Engineering Encyclopedia

Saudi Aramco DeskTop Standards

Preparing The Expenditure Request

Note: The source of the technical material in this volume is the Professional
Engineering Development Program (PEDP) of Engineering Services.
Warning: The material contained in this document was developed for Saudi
Aramco and is intended for the exclusive use of Saudi Aramco’s employees.
Any material contained in this document which is not already in the public
domain may not be copied, reproduced, sold, given, or disclosed to third
parties, or otherwise used in whole, or in part, without the written permission
of the Vice President, Engineering Services, Saudi Aramco.

Chapter : Project Management For additional information on this subject, contact

File Reference: PMT20108 Rod Kuan on 873-9701
Engineering Encyclopedia Project Management
Preparing the Expenditure Request

Content Page

BASIS OF A PROJECT EXPENDITURE REQUEST ESTIMATE ..................................... 1

Introduction .............................................................................................................. 1
ER Estimate Package ................................................................................................ 1
Project Execution Plan................................................................................... 4
Expenditure Request Form, Saudi Aramco 56D ............................................. 4
Basis of Estimate ........................................................................................... 4
Detailed Estimates ......................................................................................... 4
Contractor's Supplement Package .................................................................. 4
Schedule ........................................................................................................ 4
Basis of ER Estimate................................................................................................. 4
Design Office Engineering Man-hours and Cost ............................................. 4
List of Major Equipment Items and Cost.......................................................11
Labor Productivity Adjustment .....................................................................11
Cost Trends ..................................................................................................18
Prorates and Contingency .............................................................................18
Exceptions to the ER Preparation Guidelines ................................................18
Explanation of Major Variations from Previous Estimate ..............................18
CONSTRUCTING A PLAN FOR THE DEVELOPMENT OF AN EXPENDITURE
REQUEST ESTIMATE ......................................................................................................18
Introduction .............................................................................................................18
Steps in Development of ER Estimate ......................................................................18
Responsibilities .............................................................................................18
Construct a Logic Plan for ER Estimate Development ..............................................18
Development Activities .................................................................................18
WORK AID 1: GUIDELINES FOR THE CONSTRUCTION OF AN ER ESTIMATE
DEVELOPMENT PLAN.....................................................................................................23

GLOSSARY........................................................................................................................23

ADDENDUM......................................................................................................................25

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BASIS OF A PROJECT EXPENDITURE REQUEST ESTIMATE

Introduction

Capital budgeting is an integral part of the overall Saudi Aramco financial planning process. All
projects must go through a financial justification and approval process before the required funding
is authorized. The purpose of this process is to ensure that Saudi Aramco's capital funds are
invested in the best projects, which adds value to the company's asset base.

More projects are usually identified for the capital program than there are funds available;
therefore, some projects must be cut from the program or delayed to a later period. In order to
assure that the right projects are ultimately selected and approved, there must be a way of
objectively measuring the value of each project to the company.

Part of the evaluation process is determining the financial benefits of one project versus another
project competing for the available capital funds. In order to assure the accuracy of this
evaluation process, the projects/Budget Items (BIs) must have correspondingly accurate estimates
of their project costs. The budget approval process makes commitments of capital funds
incrementally as project definition is developed to allow the cost of the project to be
correspondingly developed to the point of Expenditure Request (ER) approval. ER approval is
the point at which the company commits to the full funding of the project.

ER Estimate Package

The ER Estimate Package is prepared by the Project Engineer and transmitted to Project Support
& Control Department (PS&CD) and later to the Facilities Planning Department (FPD) Budget
Director as the document and supporting information for the request for ER Approval (ERA).

The ER Estimate Package must contain the following six components and be submitted by the
Project Engineer to PS&CD in its entirety:

1. Project Execution Plan (for projects in excess of $50MM)

2. Expenditure Request Form, Saudi Aramco 56D
3. Basis of Estimate
4. Detailed Estimates
5. Contractor's Supplement Package
6. Schedule

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Project Execution Plan

An approved Project Execution Plan (PEP) for projects in excess of $50 million must be included.
Also, the Project Proposal and approved minutes of the Project Proposal Meeting and Technical
Review Meeting are included.

