A STUDY ON THE METHOD OF MEASUREMENT PRACTICE IN OIL

AND GAS DEVELOPMENT PROJECT IN MALAYSIA

SYED ZAFIRNA BIN WAN HASMI

UNIVERSITI TEKNOLOGI MALAYSIA

PSZ 19:16 (Pind. 1/07)

DECLARATION OF THESIS / UNDERGRADUATE PROJECT PAPER AND COPYRIGHT

Author’s full name : SYED ZAFIRNA BIN WAN HASMI

Date of birth : 11th

APRIL 1974

Title : A STUDY ON THE METHOD OF MEASUREMENT

PRACTICE IN OIL AND GAS DEVELOPMENT

PROJECTS IN MALAYSIA

Academic Session : 2013/2014

I declare that this thesis is classified as:

I acknowledged that Universiti Teknologi Malaysia reserves the right as follows :

1. The thesis is the property of Universiti Teknologi Malaysia.

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UNIVERSITI TEKNOLOGI MALAYSIA

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(full text)

SUPERVISOR’S DECLARATION

“I/We hereby declare that I/We have read this thesis and in my/our

opinion this thesis is sufficient in terms of scope and quality for the

award of the degree of Bachelor of Quantity Surveying.”

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i

A STUDY ON THE METHOD OF MEASUREMENT PRACTICE IN OIL

AND GAS DEVELOPMENT PROJECT IN MALAYSIA

SYED ZAFIRNA BIN WAN HASMI

A dissertation submitted in partial fulfillment of the

requirements for the awards of the degree of

Bachelor of Quantity Surveying

Faculty of Built Environment

Universiti Teknologi Malaysia

DECEMBER 2013

ii

DECLARATION

I declare that this thesis entitled “A Study on the Method of Measurement

Practice in Oil and Gas Development Project in Malaysia” is

the result of my own research except as cited in the references. The thesis has

not been accepted for any degree and is not concurrently submitted

in candidature of any other degree.

Signature :

Name :

Date :

iii

DEDICATION

To my beloved wife, children, father, mother, mother-in-law and late father in-law,

Thanks for your supports, encouragements and patience.

Supervisor and Panels,

Thanks for your guidance and criticism.

Thanks for Everything Granted

iv

ACKNOWLEDGEMENT

Sincere appreciations are dedicated to all the parties who have contributed to

the success of the research. Firstly, I am greatly indebted to my supervisor of the

research, Fara Diva Mustapa who had motivated and enlightened me with the

impressive ideas and knowledge in full attention and patience. Her generous

contribution and great support throughout the period of the research are much

appreciated. Without her support and interest, this thesis would not have been the

same as presented here.

In preparing this thesis, I was in contact with many people, academicians and

practitioners. They have contributed towards my understanding and thoughts. I am

very grateful to my wife and children for their patience and understandings during

my study.

My sincere appreciation also extends to all my colleagues, ex-colleagues and

others who provided assistance at various occasions, in particular, En. Ali Murad,

En. Abang Yusup Abdul Rahman and En. Ahmad Shukri Abdul Ghani (Sarawak

Shell Berhad); En. Mohd. Khairi Abdul Rahim (MMHE), En. Kamarul Syamsi

Mohamad (ExxonMobil), En. Bushral Karim Mohd Yusub (Sapurakencana

Petroleum). Their views and tips are useful indeed.

Last but not least, thankful are extended to all the respondents who are kindly

spend their precious time to take part in the questionnaire survey. Their cooperation

is the fundamental key to get the research to way of success.

v

ABSTRACT

The Standard Method of Measurement is used for the measurement of

construction works. It allows quantity surveyors to measure works in a standard

format and uniform basis for easy preparation of a Bills of Quantities, tender

comparisons and embodies the essential good practice. Standard Method of

Measurement for Industrial Engineering Construction (SMMIEC) was first published

in 1984 with an objective to provide measurement principles for the estimating,

tendering, contract management and cost control aspects of industrial engineering

construction which include oil and gas construction industry. The research was

conducted to identify if there is any Standard Method of Measurement used by the

industry players in the oil and gas construction industry in Malaysia and the current

practice to prepare quantity taking off in this industry. The research was focused on

the quantity surveyors and engineers who are working in the contracting and client

firms in the industry. 30 sets of interview form were sent via email to the quantity

surveyors and engineers who possess at least 5 years working experience in the

industry. The data were then collected and analysed by descriptive analysis. The

findings revealed that almost all respondents were not aware on the existence of

SMMIEC. The method of measurement practiced is based on individual preferences

and experience which may not suitable to other players in the industry. This has led

to disputes as a result of the discrepancy and inconsistency of the quantity taking off

generated by each party. It can be concluded that there is no particular Standard

Method of Measurement document or any similar form that is widely used or known

to the industry players in the oil and gas development project in Malaysia.

vi

ABSTRAK

“The Standard Method of Measurement” merupakan dokumen yang

digunakan untuk pengukuran kerja-kerja pembinaan. Ia membolehkan juruukur

bahan untuk mengukur kerja-kerja binaan di dalam format piawai dan seragam untuk

memudahkan penyediaan Senarai Kuantiti, perbandingan tender dan menetapkan

amalan penting yang baik. “Standard Method of Measurement for Industrial

Engineering Construction” (SMMIEC) pertama kali diterbitkan pada tahun 1984

dengan objektif untuk menyediakan prinsip-prinsip pengukuran untuk membantu

membuat anggaran kos, penyediaan tender, pengurusan kontrak dan kawalan kos

pembinaan kejuruteraan industri termasuk industri pembinaan di dalam minyak dan

gas. Kajian ini dijalankan untuk mengenalpasti jika terdapat sebarang “Standard

Method of Measurement” yang digunakan oleh pengamal-pengamal ikhtisas di

dalam industri pembinaan minyak dan gas di Malaysia dan apakah amalan semasa

untuk menyediakan senarai kuantiti kerja di dalam industri ini. Kajian ini memberi

tumpuan kepada jurukur-jurukur bahan dan jurutera-jurutera yang bekerja dalam

syarikat pembinaan dan klien di dalam industri ini. Sebanyak 30 set borang

temuduga telah dihantar melalui email kepada jurukur bahan dan jurutera-jurutera

yang memiliki sekurang-kurangnya 5 tahun pengalaman bekerja di dalam industri.

Data kemudiannya dikumpul dan dianalisa melalui analisis deskriptif. Hasil kajian

menunjukkan bahawa hampir semua responden tidak menyedari tentang kewujudan

SMMIEC. Kaedah pengukuran yang diamalkan adalah berdasarkan kepada amalan

individu dan pengalaman masing-masing. Ini mungkin tidak sesuai untuk diamalkan

oleh pihak lain di dalam industri ini. Ini telah membawa kepada pertikaian akibat

daripada percanggahan dan kuantiti yang tidak konsisten yang disediakan oleh setiap

pihak. Ianya dapat disimpulkan bahawa tidak ada dokumen “Standard Method of

Measurement” atau yang serupa yang digunakan secara meluas atau diketahui oleh

pengamal-pengamal ikhtisas industri di dalam projek pembangunan minyak dan gas

di Malaysia.

