For Use
Security Classification: Restricted
Guide C&P Organisation Design & Resource Planning

Contents
1 Introduction ................................................................................................................................................... 3
1.1 Objective ......................................................................................................................................................................... 3

1.2 Scope and Applicability .................................................................................................................................................... 3

2 C&P in Projects ............................................................................................................................................. 4
3 Organisation Design and the Project Environment ..................................................................................... 5
3.1 Mobilisation of C&P Lead ................................................................................................................................................. 5

3.2 Reporting Lines – Functional & Operational ...................................................................................................................... 5

3.3 Accountabilities ............................................................................................................................................................... 6

3.4 Alignment with Project Team design and Co-location ........................................................................................................ 6

4 Resource Estimating ..................................................................................................................................... 8
5 Project C&P Discipline Framework............................................................................................................. 10
6 Summary ..................................................................................................................................................... 11
7 Definitions ................................................................................................................................................... 12
Appendix A. C&P Activities Mapped To The ORP ........................................................................................ 13
Appendix B. C&P Projects - Job Framework & Competencies .................................................................... 14
Document administration ................................................................................................................................. 17
Document information............................................................................................................................................................. 17

Comments related to this document ........................................................................................................................................ 17

Revision history ...................................................................................................................................................................... 17

Acceptance and release ......................................................................................................................................................... 18

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Guide C&P Organisation Design & Resource Planning

1 Introduction
This Capital Project Guide PG05g is a supplementary document to PG05a - Contracting and
Procurement. Project guides are document that support the implementation of the Project
Standards that make up the Arrow Project Management System (APMS) and assist in developing
and executing capital projects to create maximum ‘value’ for the project through fit-for-purpose
designs, strategies and plans. The purpose of this document is to provide project teams with
guidelines and tools for the correct execution of the specific activities covered by Capital Project
Standard 05 – Contracting & Procurement. In addition, it will assist in creating awareness and in
transferring knowledge on the subject to other parties, such as project sponsors, stak eholders,
contractors, etc.

1.1 Objective
The objective of this project Guide is to provide guidance to a Project Contracting and
Procurement (C&P) Lead and the extended projects community on how to best design a fit-for-
purpose C&P organisation and develop the resourcing strategy, the latter being a mandatory
deliverable in the Opportunity Realisation Manual (ORM) under Project Standard 05 (PS05).
In the Select phase the mandatory C&P Execution & Resourcing Strategy frames the C&P
Execution Plan which determines all C&P organisation, policies, procedures, systems and
governance structures that will be applied to the project.
It is not the intent of this Project Guide to circumvent or limit the creativity and free thought of
experienced project professionals. Rather, the concepts are intended to be applied as an aid to
the project team and to be driven by an experienced C&P Lead. The Project Guide aims to
standardise and create consistency of approach and improve the quality of C &P Organisation
Design and Set-up and to thus help ensure effective project execution.

1.2 Scope and Applicability

The scope includes the following key aspects:
Organisational Design Principles
Resource estimating
Resourcing activities
Tools and Frameworks.
The extent to which this Guide is applied will vary depending on the project size, complexity, value
and business environment. Please contact the C&P team for guidance and support as required.

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Guide C&P Organisation Design & Resource Planning

2 C&P in Projects
Figure 1 illustrates the symbiotic relationship between the Category Management and Contracting
Process (“CMCP”) and the Opportunity Realisation Process (“ORP”). See Appendix A for further
details.

CP Projects

Business needs Identify

CMCP

Market Analysis Assess

ORP
SC Cost Modeling Select
Strategy Selection Define
Sourcing & Award Execute
Contract Management Operate

Value Delivery
Fig 1: Relationship between CMCP & ORP

C&P professionals work with project teams to obtain, on the best possible commercial terms,
specific works, equipment, materials, services and expertise to support the successful execution
of a project.

