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Standardization of Bid Evaluation in the Upstream Sector of the Nigeria Oil and
Gas Industry
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comparison of competitive bids. However, according multi-objectives strategic decisions in bid appraisal.
to Sayes 1997, though the Nigeria oil and gas Such models can be classified as: a) Weighted
industry have a standard bidding procedures that is average method; b) Sequential elimination method;
globally recognize to brings out the best and worst in and c) Goal programming technique.
bidders, the regulators/operators are the problem. A (a) Weighted average method: This is already in
recent prosecution under the U.S. Foreign Corrupt use for manual computation of bid appraisal in the
Practices Act (Gillies, 2009) is an example of how Nigeria oil and gas industry though the components
corruption had infiltrate contracting procedures in the were not standardized. It involves determining the
sector. There is high level of corruption and relative importance, i.e. the weights, of each of the
bureaucracy which in most cases prevents the most objectives of the project and taking their average in
competent contractors from winning the appropriate respect of each bidder’s submission to determine the
contracts. Therefore, there is need for further research quality of each bid. Using statistical methods, which
to develop a standard evaluation procedure which utilize historical data of the policy makers’
would provide adequate evaluation of bids and ensure preferences, these weights can be derived. They can
that favoritism towards bidders is removed during bid also be derived by directly questioning the decision
evaluation. makers about their preferences. Weighted method
appears to be very popular because of their
Challenges of the Bid Evaluation Processes and simplicity. However, the methods tend to demand too
Probable Solution much from the decision makers as evident in past
Bidding and the bid evaluation Process, which works (Sharif and Adulbhan, 1975; Churchman et al.,
involve invitation to bid and bid submission as well 1956).
as the technical, contractual and financial appraisal of (b) Sequential elimination methods entail the
the submitted bids, is particularly vulnerable to a elimination of poor alternative from the decision
variety of schemes that result in fraud and agreement space. Depending on the method, alternatives are
corruption. Technical appraisal of a bid should be eliminated if they do not meet preset standards or
conducted by project engineer who have knowledge they fail to cross at least one of the threshold levels of
of the technical aspects of the offer and the acceptance. In respect of this, a method of tolerance
constructional methods proposed. Similarly ranges was developed (Aderoba, 1977). This method
contractual and financial appraisals should be account for the effect of multiple objectives on
conducted by contract engineers having appropriate project selection and location via the reduction of the
relevant experience. Whichever way the appraisal is domain decision-making achieved by sequentially
undertaken, the three aspects should be considered considering the multiple objectives in order of their
together as they are closely inter-related. The importance and eliminating those alternatives which
appraisal must therefore be a joint team operation. do not fall within acceptable ranges of the conditional
The evaluators should analyze the risk (i.e. uncertain optima of the objectives. This approach was
event with negative impact on at least one project introduced for modeling bid appraisal in this study.
objective) the company is facing if she is awarding a (c) Goal programming (GP) method: is a special
contract. Furthermore, it is important not to type of technique developed by Charmes and Cooper
underestimate the size of a challenge as some of the (1961). This technique uses the simplex method of
biggest risks which organizations face are: systematic finding optimum solution of a single dimensional or
underestimation of the cost and time to carry out any multi-dimensional objective function with a given set
project activities; systematic underestimation of the of constraints, which are expressed, in linear form. In
management resources and, especially, managerial goal programming technique, all management goals,
talent needed to achieve objectives successfully. whether one or many, are incorporated into the
Since risk is inevitable in any projects, risk objective function and only the environmental
assessments should be taking more serious in the conditions, i.e. those outside the management’s
Nigeria oil and gas industries rather than allowing control are treated as constraints. This technique is
any influences in the award of contracts. When this more useful for optimizing the multiple goals of a
team of evaluators is partial and/or the level of firm. Real world decision problems in management
experience of each contributor within the team is not and engineering often involve multiple, potentially
taken into consideration, these constitute a major conflicting performance objectives. Such decision
challenge to the evaluation process. problems can generally be modeled as multiple
objective optimization problems, the solution of
The bid evaluation process is a multi objectives which can be based on trade-off analysis among
decision making scenario wherein several methods objectives. However, the implementation of a trade-
have been developed to solve similar evaluation off analysis is dependent upon the availability of
process for projects (Papandreou and Zohar, 1974; decision maker’s preferences and the ways of
Sharif and Adulbhan, 1975; Baum and Carlson, eliciting such preferences (Hwang and Masud, 1979;
1974). General models not tailored to project Jacquet et al., 1987; Yang and Sen, 1996). An
appraisal can be adapted and used for evaluating the important property of goal programming is its
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Journal of Emerging Trends in Engineering and Applied Sciences (JETEAS) 4(3):412-419 (ISSN: 2141-7016)
414
Journal of Emerging Trends in Engineering and Applied Sciences (JETEAS) 4(3):412-419 (ISSN: 2141-7016)
THE MATHEMATICAL MODELS IN THE under achievement of the goal is not needed so that
GENERAL FORMS only the overachievement ( is considered.
Weighted Method
This method applies the relative importance of each This optimization technique was applied to the fifteen
evaluation criterion to the bid evaluation. The general evaluation criteria to obtain optimum value for each
form of this modeling approach as used in this study of them from the model solution. These are stored
is given in Equations 1 – 3 and then utilized to determine the optimum score of
(1) each of the submitted bids.