vii

TABLE OF CONTENTS

CHAPTER TITLE PAGE

TITLE PAGE i

DECLARATION ii

DEDICATION iii

ACKNOWLEDGEMENTS iv

ABSTRACT v

ABSTRAK vi

TABLE OF CONTENTS vii

LIST OF TABLES xi

LIST OF FIGURES xii

LIST OF ABBREVIATIONS xiii

LIST OF APPENDICES xiv

1.0 INTRODUCTION

1.1 Background Information 1

1.2 Statement of Problems 3

1.3 Research Questions 5

1.4 Objective of Research 6

1.5 Scope of the Research 6

viii

1.6 Significant of the Research 7

1.7 Research Methodology 8

1.8 Proposed Chapter Organisation 9

1.8.1 Chapter 1 9

1.8.2 Chapter 2 9

1.8.3 Chapter 3 10

1.8.4 Chapter 4 10

1.8.5 Chapter 5 10

2.0 LITERATURE REVIEW

2.1 Introduction 11

2.2 Standard Method of Measurement for Industrial 13

Engineering Constructions

2.3 Oil and Gas Industry in Malaysia 14

2.4 Offshore Oil and Gas Activities 16

2.4.1 Exploration 16

2.4.2 Development Phase 19

2.4.3 Production Phase 20

2.4.4 Summary of Offshore Oil and Gas Activities 20

2.5 Offshore Oil and Gas Development Projects 21

2.6 Offshore Platforms 22

2.6.1 Drilling Platforms 24

2.6.2 Production Platforms 24

2.6.3 Living Quarters Platforms 25

2.6.4 Flare / Vent Platforms 26

2.6.5 Bridge and Helideck 26

2.6.6 Self-contained Platforms 28

2.7 Component of Offshore Platforms 31

2.7.1 Jacket 31

2.7.2 Piles 32

2.7.2 Topsides Facilities 32

ix

2.8 Sequence of Activities in Offshore Oil and Gas

Development Projects. 33

2.8.1 Design of Offshore Platform 34

2.8.2 Construction of Offshore Platform 35

2.8.2.1 Jacket and Piles Fabrication 36

2.8.2.2 Fabrication of Topsides Modules 38

2.8.3 Transportation and Installation 39

2.8.4 Offshore Hook-up and Commissioning 40

2.9 Bills of Approximate Quantities Contracts in Oil and Gas 41

Development Projects

3.0 RESEARCH METHODOLOGY

3.1 Introduction 45

3.2 Data Collection 45

3.2.1 Technique of Data Collection 46

3.2.2 Questionnaire Design 47

3.2.3 Research Sampling 49

3.3 Data Analysis 50

3.3.1 Bar Chart 50

3.3.2 Pie Chart 51

3.4 Conclusion 51

4.0 RESEARCH ANALYSIS

4.1 Introduction 52

4.2 Respondent Background 53

4.2.1 Respondents Based on Company’s Background 53

4.2.2 Respondents Based on Career’s Background 55

4.2.3 Respondents Working Experience 56

x

4.2.4 Other Respondents 58

4.3 Objective 1 – Identifying The Method of Measurement 58

or Any Similar Document Used for Quantity Taking Off

4.4 Objective 2 – Identifying The Current Practice to Prepare 61

Quantity Taking Off 59

4.5 The Future of SMMIEC for Oil and Gas Development 66

Projects in Malaysia

5.0 CONCLUSION AND PROPOSAL

5.1 Introduction 69

5.2 Conclusion 70

5.2.1 Objective 1: To Study If There Is Any Standard 70

Method of Measurement Document or Similar

Form Used by The Industry Players to Prepare the

Standardised Quantity Taking Off in Oil and Gas

Development Project in Malaysia

5.2.2 Objective 2: To Study The Current Practice of 71

Preparing the MTO for Oil and Gas Development

Project in Malaysia

5.3 Research Constraint 73

5.3.1 Duration of the Research 73

5.3.2 Lack of Related Document to Conduct Study 73

5.3.3 Other Limitation 74

5.4 Research Proposal 75

5.5 Future Research 75

REFERENCES 76

xi

LIST OF TABLES

TABLE NO. TITLE PAGE

2.1 Summary Phases of Offshore Oil and Gas Activities 20

3.1 Questionnaires Distributions According to Type of Firms 49

4.1 Number of Respondents Based on Company Background 54

4.2 Number of Respondents Based on Career Background 55

4.3 Respondents Working Experience in Oil and Gas Industry 57

in Malaysia

4.4 Respondents Awareness on SMMIEC 58

4.5 Number of Respondents Use Standard Method of 60

Measurement for Quantity Taking Off

4.6 Respondents Current Practice to Prepare Quantity Taking 61

Off

4.7 Respondents Response on Contingencies for Quantity 63

Taking Off

4.8 Disputes Encountered Due to Quantity Discrepancy 65

4.9 Respondents’ Opinion on the Relevancy of SMMIEC in 67

Malaysia

xii

LIST OF FIGURES

FIGURE NO. TITLE PAGE

2.1 Oil and Natural Gas Overview 15

2.2 Seismic Surveys 18

2.3 Steel Template Platform 22

2.4 Various Types of Concrete Gravity Platform 23

2.5 Typical Steel-Piled Self-Contained Drilling/Production 30

Platform

2.6 Typical Offshore Project Schedule Based on BOAQ 42

Approach

4.1 Percentage of Respondents Based on Company Background 54

4.2 Respondents Career Background 56

4.3 Respondents Working Experience in Oil and Gas Industry 57

in Malaysia

4.4 Percentage of Respondents Having Awareness on SMMIEC 59

4.5 Percentage of Respondents Use Standard Method of 60

Measurement for Quantity Taking Off

4.6 Respondents Current Practice to Prepare Quantity Taking 62

Off

4.7 Percentage of Respondents Allowing Contingencies for 64

Quantity Taking Off

4.8 Disputes Encountered Due to Quantity Discrepancy 65

4.9 Respondents Opinion on The Usage of SMMIEC in 67

Malaysia

xiii

LIST OF ABBREVIATION

ABBREVIATION FULL NAME

ACostE - Association of Cost Engineering

AFC - Approved for Construction

BBOE - Billions Barrels of Oils

BOAQ - Bills of Approximate Quantities

BOQ - Bills of Quantities

CESMM - Civil Engineering Standard Method of

Measurement

EPP - Entry Point Projects

GDP - Gross Domestic Product

GNI - Gross National Income

IEM - Institution of Engineers, Malaysia

IQS - Institution of Quantity Surveyors

ISA - Internal Society of Automation

ISM - Institution of Surveyors, Malaysia

JDB - Joint Documentation Board

MMHE - Malaysia Marine and Heavy Engineering

MSF - Module Support Frame

MTO - Material Taking Off

NKEA - New Key Economic Area

PDMS - Plant Design Management System

QS - Quantity Surveyor

RICS - Royal Institution of Chartered Surveyors

SMM - Standard Method of Measurement

SMMIEC - Standard Method of Measurement for Industrial

Engineering Construction

USA - United States of America

xiv

LIST OF APPENDICES

APPENDIX TITLE

A LETTER OF AUTHORISATION

B INTERVIEW QUESTIONS FORM

CHAPTER 1

INTRODUCTION

1.1 Background Information

Quantity taking off is an activity usually performed by Quantity Surveyors as

part of the construction process to determine and itemised and quantified list of

construction materials from project drawings in order to produce a Bills of Quantities

(Seeley, 1997). It involves measuring the number, volume or area of items associated

with a particular construction project, determining the associated materials and

labour costs, and formulating a bid (or estimate) as part of the bidding process. It is a

process of reading the plans and determining the quantities of work required to build

the project (Peurifoy & Oberlender, 2014).

Quantity taking off can be performed by hand calculations or by computer

where quantity of the required work is calculated. The process of performing a taking

off is the Quantity Surveyors opportunity to fully understand the work that must be

estimated (Peurifoy & Oberlender, 2014). Failure to capture all required works in the

taking off process may result in the project being planned to be under estimate and

will lead to unnecessary variation orders to the project.

2

In the building construction practice, the task normally carried out by a

trained personnel in Quantity Surveying profession and guided by a Standard Method

of Measurement (SMM) in order to produce a consistent, uniform and standard basis

for measuring building works in order to facilitate industry wide consistency and

benchmarking, to encourage the adoption of best practice and to help disputes.

According to Malaysia Standard Method of Measurement of Building Works

Second Edition, SMM provides a uniform basis for measuring building works and

embodies the essential good practice but more detailed information than is required

by SMM shall be given where necessary (e.g. in descriptions or preambles, certain

specification information including limits on tolerance imposed by the designer) in

order to define the precise nature and extent on the required work.

The term quantity taking off is sometimes called material taking off (MTO)

(Peurifoy & Oberlender, 2014). It is a widely used term in oil and gas development

projects. It is a process of analysing the drawings and determining all the materials

required to accomplish the design. The MTO is used to create a Bill of Materials

(BOM) or Bills of Quantities. Procurement and requisition are activities that occur

after the BOM is completed (International Society of Automation, ISA Press, 2004).

This term is used in the engineering and construction sector that refers to a list of

materials with quantities and types (such as grades of steel) that are required to build

a designed structure or item. This list is generated by analysis of a blueprint or other

design document.

3

1.2 Statement of Problems

The quantity taking off must be as accurate as possible and should be based

on all available engineering and design data. Use of appropriate automation tools is

highly recommended. Accuracy and completeness are critical factors in all cost

estimates. An accurate and complete estimate will establish accountability and

credibility of the quantity surveyor or cost engineer. This will therefore, provide

greater confidence in the cost estimate.

The quantity of material in a project can be accurately determined from the

drawings. The quantity surveyor must review each sheet of the drawings, calculate

the quantity of material and record the amount and unit of measure. Each quantity

surveyor must develop a system of quantity taking off that ensures that a quantity is

not omitted of calculated twice.

A person who is going to do the quantity taking off must also know how the

project is to be constructed and must prepare a well-organised checklist (taking-off

list) of all items required to construct the project (Peurifoy & Oberlender, 2014). A

well organised checklist of work will help reduce the chances of omitting an item.

The quantity taking off is extremely important for cost estimating because it often

establishes the quantity and unit of measure for the costs of materials, labour and

contractor’s equipment.

Before beginning to carry out the quantity taking off, an estimator (or

quantity surveyor) must thoroughly read through and study the bid documents to get

a good understanding of the total scope of work. Bid document can differ from

company to company but normally consists of instructions to bidder, scope of work,

bid forms, conditions of contract, project specifications and drawings (American

Society of Professional Estimators, Estimating Today, March 2011).

4

The Standard Method of Measurement (SMM) is used for the measurement

of construction works. It gives guidelines as to what should be measured for various

parts of the construction process. It allows for estimators to measure works in a

standard format for easy preparation of a Bills of Quantities and easy comparison of

tenders.

A foreword from Standard Method of Measurement for Industrial

Engineering Construction (1984) indicates that there has been a need for a

comprehensive for some years. The need was first recognized by the Institute of

Quantity Surveyors resulting in the Formation in 1980 of the Joint Documentation

Board (JDB) comprising members in equal numbers of the Association of Cost

Engineers (ACostE), the Institute of Quantity Surveyors and The Royal Institution of

Chartered Surveyors (RICS).

The purpose of the Standard Method of Measurement for Industrial

Engineering Construction (SMMIEC) is to contribute to the framework of project

documentation, and in particular to provide measurement principles for the

estimating, tendering, contract management and cost control aspects of industrial

engineering construction which include Oil and Gas development projects.

A particular feature of the SMMIEC is the recognition of the need to separate

fabrication from erection, and the common practice of supplying materials and

equipment as “Free Issue” to the Contractor. Where it is necessary to depart from the

method of measurement or where an alternative method of measurement is used this

shall be clearly stated.

Based on the study conducted among engineers and Quantity Surveyors who

are currently working in the oil and gas development projects in Malaysia, almost all

of them were not aware on the existence of SMMIEC. They further indicated that

method of measurement used in the oil and gas development projects is based on

5

individual user’s preferences and standard. Therefore, it may not be suitable to other

players in that industry. The industry players in this context are referring to the

quantity surveyors and all discipline engineers such as structural engineers, piping

engineers, electrical engineers, instrumentation engineers, mechanical engineers and

process engineers who involve directly the project development.

1.3 Research Questions

Based from the statement of problems above, several research questions have

been identified as follows:

1.3.1 Is there any Standard Method of Measurement being used or practiced

in the oil and gas development projects in Malaysia?

1.3.2 What is the current practice in the preparation of quantity taking off

for every component of works in the oil and gas development projects

in Malaysia?

6

1.4 Objectives of Research

The objectives of research are as follows:

1.4.1 To study if there is any standard method of measurement document or

form used by the industry players to prepare the standardised Quantity

Taking Off in the Oil and Gas Development Project in Malaysia.

1.4.2 To study the current practice of preparing the Quantity Taking Off for

Oil and Gas Development Project in Malaysia.

1.5 Scope of the Research

The research was carried out by identifying the method of measurement used

or practised by players in the oil and gas construction industry only. Due to the

respondents Company’s policy, respondents were unable to furnish project data in

the form of hard documents such as contract documents, project drawings, taking off

sheets, etc. with regards to quantity taking off related to the project.

7

1.6 Significant of the Research

The research is meaningful to all parties and players in the oil and gas

development projects especially to those involve in preparing the Bills of Quantities

and project development costing or budgeting. The study was conducted to survey

the quantity taking off practices in the oil and gas industry as well as the industry

players’ awareness on the existence of SMMIEC. It is hope that this survey will

bring a significant result to the readers on the commonly used of quantity taking off

in the oil and gas construction industry.

It is also hoped that the outcome of this study will lead to the adoption or

usage of SMMIEC to be used and accepted as a standard reference and guidelines by

all players in the oil and gas construction industry when preparing quantity taking off

and cost estimate.

A standardised and consistent method of measurement means to give less

room for contractual dispute in the future as far as quantity taking off is concerned.

Hence, it lowers the probability of the opposite parties to be arguing when come to

agree on the outcome of quantity taking off from the same documents.

8

1.7 Research methodology

This section discusses the methodology of the research conducted. This

research provides brief indication on the strength and weakness in preparing the

quantity taking off without having a standard method of measurement as a reference

and guidelines when carrying out the task.