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Guide C&P Organisation Design & Resource Planning

3 Organisation Design and the Project Environment

Designing, determining and resourcing a fit for purpose C&P organisational to support the delivery
of Industry Top Quartile Projects needs to take into account key considerations, such as
Project complexity, often frontier operating environment
Market conditions (e.g. Volatile)
(new) Venture set up
Contracting options (mega projects requiring multiple contracting options within a single project
as no Contractor can assume all the liabilities or provide adequate capacity)
Host government and venture partner interests (how to address these)
As a result the organisational structure of project teams vary dependent upon a number of these
aspects such as the nature of the opportunity, its size and complexity, contracting strategy, local
requirements etc. However, the following principles’ underpinning the establishment of C&P teams
applies equally to major, medium and integrated projects – Greenfield, Brownfield, on and
offshore projects.

3.1 Mobilisation of C&P Lead

At DG2, at the start of the Select phase, the rapid deployment of a competent and experienced
C&P Lead early enough to add commercial insight to the project concept selection is essential
(see Section 6 & Appendix B on standard job roles). During the Define phase, ramp up of the C&P
team shall commence with procurement and contract engineers on seat and considerable value is
gained if the C&P Lead can remain on the project team all the way through to Commissioning &
Start Up (CSU). However it has to be recognised, particularly in the case of large complex
integrated projects with longer duration, that it would be somewhat unrealistic to expect individuals
to remain with a single project throughout. In addition the skills requirements change through the
life of the project ranging from strategic in the early phases to that of more focussed, controlled
and directive in the execution phase.

3.2 Reporting Lines – Functional & Operational

The Project C&P Lead should be resourced with Arrow staff. The Project C&P Lead should
‘operationally’ report directly to the Project Manager (also referred to as Project Director), and
should have single point accountability for all aspects of the C&P Function. An example of an
organisational set-up is illustrated in Fig 2 below; details on standard job roles are in Appendix B.

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Guide C&P Organisation Design & Resource Planning

Fig 2: Example of Functional and Operational Reporting Lines

3.3 Accountabilities
The Project C&P Lead is accountable for ensuring that the project is delivered in compliance with
PS05 providing sign off of the application of standards and assurance processes at Decision
Gates. In addition, to ensure project delivery is integrated with C&P overall requirements, a seat
on the C&P Functional leadership team is suggested.

3.4 Alignment with Project Team design and Co-location

Based on how the Project has split its work scope, C&P resources need to be aligned accordingly
to provide optimal support to Contract holders. Ideally Contracts Engineers are being co-located
with Contract Holders and/or Project team. Logistics and associated supporting resources for
warehousing for example are not generally part of the C&P organisation. The example shown
below illustrates design split by project work breakdown structure, and support by a centralised
functional team.

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Guide C&P Organisation Design & Resource Planning

Fig 3: Example – Project Work Breakdown Structure/Centralised Functional Support

The organisation design as above and the resourcing strategy for C&P resources in project teams
will be influenced by various factors such as: scale and complexity, selected contracting strategy,
availability of corporate/shared C&P support. These factors are further explained in the sections
following.

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Guide C&P Organisation Design & Resource Planning

4 Resource Estimating
Based on historical project data, C&P Project organisation sizing has been analysed. The
researched data includes ‘optimal number of C&P staff’ (to avoid measuring based on past
inefficiencies), CAPEX (in real terms), contracting strategy and country risk during the ORP
phases Define and Execute for projects between US$ 500 mln and US$ 5 bln in CAPEX. Other
ORP phases are excluded as the bulk of C&P staff resourcing needs are in these two phases.
The study indicates a significant relationship between these project characteristics and C&P
Project FTEs expressed by two formulas for the Define and Execute phase. These formulae give
reasonably good correlations for most projects in this size range. As a consequence, the ‘C&P
resourcing estimation’ formulas can be used to calculate the C&P resourcing needs on any
particular project. A breakdown of FTEs in to Job roles/Job levels has not been analysed.
However, a typical ratio of JG1-2: JG3-6 is 1:3 looking at the Discipline holistically.
Project C&P resourcing estimating formulas for projects 0.5 Bln US$ < CAPEX in BLN US$) < 5
Bln US$:
Define phase

Execute phase

Example FTE outcomes using C&P Resourcing estimating formulas:

Capex Country Contract FTE FTE
Risk type Define Execute
500 1.5 EPC 0.3 0.4
mln
1Bln 2.0 EPC 1.7 2.0
1Bln 2.5 EPCm 3.4 4.0
2 Bln 2.0 EPC 2.9 3.5
4 Bln 2.5 EPCm 6.9 8.3
5 Bln 1.0 EPCm 5.9 7.0
5 Bln 3.0 EPCm 8.9 10.7
Please note that that the C&P capabilities per project phase are different, hence this is not
necessary the same staff mix.
Some country risk 2011Q1 examples are 1.01 Norway; 1.12 NL; 1.46 UK; 1.81 US; 2.31 Malaysia;
3.55 Nigeria

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Guide C&P Organisation Design & Resource Planning

Further calculation can be made with the CP Resourcing Estimation Tool that can be found in
the PG05g Toolkit on the APMS website. This Tool also includes the County Risk index numbers
for each country.
Notes:
Country risk is an index number which is published by IHS (www.ihs.com) and represents a
composite of three risks: political risk, socio-economic risk and commercial-petroleum risks. The
reason for using IHS is because it has a transparent and sound methodology and the index is
specifically designed for the oil and gas industry with quarterly updates.

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Guide C&P Organisation Design & Resource Planning

5 Project C&P Discipline Framework

From an HR resourcing perspective project C&P Discipline personnel are part of the Functional
C&P Skill pool. Within the C&P Skill pool the Discipline Project C&P represents the specific C&P
competencies group that supports Capital Projects.
The C&P Project Discipline Framework describes the structure of the Discipline in te rms of job
ladder and competencies. It consists of HR calibrated and standardised Project C &P roles and
required experience exposure. The Project C&P career ladder roles are: C&P Regional Lead/ C&P
Manager (JG1-LC), C&P Lead (JG1-2), Senior Contract Engineer (JG3), Contract Engineer (JG4-
5) and C&P Assist (JG6-7). The Job titles are standardised in the Discipline.
Each role has a standardised model job description that is used in the resourcing process to
compile the final project specific job description. The exact Job Group level will need to be
assessed by HR and the C&P Group Manager before issue using the competency based job
assessment matrix. Appendix B provides more details on C&P Projects Job Framework and
Project C&P Discipline Competency Framework. Please contact the C&P Group Manager for
further detail or the application of model job descriptions.

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Guide C&P Organisation Design & Resource Planning

6 Summary
As stated in PS 05, the C&P Execution Plan determines all C&P organisation, policies,
procedures, systems and governance structures that will be applied to the project.
The initial design of the C&P organisation with the required number of resources, job levels and
reporting lines is not the end of a process, but signals the beginning of an important journey for
the project. It has to work for Arrow, but equally important it must work well for the contractors.
The organisation setup should be viewed from Project CAPEX, contracting strategy, country-risk
perspectives and incorporate specific project considerations and learning from other similar
projects. Keep the organisational design simple and fit for purpose, but innovative enough to
uncover commercial value and make the project more viable in the eyes of stak eholders.
Finally, each organisation design and size will have its merits and bring opportunities to the
Project Team; however, it is not free of risk (e.g. lack of project C&P resources, continuity of key
staff, reliance on agency Contract Engineers for critical contracts etc). Proper assessment and
mitigation of risks should take place in the Select or Define phases and thus prepare a solid
foundation for managing the risks and maximising the opportunities during Execution.

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Guide C&P Organisation Design & Resource Planning

7 Definitions
CAPEX = Capital Expenditure; expenditures creating future benefits
C&P Lead = Contracting and Procurement Lead
DCAF = Discipline Control and Assurance Framework
FTE = Full Time Equivalent
JV = Joint Venture
ORM = Opportunity Realisation Manual
PM = Project Manager
PS05 = Capital Project Standard 05 - Contracting and Procurement
TQ = Top Quartile (Project Benchmarking)
VIP = Value Improving Practice

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Guide C&P Organisation Design & Resource Planning

Appendix A. C&P Activities Mapped To The ORP

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Guide C&P Organisation Design & Resource Planning

