Evaluating bids on a lifecycle cost basis

January 10 2013 - TI Staff

\"\"It is an established fact that the contractor will prepare the bid tabulation and present it to the end user for acceptance. However, the contractor bid is usually nothing more than a scope of supply list, and not a true comparison of the offered equipment. If the pre-bid meetings are conducted correctly, the scope and vendor exceptions to specifications will be essentially the same.

The contractor should be sure to include a ‘technical check list’ section in the bid tabulation, for a quick confirmation that the best technical alternative which will produce the highest availability and therefore highest profits is selected. The bid tabs should be minimized in size but include the critical items necessary for evaluating bids on a lifecycle cost basis.

Use of the EP&C typical bid tabulation format extends the bid cycle and evaluates only on a capital cost and not life cycle cost basis. Using this format will result in the extension of the bid cycle time by two or more weeks, evaluation based on technical items but on their capital cost only, and a vendor selection that will not result in the highest level of plant safety, reliability and revenue for the life of the process unit.

This approach has been used since 2007 in all critical equipment bid tabulations and has gained approval from project teams from its use. As the size of plants (mega) and daily revenue has increased significantly in recent years, end user clients have seen the advantages in this approach over the “standard industry bid tabulations” that were used in the past. This approach has been used in the following projects since 2007:

Upstream – gas plant booster compressor project

LNG plant feed gas compressor project

LNG plant mixed refrigeration gas compressor project

Proposed Bio-Fuels compression equipment project

One of the projects mentioned above allowed the selection of a machine with a capital cost of +25 percent based on yearly revenue, power cost and maintenance savings equal to the capital cost increment.