Approach and Methodology to

Calculate Project Cost to

Completion in event of Covid-19
Lockdown

Discussion Document

27 March 2020
Approach towards EAC of EPC Project in the event of Covid-
19 Lockdown
Engineering Cost to Completion due to Covid-19
+
Procurement Cost to Completion due to Covid-19
Direct +
Construction Cost to Completion due to Covid-19

(-)
Engineering EAC As per Control Budget & balance To Go
EAC
+
Procurement EAC As per Control Budget & balance To Go
+
Construction EAC As per Control Budget & balance To Go

(+)
Indirect Indirect Impact On Cost due to Force Majeure

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Approach To Calculate Time to Completion in the event of Covid-
19 Lockdown
NORMAL CASE

Timeline for Balance to Go Completion

Time to Complete
E Balance to go
Engineering Tasks
Time to Complete Balance to go
P Procurement Tasks

Time to Complete Balance to go Construction

C Tasks

Lockdown CASE

Timeline for Balance to Go Completion Post Lock-down

Lockdown Lead time of Time to Complete

E Time remobilization till Balance to go
peaking Engineering Tasks
Lockdown Lead time of Time to Complete Balance to go Cascading Effect
P Time remobilization till Procurement Tasks of Engineering
peaking Delay
Lockdown Lead time of Time to Complete Balance to go Construction Cascading Effect
C Time remobilization till Tasks of E&P Delay
peaking

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Tuesday, March 30, 202
Framework for Calculating Direct Project Cost to Completion in
event of Covid-19 Lockdown
Project Organization

EPC Project Delay

Impact upon resuming

Current Impact
Project Activities

PMT & PMT &

Engineering Procurement Construction Shared Engineering Procurement Construction Shared
Services Services

Evaluation Areas

Measurement Methods

Project Infrastructure

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 Direct Cost Impact of Lockdown on EPC Stages of Project

Steps 1 Engineering 2 Procurement 3 Construction 4 PMT

► Idle Time of Resources (Direct + ► Idle Time of Resources ► Idle time Costs of Labour ► Idle Time of Overhead
Indirect) (Direct + Indirect) ► Idle P&M Financing Costs & Indirect Staff
► Idle Charges for ► Disruption in Supply Chains ► Cost of Financing of
► Software / Design Services ► Lost Manhours Project
Charges ► Statutory and Regulatory ► Loss due to Shelf life
Impact ► Additional IT Infrastructure Changes reduction (Write Off)
During Expenses ► Loss of Paid Advances ► Idle P&M Servicing Costs
Lockdown ► Remote Working ► Warehousing / Storage ► Labour & P&M evacuation
► Limited Laptop Issuance Cost
with Design Suites ► Idle Yard / Laydown /
► Idle Charges for Engineering Warehouse / Fab-shop
Agency rental

► Sequential Delay in Inputs ► Loss Of productivity ► Loss Of productivity ► Cost due to extended
► Vendor Design Inputs ► Delayed Deliveries of ► Remobilization expenses deployment of indirect
► Soil Reports Critical items and impact on ► Impact on Schedule staff & Overhead
► Client Review and working capital ► Zero to Peak
Confirmations ► Reinspection and Clearance Labour
Impact upon ► Loss of Productivity upon charges remobilization
resuming resuming engineering activities ► Price volatility due to ► Site Admin and HSE
project ► Rework and Chances of Errors uncertain condition Expenses
Activities from faster design activities ► Extension Of Warranty &
► Delay in release of Engineering Defect Liability
Drawings ► Logistics Demurrages
► Remobilization Charges of ► Additional Financial Impact
Agencies to ensure seamless
manufacturing & delivery

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Engineering
Impact and Measurement metrics
Impact During Lockdown
1 Idle Time of Resources
• Timesheet / Manhours Estimate sheet for Lockdown period
• Manhour Estimate for Remote Working Deliverables (if any)
2 Software / Design Services Charges
• Design software package annual charges amortized to lockdown
period
• Identify Cloud Services Storage costs
3 Additional IT Infrastructure Expenses
• Additional Software license costs (Single User Licenses) for work
from Home Operations
• Laptops with software suites expense
• IT Accessibility expenses for Client and PMC
Idle Charges for Engineering Agency
4
• Manhours for idle resources engaged for the project by
Engineering Agency
• Timesheet record and Mail communications between client and
Engineering agency
• Contract Value vis a vis order book value for engineering agency
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Post Lockdown Impact
1 Sequential Delay in Inputs
• Record of Mail Communications with Vendors and record cycle
time from data inputs received and measure with agreed upon
turnaround times
• Client communication and approval delay record with reference to
contract approval matrix and schedule
2 Loss of Productivity
• Peak Performance measures (Impact of Learning Curve)
• Loss of manhours for revisiting all design parameters
3 Rework / Design Errors
• Risk of Design errors from expedited design processes causing
rework
• Measure Inputs received to Drawing Issued Cycle Time to find
redundancies
• Simulations/ no. of design optimization cycles carried out
• Delay report for inputs from various departments for carrying out
design
4 Delay in release of Drawings
• Baseline vs actual, drawings released schedule
• Manhours planned vs actual report
Remobilization Expenses
5
• Remobilization Charges for Engineering Agency
• Remobilization for Field Engineering team
Procurement
Impact and Measurement metrics
Impact During Lockdown
1 Disruption in Supply Chains
• Status of all transit equipment's and locations
• Order Fulfilment report of various suppliers
• Report and Impact of Disruptions in suppliers / vendors supply
chain
Post Lockdown Impact
1 Loss Of productivity
• Peak Performance measures (Impact of Learning Curve)
• Loss of manhours for reviewing purchase order terms and impact
assessment