Expenditure Request Form, Saudi Aramco 56D

The ER Form 56D, reflects the total project cost as determined through development of the ER
estimate. After completion of the estimate, Form 56D is prepared by the Project Engineer and
Cost Engineer, with the assistance of the PS&CD Estimating Unit. There is one Form 56D for
each job order phase listing; and one Form 56D that summarizes the job orders for each BI. A
copy of Form 56D is included as Addendum 1.

The definitive estimate is broken into parts called Job Orders. The number of job orders is
dependent on the established method and structure of cost control as determined by the Project
Engineer. The job orders may break the project by geographic areas (such as north-south, in-
plant or off-plot) or other designation, which allows the best control of costs. It should be noted
that the method and structure of control are a Project Engineer's responsibilities and they have a
significant influence on the approach to the detailed estimating. Consequently, the method and
structure of control should be established early in the Project Proposal development.

A job order is further divided into Authorization for Expenditure (AFEs). Funds can be released
only through an AFE. Details of the AFE process are contained in SAEP-11, Authorization for
Expenditures (refer to Addendum 2). The AFE provides authorization to the Project Engineer to
make commitments for detailed engineering, material procurement, and construction.

Each ER Estimate along with the cash flow forecast are reviewed and concurred to by PS&CD
and the Project Manager before they can be transmitted to the Budget Director and presented to
the Board of Directors/EXCOM for approval. Once the ER Estimate is approved, the Project
Engineer and the Project Manager accept overall responsibility for the ER estimate.

Basis of Estimate

The Basis of Estimate is intended as a management review tool and it defines the various
assumptions made during the development of the ER estimate. It is the responsibility of the
Estimating Unit in PS&CD working with the Project Engineer, to prepare the Basis of Estimate,
which includes but is not limited to:

• Allowances for assumptions due to incomplete design detail, material quotes, or

uncertain construction conditions

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• Cost trends (escalation)

• Labor productivity adjustment factors
• Currencies and exchange rates
• Exceptions to ER Preparation Guidelines, including justification
• Explanation of major variations from previous estimates

Detailed Estimates

The detailed estimate should be structured to conform with the number of job orders that have
been established for cost control. Individual line items within the body of the estimates should be
referenced to the appropriate Saudi Aramco Standard Code of Accounts (SCA) numbers,
included as Addendum 3.

Since a complete and approved Project Proposal is required, the ER Estimate should be definitive
in nature, that is, based on specific material and work quantities. Factored estimating should be
used only when absolutely necessary.

ER estimates prepared by a contractor must be compatible in detail and in the Saudi Aramco
standard estimate format. Prior to commencing the development of the ER estimate, the SAPMT
must brief the contractor on (1) the intended estimating methods and procedures to be used, (2)
agreements reached on the use of productivity factors, and (3) labor and equipment rates used by
the contractor in the contractor's supplement. All lump sum subcontracts must be broken down
into labor, material and construction.

Contractor's Supplement Package

The format for the Contractor's Supplement Package is provided by PS&CD and it may consist of
restricted or confidential Saudi Aramco information that is required to complete the estimate.
The supplement is intended to provide customized adjustments to the guideline to accommodate
any special conditions.

The intent is to allow the contractor to assess the Saudi Aramco ER Estimate information
package and to respond to the additional information, or alternatives, that may be needed. The
contractor’s assessment opens a constructive dialogue early enough to take advantage of any
contractor special expertise, state-of-the-art methods and procedures, or adjust to a specific
contractor weakness.

The contractor should provide feedback on the information that is transmitted to them, (i.e.,
constructive comments on trend elements they are familiar with, as well as any Middle East
productivity experience).

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Schedule

Accurate scheduling of cash flow by quarter is important in an ER estimate because it can change
the decision to proceed with the project, or other projects, when there are constraints on available
funds for the Capital Program.