After the research objectives and scope were confirmed, research data were

collected in two ways which were desk study and fieldwork research. In the desk

study, articles, journals, conference paper, books and electronic resources such as

reading materials from the internet were referred in order to complete the literature

review of the research.

In the fieldwork research, interview method was selected where selected

personnel who involved directly in the project were invited to be interviewed. The

outcome of the research was to obtain information on method used to carry out

quantity taking off. The outcome of the research was also to identify the reference or

guidelines used by personnel who are carrying out the tasks.

9

1.8 Proposed Chapter Organisation

The proposed Chapter Organisation for the research topic will comprise of

five (5) chapters. These chapters are:

1.8.1 Chapter 1

Chapter 1 discusses on the important aspects which are relating to the

research topic. It comprises of the introduction on the research topic

and problem statement that create research objective which lead to the

research methodology that will be used. In general, this topic will

explain in brief on the study in the preliminary stage and introduction

to the research topic.

1.8.2 Chapter 2

In this chapter, it explains the brief history and development of SMM

and its functions. Later, it gives an overview and background of oil

and gas industry in Malaysia. This chapter also discusses the typical

phases and activities involved in the offshore oil and gas

development. The aim of this chapter is to provide an understanding

of the activities and sequences of the events involved in the upstream

oil and gas development projects.

An understanding of the engineering and construction activities in the

oil and gas development projects in very important in formulating the

suitability of adopting SMM system and as standard reference and

guideline for all players in the oil and gas development projects.

10

1.8.3 Chapter 3

In the third chapter, it decides on the technique to be used to gather

data and information to meet the objective. It explains on the method

to be adopted to analyse the information and research methodology. It

also explains the research process that will be carried out such as

preparing interview questionnaire and other research questions to

personnel involve directly in the project.

1.8.4 Chapter 4

In chapter 4, it discusses on the data that have been collected and

analysed. All data that have been gathered and collected were

analysed to obtain result. The aim of this process is to meet the

objectives that have been set in Chapter 1.

1.8.5 Chapter 5

This is the final chapter for this study where it concludes the overall

study that has been carried out. It covers the main research finding

obtained during research process while carrying out the research.

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

Up to the middle of the nineteenth century, it was the practice to measure and

value the building works after it had been completed and the Bills of Quantities were

not prepared. It was during this era, the Revolution in Britain contributed to a

booming building industry. Builders had to prepare bids by measuring the same

quantities from the architect’s drawings. Hence, they were duplicating the same

activities for each bid. The logical solution was for the builders to get together and

employ one individual to measure the work and detail it in the Bills of Quantities

booklet. After pricing the works, the successful bidder would pay the person, called

Quantity Surveyor and include his fee in the bid. The common problem occurring

was that different quantity surveyors would measure work in different ways. These

disputes led to the introduction of the SMM by the Surveyors Institution in the

United Kingdom (Bunyad, 2010).

RICS (2013) indicates that the SMM first appeared in 1922 and was based on

‘the practice of the leading London quantity surveyors’. It was an attempt to bring

uniformity to the ways by which quantity surveyors measured and priced building

12

works as well as giving detailed information where necessary, in order to define the

exact nature and extent of the work required. The SMM applies to both proposed and

completed works.

The usage of the SMM in lieu with the preparation of the construction cost is

to ensure that similar platform is used by utilizing the same standard construction

measuring method approved by the professional bodies. It is a document that

contains definition of principles that is aimed to provide a uniform method of

measurement, qualification and billing of building works for use by quantity

surveyors.

In general, the SMM provides guidelines to do the following;

a. How to itemise the various building works items,

b. How to describe the various building items,

c. How to measure the various work items,

d. What is the unit of measurement or billing for various work items,

e. Also define how BQ should be prepared and formatted.

In addition to the SMM for the building works, there are also several types of

SMM had been published which are Civil Engineering Standard Method of

Measurement (CESMM) and Standard Method of Measurement for Industrial

Engineering (SMMIEC) which are to be used in the Civil Engineering works and

Industrial Engineering works respectively.

13

2.2 Standard Method of Measurement for Industrial Engineering Works

There has been a need for a comprehensive Standard Method of Measurement

for Industrial Engineering Construction (SMMIEC) for some years. The need was

first recognised by the Institute of Quantity Surveyors (IQS) resulting in the

Formation in 1980 of the Joint Documentation Board (JDB) comprising members in

equal numbers of the Association of Cost Engineers (ACostE), the Institute of

Quantity Surveyors and The Royal Institution of Chartered Surveyors (RICS).

The purpose of the SMMIEC is to contribute to the framework of project

documentation, and in particular to provide measurement principles for the

estimating, tendering, contract management and cost control aspects of industrial

engineering construction.

The term Industrial Engineering Construction shall mean equipment, facilities

and structures which ultimately carry out a mechanical function, a manufacturing

activity or a process operation, and the SMMIEC is particularly aimed at projects

emanating from the following industries:-

a) Chemical

b) Petroleum

c) Nuclear

d) Gas Exploration and Production

e) Oil Exploration and Production

f) Power Generation

g) Food and Drink

h) Refining

i) Steel Production

j) Pharmaceuticals

14

A particular feature of the SMMIEC is the recognition of the need to separate

fabrication from erection, and the common practice of supplying materials and

equipment as “Free Issue” to the Contractor. Where it is necessary to depart from the

Method of Measurement or where an alternative method of measurement is used, this

shall be clearly stated.

2.3 Oil and Gas Industry in Malaysia

The discovery of oil in Sarawak in 1910 had provided the bedrock for the

development of Malaysia’s present day oil and gas industry. It created opportunities

for many oil majors such as Shell, ExxonMobil (formerly known as ESSO), Murphy

Oil Company, Hess, Talisman, Nippon Oil and others to invest in the upstream and

downstream sectors of the industry, provided employment and skills transfer to

thousands of Malaysians and changed the economic landscape of the country forever.

As reported by Malaysia Petroleum Resources Corporation (2013), to date,

Malaysia has some 28.35 billion barrels of oil (BBOE) reserves and about 1.2 per

cent of the world’s natural gas reserves (2.35 trillion cubic metres) of proven

reserves. Malaysia has a current production rate of 730,000 (Seven Hundred and

Thirty Thousand) barrels per day of crude oil products.

The oil and gas industry in Malaysia contributes a total of RM111 billion, or

16.6 percent, to the nation’s gross domestic product (GDP). The share of the

upstream oil and gas production stands at RM87 billion, while downstream activities,

including refining, constitute RM24 billion. The Oil, Gas and Energy NKEA is

targeting into an increase of RM131.4 billion (5% annual growth) in the period from

2010 to 2020. There are 12 entry point projects (EPP) have been identified under the

oil, gas and energy sector. These EPPs are expected to create RM64 billion worth of

15

Gross National Income (GNI) contribution and at least 47,156 jobs by 2020 (Matrade

website, as accessed on 13/04/2013).

This initiative will lead to the development of the development of the new

O&G facilities for the next few years. As part of the development process, personnel

involve in the project budgeting and development cost plan will be required to

produce the quantity taking off based on the design that will be provided.

Figure 2.1: Oil and Natural Gas Overview

2.4 Offshore Oil and Gas Activities

16

In general, Malaysia oil and gas reserves are located offshore, primarily in the

east coast of Peninsular Malaysia and also of Sabah and Sarawak. In order to realise

the benefits of the hydrocarbons underneath the ocean, the hydrocarbon must be

extracted, processed and eventually marketed to consumers.

Oil operation conducted at offshore can be divided into five main areas which

are exploration, exploration drilling, development drilling, production operation and

transportation (W.J. Graff, 1981). According to Walsh (2003) there are four distinct

phases identified in the life cycle of offshore oil and gas fields, namely, exploration,

development, production, decommissioning / abandonment.

Therefore, in general, it can be said that offshore O&G development can be

summarised into three stages, namely, exploration, development and production.

2.4.1 Exploration

Scientific exploration for oil, in the modern sense, began in 1912 when

geologists were first involved in the discovery of the Cushing Field in Oklahoma,

USA. The fundamental process remains the same, but modern technology and

engineering have vastly improved performance and safety.

The exploration phase consists of activities involved in locating oil-bearing

strata within the ground underneath the ocean. Geologist and geophysicist are the

experts involved in the activities. Geophysicist uses methods of remote data

17

gathering such as seismic exploration and instrumentation for measuring gravity

fields and make interpretation as to the possible presence of oil-bearing strata.

In the first stage of the search for hydrocarbon-bearing rock formations,

geological maps are reviewed in desk studies to identify major sedimentary basins.

Aerial photography may then be used to identify promising landscape formations

such as faults or anticlines. More detailed information is assembled using a field

geological assessment, followed by one of three main survey methods: magnetic,

gravimetric and seismic.

The Magnetic Method depends upon measuring the variations in intensity of

the magnetic field which reflects the magnetic character of the various rocks present,

while the Gravimetric Method involves the measurements of small variations in the

gravitational field at the surface of the earth. Measurements are made, on land and at

sea, using an aircraft or a survey ship respectively.

A seismic survey, as illustrated in Figure 2.2 is the most common assessment

method and is often the first field activity undertaken. The Seismic Method is used

for identifying geological structures and relies on the differing reflective properties

of sound waves to various rock strata, beneath terrestrial or oceanic surfaces. An

energy source transmits a pulse of acoustic energy into the ground which travels as a

wave into the earth. At each point where different geological strata exist, a part of the

energy is transmitted down to deeper layers within the earth, while the remainder is

reflected back to the surface. Here it is picked up by a series of sensitive receivers

called geophones or seismometers on land, or hydrophones submerged in water.

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Figure 2.2: Seismic Surveys

The ground structure underneath the ocean will be systematically surveyed,

and when an area thought to be favourable is found, sample cores are drilled for

further investigation. The Geologist then studies surface formations and core samples

to describe the geometry of the earth’s fault and strata and identifies the areas that

may contain oil-bearing strata.

Once it is decided that an area may contain oil-bearing strata, an exploratory

drilling need to be carried out in order to confirm or deny the presence of

hydrocarbon. The formation can yield gas or oil, or both. The exploratory drilling

also provides information on quantity and quality of the hydrocarbon. As such,

further analysis could be done to determine whether the reserves are commercially

feasible to develop.

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2.4.2 Development Phase

The development of the offshore oil and gas fields begins when it is decided

that the fields contain producible amount of oil or gas. It is during this stage that

decisions are made on the types of facilities that are required to be developed to

process the extracted mixture of oil, gas and water and to transport the crude

hydrocarbon products to onshore for further processing. These facilities, such as, the

necessary drilling and production equipment, are normally contained on large

permanent offshore platforms. The types of offshore platforms commonly used for

offshore oil and gas development are discussed later in this report.

