Airgases Projects are flexible to meet requirement of customers under different situations. The idea is to provide customer just what it needs and not whole lot of services. Different customers in different industries for same product have different critical needs and risk perception and therefore we need to be flexible to meet those.
One of very novel and innovative model Airgases Projects proposes is BYPY to its customers which they may find extremely useful.
Airgases Projects proposes a unique project execution philosophy known as BYPY ie Build Your Plant Yourselves. Under this execution philosophy the end customer virtually builds its own plant. Airgases Projects acts as a guide and catalyst to ensure that the plant delivers guaranteed performance and at the same time ensure that the capex does not exceed the committed value.
So what is BY-PY model? Broadly the execution philosophy under this model would consist of followings.
Scope of work model
1) Airgases Projects will identify the “Technology Provider” who will provide performance guarantees of the plant and supply of critical component of the plant. In an ASU project this would typically be a cold box or critical items of cold box including expander. Airgases Projects have agreement with several such technology providers who are prepared to work on BYPY model as long as they are assured that Airgases Projects is the nodal agency for execution.
2) Undertake basic design work of rest of plant not covered by technology provider and not covered by the local vendors.
3) Detail engineering would be undertaken by Indian engineering companies but under overall review and responsibility of Airgases Projects.
4) Procurement of all equipment and materials not supplied by “Technology Provider” on behalf of customer. This includes preparing purchase specifications, issuance of inquiries, receipt of offers, review of offers and technical discussions, commercial discussions and price negotiations. The results of this procurement process would be presented to end customer with recommendations to place orders. Airgases Projects would also provide order specifications to be attached with PO to be placed by end customer. End customer has to simply print on its stationary and place order.
5) Review of all vendor drawings and documents and approve/comment as required.
6) Assistance in placing orders for all services including those for design & engineering work, site construction work, inspection services, vendor supervisor services and all other such services.This includes preparing inquiry specifications, issuance of inquiries, receipt of offers, review of offers and technical discussions, commercial discussions and price negotiations. The results of this process would be presented to end customer with recommendations to place orders. Airgases Projects would also provide order specifications to be attached with PO to be placed by end customer. End customer has to simply print on its stationary and place order.
7) Follow up and expediting with all vendors for timely delivery of materials and services.
8) Co-ordination with inspection agency for inspection and issue despatch advice on behalf of customer.
9) Issue advice to site management team of end customer for receipt and safe storage of materials.
10) Providing services of one site manager to overall supervise construction work of the plant. End customer will provide its team of supervisors and site management team which will report and work under Airgases Projects site manager command. If required external engineers will be recruited by end customer on short term basis of different disciplines. All engineers/supervisors coming from OEM suppliers will also report to him. However site safety and security will always remain direct responsibility of end customer.
11) Provide services of one commissioning manager to overall supervise commissioning with help of plant operators provided by end customer as well as commissioning team from technology provider as well as engineers/supervisors coming from OEM suppliers.
12) All statutory approvals will be arranged by end customer. Wherever technical documents are required, these would be arranged by Airgases Projects through all vendors.
Commercial operating model
Commercially the BY-PY model would broadly work on following mechanism :
1) Based on precise gases requirement of customer, Airgases Projects will locate a basic technical knowhow provider ( in some cases that could be Airgases Projects as well) to prepare a basic design and make a proposal to customer on following basis
a. Fixed price from Airgases Projects for project management services which will include.
i. Basic design and engineering services.
ii. Project management services including procurement, expediting, inspection etc.
iii.Overall management of site construction work through a site manager.
iv. Overall management of commissioning of plant through a commissioning manager.
b. Estimated cost of procurement of plant and equipment which will be procured by customer based on recommendation of Airgases Projects. The customer will make direct payment to these suppliers and take direct delivery.
c. Estimated cost of services required from vendors for detailed design, site construction, site supervision services by OEM’s, inspection services and all other such services. All these will be ordered by customer based on recommendation of Airgases Projects. The customer will make direct payment to these contractors based on certification from Airgases Projects.
2) The price under item (a) is fixed and to be paid to Airgases Projects. The costs under (b) and ( c ) are estimated but Airgases Projects shall be committed to it and will guarantee that the total cost actually incurred during execution under (b ) & ( c ) does not exceed total cost indicated by Airgases Projects in the proposal.
3) In the event actual spend on (b ) plus ( c ) exceeds the cost now estimated as indicated in the proposal, Airgases Projects will pay some % of the increase in amount to customer as penalty . However total penalty payable by Airgases Projects will be capped to some % of total fee quoted under item (a). Likewise in the event actual spend on (b ) plus ( c ) is lower than the cost now estimated as indicated in the proposal, Customer will share same % of the savings with Airgases Projects as bonus. However total bonus payable to Airgases Projects will be capped to same %, as penalty, of total fee quoted under item.
Advantages of BYPY
This unique operating model offers following distinct advantages to end customer:
1) Lowest possible capital expenditure as end customer does not pay for contingency, overheads and profits payable to an EPC plant supplier. An EPC plant suppliers will typically have more than 80% of plant equipment/ components as bought out from OEM’s and then adds on it overheads, contingencies, warranty provision as well profit, all put together which adds to around 20-30% to the cost to arrive at sales price.
2) End customer will get an optimised plant as an EPC plant supplier has very often has vested interest in supplying a standard design plant available with it and not an optimized plant specially designed for end customer. Especially if EPC plant supplier is also a gas company it will take in consideration its own interests before deciding what plant it will offer to the customer.
3) End customer would have direct one to one relationship with all OEM suppliers. This is big advantage because if there is a problem during plant operation customer will have direct access to OEM and get quick services without going through EPC plant supplier who hardly has any ability to provide aftersales services related to its bought outs and instead depends upon its vendors. In any event of any problem he has to depend upon plant supplier to contact actual OEM supplier. This is additional interface which causes delay in providing timely service. At times this can prove to be very costly. This becomes bigger problem once plant warranty period is over.
4) End customer can get spares at significant lower prices compared to those when he gets through EPC supplier. As a matter of fact end customer can negotiate prices of spares while finalising main plant order with deferred delivery.
5) End customer can get OEM supplier of its choice and is not on mercy of EPC plant supplier who will always take lowest cost approach. Direct approach to OEM supplier also allows end customer to get additional special features in that equipment which would be difficult in case of EPC supplier as they will always take lowest cost approach to maximize its profit and not take in consideration 20 year life of the plant. Moreover the selected vendor by EPC plant supplier may not be able provide required service due to geographical location. The owner has no say in choosing vendor of bought outs.
6) Direct control on project would mean expeditious completion as for end customer it is a top priority but for EPC contractor this would be one of several projects.
7) The plant supplier work with positive cash flow and very often supplies equipment not necessarily based on when it is required to be erected. This becomes a bigger problem where customer is undertaking civil works and other infrastructural facilities.
8) The plant supplier normally does not provide most of technical design documents to customer which customer would be needing at a later stage. In BY-PY model the customer will get all information directly from all vendors.