Cash flows are projected on an annual basis in the budget estimate using cash-flow models
developed from historical data by PS&CD. By the time the Project Proposal and ER Estimate are
complete, data from the PEP, engineering cost details, schedule of material procurement, and
construction contracts are available, which make it possible to forecast cash flows accurately.
When PS&CD endorses the Form 56D, in addition to the total project cost, PS&CD is also
endorsing a reasonable cash-flow forecast. Saudi Aramco Cost Manual, Section 12, Forecasting,
describes the procedure to generate cash flows. The Project Engineer should recognize that cash
flow means when the company actually spends the funds. When the Project Engineer and the
Cost Engineer determine the cash flow, they should look at the time expected to actually receive
invoices and add the appropriate processing time, usually 40 days.

Basis of ER Estimate

The process of quantifying the cost establishes the basis for the ER estimate. The basis of the ER
estimate is the foundation for determining the cost magnitude of the Scope of Work. In order to
determine the cost for the Scope of Work, the following seven major categories of work must be
quantified.

1. Design office engineering man-hours and cost

2. List of major equipment items and cost
3. Labor productivity adjustment
4. Cost trends
5. Prorates and contingency
6. Exceptions to the ER preparation guidelines
7. Explanation of major variations from previous estimate

Design Office Engineering Man-hours and Cost

The design office engineering costs includes the SAPMT as well as the engineering contractor and
the program management contractor.

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Saudi Aramco Project Management Team - This estimate includes costs incurred by the Saudi
Aramco personnel who are assigned to the project and who are directly charged to that project.
The costs should be estimated separately as design office SAPMT in-Kingdom (IK), Out-of-
Kingdom (OOK) and field construction SAPMT. If a program management contractor is
preparing the estimate, they need not be concerned about this component of the estimate. The
estimate is developed by SAPMT with the assistance of the appropriate Estimating Unit in
PS&CD. The estimate should include the following elements:

• Design Office SAPMT (IK and OOK)

- Saudi Aramco personnel man-hours at appropriate rates
- Supplementary manpower
- Travel requirements (Company and commercial aircraft)
- Saudi Aramco vehicle requirements
- Miscellaneous expenses
• Field Construction SAPMT and support
- Saudi Aramco personnel’s field and home-office man-hours
- Supplementary manpower/construction technical services
- Anticipated general services contractor, e.g., surveying, soil reports, miscellaneous
construction, and commissioning
- Saudi Aramco and contractor inspection man-hours
- Vendor representatives
- Travel requirements
- Saudi Aramco construction support, e.g., SCECO charges, heavy lifts, and blasting
- Vehicle requirements (if other than construction contractor provided)
- Catering and accommodation (if other than construction contractor provided)
- Miscellaneous expenses

The best way to determine the above costs is to prepare a complete organizational chart for the
total project and to apply mobilization and demobilization dates to the chart. With this
information, the Project Engineer will also be able to see the travel requirements as well as vendor
rep requirements. The cost engineer can apply the appropriate costs to the number of months per
job classification.

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Contractor Project Management/Program Management Team - If a contractor management

team is used, then a cost estimate is prepared in the same manner as that for the SAPMT.

The estimate will be separated into design IK, design OOK and field construction support with
manpower requirements identified by equivalent Saudi Aramco salary grades and disciplines.

The rates for catering, accommodations, vehicles, business travel, etc., must be developed based
on the location.

Engineering, Design, and Procurement - This estimate includes costs that are associated with
the following:

• Project Proposal preparation

• Detailed engineering and design
• Material procurement
• Engineering support during construction

The best way to estimate the detailed engineering and design costs is to prepare a list of
deliverables, i.e., a drawing control log (refer to Addendum 4). The drawing control log will
identify each drawing that is required to procure and construct the facility. This can easily be
prepared by the engineering contractor. It is customary in most engineering organizations to also
include man-hour estimates for other activities that occur in the engineering office, such as studies
that might be required, Quarterly Review costs, etc.

Generally, procurement costs can also be estimated by the engineering contractor based on the
total number of material requisitions and purchase orders required. Historical information specific
to the type project are available within MSO and PS&CD. Other engineering expenses, such as
project control and support, are included in the estimate and they are identified by engineering
office location.