During this stage, the Oil Company’s efforts will concentrate on the planning

and managing the contracts for the design, procurement of materials and construction

of the required platforms. A project team will be set up to undertake the tasks. The

offshore platforms are normally constructed at the fabrication yard for cost savings

and to facilitate the construction phase. Once completed (contractually defined as

Mechanical Completed), the platforms will then be transported by transportation

barge to the offshore location for installation.

Developing oil and gas fields presents many difficulties and very costly

particularly in the offshore development. The less stable environment and volatile

weather conditions create unique problems for offshore development activities which

has led to the development of specialised equipment and techniques. Thus, a proper

project management strategy are evaluated and developed from the outset to ensure

that all the resources are appropriately expanded.

2.4.3 Production Phase

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Once all the platform facilities are successfully installed, hook-up and

commissioned, the facilities are then ready to be start-up and the production and

operation phase will begin. The extracted hydrocarbon will be processed from the

offshore platforms and transported onshore, through pipelines or ships, for further

processing and refining before they become consumable products. The facilities will

continue to produce and transport the crude hydrocarbon until it is no longer

economic, normally after 15 to 20 years. Then, the platforms will be

decommissioned, dismantled and removed from their locations.

2.4.4 Summary of Offshore Oil and Gas Activities

Table 2.1: Summary Phases of Offshore Oil and Gas Activities

Phase Descriptions Activities

Phase 1 Exploration Locating the oil bearing strata underneath the

ocean

Phase 2 Development Design, Construct, Transport, Install, Hook-up

and Commissioning the facilities for extracting

the hydrocarbon from underneath the ocean

Phase 3 Production Extracting, processing and transporting

hydrocarbon from underneath the sea to

onshore for further processing and refining.

As earlier discussed, oil and gas formations are found deep underneath the

earth. In Malaysia, the oil and gas fields have been mostly found at offshore

locations. In order to realise the benefits of hydrocarbon underneath the ocean, the

fields must be developed. The main three phases of the offshore oil and gas activities

can be diagrammatically summarised as shown by Table 2.1.

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2.5 Offshore Oil and Gas Development Projects

The offshore oil and gas development projects take place during the

‘Development Phase’ of the overall oil and gas activities. The main objective of the

development projects is to study a suitable offshore facility to be developed. Once

decided, it will be translated into design and constructed into a physical platform in

order to provide offshore facilities for extracting, processing and transporting the

hydrocarbon onshore for further processing. The facilities to be provided for that

purpose are the offshore platforms which also include sub-sea pipelines.

Like any other engineering and construction projects, a typical offshore oil

and gas development project covers a whole range of activities from its inception

phase up to ultimate realisation i.e. production of the oil, gas or both. In general, the

typical offshore development projects will normally include the following activities:

Stage 1: Design of Offshore Platforms

Stage 2: Procurement of long lead materials and specialist equipment

Stage 3: Construction of Offshore Platforms

Stage 3: Transportation and Installation Offshore Platforms

Stage 4: Offshore Hook-up and Commissioning of Offshore Platforms

In order to produce a comprehensive quantity taking off when preparing cost

estimate for offshore platforms, having an understanding on the types, functions and

components of the offshore platforms is very important.

2.6 Offshore Platforms

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There are various types of offshore platforms that have been built and

currently in operation. In general, the offshore platforms used in the oil and gas

development projects can be firstly divided into two types, i.e. the steel template

platforms and the concrete gravity platforms. Then, they can be further sub-divided

according to construction or their functions. To date, all the platforms constructed

and installed offshore Malaysia are of steel template type.

Figure 2.3: Steel Template Platform

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Figure 2.4: Various Types of Concrete Gravity Platform

The economics control the specific choice of platforms to be placed at a given

offshore location. In deep water with a depth of at least 400ft or 122m, a self-

contained platform would be the most advantageous. Self-contained platform

combines all functions on one multilevel structure (W.J. Graff, 1981).

For shallow water development, it is more advantageous to separate the

functions and have several separate platforms. These platforms can be collectively

divided into the following functional types:

1. Drilling Platforms

2. Production platforms

3. Living Quarters Platforms

4. Flare / Vent Platforms

5. Heliport and Bridges

6. Self-contained Platforms

2.6.1 Drilling Platforms

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Drilling platforms are used for production drilling. In general, drilling

platforms comprise of the drilling derrick and substructure, drilling mud, primary

power supply and mud pumps. The drilling crew living quarters, remaining

equipment, and supplies are placed on the tender barge moored adjacent to the

platform. The two are normally connected by a long walkway or gangway.

2.6.2 Production Platforms

A production or processing platform is basically a platform that is

designed to separate the oil-gas-water mixture of the produced crude hydrocarbon

into crude oil, natural gas and water; and treating each of these by a simple in the

field processes, prior to transporting the product onshore for further processing.

The processing facilities on a particular production platform may vary

depending on what is to be done with the crude oil and/or natural gas, whether the

they are to be off-loaded into tankers or pumped ashore through pipeline. Sometimes

there are facilities on the platform for injecting pressurised water into the oil bearing

strata within the earth to improve the production.

If the products are to be transported onshore facility via pipelines,

there should be two pipelines from the platform to shore i.e. one for crude oil and

another one for natural gas. The platform must also be equipped with two sets of

metering and shipping equipment. Pumps will send the crude oil through strainers,

then through meters and into liquid pipeline. Compressors will send the natural gas

through strainers, then meters and into gas pipeline.

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For each system, there are meter calibrations or test-loops, recording

instruments and sphere launchers to force cleaning devices through the pipelines.

These cleaning devices or better known as pigs, are spheres of hard rubber,

somewhat larger in diameter than the pipeline through which they are to pass. They

are inserted into the pipeline through by-pass loop in the line and are forced along the

pipeline through by the pressure of the compressed gas or liquid behind them.

If there is no gas pipeline installed on the platform, the natural gas is

usually burned off through a flare tower remote from the production facilities on the

platform. For some self-contained platforms, the flare tower is part of the deck.

However, when water depths permit it is safer to mount the flare tower on a separate

jacket remote from the treatment plant.

Besides the above processing facilities, production platform also

include equipment for separation of the natural gas from the liquid mixture and

water. Usually, some of the separated gas is used to power the gas turbine generators.

The pumps and compressors on platforms are normally electric driven.

2.6.3 Living Quarters Platform

The living accommodation for offshore workmen is commonly known

as living quarters platform. It is built as an integral part of the single platform when it

uneconomical to transport the operation crews between mainland and offshore

location on daily basis or a deep water platform, about 100 m deep.

In more shallow water, the living quarters may be separated from the

drilling or production activities as a matter of crew safety. The living quarters

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platform is normally, connected to the drilling or production platform by a bridge.

The living quarters platform are typically equipped with the all facilities that are

provided in any accommodation such as, bedrooms, shower, toilets, dining hall,

kitchen, games and recreation room, gymnasium, changing room, radio room,

medical room, laundry room, TV room, etc.

2.6.4 Flare / Vent Platforms

The function of Flare / Vent platform is built with a purpose to release

the access gas and/or hydrocarbon. Like the living quarters platform, the flare / vent

may be separated from the drilling or production platform activities, in shallow water

development. Due to this, it is normally installed more than one kilometre away from

the main platform. The access gas and/or hydrocarbon are release through sub-sea

pipeline connecting the main platform with the vent platform.

On the other hand, in deeper water, the vent towers are integrated with

the main platform. As a result, the height of vent towers could reach as high as one

hundred meter above the top deck of the platform.

2.6.5 Bridge and Helideck

A bridge or catwalk serves as a link between two neighbouring offshore

platforms for the crews or pedestrian movement. Sometimes, a bridge may also be

built to serve as a supporting structure for pipeline and utility cables linking the

platforms. Bridges are normally found in shallow water complex where various types

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of platforms are installed and connected to each other. In deeper water, self-

contained platform will be more likely used.

Helideck is required if the offshore crews are to be transported via helicopters

and when the distance of the offshore platform is more than 80 km from the

mainland. For the offshore platforms which are located approximately 80 km or less,

the offshore crews will be transported by boat (W.J. Graff, 1981). Helideck are

normally constructed on top of living quarters. Sometimes, it will be constructed as a

standalone platform.

According to W.J. Graff (1981), the advantages of using helicopters for

transporting of the work crew to offshore platforms can be summarised as follows:

1. Considerable time saving and, therefore, reduction in cost. A

helicopter cuts travel time to about one-sixth of that by boat.

2. Transfer between boats and the offshore platform are sometimes very

dangerous in high seas. Helicopters reliability and capability in the

weather are much better.

3. Boat-delivered crews sometimes arrive seasick and ill-prepared for

work – not so for helicopter transported crew.

4. Supervisors and specialist can hop quickly from shore to platform and

back, accomplish their job more efficiently.

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5. Emergency repair parts can be obtained more quickly; geological

specimen can be more rapidly taken to shore for analysis.

6. Injured man can be flown to hospitals on shore faster.

7. Rapid evacuation of the platform is possible in the event of an

emergency or severe storm.

2.6.6 Self-Contained Platforms

Self-contained platform is a huge and gigantic multiple decked

platform, with adequate strength and space to support the entire drilling rig, its

auxiliary equipment, living quarters and vent / flare tower. It also has the capabilities

to stock enough supplies and materials to last through the longest unexpected bad

weather when supplies cannot be brought in.

There are two types of self-contained platforms, namely, the template

type and the tower type. The different between the two types is the way the piles are

driven.

The ‘template type’ platform comprises of a huge multi-level deck

structure supported by long piles driven deep into the ocean floor. The template, also

known as jacket, is a three-dimensional welded frame of tubular members and is

used as a guide for driving piles through the hollow legs of the jacket. The jacket also

holds the piles together so that it will act as a single unit against all lateral forces.

29

Early template structures had many legs and a multiplicity of

horizontal and diagonal braces. More recently, with the availability of very large

tubular, the trend is toward the eight piles type of platform. The jacket legs are not

vertical. They actually battered out. Normally, the battering is about one in seven or

eight for the legs on the long sides and one in ten for legs in the narrow dimension of

the jacket.

The ‘tower type’ template platforms is characterised by relatively few

large diameter, non-battered legs and fewer diagonal braces of larger sizes than those

used in regular template type structures. The tower type jacket was conceived to

eliminate the need to launch the structure from the barge; it can be floated to location

using buoyancy of its larger-diameter legs.

30

Figure 2.5: Typical Steel-Piled Self-Contained Drilling/Production Platform.

Source: Introduction to Offshore Structures, W.J. Graff

2.7 Components of Offshore Platforms

31

Figure 2.5 shows the schematic design of a self-contained platform showing

the various components. In general, there are three major components of steel

templates platforms, namely, the Jacket, Piles and Topsides Facilities.

