Landmark agreement could signal the end of contractors providing cost management services
The UK/Dutch Shell has signed a global enterprise framework agreement (EFA) with the UK’s EC Harris that will see the company provide cost management consultancy services for the supermajor’s capital projects.
Mark Howard, head of oil and gas at EC Harris, says that the agreement includes Shell’s major current capital projects in the Middle East.
“The deal covers capital projects on upstream and downstream as well as working on the assets themselves as well as real estate and contract disputes,” Howard says.
Howard adds that until now most international oil companies have been using contractors for the service, but this has caused a conflict of interest.
“Shell is the first [company] to realise that you need an independent professional service provider because budget controls are crucial to time and cost certainly on major investments,” Howard says.
The framework arrangement was developed by Shell to improve the quality of its project controls services. EC Harris will provide personnel including project control leaders, estimators, schedulers and cost engineers.
“We are embedding our people into Shell’s governance systems and our people will follow those systems,” Howard says. “The purpose of the contract is to try to localise staff, implement an accreditation process that will improve the competencies of the local staff.
”The primary driver is not to instigate changes into Shell’s systems, it’s to provide the company with independent personnel,” he adds.
The EFA started in November and the personnel provided by EC Harris will gradually grow as the contract progresses. The Middle East will be serviced by a hub manager and local EC Harris employees. The value of the contract will grow as more personnel are seconded to Shell.
A Middle East-based source from a major engineering contractor admits that the contract could signal the end of such contracts being awarded to contractors in the future.
“EC Harris has done well to win this award,” the source says. “While most engineering contractors focus on their core business, this kind of service is still something most are interested in pursuing.”