The Project Engineer should keep in mind the deliverables and the estimated man-hours that are
required to produce each deliverable. A breakdown of cost categories to be included are as
follows:

• Engineering, Design and Drafting

– Drawings
– Specifications
– Material Take-offs (MTOs)

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– Purchase Requisitions (PRs)

– Alternative analysis
– Technical manuals
• Project Controls
– Schedule preparation
– Cost control and forecasting
– ER Estimate preparation
– Report preparation

– Miscellaneous support
• Materials
– Purchase Orders (P.O.s)
– SAMSS input preparation
– Review of surplus and excess materials
– Expediting
– Inspection
– Traffic control

The Construction/Installation estimate reflects the field costs that are associated with the
construction and/or installation of the facilities. It should be separated into direct and indirect
costs (shown below) and structured in accordance with the Saudi Aramco SCA numbers, which
are supplied as part of the contractor's supplement (i.e., 200, 400, 700, etc.).

• Direct Field Cost. The direct field cost estimate required for the construction/
installation of the facilities includes:
– All labor, foreman level and below
– Associated construction equipment
– Miscellaneous materials
Specific construction material quantities and estimated man-hours per unit are
required. The estimate is developed through MTO material quantities required for
physical completion of the project.

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Labor productivity adjustment factors are developed for application to total man-hours
and are shown in the Basis of Estimate and discussed in the contractor's supplement.
A composite labor force is assumed and wage rates for the specified labor
classifications may be provided in the contractor's supplement.
• Indirect Field Cost. The indirect field costs include:
– Temporary construction offices and utilities
– Field supervision and job support
– Consumables and small tools
– Scaffolding
– Janitor/clean-up crews
– Commissioning/start-up crews
– Job support equipment
– Mobilization and demobilization of equipment
– Material handling off- and on-site
Camp Catering and Accommodation (C & A) are generally assumed to be provided by the
construction contractor. That assumption must be endorsed by the Project Engineer prior to the
development of the estimate. C & A includes the capital cost of the camp and operating and
maintenance costs stated on a man-day usage basis. That cost is shown as Phase 181 in the Saudi
Aramco SCA.

Overhead and Profit for the contractor home-office is reviewed and agreed upon with the
SAPMT prior to the completion of the estimate. When a GES contract will be used, the estimate
can be formulated by using percentages from a typical GES contract.

List of Major Equipment Items and Cost

The pricing of major equipment items has a significant impact on the accuracy of an estimate.
Thus, it is expected that purchase requisitions will be developed and that firm quotations will be
obtained. If the quotations cannot be obtained, then documented costs from other sources may be
used. These costs are highlighted in the estimate.

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For estimating purposes, it is assumed that project material is obtained from the two main
sources:

• Saudi Aramco supplied (DC and SAMSS)

• Contractor supplied

Saudi Aramco Supplied Materials constitute materials procured from a vendor through a DC
purchase order or store stock requisition and project materials identified as surplus or excess.
These materials are subject to cost trends; however, surplus and excess materials are not subject
to cost trends because they already exist.

Laid Down in Field (LDF) factors are applied to DC material Purchase Order Value free-on-
board. LDF factors are used to estimate the cost of delivering the material to the job site. The
factors include material handling charges, shipping charges, custom duties and Saudi Aramco DC
overhead prorate. When the source country or the means of transport are unknown, LDF factors
(as published by PS&CD) are applied to the estimated purchase order value.

When detailed information is available (e.g., the material's point of origin, size, weight and method
of shipment), a specific LDF may be calculated by referring to GI 216.965-50.)

Some items that are considered to be DC material may be obtained in Saudi Arabia. Locally-
manufactured material receives preference over imports. No LDF factor is applied to DC
materials that are purchased locally; only the Saudi Aramco DC overhead prorate is added.

Saudi Aramco Material System Specifications (SAMSS) materials are those items that are
regularly stocked by the Saudi Aramco Material Supply Organization (MSO) in Saudi Arabia. All
SAMSS material required is identified and priced using the latest edition of the "SAMSS Listing
of Stock Numbers and Descriptions." Those prices are subject to the Saudi Aramco material
overhead, as per GI 216.965-50.