2.7.1 Jacket

Jacket which is also known as substructure is the most bottom section that

submerged below the sea level. It is the most critical to the entire platform, as it is

designed to carry all the dead loads of the platform as well as live loads. Due to this,

most of the design effort is spent on this component. It comprises of large diameter

tubular legs framed together by a large number of smaller tubular members called

braces.

Jacket is a welded tubular space frame with three or more near vertical

tubular chord legs with a bracing system between legs. The jacket provides support

for the foundation piles, conductors, risers and other appurtenances. Jacket

foundation includes leg piles which are inserted through the legs and connected to

the legs either at the top, by welding or mechanical means, or along the length of the

legs, by grouting.

From end elevation, the legs are battered out to provide a larger base for the

jacket at the mud-line and thus assist in resisting the environmentally induced

overturning moments. Depending on the type of platform, the appurtenances of a

jacket include the boat-landing, riser protection frame, launch runners, drilling

conductor guides and riser guides and clamps.

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2.7.2 Piles

The Jacket structure is fixed to the sea bed using piles. The pile foundations

used offshore by the oil and gas industry are designed for loading conditioned

substantially greater than those onshore. Large lateral forces on the combined jacket

and pile structural system, imposed by waves and wind required that the piles to

penetrate the great distances into the earth underneath the ocean. The penetrations in

range of 76 – 122 m are common. As the piles usually installed through the jacket

legs, the total pile length may easily exceed 183 – 244 m.

The piles also vary in wall thickness. The largest wall thickness occurs in the

area of highest bending stress from a short distance above the mud-line to a

considerable depth below the mud-line. The cross-section of the piles is also thicker

at its tip as it serves as a driving shoe.

2.7.3 Topsides Facilities

The type and size of the topsides will very much depend on the function of

the platform. If the platform is a drilling platform, the topsides would have the

drilling facilities. A Living Quarters Platform will be equipped with living-quarters

module, etc. A self-contained platform would have all the facilities like Power

Generation and Utility module, Living Quarters module, Production module, Drilling

modules as well as the Helideck and Flare Tower.

In principle, all topsides structures are made of three-dimensional steel

elements. The primary load-carrying members may be classified as plate girders, box

girders or trusses.

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Topsides facilities can be categorised into two groups, namely, integrated

topsides and modular topsides. In the integrated deck system, all the equipment,

piping and electrical facilities are readily installed, hook-up and commissioned

during the construction of the deck. The advantage of integrated system is that all the

commissioning work can be carried out onshore, thus, minimise the offshore

duration. Nevertheless, due to its heavy weight, the deck would require a heavy

lifting barge to install the topsides. In the absence of heavy lifting barge, the

integrated deck could be installed by ‘float-over’ method.

In the modular system, the facilities are constructed as an individual smaller

module. It will normally consist of Module Support Frame (MSF), power generation

module, utility module, production module and living quarters module. The modules

are then assembled, hook-up and commissioned offshore during the installation. The

advantage of this system is that heavy-lift barge would not be required. However, the

main disadvantage is that the offshore work would require longer duration and likely

to be more expensive.

2.8 Sequence of Activities in Offshore Oil and Gas Development Projects

As discussed earlier, the offshore oil and gas development project involved

design, fabrication, transportation, installation, hook-up and commissioning of

offshore platforms for extracting and processing hydrocarbon. In most instances, it

will also include the installation of sub-sea pipelines for transportation of oil and gas

to onshore facilities for further processing.

34

Generally, the offshore oil and gas development projects activities can

be divided into the following:

a) Platform Design (Substructure and Topsides)

b) Procurement of Specialist Equipment and long-lead materials

c) Platform Fabrication (Substructure and Topsides)

d) Transportation of Platform (Substructure and Topsides) to offshore

location

e) Installation of Platform (Substructure and Topsides) at offshore

location

f) Hook-up and Commissioning of Platform

2.8.1 Design of Offshore Platforms

Offshore oil and gas platforms are specialised and uniquely developed

structures to serve special purpose. The concept and design of offshore platforms are

based almost entirely on the method of installation of the structure at the offshore

location i.e. either by lifting or float-over. Apart from this, the design of new

offshore oil and gas infrastructures are optimized without compromising the health

and safety of personnel and the environment to ensure a value for the money

investment.

The structural aspects of offshore platform are designed to withstand

the environmental and operational loads. In addition, they must also be designed to

withstand the forces imposed on them during fabrication, load-out, transportation to

offshore location, and launching or lifting from the barge into final position.

35

In any typical offshore platform design, it shall consist of the

following major engineering disciplines:

a) Structural Works

b) Architectural Works

c) Piping Works

d) Mechanical Equipment

e) Electrical Works

f) Instrumentation Works

g) Fire and gas facilities

2.8.2 Construction of Offshore Platforms

Upon substantial completion of the detailed design, a list of contractors will

be invited to participate in bidding for the fabrication of the offshore platforms. The

bidding can either based on open bidding or direct negotiation. Once the fabrication

contract is awarded, the construction or fabrication phase will commence. The

offshore platforms are normally constructed in ‘fabrication yard’ for cost savings and

to facilitate construction. Once completed, the offshore platforms will be transported

offshore by barge to its offshore location. List of major fabrication contractors

registered with PETRONAS are:

1. Malaysia Marine and Heavy Engineering Holdings Bhd.

2. Sapura Kencana Petroleum Bhd.

3. Brooke Dockyard and Engineering Works Corporation

4. TH Heavy Engineering Bhd (Formerly Known as Ramunia Bhd)

5. Labuan Shipyard and Engineering Sdn. Bhd.

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The sequences of the construction or fabrication will very much a reflection

of the offshore installation sequence. Typically, the fabrication sequence will be as

follows:

a) Jacket and piles

b) Topsides modules

2.8.2.1 Jacket and Piles Fabrication

The substructure’s fabrication will normally start first, followed by the

topsides fabrication. The substructure construction is mainly built-up of steel. Its

fabrication will begin with the procurement of long lead-time steel materials from

steel mill or supplier. Steel plates for rolling or forming thick-walled tubular are

ordered in specific dimensions to produce the required tube sizes with minimum

waste.

Prior to beginning the fabrication of the jacket, two parallel skid runners or

beams must first be constructed perpendicular to the quayside and extending far

enough away from the quay edge to accommodate the height of the jacket. The skid

runner must be placed on very firm foundations capable of supporting the final jacket

weight without imparting detrimental differential deflections on the surface as it

slides on its way to the launch barge during load-out. The jacket legs are then placed

on levelled pedestal or blocks in proper position for installing the braces. As many of

the jacket components as possible are fabricated lying horizontally on the ground.

Each major planar or bent across the narrow dimension of the jacket is fabricated flat

on the ground.

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The first two panels to be built are the two that have parallel launch trusses

attached to the sides of the jacket legs. Upon completion these two panels are rotated

upright and placed on the skids of the skid beams. This position causes the

substructure, when completed, to lie on its sides with the legs that contain the parallel

launch trusses mated with the skid beams embedded in the ground of the fabrication

yard.

The skid beams are faced with heavy timbers before the first two panels are

put in position. The first panel is held in position with guy wires; the second is also

held by guy wires before installation of the braces between braces begins. The braces

are held in place by cranes. The joints are connected by welding. At this position, the

fitters and welders will be working from scaffolding or out of baskets supported by

cranes. If the full length of the panel is too heavy to be rotated into the vertical

position all in once, then it broken down into sections, and rotated section by section.

The sections are then rotated into vertical positions and welded end-to-end.

Fabrication of the jacket braces started as soon as the steel tubulars are

available. The fabrication work is normally done on special racks. The pipes are

place on the racks and the specified distance between the end patterns is measured

off. As the fabrication of the braces is completed, they will be marked and move

nearer to the substructure fabrication area. They are now ready to be lifted and

assembled onto the overall substructure.

While the jacket is being fabricated, many smaller ancillary structures are

also being fabricated, such as, conductor guide and framing, piles guides, boat

landings, walkways, buoyancy tanks, piping component for the decks, pipeline riser

guides, handrails, lifting eyes, stiffener rings for the jacket etc. Upon completion of

these items, they will be assembled onto the jacket structure.

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The fabrication of pile sections is relatively straight forward. Piles are

made of high strength large steel plates, up to 75mm thick. The plates are rolled to

form large diameter tubulars about 3m long each. These tubulars are then jointed end

to end to form pile sections.

The fabrication of pile sections is normally carried out on a horizontal

rotating rack. The racks contain rollers so that tubular pieces can be rotated relative

to each other. Each sections must not be jointed together with the longitudinal weld

align to each other. Upon completion, the pile sections are marked and put in storage

until time for loadout to transportation barge for offshore installation.

2.8.2.2 Fabrication of Topsides Modules

The construction of the topsides modules begins with the fabrication

of the Module Support Frame (MSF). Modules Support Frame is the structural

portion that is attached to the substructure by stabbing cones. The topsides facilities

will then be installed on the deck of the MSF.

The structural members of facility modules may be fabricated in many

ways. Generally, the structural members will be fabricated and assembled as much as

possible. Then, the members will be blasted and painted.

Once most of the structural members are erected and painted, the

major equipment, piping spool and other utilities will be installed and incorporated

within the structural shell.

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2.8.3 Transportation and Installation

Once all the fabrication of all the major components i.e. jacket including

appurtenances, piles and topsides facilities have been completed, they are then ready

to be transported to the final location for installation.

In Malaysia, all the components are normally transported to offshore by

barges. At fabrication yard, a completed jacket is normally loaded out onto

transportation barge by skidding. In recent time, load out by boggy are relatively

common. Other components, such as piles and topsides modules are normally loaded

out by lifting onto the barges. There will be a total of four transportation barges i.e.

one barge for the jacket, one barge for the piles and appurtenances, one barge for

module support frame and the final barge for the facilities modules.

Upon completion of the loadout operation, the components will then be

appropriately secured to the barges. This is called seafastening. As soon as all the

activities of seafastening of the structures to the barges completed and certified by

the Marine Warranty Surveyor, the barges and its cargoes may start the journey to

the final offshore location.

Typically, the journey to the offshore location will take about one week. On

arrival at the final location, the Jacket will first to be installed. The jacket will be

launched from the barge. It will then be up-ended using crane or derrick barge. At

this position, the jacket legs will slowly be filled up with water and the jacket slowly

submerging into the ocean.

Once the bottom of the jacket reached the sea bed, the jacket will be levelled

and the piling to its final position will commence. The piles will be driven by a large

hammer one by one until they reached at the desired penetration. After all the piles

40

are driven, the areas between the piles and the insides of the guides will be grouted.

The grout produces a permanent bond between the piles and the jacket, which creates

a single, rigid structure. The pile ends extending out of the tops of the jacket legs are

cut off to ensure that the topsides facilities on top will be levelled.

