Understanding the EPC Contract: Project Schedule Levels
Project schedule levels are part of the art and science of developing the project plan.
Project Schedule Risk
Assessing the risk in a project schedule is driven by the amount of detail available when developing the schedule along with the participation of all the stakeholders. At the point of project finance, a Level 2 schedule should be available, but a Level 3 is preferred as it represents a better project definition. This level of detail typically breaks out enough scope to identify and evaluate the risks that exist between logically tied schedule tasks. It also should contain enough logic such that a schedule software (such as Primavera) can run a PERT analysis to appropriately calculate project float along with other various standard schedule metrics that can provide a guideline to evaluate how aggressive the project schedule is.
Five Levels of Project Schedules
Management/Milestone Level Schedule (Level 1)
A level 1 schedule is typically a one-page bar-chart and milestone list that outlines, in broad form, the project’s objectives, significant milestones, and phase relationships. It is easy to digest and serves as a quick way to view and assess critical milestones. This schedule also often includes key contractual milestones and requirements as it is included in the EPC contract.
Master Schedule (Level 2)
Level 2 schedules contain more detailed activities for each of the summary phases previously identified in the Level 1 schedule. This often includes a breakout of the various disciplines responsible for the activities in each phase, the critical engineering and procurement activities, the major elements of construction by work area, and general commissioning and start-up requirements. Generally, this is the first level of scheduled detail where logical links or task relationships may be shown.
Project Level Schedule (Level 3)
Level 3 schedules contain all project scope and are derived from key project execution stakeholder information (equipment suppliers, contractors, construction experts, etc.). This schedule is often referred to as a project schedule and oftentimes will go through a baseline approval process as it will become the foundation for which the project will be measured. The baseline schedule will typically have requirements to meet the Level 1 and Level 2 contractual requirements. While we like to see a version of this is the level of detail prior to any project financing, a hybrid of a level 2/3 is often what is available. A fully detailed Level 3 will only exist if engineering was close to 100% complete before contract execution. A more common industry standard is to require a level 3 baseline to be established 60 or 90 days after EPC contract execution.
Control Level Schedule (Level 4)
Level 4 schedules are developed and maintained by a project execution team and are commonly prepared by project leads and construction subcontractors to monitor and control day-to-day work activities and serve as the foundation for measuring project progress and performance.
Detail Level Schedule (Level 5)
Level 5 schedules are typically used for managing shutdowns, outages, and planned maintenance activities. Some of the specialty schedules (mini-schedules) for specific work tasks may also fall into this category. We see these types of schedules being utilized for highly specialized work tasks or where several contractors and trades need to coordinate work in a specific area.
Why it Matters for EPC Contracts
The better defined a project is during project development, the more flexible you can likely be for project execution and contracting strategy. Selecting an EPC, and defining the commercial arrangement is a matter of defining and assessing risk. Think about it this way: If you live on the top of a hill in a dry part of Texas, you likely will not purchase flood insurance.
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