All materials are assumed to be withdrawn from the Saudi Aramco warehouse nearest the job site.
The construction estimate must reflect the cost of transporting material from the Saudi Aramco
warehouse to the job site or laydown area for the contractor's easy access.

Contractor-provided Material as a result of lump-sum turn key or procure-build contracts, do

not attract Saudi Aramco overhead charges. A separate LDF factor is provided in the
contractor's supplement; however, that material is subject to cost trends and overhead and profit.

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Labor Productivity Adjustment

Various factors that affect productivity of the direct labor force include:

• Nationality of labor
• Time of year work is to be accomplished
• Distance of housing to the work
• Timely delivery of materials to job site
• Fast tracking of work schedule
• Quality of engineering drawings

Cost Trends

General escalation factors for estimating capital construction projects are forecast by PS&CD and
documented in the current PS&CD Cost-trend Letter. Those escalation factors are applied to
adjust the elements of project cost (engineering, materials and construction) from cost data base
date to anticipated costs at the time that funds are expended.

Prorates and Contingency

An E&PM overhead prorate is applied to the total project cost. That prorate is presently 4%,
which is applied on the total ER cost estimate and identified as a separate line item within the
body of the estimate.

Contingency, included in the ER Estimate for unforeseeable costs that may occur in the execution
of a project, would normally be 10%. Contingency covers:

• Productivity variances
• Unknown soil conditions
• Change orders
• Changes to assumed rates for items such as air freight, catering and accommodation
and prorates.

Contingency is not intended to cover:

• Scope changes

• Natural disasters

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• Contractor non-performance
• Claims

PS&CD issue guidelines to be followed when rounding the ER estimate and its components. A
copy of the latest Revised Rounding Guideline is included as Addendum 5.

Exceptions to the ER Preparation Guidelines

As is the case with almost everything, there are sometimes exceptions. The exceptions must be
delineated so that all of the people who are responsible for preparing and approving the ER
Estimate are made aware of the exceptions. An exception to the ER preparation guideline can be
defined as an item or part of an item that makes up the ER Estimate and that cannot be estimated
to within the required 10% accuracy. The larger the cost of the item, the greater the impact to the
ER estimate. Conversely, the less the cost of the item, the less the impact of that item on the ER
estimate. The Project Engineer must recognize when an individual item could be large enough to
start impacting the 10% accuracy that is required of the ER Estimate.

Typical examples of exceptions include:

• Major Equipment items where the specifications are not completely developed
• Catalysts containing undecided percentages of precious metals, such as platinum
• Clad vessels when the methodology of the cladding is undecided
• Unknown escalation of currencies
• Unidentified rock or other soil conditions

As the ER estimate is being prepared, there is a tendency to lump things together, which is
sometimes acceptable because there is little choice. Usually, it is much better to identify
individual items whenever possible. As the project progresses, items are assigned values and they
are pulled from the general categories and individually delineated. If this process was
accomplished at the estimate preparation stage, any deviations can be easily tracked.

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Explanation of Major Variations from Previous Estimate

At the time the DBSP is issued, the project scope is less defined and the estimated project cost is
accurate to ± 40%. As the project scope is defined and the project proposal is developed, the
project costs are refined to ± 10% at the time of the ER estimate. As a result, there may be
significant differences between the two estimates. It is the responsibility of the ER Estimate
Package to explain the differences between the estimated cost from the DBSP and the ER
estimate. It is in the best interest of the Project Engineer to investigate each of these variances
carefully to assure himself that the ER Estimate is presented accurately.

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CONSTRUCTING A PLAN FOR THE DEVELOPMENT OF AN EXPENDITURE

REQUEST ESTIMATE

Introduction

The Project Engineer plays an important role in preparing an Expenditure Request (ER) estimate.
He is the principal coordinator in the ER development process. The Project Engineer ensures that
the ER Estimate is constructed according to specific project requirements. The Project Engineer
works closely with the PS&CD and the contractor in the development of the ER estimate.