2 Delayed Deliveries of Critical items and impact on

2 Lost Manhours working capital
• Manhours Spent on coordinating with suppliers for impact
• Plan vs actual delivery schedules and impact on project execution
assessment
schedule
• Manhours Estimate for idle resources
• Milestone / Billing Cycle Schedule and impact on cash flow
• Loss of manhours from discussion with suppliers for which is not
• Extended Lockdowns (if any) in country of origin for international
placed
shipments

3 Statutory and Regulatory Changes

• Report on Government ban on imports / exports and impact on raw
materials to suppliers and global sourcing
4 Loss of Paid Advances
• Suppliers not honoring contracts due to cease of operations /
supply chain disruptions
• Onboarding new vendors due to reduced existing supplier
capabilities
5 Warehousing / Storage / Logistics
3 Reinspection and Clearance charges
• Status of Material Clearance and Dispatch notes void and
requiring re clearance from ports
• Critical Equipment's requiring retesting
4 Price Volatility
• Monitor fluctuations in price and impact due to raw material
unavailability
• Evaluation matrix for Price of raw material tied to finished
product of Supplier (Steel, Fuel etc)

• Detention / Demurrages incurred (if any) for storage at ports

• Charges for materials diverted to nearest warehouses and storage
due to lockdown

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Construction
Impact and Measurement metrics
Impact During Lockdown
1 Indirect Costs/ Idle time
• Wages paid towards retained / idle labour
• Costs for Food and accommodation of Employees and labour
camps
• Site establishment maintenance and security costs
• Indirect costs loaded onto project overall cost during downtime
• Theft/ Loss of materials/ rental of property during downtime
2 P&M Financing Costs
• Internal Hire charges for P&M
• Financing / EMI charges for Equipment paid during non operation
hours of equipment (loss of revenue)
3 Cost of Financing of Projects
• Cash Flow assessment to evaluate payment of project financing
cost
• Increased project costs requiring additional finances
4 Loss due to Shelf life reduction (Write Off)
• Assess shelf life of material stored in stores / warehouses (Cement,
Paints etc)
5 P&M Servicing Costs
• Maintenance expenses for P&M during idle time
• Breakdowns and overhauls of equipment during resumption of
work
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Post Lockdown Impact
1 Loss Of productivity
• Peak Performance measures (Impact of Learning Curve)
• Change in subcontractors working in work in progress activities
• Status of supervision personnel deployed in sites
2 Remobilization expenses
• Expenses incurred toward remobilization of P&M and Manpower
• Loss of Advances paid towards default subcontractors
• Revision in Subcontractor Rates for onboarding new subcontractors
(Comparison between Budgeted , Earlier S/C Rates and New Rates)
3 Impact on Schedule
• Critical path assessment for project schedule
• Progress Shortage due to slower remobilization (Daily Manpower
Report Trend)
• Additional resources mobilized to achieve peak resource
requirements
• Additional costs incurred for crashing of project schedules
• Impact of Weather / monsoon on project schedule and
resequencing of some activities
4
Site Admin and HSE Expenses
• Increased worker insurance
• Expenses towards employees loss of life if any
PMT, HSEQ, Contracts & Other Services
Impact and Measurement metrics
Impact During Lockdown Impact on Resumption
1 Indirect Costs/ Idle time 1 Additional Cost
• Wages paid towards retained / idle indirect staff • Additional wages paid towards extended deployment of indirect
staff
• Overhead Cost
• Extended overhead cost
• Licensing Fee / Maintenance cost of PMT Tools & software
• Additional Licensing Fee / Maintenance Cost of PMT Tools &
Software

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Framework for Calculating Indirect Impact Cost to Completion in
event of Covid-19 Lockdown
Project Organization

EPC Project Delay

Contractor Side

Extended Increase In
Interest On
Resource Order
WC
Deployment Backlog

Evaluation Areas

Measurement Methods

Project Infrastructure

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Indirect Cost Impact of Covid-19 Lockdown on EPC Project

Contractor

►Impact On Interest due to additional funding of Working

Capital due to extended payable & delayed Invoicing
►Extended Account Receivable / Book Closure
►Loss Of Goodwill / PTR

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Indirect Impact and Measurement metrics
Contractor Side
1 Extended Payable
• Interest on Extended Payable Duration

2 Extended AR / Delayed Invoicing

• Impact on Cash flow due to Delayed Invoicing

6 Loss Of Goodwill
• ???

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 Work Plan (Post Receipt of Data)

Week 1 Week 2 Week 3

Update Project Scope & Status Of

Contractual Commitment

Re-baseline Project Schedule

(Considering Time Extension)

Arrive at Estimate at Completion

(Engineering)

Arrive at Estimate at Completion

(Procurement & Logistics)

Arrive at Estimate at Completion

(Construction, Comm. & Start-up)

Arrive at Estimate at Completion

(PMT, Contracts, HSEQ)

Assess Overall Financial Impact

Conduct Validation & Obtain Sign Off

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