Appendix B. C&P Projects - Job Framework & Competencies

PT CP-Projects Core Job Evaluation Framework (Model 3 Projects)
CP Regional Snr Contracts Contracts Contracts CP CP
Role Title CP Lead CP Lead
Lead/ Manager Engineer Engineer Engineer Assistant Assistant
JG 1-A* 1 2 3 4 5 6 7
EXPERIENCES EXPOSURE

Consistent
Provide Strategic Development of the CP
development of
and Tactical advice Strategy (at a large External and internal factors Low complexity contract,
employees and
across the organisational level), considered in developing including initialisation,
Key Challenges guides others on key
businesses focusing incorporating leading the overall enterprise-wide variation and the finalisation
elements of the CP
on enhanced Project practice insights to achieve CP strategy. process.
Strategy and its
delivery. Top Quartile performance.
implementation.

Manage
Deep understanding
communication of First hand experience of all
of the procurement
the CP strategy elements of the supply Basic model terms and
process as far as it is Lead negotiations with all
internally & chain and guide others conditions , low complexity area
affected by Project stakeholders on large
externally, efficiency and costs , , support the development of a
issues. Involved in projects and support
Responsibility for Applying the principles of contract execution plan. Basic
identifying portfolio complex, mega-project
adapting tools and effective inventory supplier management tools to
issues and negotiations. Manage the
methodology to management , First hand access, collect, analyse and
developing an procurement aspects of
improve costs and experience in developing track supplier performance.
integrated view of projects, especially long
articulate key sourcing strategy and Exposure to negotiation
Delivery Shell’s Capital lead items for procurement.
success factors for tactics for low complexity principles and the use of
Projects. Direct role Write the full range of large
optimising end-to- goods and services. negotiation strategies.
in creating & complex contracts (e.g. large
end process , Understands fundamental Understand key elements of a
managing Shell’s EPC, FEED and PSA contracts)
Contribute to differences between pricing sourcing strategy and its tactics
broader approach to and develop an
significant parts of strategies, applying the for low complexity goods and
Projects contracting understanding of contract
large contracts (e.g. principles of incentives and services. First hand experience
& procurement. planning/scheduling/packagi
large EPC, FEED and selecting the most in the sourcing process for low
Provide advice to a ng.
PSA contracts) and appropriate reward for complexity goods and services.
number of tender
gain exposure to requirements.
boards.
contract scheduling

Support the
development of
Contracting Work on multi-partner,
Large, multi-partner,
Strategies and complex, mega Projects. Low complexity contract model/
relatively complex Larger, more complex
Managerial Contracting Tactics Provide advice on changing contract and in the
Contracts. Provide contracts (in comparison to
Integration with particular commercial terms and development and structuring of
support for mega- CP Assistance roles).
emphasis on the making/handling claims on contracts.
project negotiations.
front-end strategy large contracts.
side of Project
planning.

Handle category
management &
supplier
relationship
Gain full responsibility in Lead negotiations on
management in First hand experience in
effectively managing all medium-sized
several regions, developing category/
types of risk, including contracts with First hand experience of the
Stakeholder Exposure to local project strategies and
business, technical and multiple business processes, procedures
Management content executing implementation
commercial within the span stakeholders (EPC and controls.
requirements, plans for a low complexity
of control including supplier companies and
government category/ project.
risks. project partners).
considerations &
partner contracting
needs in several
Regions.

Experience in
projects led by Shell
Lead, manage and coach
partners, Work
teams of varying seniority
across several
Interface levels and gain
projects Exposure to multiple
mngt/ responsibility for staff Coach an entry-level
simultaneously, supplier N/A
Personnel planning and developing member.
Manage large and environments.
mngt roles and responsibilities for
diverse teams and
contracting staff to complete
provide advice to,
tasks and overcome issues.
and influence,
functional leads

Critical level of
Critical level of
influencing with
Critical level of influencing influencing with Critical level of influencing
senior Shell Important level of influencing
with senior Shell Shell stakeholders; with Shell stakeholders;
Human stakeholders; with Shell stakeholders; work
stakeholders; working with negotiating with negotiating with suppliers
Relations Skills working with major with suppliers to ensure
major suppliers to ensure major suppliers to to ensure favorable terms
suppliers to ensure favorable terms for Shell.
favorable terms for Shell. ensure favorable for Shell.
favorable terms for
terms for Shell.
Shell.