Steps in Development of ER Estimate

Project Support & Control Department (PS&CD) has primary responsibility to ensure that the ER
estimate satisfies all standards of format and quality.

The PS&CD/CSD and the Project Engineer work together to present the ER preparation
requirements and basic information to the engineering contractor early in the estimate preparation
phase. The presentation is usually made at, or shortly after, the preliminary engineering services
contract "kick-off" meeting, where an ER Preparation Guideline Package is presented and
discussed with the SAPMT and the Project Proposal Contractor's cost control and estimating
personnel. At least one week prior to the kick-off meeting, copies of the ER Preparation
Guideline Package are distributed to the participants of the kick-off meeting.

ER Estimate progress milestones are established during the kick-off meeting, and progress is
monitored to judge PS&CD's participation, timing, and special support requirements. A team of
PS&CD estimators conducts at least one detailed analysis and progress review before the final
review and endorsement of the ER estimate.

After the kick-off meeting, a Contractor's Supplement Package definition is developed by PS&CD
for the SAPMT and the Project Proposal contractor. The supplement should document
customized adjustments and project-specific information to accommodate any special strengths or
weaknesses in the relations between PS&CD, SAPMT and the contractor. The intent is to
document and communicate all Saudi Aramco requirements to the Project Proposal contractor
and to open a constructive dialogue early enough to take advantage of any contractor special
expertise, state-of-the-art methods and procedures, or to adjust to a specific contractor weakness.

The Project Proposal contractor may use an in-house proprietary computer application program
or any commercial software package to prepare the estimate. During the PS&CD review,
PS&CD has the capability to rerun independently, on a confidential basis, the estimate with Saudi
Aramco labor and equipment rates.

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The ER Estimate Package is then accumulated by the Project Engineer and made ready for the
review and approval process.

Responsibilities

Some of the more significant organizational responsibilities in the preparation of ERs that cost
more than $1MM are described below.

• Saudi Aramco Project Management Team:

- Has primary responsibility for the initiation of an ER estimate
- Issues minutes of Technical Review and Project Proposal meetings
- Supports FPD and Capital Programs, Forecasts & Analysis Department
(CPF&AD) in the preparation of the presentation for the EXCOM or Board
of Directors
- Prepares, with PS&CD, the ER quality estimate, and
- Prepares and submits an AFE to the Financial Analysis Unit (FAU) of
PS&CD
• Operating Proponent:
- Supports SAPMT in the preparation and review of the ER estimate and the
Executive Summary
- Provides a solid justification statement for the ER Brief
- Has final approval responsibility for the content of the Brief, and
- Supports FPD and CPF&AD in the preparation of the presentation for
EXCOM or the Board of Directors.
• Responsible FPD Division:
- Reviews the submitted ER materials
- Prepares the ER Brief
- Coordinates the final editing of the ER Brief for approval by the operating
proponent administrative-area head
- Discusses financial aspects with the Budget Director
- Reviews the justification and evaluation of alternatives with the Business
Analysis Department.

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• FPD Budget Director:

- Issues the annual calendar for EXCOM and Board meetings
- Has primary responsibility for ensuring the suitability of each ER package for
EXCOM or Board of Directors' review
- Reviews and coordinates ERs submitted against the approved capital budgets
- Advises FPD engineers of required revisions and corrections to ERs, and
- Prepares the Management Committee books
• Resources Planning Department (PS&CD):
- Reviews and approves the ER estimate
- Establishes a financial master accounting data file after AFE approval.
• Capital Programs, Forecasts & Analysis Department (CPF&AD):
- Assists all proponents and FPD regarding accounting policies and procedures
- Reviews the ER package prior to Management Committee review
- Finalizes and distributes the advance book and the final EXCOM or Board of
Directors ER book.

ERs for BIs that meet all of the following criteria do not require EXCOM approval, unless
requested, but are approved by the Chief Executive Officer:

• The total cost is over $2 million but not over $10 million
• The BI is in the approved Capital Program
• EXCOM has not requested review, (i.e., the item does not appear on the recall list).