Once the jacket installation is completed, the topsides facilities will be

installed. The MSF will be the first to be installed. It will be lifted from the

transportation barged and installed on top of the jacket. The four points which the

MSF’s columns jointed to the jacket legs are known as the docking points. Once

properly aligned, they will be welded together. The facilities modules will then be

lifted one by one and installed on top of the module support frame.

2.8.4 Offshore Hook-up and Commissioning

Once all the modules are installed, the utilities and services of all the modules

are linked to each other. This activity is termed as hook-up. All the equipment and

system are then commissioned. Checking and testing will be carried out to ensure

that systems are functional. It is also during this period that all defects and

incomplete work are repaired and made to complete. Once completed, the platform

is ready for start-up and to be handed over to the operation team.

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2.9 Bills of Approximate Quantity Contracts Approach in Oil and Gas

Development Projects

Traditionally, the contracts for offshore oil and gas development projects in

Malaysia have been based on drawings and specifications. From the interviews with

several experienced practitioners who have been involved in the development and

implementation of contracting strategies for offshore oil and gas development

projects in Malaysia, there were some initiatives to introduce Bills of Approximate

Quantities (BOAQ) as the basis of obtaining tender price from the Contractors. The

main reason is to adopt this method is to expedite the tender process while detailed

design is still in progress. Then, the BOAQ will be used as a basis of evaluation of

the tenders.

Normally, the BOAQ was issued unofficially only for reference and

information to enable Contractors to price the tender document. The BOAQ will not

form part of the contract as the contract is still on Lump Sum basis. It is merely a tool

to expedite the pre-award activities in order to minimise the overall project duration.

Upon completion of detailed design where Approved for Construction (AFC)

drawings were issued, the work will be re-measured and the revised Bills of

Approximate Quantities is then produced. During this stage, the tender price will be

revisited where unit rates as quoted in the price will be inserted into the revised

BOAQ. Contractor sometimes challenged Client’s quantities in the BOAQ by

insisting Contractor’s quantities to be used. The disputes in quantities were normally

due to contingencies and wastages allowed in the quantity taking off.

42

Figure 2.6: Typical Offshore Project Schedule based on BOAQ Approach

In practice, the BOAQ approach was first introduced in the MLNG-2 Gas

Development Project in 1992. This approached was adopted mainly due to schedule

constraint and to accelerate the overall project schedule. Figure 2.7 above shows a

typical overall project schedule based on BOAQ approach.

In the typical BOAQ, it would normally consist of the following:-

a. Preambles to Schedules of Rates

b. Schedules of Rates

c. Bills of Approximate Quantities

The Preambles to Schedules of Rates define the rules governing the method

of measurement of the works and contain instructions as to what is to be included

within the unit rates and/or lump sum prices. The preambles do not define the scope

of works. The schedules of rates consist of units of works that are grouped according

to the trade and work content (sometimes also called as Work Pack group) and are

presented in table form.

The BOAQ were prepared by the discipline engineers who involve directly

from early design information and were not definitive. They were only representing

an estimated of the measured quantities for the work. The primary function of BOAQ

Dur.

Descriptions Mths J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Overall Project Duration

Preliminary Studies 5

Tender, Evaluate & Award Design Contract 6

Design Stage 12

Procurement of Long Lead Materials 18

Prepare BOAQ for Fabrication & HUC Contracts 2

Tender Stage for Fabrication Contracts 5

Fabrication Works Stage 15

Transport & Installation of Platform 2

Offshore Hook-up & Commissioning 1

TYPICAL OVERALL PROJECT SCHEDULE FOR BOAQ APPROACH

Year 01 Year 02 Year 03 Year 04

43

was to establish an estimated contract price and allow comparison and analysis of

tenders by Client.

Upon completion of the BOAQ, it will be issued together with other tender

documents to the approved bidders for tendering purposes. All bidders were required

to complete the Schedule of Rates by inserting all respective lump sum prices and

unit rates. Bidders were then to price the items in the BOAQ by using rates readily

quoted in the Schedules of Rates. This will automatically generate a total sum, which

shall then be carried forward to the bills summary to form the total tender price.

The tenders will be evaluated and award recommendation will be presented to

PETRONAS for approval. Once approved, letter of award will be issued to the

successful Contractor.

For successful Contractor, the executed contract price will be ascertained by

pricing the updated BOAQ using the rates quoted in the Schedules of Rates in the

tender document. Once verified and agreed by both parties, the BOAQ will be

discarded and will not form part of the contract document. The Schedule of Rates

will be part of the Contract Document where it will be used as a basis for pricing the

post award changes.

By adopting this method, the appointment of Fabrication Contractor can be

accelerated by at least two months.

According to Seeley (1997), the advantages of using Bills of Quantity (BOQ)

are as follows:-

a. BOQ avoids the need for all of the tendering contractors to measure the

quantities of the work themselves before preparing an estimate. If all

44

tenderers have to measure the works, there is wasteful duplication of

effort and an increase in Contractor’s overheads, which eventually passed

on to Clients.

b. BOQ prepared in accordance with SMM, ensure that an adequate

description of the work in a recognised format is given to all tendering

Contractors and therefore all tender on the same basis. The absence of

BOQ leads to greater variability, increase risk in estimating and

consequently more disputes.

c. The detailed breakdown of the contract sum (in BOQ format) permits

proper financial management of the contract.

CHAPTER 3

RESEARCH METHODOLOGY

3.1 Introduction

In this chapter, the research method of collecting and analysing data will be

indicated and stated out clearly to reach the stipulated objectives of this study. The

interview outcome the respondents is the tool to achieve the objectives i.e. to identify

if there is any standard method documents used by the industry players as a reference

or guidelines to prepare quantity taking off and what is the current practice to

complete that task.

3.2 Data Collection

This research adopted quantitative research approach. The definition of

quantitative research had been explained by Naoum (2007) as an inquiry into a social

or human problem based on testing a hypothesis or a theory composed of variables

by analysed the data with statistical procedures to identify whether the hypothesis or

46

the theory is true or false. Aliaga and Gunderson (2000) define quantitative research

method as explaining phenomena by collecting numerical data that are analysed

using mathematically based methods (in particular statistics).

The data in Chapter 2 are collected in two ways which are desk study and

fieldwork research. By using desk study spproach, the data are obtained from the

sources such as journals, articles, books and internet. Data collected are in

descriptive format whereby the data are then analysed in order to critically evaluate

the content of the document. All data are processed before being inserted as part of

this research.

The another method of collecting data is fieldwork research whereby it is

regarded as the primary data collection. The structured interview approach is selected

as the data collection method. According to the History Learning Site (2013), a

structured interview, or a standardised interview is a quantitative research method

commonly used in survey research. The aim of this approach is to confirm that each

interview is offered with exactly the same questions in the same order. This

guarantees that answers can be reliably collected and that comparisons can be made

with confidence between sample subgroups or between different survey periods.

3.2.1 Technique of Data Collection

The technique adopted for data collection in this research is questionnaire.

Questionnaire is the most ideal technique for this research as the questionnaire can be

distributed randomly to a large numbers of respondents which it fulfills the

quantitative research approach.

47

A set of questionnaire was created to collect the data relevant to this research.

The questionnaires were sent to three categories of companies or firms which are

consulting firms, contracting firms and clients (commonly known as Profit Sharing

Contract or the Oil Operator). The distribution of questionnaires is primarily done

via emails delivery as it involves lower cost, convenience, efficient, reliable and the

respondents locality that are too far to be approached personally.

3.2.2 Questionnaire Design

In order to collect the relevant data for the research, a set of questionnaire is

created. The questions are designed to be the mixture of opened-end and closed-end

questions whereby the respondents are given with options to the questions and later

clarify further why they pick that answer.

Basically, the questionnaire is divided into two (2) sections. Section A

(Respondent’s Background) is to obtain the general information of the respondents

such as respondent’s name, company’s name, job title and working experience.

Section B (Interview Questions) is to meet the research objectives. There are

14 questions have been drafted which were designed to understand and study the

following issues:

a) if there is any standard method of measurement document or form

used by the industry players to prepare the standardized Quantity

Taking Off in the Oil and Gas Development Project in Malaysia.

b) the current practice of preparing the Quantity Taking Off for Oil and

Gas Development Project in Malaysia.

48

The following are some of the questionnaires that were sent to the

respondents:-

a) Is there any Standard Method of Measurement being used of practiced

in the oil and gas development projects in Malaysia?

b) Does the industry players in the oil and gas development projects in

Malaysia aware on the existence of Standard Method of Measurement

for Industrial Engineering Construction (SMMIEC) which is aimed to

be used in the oil and gas industry?

c) What is the current practice in the preparation of quantity taking off

for every component of works in the oil and gas development projects

in Malaysia?

d) Why quantity taking off is required to be carried out or produced even

though most of the contracts are on Lump Sum basis?

e) Is there any problems encountered during price negotiation and

justification, change order/variation order evaluation, quantity

reconciliation, etc. as far as quantity taking off is concerned?

f) Does the oil and gas development projects in Malaysia need a

common and accepted Standard Method of Measurement?

49

3.2.3 Research Sampling

Naoum (2007) defined sample as a specimen or part of a whole population

which is drawn to show what the rest is like. The research sampling used in this

study is random sampling. Naoum (2007) explained it can be used when specifics

about the characteristics of the sample are not essential. The respondents are chosen

randomly from three types of firms which are consulting firms, contracting firms and

client firms irrespective the size of the company. However, the respondents must be

someone must be someone who involve directly and having working experience in

the project development in the oil and gas industry.

The questionnaires were then distributed according to Table 3.1 below: -

Table 3.1: Questionnaires Distributions According to Type of Firms

Item Type of Firms No. of Questionnaires Percentage

1 Consulting Firms 5 17%

2 Contracting Firms 10 33%

3 Clients 15 50%

Total 30 100%

50

3.3 Data Analysis

Naoum (2007) stated that after collecting all the data, it is very difficult to

present all of them and hence, the data should be analysed to produce the main trend

that symbolise the whole data..

The large volume of raw data from questionnaire were gathered and arranged

in organised way. As stated by Naoum (2007), these data should be summarised by

classifying it into various categories and meanwhile determine each individual

answer is grouped under which category. In this research, Microsoft Excel version

2010 was used to analyse the data in table form and converted to, bar chart and pie

chart.

3.3.1 Bar Chart

The frequency distribution from the table can then be converted into

percentages of the total number by using the formula below:

Percentage (%) = Frequency Selected Variable x 100%

Total Respondents

After calculating the percentage of each category, the percentage will then be

transformed into bar chart. Naoum (2007) states the height of the bars represents the

proportion of the frequency.

51

3.3.2 Pie Chart

Based on the collected data by questionnaire, it can be also converted into the

form of pie chart. Naoum (2007) emphasizes the areas of the pie chart indicate the

proportion of the respondents and are usually presented as percentages.

