Project Management in the Oil and Gas Industry

When The report should be done in early operations to capture both good 
and bad issues.
Who
The project leader is responsible for the generation and 
communication of the report.

---

210 
Project Management in the Oil and Gas Industry
8. The reasons for completion of the project before or after the 
plan schedule
9. The change in the quantity rather than in the contracts and 
their impact on the time and costs
10. Recommendations:
• Amendment to calculate the estimated cost
• Modified schedule plan
• Recommendations for the performance of contractors 
and suppliers
• Recommendations for the operator
Quiz
1. You are reviewing bids from various contractors for work on your 
project. One of the bidding contractors has a history of delivering on 
time within budget and you have personally worked with this com-
pany successfully on previous engagements. You receive a call from the 
manager submitting the bid inquiring about how the process is going. 
He asks to have lunch with you to discuss the bid. What is the BEST 
response?
• Do not mention the other bidders, but simply inform him 
that based on past experience, he has a good chance of win-
ning the business.
• Inform him that it would be inappropriate to discuss the 
matter at all and inform the customer or a team member of 
the conversation.
• Inform him that it would not be appropriate to discuss the 
matter over the phone during business hours, but that an 
informal lunch discussion would be more appropriate.
• Politely avoid continuing the conversation and disregard 
the bid.
2. Although your company is not the lowest bidder for a project, the client 
has come to expect good performance from your company and wants 
to award the contract to you. To win the contract, the client asks you 
to eliminate your project management costs. The client says that your 
company has good project processes and project controls unnecessarily 
inflate your costs. What should you do under these circumstances?
• Eliminate your project management costs and rely on 
experience.

---

Tendering, Bidding, and Contract Traps 211
• Remove costs associated with project team communica-
tions, meetings, and customer reviews.
• Remove meeting costs but not the project manager’s salary.
• Describe the costs incurred on past projects that did not use 
project management.
3. Bidders’ conferences can have a negative effect on the project if the 
project manager does not remember to make sure:
• All questions are put in writing and sent to all contractors.
• All contractors get answers to their questions only.
• To hold separate meetings with each bidder to ensure you 
receive proprietary data.
• There is room in the meeting for all contractors.
4. An example of the contract price in a cost plus fixed fee contract is:
• $2,0000 plus fee.
• Costs, whatever they are, plus $20,000 as fee.
• $20,000.
• $250 per hour.
5. Which of the following factors can govern the project contract type?
• How your company does business
• How complete the scope of work is
• Type of contract the law requires
• Type of contract you have experience with
6. A company has just contracted with a well-known software developer 
to provide services during the planning and design phases of your 
project. Invoicing requirements were specifically defined within the 
contract, but expense limits were overlooked. As the project manager, 
which form of corrective action should you take?
• Modify the terms of the contract.
• Define acceptable limits to be adhered to.
• Proceed in good faith.
• Terminate the contract.
7. All of the following are generally part of the contract documents 
EXCEPT:
• Proposal
• Scope of work
• Terms and conditions
• Negotiation 
process

---

212 
Project Management in the Oil and Gas Industry
8. Your company is receiving a shipment of goods from the seller when 
you get a call from the contracting officer who tells you that the ship-
ment does not meet the requirements of the contract. You look at the 
shipment yourself and determine that the shipment meets the needs of 
the project. What should you do?
• Send the shipment back.
• Accept the shipment.
• Issue a change order to change the contract specifications.
• Expect to receive a claim from the seller.
9. During the execution phase of the contract, the project manager should 
be concerned about conflict with the contract administrator because:
• In many cases, the contract administrator is the only one 
who can change the contract.
• The contract administrator is not interested in the contract.
• The company favors the contract administrator rather than 
the project manager.
• The contract is complex.
10. Your contract mentions that the maximum charge for services from 
the vendor will be US $40 thousand per month. However, the actual 
invoices have been US $90,000 for the past three months. Stopping the 
vendor’s service will impact the project schedule. Under these circum-
stances, the BEST thing to do is to review the:
• Contract change control system.
• Scope change control system.
• Performance reporting system.
• Cost change control system.
11. An advantage of a fixed price contract for the owner is:
• Cost risk is higher.
• Cost risk is lower.
• There is little risk.
• Risk is shared by all parties.
12. The vendor on your project abruptly goes out of business. What should 
you do?
• File for a portion of the company’s assets.
• Hire a new vendor immediately under a time and materials 
contract.
• Terminate the project.
• Terminate the contract.

---

Tendering, Bidding, and Contract Traps 213
13. You are in the process of having work crews dig a trench to lay fiber 
for a high-speed internet connection. All of the work permits have 
been obtained and funding has been approved. There have been several 
weather related delays, but due to perseverance of the entire team, the 
project is on time. It is the customer’s responsibility to provide entrance 
into facilities so the connection into the building can be made. You dis-
cover the customer does not have adequate facilities and will not have 
them in time. What should you do?
• Slow down the work, allowing the team time off but ensur-
ing that you will be completed before the customer finishes 
their portion of the work.
• Continue working according to your contract. Remind the 
customer both verbally and in writing of the customer’s 
responsibilities. Provide the customer with an estimate of 
the impact if they do not meet their responsibilities.
• Continue working with your company’s portion of the work 
according to the contract. As a project manager, your job is 
done once this work is completed.
• Stop all work and request that the customer contact you 
when they have fulfilled their responsibilities.
14. An IT manager says to you that he receives 35 new computers from the 
seller, but they were expecting only 30. In looking at the contract, you 
see that it says “seller to provide thirty (35) computers”.
• What should you do?
• Call the seller and ask for clarification.
• Return the five extra computers.
• Make payment for the 35 computers.
• Issue a change order through the contract manager.
15. From the contractor’s point of view, the contract is considered closed when:
• Scope of work is complete.
• Lessons learned is complete.
• Final payment is made.
• The archives documents are completed.
16. You are working on your research and development project when your 
customer asks you to include a particular component in the project. 
You know this represents new work, and you do not have excess funds 
available. What should you do?
• Delete another lower priority task to make more time and 
funds available.

---

214 
Project Management in the Oil and Gas Industry
• Use funds from the management reserve to cover the cost.
• Follow the contract change control process.
• Ask for more funds from the project sponsor.
17. Your company is very happy to work on this major new project. Noting 
that the contract is not yet signed, your management wants you to go ahead 
and begin to staff the project.
• What should you do as the project manager?
• Wait until the last minute to do so.
• Ask the customer for a letter of intent.
• Only start to collect resumes and not commit any funds.
• Explain to management that this would not be a good idea 
at this point.
18. What is one of the KEY objectives during negotiations?
• Obtain a fair and reasonable price.
• Negotiate a price under the contractor’s estimate.
• Ensure that all project risks are thoroughly delineated.
• Ensure that an effective communication plan is established.
19. Your company is purchasing the services of a consultant. You know 
one of the consulting companies interested in the work. What should 
you do?
• Work hard to get the consulting company selected for the 
project.
• Tell your manager and remove yourself from the selection 
committee.
• Tell the people from the consulting company that you hope 
they get the work.
• Keep the information to yourself.

---

215