EXCOM can approve budget items from $2MM; however, the Board of Directors must approve
budget items with a value greater then $10MM.

Construct a Logic Plan for ER Estimate Development

A flowchart for ER Estimate development is shown below in Figure 1. It describes the sequence
activities that take place in the development and approval for the Expenditure Request of a Saudi
Aramco project.

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Kick-Off Meeting
Conducted By
SAPMT and RPD

Assignment of
Preparation of Preparation of
Specific
Project Schedule Detailed ER Estimate
Responsibilities for
for ER Estimate by Design Contractor
Each Phase

Review by Review of
Support Provided as
SAPMT of Each Contractor Estimate
Requested by
Estimate Category by SAPMT
PC&SD Estimators

Review/Concurrence Review/Approval Review/Approval

by by by
Estimating Units SAPMT Project Manager

Review/Approval
Review/Procesing Review/Concurrence
by
by FPD by SAO
MANCOM/EXCOM/
Budget Director Estimating Units
BOARD

Figure 1. Flow Chart for ER Estimate Development

Development Activities

The following shows the activities and approximate schedule leading to EXCOM or Board
review. It may be used as a planning guideline in the preparation of the ER Estimate Package;
however, the schedule relative to the ERA of a specific BI should be confirmed through FPD.
Following this schedule ensures appropriate internal review prior to EXCOM or Board review
and approval.

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Preparation for EXCOM or Board of Directors Review

Week Preceding Review Activity

Fourteenth Week ER Estimate Package submitted to Supervisor, PS&CD Estimating

Unit.

Eleventh Week ER materials prepared by FPD engineer. Approved Saudi Aramco

Form 56D to the Budget Director.

Tenth Week FPD submits ER Package to the Budget Director

Ninth Week FPD Review

Eighth Week Revisions to Budget Director

Seventh Week Preliminary review books distributed - E&PM

Sixth Week Preliminary Review Meetings - E&PM

Fifth Week Revisions to Budget Director. Management Committee books to

the committee secretary

Fourth Week Management Committee Review

Third Week Reviews to Budget Director. ER's to Capital Programs Forecasts

& Analysis Department for transmittal to the corporate secretary
for transmittal to EXCOM/Board

Review and Approval Activities - The following procedure has been developed to verify the
required quality and level of confidence prior to PS&CD endorsement and transmittal to executive
and corporate management for funding approval and to ensure that ER estimates can be used as
the basis of project cost control.

Preliminary Review - The PS&CD Supervisor of the Estimating Unit conducts a comprehensive
review of the ER Estimate Package.

The completed ER Estimate Package must be submitted by the Project Engineer to the PS&CD
Supervisor three weeks prior to the required submittal date to the Budget Director. That time
may be reduced depending on the level of PS&CD involvement in developing the estimate.

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Final Review - The Supervisor is responsible for arranging and coordinating the final review
meeting. The Supervisor chairs the final review meeting to which the following individuals are
invited:

• PS&CD Manager
• Cost Services Division, Superintendent
• SAPMT
• The assigned PS&CD estimator and/or estimators involved
• Others, as required

The following item copies are provided to the attendees at least one day prior to the final review
meeting:

• Completed 56D sheets

• Original Budget Brief
• BI supporting information (BSI)
• ER brief
• Basis of estimate and detail backup will be available for reference at meetings

The Estimating Unit supervisor makes the introductions and summarizes the preliminary review:

• Changes to the original estimate

• Items not resolved in the preliminary review
• Recommendations

The estimator presents a short narrative on the Scope of Work and summarizes how the estimate
was put together, including:

• Verification of the Project Proposal approval and any subsequent addenda

• Source of material pricing
• DC surplus and SAMSS excess use
• C&A rate
• Review of all allowances included in the base estimate

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• Assumptions due to the incomplete design

• Comparison of ER Estimate with the budget estimate
• Comparison of ER Estimate with similar projects
• Relation of scope and unit cost ($ per square ft., etc.)
• Review of cost trends included in the estimate

The Unit supervisor is responsible for documenting any action items to be completed before the
estimate is accepted.