3.4 Conclusion

In conclusion, upon receiving the completed questionnaires from the

respondents, all data were analysed to according to the intended category based on

the objectives set in this research. Further findings will then be discussed in chapter

4.

CHAPTER 4

RESEARCH ANALYSIS

4.1 Introduction

This Chapter explains the outcome of data collection and how the data was

analysed. Prior to the interview, efforts were made to identify the suitable candidates

to ensure that the respondents are able to provide the required data. The candidates

must be a person who involves directly in the project development process in both

Contractor and Client sides. The candidates also must be someone who involve either

directly or indirectly in preparing the quantity taking off for the project in both pre

and post contract phase.

Potential candidates for the interview were identified via recommendation or

reference. Most of them were either Contract Administrator with Quantity Surveying

background or the Discipline Engineers who have more than 5 years working

experience in Oil and Gas Industry in Malaysia. Due to the candidates location, the

interview can only be carried out via email communication and telephone call.

53

The interview forms were distributed via email. The respondents then filled

in the interview form simultaneously while answering the questionnaires during the

telephone interview . Once completed, they need to sign, scan and email the

interview forms back to the researcher for compilation and data analysis.

4.2 Respondent Background

The interview form begins with Section A where all respondents were

required to complete their personal data and employment background. Among data

collected under this section are name of the company, respondents’ position and the

amount of their working experience in the industry.

4.2.1 Respondents Based on Company’s Background

There were about 30 sets of interview forms distributed via email to the

selected candidates. Only 15 sets of completed interview forms were received

whereby it was composed of 4 sets from Contractor’s personnel and another 11 sets

from Client’s personnnel as shown in Table 4.1 and Figure 4.1. The return rate is 50

percent.

54

Table 4.1: Number of Respondents Based on Company Background

COMPANY Number %

Main Contractor 4 26.67%

Client (PSC/Oil Operator) 11 73.33%

Total 15 100.00%

As indicates in Table 4.1 above, respondents from client’s company provide

the biggest data for this research. 73 percent of the respondents are from client’s firm

while only 27 percent from main contractor’s personnel. This is expected as more

questionnaires were sent to the client’s personnel compare to the main contractor i.e.

about 15 and 10 sets respectively as indicated in Table 3.1 in Chapter 3.

Figure 4.1: Percentage of Respondent Based on Company Background

26.67%

73.33%

Respondents Company Background

Main Contractor Client (PSC/Oil Operator)

55

4.2.2 Respondents Based on Career’s Background

From 15 respondents, 8 of them or about 53% are personnel with Quantity

Surveying background, while the balance or about 47% are engineers as indicated in

Table 4.2 and Figure 4.2 below.

Table 4.2: Number of Respondents Based on Career Background

Respondents Career's

Background Number %

QS Background 8 53.33%

Engineering Background 7 46.67%

Total 15 100.00%

The distribution of the respondents based on their career’s background is

quite balance. As shown in Table 4.2 above, there are about 8 respondents who are of

quantity surveying background and another 7 respondents are the discipline

engineers or about 53 percent and 47 percentage respectively.

56

Figure 4.2: Respondents Career Background

4.2.3 Respondents Working Experience

Working experience is the prerequisite to be considered to determine whether

the respondents have sufficient experience to give opinions. Table 4.3 and Figure 4.3

shows the breakdown of the respondents based on their working experience in the

Oil and Gas Industry in Malaysia.

53%

47%

Respondents Career Background

QS Background

Engineering Background

57

Table 4.3: Respondents Working Experience in Oil and Gas Construction

Industry in Malaysia

Years of Experience in O&G Number %

6 > 10 Years 6 40.00%

10 > 15 Years 1 6.67%

> 15 Years 8 53.33%

Total 15 100.00%

As indicated in Table 4.3, there are about 6 respondents possess 6 to 10 years

working experience in the oil and gas construction industry in Malaysia. There is

only 1 respondent with working experience between 10 to 15 years while another 8

respondents have worked for more than 15 years in the industry. This shows that all

respondents possess enough experience to provide data based on the questionnaires

given.

Figure 4.3: Respondents Working Experience in Oil and Gas Industry in

Malaysia

40%

7%

53%

Respondents Working Experience

6 > 10 Years

10 > 15 Years

> 15 Years

58

4.2.4 Other Respondents

The other 15 candidates who failed to respond to the interview questions had

indicated that they were either busy or don’t understand to the questions asked in the

interview forms. Effort has been made to conduct the interview via telephone call

where candidates were explained and guided through the questions to ensure that the

data collected is alligned with the research objective. However, this effort was not

well received.

4.3 Objective 1 – Identifying The Standard Method of Measurement or Any

Similar Document Used for Quantity Taking Off

The first objective of this research is to identify if there is any document used

by the industry players in oil and gas development project which maybe similar with

SMM as practiced by quantity surveyors in building construction industry or maybe

the usage of SMMIEC is already in practice.

Table 4.4: Respondents Awareness on SMMIEC

Answer Number Percentage

YES 1 6.67%

NO 12 80.00%

NOT SURE 2 13.33%

Total 15 100.00%

59

As indicated in Table 4.4 and Figure 4.4, there was only 1 respondent (who is

identified as respondent RC1) or represented by 7% of the respondents having

knowledge or awareness on the existence of SMMIEC. Respondent RC1 further

indicates that some of the principles of the SMMIEC were adopted to develop an in-

house method of measurement specific for the projects that the respondent was

involved. However, the respondent had no knowledge if there is any SMM or similar

form of document that is common to the Malaysia oil and gas industry.

About 13 percent or 2 respondents were not sure about the existence of

SMMIEC while another 12 respondents or 80 percent said they have no knowledge

at all.

Figure 4.4: Percentage of Respondents Having Awareness on SMMIEC

Prior to the question on respondents’ awareness on the existence of

SMMIEC, they were asked about any standard method of measurement or other

similar document used to carry out quantity taking off. The finding is summarised in

Table 4.5 and Figure 4.5 below.

7%

80%

13%

Respondents Awareness on SMMIEC

YES

NO

NOT SURE

60

Table 4.5: Number of Respondents Use Standard Method of Measurement

for Quantity Taking Off

Answer Number Percentage

YES 2 13.33%

NO 11 73.33%

NOT SURE 2 13.33%

Total 15 100%

Majority of respondents which were about 74 percent or 11 respondents did

not use standard method of measurement or any other similar documents to carry out

quantity taking off. Only 2 respondents indicated that there is a standard method of

measurement used which is their in-house document while another 2 respondents

were not sure whether there is such document to be referred to.

Figure 4.5: Percentange of Respondents Use Standard Method of

Measurement for Quantity Taking Off

13%

74%

13%

SMM Used for Quantity Taking Off

YES

NO

NOT SURE

61

4.4 Objecctive 2 – Identifying The Current Practice to Prepare Quantity

Taking Off

Next data to be collected as set under second objective of this research is to

identify the current practice to prepare quantity taking off for oil and gas project

project development in Malaysia. This is to understand how quantity taking off was

carried out and to see if there is any problems encounter and faced by the

respondents based on the current practice.

Table 4.6: Respondents Current Practice to Prepare Quantity Taking Off

Answer Number Percentage

Based on individual common understanding,

practice & experience 10 66.67%

In-house method of measurement 2 13.33%

PDMS is used as a Tool but method still based on

individual understanding, practice & experience. 3 20.00%

Total 15 100.00%

Table 4.6 and Figure 4.6 shows that 67 percent or 10 respondents indicated

that the quantity taking off was carried out based each individual common

understanding, practice and past experience. The respondents explained, quantity

taking off was generated based on the drawings given by the consultants. There is no

specific documents that called standard method of measurement or other similar

documents to be referred to. Measurement or quantity taking off was carried out

based on each individual understanding and common practice. Experience also

playing an important roles especially to make allowance for wastages or

contingencies.

62

Figure 4.6: Respondents Current Practice to Prepare Quantity Taking Off

Only 2 respondents indicated that the quantity taking off was carried where

their in-house method of measurement was used as reference or guideline.

Researcher was unable to obtain a copy of this in-house document as it is a restricted

and control document for internal use only. It is still to be considered as a non-

standard document as it was used for project specific where it may be amended for

other project usage.

Another 3 respondents mentioned that Plant Design Management System

(PDMS) was used as a tool to do the quantity taking off. However, method of

measurement was still based on each individual understanding, common industry

practice and past experience.

When the respondents were questioned on method of measurement to

produce a consistent and uniform quantity taking off that will be accepted and easily

understood by others, each of them given a differrent answer. There is no clear

67%

13%

20%

Respondents Current Practice to Prepare Quantity Taking Off

Based on individualcommon understanding,practice &experience

In-house method ofmeasurement

PDMS is used as a Tool butmethod still based onindividual understanding,practice & experience.

63

answer that referred to as “common industry practice” as indicated by respondents

and more like each individual understanding when come to producing quantity taking

off. 15 respondents given 15 different answers. Among answers given are method of

measurement and standard to be agreed upfront prior to produce quantity taking off,

measurement will be carried out based individual understanding and if there is any

discrepancy it will discussed and agreed later, the practice only applicable for

remeasurement type of contract, etc.

According to Item A.5.2 of Section A under General Rules of SMMIEC,

“work shall be measured net as fixed in position where no allowance shall be made

for wastaged or contigencies”. Respondents were later questioned whether quantity

measured either based on net quantity as ruled by SMMIEC above or some

contingencies were allowed in their measurement. The finding is shown in Table 4.7

and Figure 4.7.

Table 4.7: Respondents Response on Contingencies for Quantity Taking Off

Answer Number Percentage

Based on Net Quantity 4 26.67%

Based on Net Quantity but with Contingencies 11 73.33%

Total 15 100.00%

Only 27 percent of respondents indicate that the quantity of materials were

measured based on net quantity while 73 percent or 11 respondents said some

allowance for contingencies or wastages were allowed in their measurement. The

main reason for this allowance is to ensure there will sufficient quantity of materials

available during the actual fabrication works and to avoid materials shortfall. This

shortfall may lead to project delay as most of the materials are long lead.

64

Percentage allowed for contingencies or wastages are varies according to the

respondents. Each respondents given different percentage allowance where the

lowest is between 5 percent to 10 percent while the highest is on the range of 30

percent to 50percent of the net quantity measured. According to all respondents,

percentage for contingencies or wastages were allowed based on the past project

experience. Some further mentioned that any unused materials will be labelled as

surplus materials where it will be stored and kept for future use.