Notes:
1) It is acknowledged that there may be some positions that do not fit well within this model.
2) Multi-grading of a position is not allowed; The JG 1-LC designation is meant to illustrate that there are positions at JG1 and the JGA level.

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Guide C&P Organisation Design & Resource Planning

Project CP Discipline Competency Framework

Opportunity Realisation Process
CMCP Competency Existing Competency Identify / Select Define Execute Operate
Area Assess
1.Business a. Development & Implement CP Strategy (CP)
Need / Interface b. Demand Management (CP)
c. Project Context : Manage Project Complexity
and Program/ Portfolio aspects (PS)
d. Financial Risk Management :Manage Financial
Risk (FN)
e. Treasury Operations : Capital and Finance
Structure (FN)
f. Treasury Operations : Counterpart Evaluations
(FN)
2.Market a. Analysis of Industry, Local & Global Markets
Analysis (CP)
3.Supply Chain a. Develop and Apply Cost Modelling Concepts
Cost Modeling (CP)
4.Strategy a. Develop Category / Project Strategies (CP)
Selection b. Formulate Sourcing Strategy & Tactics (CP)
5.Sourcing & a. Develop & Apply Supply Chain Concepts (CP)
Award b. Develop & Apply Negotiation Strategies (CP)
c. Manage Sourcing Process (CP)
d. Develops Contracts (CP)
6.Contract a. Deliver Contract Value (CP)
Management b. Develop and Manage Suppliers (CP)

7. CP in a. Resource & Schedule Management: Manage

Projects the Schedule and Resource Plan (PS)
b. Resource & Schedule Management: Mature the
Plan and Schedule (PS)
c. Cost Management: Manage the Cost (PS)
d. Cost Management: Implement Cost Control
Processes (PS)
e. Manage Strategic and Front-end Processes:
Identify and Manage Project Risk (PS)
f. Manage Strategic and Front-end Processes:
Develop Project Execution Strategies and
Plans (PS)
g. Manage Project Execution: Handover and close
out work (PS)
h. Manage Project Execution: Risk Analyse
Probalistic Schedule (PS)
i. Manage Project Execution: Perform
Probabilistic Cost Risk Analysis (PS)
8.CP Standards a. Develop and Apply CP Processes (CP)
& Tools b. Develop and Apply CP Systems (CP)
c. Project Control Processes : Specify Quality
Assure/Control Req's and Develop Quality Plan
and Perform QA/QC (PS)
d. Project Control Processes : Implement Project
Information Management System (PS)
e. Project Control Processes : Manage and
Communicate Project Performance (PS)
f. Project Control Processes : Develop Lessons
Learned / Participate in audits and reviews (PS)
(CP): Global Contracting & Procurement competency, (PS): Project Services , (FN); Finance

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Document administration

Document information
Capital Project Management System
Document Number 99-PM-GDL-0005-G
Title C&P Organisation Design & Resource Planning
Summary The objective of this project Guide is to provide guidance to a Project Contracting
and Procurement (C&P) Lead and the extended projects community on how to best
design a fit-for-purpose C&P organisation and develop the resourcing strategy.
Converted from the Shell Guide Issue A, May 2011.
Revision 1.0
Revision Date 20/12/2012
Scope Corporate (99)
Originator Arrow Energy
Discipline Capital Project Management (PM)
Document Type Guide
Document Status Issued For Use
Security Classification Restricted

Comments related to this document

Comments on this document should be made in the first instance to Arrow Energy by e -mailing:
dc@arrowenergy.com.au

Revision history
Revision Revision Date Document Status Revision Comments Author
1.0 20/12/2012 Issued For Use Converted from Shell PMS Andrew Hugo
document May 2011 Issue A

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Guide C&P Organisation Design & Resource Planning

Acceptance and release

Author
Position Incumbent

Senior Contracts Engineer Andrew Hugo

Reviewers
Position Incumbent Review Date

PMS Project Team Paul Dominic 13/11/2012

PMS Steering Committee 13/11/2012

Approver(s)
Position Incumbent Approval Date

GM, Business & Project Services Nick Binks 3/12/2012

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