Upon completion of open items and acceptance by the responsible SAPMT, the Superintendent,
CSD and Manager, PS&CD, endorse the estimate by signing the 56D forms. The signed original
56D forms are then hand-delivered to the Budget Director with a letter of transmittal signed by
the Supervisor of the Estimating Unit.
If agreement cannot be reached on the ER value, the review is escalated to higher signature levels
for settlement.

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WORK AID 1: GUIDELINES FOR THE CONSTRUCTION OF AN ER ESTIMATE

DEVELOPMENT PLAN

Use the following steps in the construction of an ER Estimate development plan.

1. The Participant should prepare the basics of the PEP.

2. The Participant should develop a project schedule to set parameters on engineering,
procurement and construction
3. Having the basic schedule constraints determine the contracting plan.
4. Answer the 5 questions.

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GLOSSARY

AFE Authorization for Expenditure

BI Budget Item

BSI Budget Supporting Information

C&A Catering & Accommodation

CPF&AD Capital Program, Forecast & Analysis Department

CSD Cost Services Division of PS&CD

DBSP Design Basis Scoping Paper

DC Materials Direct Charge Materials

E&PM Engineering & Project Management

ER Expenditure Request

ERA Expenditure Request Approval

ERC Expenditure Request Completion

EXCOM Executive Committee

FAU Financial Analysis Unit

FAWIP Fixed Assets and Work In Progress

FPD Facilities Planning Department

GI General Instruction

IK In Kingdom

JO Job Order

LDF Laid Down in Field

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MSO Material Supply Organization

MTO Material Take-Off

OOK Out of Kingdom

PAER Prior Approval Expenditure Request

PEP Project Execution Plan

PO Purchase Order

PR Purchase Requisition

PS&CD Project Support & Control Department

SAEP Saudi Aramco Engineering Procedures

SAMSS Saudi Aramco Materials System Specification

SAPMT Saudi Aramco Project Management Team

SCA Standard Code of Accounts

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ADDENDUM

1. Expenditure Request, Form 56D

2. SAEP-11, Authorization for Expenditure
3. Standard Code of Accounts
4. Drawing Control Log
5. Revised Rounding Guidelines, dated January 6, 1992

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ADDENDUM 1: Expenditure REquest, Form 56D

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Addendum 2: SAEP-11. Authorization for Expenditure - 1

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Addendum 2: SAEP-11. Authorization for Expenditure - 2

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Addendum 2: SAEP-11. Authorization for Expenditure - 3

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Addendum 2: SAEP-11. Authorization for Expenditure - 4

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Addendum 2: SAEP-11. Authorization for Expenditure - 5

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Addendum 2: SAEP-11. Authorization for Expenditure - 6

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Addendum 2: SAEP-11. Authorization for Expenditure - 7

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Addendum 2: SAEP-11. Authorization for Expenditure - 8

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Addendum 2: SAEP-11. Authorization for Expenditure - 9

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Addendum 2: SAEP-11. Authorization for Expenditure - 10

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Addendum 2: SAEP-11. Authorization for Expenditure - 11

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ADDENDUM 3: Standard Code of Accounts - 1

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ADDENDUM 3: Standard Code of Accounts - 2

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ADDENDUM 3: Standard Code of Accounts - 3

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ADDENDUM 3: Standard Code of Accounts - 4

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ADDENDUM 3: Standard Code of Accounts - 5

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ADDENDUM 3: Standard Code of Accounts - 6

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ADDENDUM 3: Standard Code of Accounts - 7

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ADDENDUM 3: Standard Code of Accounts - 8

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ADDENDUM 3: Standard Code of Accounts - 9

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ADDENDUM 3: Standard Code of Accounts - 10

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ADDENDUM 3: Standard Code of Accounts - 11

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ADDENDUM 4: Drawing Control Log

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ADDENDUM 5: Revised Rounding Guidelines - 1

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ADDENDUM 5: Revised Rounding Guidelines - 2

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ADDENDUM 5: Revised Rounding Guidelines - 3

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