Figure 4.7: Percentage of Respondents Allowing Contingencies for Quantity

Taking Off

Table 4.8 and Figure 4.8 show the outcome of the response when respondents

were questioned on problems encountered by them where quantity taking off was

disputed by their counterparts during price negotiation and justification, variation

orders evaluation, quantity reconciliation, etc.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Based on Net Quantity Based on Net Quantity but withContigencies

Percentage of Respondents Allowing Contingencies for Quantity Taking Off

65

Table 4.8: Disputes Encountered due to Quantity Discrepancies

Answer Number Percentage

YES 10 66.67%

NO 5 33.33%

NOT SURE 0 0.00%

Total 15 100.00%

As shown in Table 4.8 and Figure 4.8, 67 percent of respondents said they

had faced problems either the quantity produced by them was disputed or they

disputed the quantity generated by their counterparts. The disagreement or variance

of the quantity was normally due to different method when generating the quantity

taking off by the industry players where each of them have their own understanding

and approach.

Figure 4.8: Disputes Encountered by Respondents Due to Quantity

Disrepancies

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

YES NO NOT SURE

Disputes Encountered by Respondents due to Quantity Discrepancies

66

This remind us on the history that led to the introduction of SMM by

Surveyors Institution in United Kingdom as explained in Chapter 2.1 earlier where

common problem occuring was that different quantity surveyor would measure the

work in different ways.

4.5 The Future of SMMIEC for Oil and Gas Development Project in

Malaysia

All respondents were questioned on their opinion whether SMMIEC should

be used as a reference and guideline to help all players to produce a standard and

uniform quantity taking off or BOQ. As shown in Figure 4.9 below, 47 percent of

respondents agreed SMMIEC will be able to help to monitor and manage the project

as far as the estimating, tendering, contract management, project planning and cost

control are concerned. Another 47 percent of respondents were not sure as they are

not familiar with SMMIEC to make comment on this question. The remaining 7

percent disagreed. Reason given by the respondent is preambles provided in the

contract document is sufficient for reference. Furthermore, if there is any quantity

disputes, it can be discussed and resolved between the parties involve.

67

Figure 4.9: Respondents Opinion on the Usage of SMMIEC in Malaysia

Respondents were later questioned whether Oil and Gas industry in Malaysia

requires a standard document like SMMIEC to be used as a standard reference or

guideline to generate quantity taking off and BOQ in order to minimise dispute as far

as the estimating, tendering, contract management, project planning and cost control

are concerned. The result is shown in Table 4.10 below.

Table 4.9: Respondents’ Opinion on the Relevancy of SMMIEC in Malaysia

Answer Number Percentage

YES 8 53.33%

NO 1 6.67%

NOT SURE 6 40.00%

Total 15 100.00%

53 percent of respondents given a “YES” answer to the usage of SMMIEC in

Oil and Gas industry in Malaysia. The respondents agree that by adopting SMMIEC

will help to minimise dispute and a standard and uniform BOQ can be produced as

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

YES NO NOT SURE

Respondents’ Opinion on the Usage of SMMIEC in Malaysia

68

far as the quantity taking off is concerned. It also can smoothen the project, contract

closure and getting the optimum budget for the project.

Only 1 respondent disgree by indicating that every oil operator has their own

standard and guidelines. The respondent further suggest that a comprehensive

preamble to be agreable by all industry players to be introduced in lieu of SMMIEC.

About 40 percent of respondents were not sure whether Oil and Gas industry

in Malaysia requires SMMIEC as a standard reference. The respondents were not

sure because have not seen the SMMIEC and have zero knowledge of its contents.

Without viewing the SMMIEC, they were unable to comment.

CHAPTER 5

CONCLUSION AND PROPOSAL

5.1 Introduction

This will be the final chapter of this study where it summarises the finding of

the research according to the research objectives. Other than that, discussion will be

focus on problems which aroused when conducting this research. Future researches

are also recommended in this chapter to enhance the study in depth with different

scope.

Generally, all the collected findings or data from the interview questions had

achieved the objectives of the study that were set in Chapter 1.

70

5.2 Research Conclusion

The objectives of this research were to study if there is any standard method

of measurement document or form used by the industry players to prepare the

standardized quantity taking off and to study the current practice of preparing the

quantity taking off for Oil and Gas Development Project in Malaysia.

5.2.1 Objective 1 – To Study If There Is Any Standard Method of

Measurement Document or Similar Form Used by The Industry Players

to Prepare the Standardised Quantity Taking Off in Oil and Gas

Development Project in Malaysia

It can be concluded that there is no particular standard method of

measurement document or any similar form that is widely used or known to the

industry players in the oil and gas development project in Malaysia. The fact that the

existence of SMMIEC since 1984 is also not known to almost to all respondents.

Only one (1) respondent indicated his awareness on the existence of SMMIEC. The

respondent further indicated that some of the rules in the SMMIEC were being

adopted to develop their in-house method of measurement for specific project that he

was involved.

The method or standard used by the players to generate quantity taking off in

the oil and gas industry is really much depend on each individual and their previous

exposure. According to some of the respondents, it depends on the projects as every

oil operator has their own procedure, guidelines and contractual requirements. Some

also indicate that they follow consultant’s standard guidelines. However, this claim

cannot be confirmed as researcher has failed to obtain a single respond from any

consultant’s personnel that were invited to answer the survey questions.

71

In certain project or contract, preambles is used as a reference. It is still

cannot be considered as a standard document for oil and gas industry in Malaysia as

it is only applicable and enforceable for one particular project only. The requirements

or rules may be different with other projects.

Common practice and individual past experience are the most popular answer

from the respondents. It can be assumed that this is a legacy inherited by the

respondents or others from the more experience industry players. As the time goes

by, this practice has later on become a norm. It is important to note that a norm or

common practice is not contractual and open for arguement should dispute arise.

Thus, any disputes due to the discrepancy in quantity as a result of the absent of

standard method of measurement document may create unnecessary problem and

disagreement when come to contract price negotiation, variation orders evaluation,

etc.

5.2.2 Objective 2 – To Study The Current Practice of Preparing the MTO for

Oil and Gas Development Project in Malaysia

Measurement for the quantity was done or carried out by the industry players

involved based on each individual understanding and interpretation. This has led to

problems encountered by some of the respondents due to the disputes as a result of

the disprepancy of quantity taking off generated by each party. However, according

to some of the respondents, this dispute is not worrying them as it can always be

discussed and resolved later, and has become a norm to their practice.

Disputes in quantity is the result of when there is no standard guidelines or

method of measurement is used as a reference. Other factors contributed to the

discrepancy and inconsistency of the quantity taking off is the allowance adopted for

72

contingencies or wastages to the actual quantity required for the projects. SMMIEC

under Section A - General Rules, item A.5.2 has clearly indicated that work shall be

measured net as fixed in position where no allowance shall be made for wastages or

contigencies. This rule is also echoed by Malaysian Standard Method of

Measurement of Building Works Second Edition as stipulated in Section A – General

Rules, item A.3.2. This is to ensure that all materials measured will be measured on

the same principles and basis to avoid discrepancy and inconsistency.

When allowance for contigencies or wastage is being practiced, the tendency

of quantity discrepancy is always there. Based on the interview conducted, allowance

for contigencies or wastages are varies depend on each individual approach and

understanding. Some of the respondents given the allowance between 5 percent to 10

percent from the actual net quantity. Some even go to the range between 30 percent

to 50 percent of the net quantity which is too execessive and create unnecessary

wastage. Reason given by the respondents is to ensure there will be suffiecient

materials available during fabrication works. According to them, this practice is

necessary to avoid materials shortage which can result in overall project delay if it

happens.

There are also respondents who indicate that the quantity measured is based

on net quantity. There is no allowance made for contingencies or wastages. As

different individual practice different approach, this will surely cause the

inconsistency in quantity taking off if they involve in the same project. Thus, create

quantity disputes when come to contract price negotiations, variation orders

evaluation, progress claim, etc.

An accurate and complete quantity taking off will establish accountability

and credibility of the individual that carrying out the task. This will therefore provide

confidence in the cost estimate which will produce a reliable tender price during

tender stage and reasonable variation order price in post contract phase. Thus, can

73

reduce the process to carry out tender price justification, variation orders evaluation

or other similar activity where quantity of works play a vital role.

5.3 Research Constraint

There were few constraints encountered when this research was conducted.

Among them were duration of the research, lack of related documents, understanding

level of the respondents on the research topic, etc. This will be further explained

below.

5.3.1 Duration of the Research

The time allocated for this research is only limited for two months. The

limited time available to conduct the study is the biggest challenge to complete this

research. The only available time to conduct the study is during weekend. However,

weekend is not a convenient time to almost all personnel that have been approached

to seek for their cooperation for this study.

5.3.2 Lack of Related Document to Conduct Study

It is really difficult to obtain document and information for this study. Prior

to the interview question distributed to the interview candidates, effort has been

made to gain access to the project related documents such as projects drawings,

MTOs, Contract Price Breakdown and other related documents. All documents have

been classified as Confidential.

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5.3.3 Other Limitation

About half of the respondents, mostly engineers were not really understand

to the research interview questions that were sent to them. Compare to the

respondents with quantity surveying background who has knowledge on the basic

principles of SMM, it can be assumed that the respondents with engineering

background may not know or has any knowledge what SMM is all about.

The researcher also failed to obtain response from consultanting firms. The

view and opinion from the consultants’ personnel is equally important. The

consultants may have some knowledge on the existence of SMMIEC. Unfortunately,

this piece of information or data cannot be verified.

Some of the returned questionaires are suspected to be bias due to the

attitude and attempts of respondents just to response to the questionnaire for the sack

of completing it and in rush manner. Some even do not understanding on the whole

objective of this research. They are confuse between method of measurement and

tools to do the measurement. For example, among method indicated by respondents

are PDMS and microsoft excel. Even, after it was explained to the respondents, they

still maintain their answer.

This research also failed to confirm or verify if there in any revision to the

first edition of SMMIEC that was published in December 1984. An email was sent to

RICS and AcostE on 27th September 2013 to enquiry on any revision or latest

update of SMMIEC. RICS only indicated that SMMIEC is currently out of print.

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5.4 Research Proposal

It is essential that a recommended Standard Method of Measurement to be

introduced or adopted to prepare the quantity taking off in the Oil and Gas Industry

Development project in Malaysia. This will provide a standard and uniform guideline

and reference to all industry players. As a result, dispute can be minised when come

to contract price negotiation, variation orders evaluation and quantity reconciliation

as far as quantity taking off is concerned.

5.5 Future Research

Based on the findings and conclusions of the study, the following are several

recommendation for future research:

i. To conduct a more detail and precise study by going into each and

individual elements of the works as specified in the SMMIEC. Detail

comparison should be made to identify the similarity and differences

of commonly available SMM in the construction industry.

ii. To study the need to have a common and accepted standard method

of measurement like SMMIEC in oil and gas development project in

Malaysia.

iii. To study and identify the main components of the oil platforms that

require quantity taking off to be generated.

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