kat,

As an "oil-field brat" you may be aware of how much a tender costs to put together. You must also realise that, world-wide, the oil & gas industry is, to all intent and purpose, very much an "American Game", in terms of technology and equipment (practically all patents relating to drilling and wellhead technology are American).

In Europe we have a thing called the "Achilles System". Under EU rules before you go out to ask for bids for any work you have to go into this system and get a list of all companies that are listed as being capable of doing the work. You then have to invite all of them if they wish to pre-qualify to go on the tender list. On the basis of the replies you then have to send them pre-qualification documents, when these are returned they have to read and evaluated. Those who pre-qualify must then be asked if they wish to proceed, those that do get sent the "Invitation to Tender" packages. While the tenders are being prepared there will be tender clarifications to be addressed by company and contractor. When these are returned they all have to be evaluated technically and commercially. From this evaluation a short-list of tenders will be selected (can be anything from three to six contractors). Those tenders are then gone into in great detail and factors considered such as the projected work-load of those contractors, do their committments work to their advantage, or disadvantage. The short-list is reduced to two companies for the final round and the contract is then awarded.

That system, although it is extremely fair, is extremely costly to both client and contractor. What was noticed very early on was that you could start with 33 companies stating their interest in pre-qualifying, you always seemed to end up with the same six companies at the end - that translates to around 80% wasted time, money and effort on the part of the client and 27 potential contractors.

In order to overcome this problem the Operators (oil companies) entered into long term frame agreements with contractors to provide clearly defined services. This meant that you go through the process detailed above once every five years. Any work that comes up in that period you immediately go to your Frame Agreement Contractors and you deal with three bids - much more cost effective for both Operator and Contractor, far better utilisation of resources, a great deal better in terms of advancement of technology, therefore far better for the industry as a whole.

There are two important things to be realised and accepted by parties entering into any contract:

1. By it's nature, it is an agreement entered into by reasonable people.

2. The contractor must make a profit - because if he doesn't he tries to recoup his losses by cutting corners, you as client do not get the job you wanted and you end up paying in the long run to get things put right - rectification work always costs double what it would have cost had it been done right in the first place. If as an Operator you enter with the attitude to squeeze your contractor till the pips squeak - all you will succeed in doing is shafting yourself and driving a contractor out of business - and that is not in your interest.

For the oil-field scope of work required to be undertaken in Iraq USAID (restraint on where American money can be spent apart) has gone to what would have ended up as the short-list in any case.

In no way am I saying they are Saints - but they are damn good at what they do.