Industry publication, December 2001

NYC 9/11 Public Portal Document

B1 LACTIN QBS T R A T E G I E

ongoing project that involve target construction projects. Urban areas with higher hourly pay prices. Graycor is building a 530-Mw, sun- Another powerplant contractor, ARB rates can be expensive if there are labor pie-cycle peaking powerplant in Univer- Inc., worked under a target price con- overruns. And California can be a hard sity Park, DI., for PPL Global, a unit of PPL tract on the new Elk Hills project near place to build. One powerplant develop- Corp., Allentown. The construction Taft, Calif. ment executive says that CMifornia is dif- team for the project includes subcon- After finishing one plant being devel- ficult because its aging construction craft tractor McCarl’s Inc., a mechanical con- oped by a joint venture of Sempra Ener- force can’t provide enough people with ■

tractor owned by PPL, and Sargent Elec- gy Resources and Occidental specialized skills, such as fiber- trie Co., Pittsburgh. A recently com- Energy Ventures, ARB signed optic cable connections and pleted project involving a target price is the 250-Mw peaker at Kennerdell, Pa., up with the same clients . for the construction X ARB . chromium pipe welding. \ “Unions have the labor for Constellation Power Source. The work on another proj- / has enough \ market locked up pret- plans and specs for this project were well- ect, the 570-Mw com- / \ ty tight,” says the exec- developed when construction began. bined-cycle plant in power work in y utive. “California is a Bruce Evenson, Graycor’s manager of Elk Hills. The con- I whole separate issue.” estimating, calls this style of target pric- tractor says it is work­ California and J ARB found itself ing a dead-band system because only the ing on a fast-track V f well-positioned when owner, not the contractor, reaps any gainschedule where its \ won’t tiWef * / the power construc- payment depends on ' or suffers any loss if the job fells within tion market suddenly J an established percentage “band” of the production and safety until the state surged in California. It target price. Owner and contractor may incentives. After establish- is built . done enough power- split any savings or cost overruns beyonding a target price with a well- related work during the slow the dead band according to a predeter- defined scope, ARB and its client years, keeping relationships with mined percentage. Often, Graycor’s share will share any underruns or overruns. “If the constantly-changing cast of power we have a bill or quantity and base con- companies, and had been an active in- of any penalties is limited to the size of its fee. tract on something that has increased or dustrial contractor with the solid corps The difference between a typical EPC decreased, we will adjust on unit rates,” of craft supervisors and craft workers contract and the targeted prices is that says Tim Healy, who is in charge of Indus- now so urgently needed. For now, Healy the contractor doesn’t have to put so trial construction for ARB. says ARB won’t travel out of California to much risk money into its estimates. He says the company’s arrangement work on new power generation projects. ‘There has been a shift in business in on Elk Hills is the result of a good record Graycor also feels it is well-armed with the market in the last six to eight months and relationship. craft workers. It self-performs much of where owners are starting to recognize if Lockwood Green’s Zabilansky says the civil part of its powerplant contracts. you want an EPC contractor to take on a negotiating possible labor overruns is On the EPC side, the partnership pair- lot of risk they will build a lot of money now a routine practice for his company, ings involving engineers and contractors and cost into the estimate to make sure Tn areas where labor is lower cost and are constantly changing. The only dif- they are covered,” says Evenson. “Too more predictable, contractors are still ference, says EMI’S Reister, is that now many major contractors have gone under taking more risk,” he says. “But where the engineers are assuming more risk in because they accepted risks they were labor cost is high, and where it’s hard to hope of earning a bigger part of the not capable of accepting. So our philos- determine how much will be available profits. ophy is that we are a constructor. We on the day you break ground, small Utility Engineering Corp, works in don’t accept performance risk on any errors can be costly. We say, ‘Do you want joint ventures with contractors like H.B. jobs.” Graycor, however, will form joint to take the risk? Ifwe do better [and save Zachry and TIC. It generally takes a lump­ ventures for engineer-construct and EPC money], you get the benefit.’” sum price for its engineering services . shares the overall . risk or profit with its contractor partner. ? So far, says Rugg, his : company has stayed ~mH from exclusive re- ~ ‘ lationships in order to be able to work with contractors in different

SSfein* regions. “Some have better relations with trade crafts” in specific -’■J areas, says Rugg. As a result, he says, designers and contrac­ Ji tors don’t form exclu­ sive alliances: “Every­ body’s dating but no­ body’s getting mar- ried.” □ SERIAL PARTNERS Utility Engineering and TIC built Colorado plant, but alliances aren’t permanent. Sy mchard Korman

24«powerplant Construction

NYC-WTC_000141967