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Journal of Emerging Trends in Engineering and Applied Sciences (JETEAS) 4(3):412-419 (ISSN: 2141-7016)
the use of the response of the bidder(s) to the APPLICATION AND EVALUATION OF
company advertisement as contained in the bid(s) SOFTWARE
submission. The development of appropriate The developed software was applied to three case
questionnaire had earlier been undertaken and these studies of live projects at one of the major operators
questions have been completely coded for scoring in in the Nigeria oil and gas industry and evaluated.
the database. The authority level for this section of Case Study I is the Engineering Procurement,
the database is limited to a data entry clerk. Construction, Installation, Commissioning (EPCIC)
for a Gas Flare Elimination Project. Case study II
The Engineer executes the first stage of apportioning involves Engineering Procurement, Construction,
scores to the fifteen parameters of evaluation based Management (EPCM) Major Integrity Project while
on the bidders’ submissions early described by the Case study III involves Usari Engineering
entry clerk. The scoring is done by the different Procurement, Construction (EPC) Pressure
evaluators who are specialist in the fifteen evaluation Maintenance. The scope of case I include facilities
criteria areas. The authority level at this stage is an upgrade including power generation and gas
Engineer. compression system along with associated control
systems and utilities. Also the scope of case II
The Senior Engineer reviews the preliminary includes Engineering, Procurement, Construction and
evaluation done by the Engineer. He/She engages repair of 42 inches crude loading line and
Technicians and Engineers to verify the bidder’s replacement of three main crude oil pipelines which
facilities on the field. He then proceeds to review the collectively carry about 350 kbd crude oil production
scores as appropriately. Using the review of from offshore platform to the treating, storage and
preliminary evaluation interface of STUN the senior loading facilities while the scope of case III includes
engineer then provide a review of evaluation of the Engineering, Procurement and Construction for the
various bidders submissions based on his/her installation of a new 8 legged injection platform (F1)
findings. adjacent to the existing Usari production platform.
The invitation to tender (ITT) was sent out for each
Evaluation of the bidders submission is done by the of these projects as at the time each was to be
Project Engineer by activating the Manager interfaces executed. Five (5) contractors were invited to submit
of the software after having login through his/her technical bids for case I while seven were invited
password (see Figure 2). When the Project Engineer each for case II and case III. Manual evaluation of
triggers the appropriate function of STUN, the these bids which was carried out and compared with
software compares the various bids using any or all the evaluation that was done using the developed
of the three standardized methods of weighting, software (STUN) is as presented on Tables 3 - 5.
sequential elimination and goal programming
depending on the Project Manager’s request. The For the three case studies, Tables 3 to 5 shows that
software conducts the comparative analysis using the the results obtained from the existing appraisal (EA)
data/information already entered into the database in done in the past using weighted average method
respect of the bidders’ submissions, preliminary (obtained from the appraisers) are on the high side in
evaluation and review of the preliminary evaluation comparison with the manual evaluation (ME) done
of the various bidders. The result generated from this using the weighted average model modified in this
assessment would form the basis of the study. This shows that the modified model present a
recommendation to the management. stiffer evaluation of the bids through the
consideration of the experience of the evaluators.
Also, the bid scores obtained from the manual
evaluation (ME) and the developed software (STUN),
using the weighted average, sequential elimination
and goal programming methods are in agreement
with one another as it could be observed for the
weighted average method on the Tables. This serves
as a way of validating the developed software.
Furthermore, Tables 3 to 5 reveal that the goal of transparency thereby reducing favoritism of some
programming approach generally returned lower contractors and tailored evaluation.
marks/scores for the assessed bids in comparison
with the weighting average method. Therefore, it CONCLUSION
could be inferred from this that the goal programming A standard evaluation procedure for evaluating bid
method provides a stiffer measure for bids appraisal value was developed for the upstream sector of the
than the weighted average method. Nigeria oil and gas industry in this study. The
existing weighted average method was modified and
However, these Tables show that the sequential sequential elimination and goal programming
elimination method reduced the contractors to three methods were introduced to model the bid evaluation
for the first case while in the second and third cases it problem. Model evaluation using practical case
reduced the contractors company to two. A general studies showed that the modified weighted average
observation that could be drawn from these results is model provides a stiffer evaluation than the existing
that the methods could actually be combined toward model. Nevertheless, the goal programming model
pursuing and achieving unbiased evaluation of bids in provides more stiffer evaluation than the modified
the Nigeria oil and gas industry. Generally, the weighted average model though both appear to
Project Manager has unlimited influence on the exhibit similar trends in respect of the scores obtained
process so that he can manipulates the appraisal by the bidder companies. Also, the sequential
process, but in STUN, the Project Manager has elimination model was found to have eliminated
limited access. He/She can only view the work of some of the bidder companies considered
other users, but cannot change their entries. incompetent in certain areas required for adequate
execution of the contract. However, after a careful
In addition, when compared with the time it took to study of the evaluation score data, the eliminated
complete the manual evaluation of the case studies companies happened to have obtained low scores in
the software developed (STUN) was able to reduce the other evaluation using the modified weighted
the total duration of the bid evaluation process by an average and goal programming models. Hence the
average of four weeks. This is due to the fact that the methods could be combined for effective evaluation
period required for manual organization, of bids in the Nigeria oil and gas industry. Interactive
interpretation and evaluation of bid submissions had and user friendly software developed using the
been eliminated by the use of the software. Also, the CSharp programming environment was used to
approach applied to develop the accessibility implement the models and the evaluation procedure.
structure of the software had facilitates improvement The software which runs on Microsoft Windows
operating system was hierarchically encrypted to
418
Journal of Emerging Trends in Engineering and Applied Sciences (JETEAS) 4(3):412-419 (ISSN: 2141-7016)
prevent the integrity of the evaluation procedure so Lee, S. M. (1972). Goal programming for decision
that favoritism in bid evaluation is highly reduced. analysis. Auerback Publishers, Inc. p 89.
The software developed to facilitate the bid
evaluation process is only applicable for use in the Odofin, D. (1979). The impact of multinational oil
upstream sector of the oil and gas industry corporation on Nigeria’s economic: theoretical and
empirical explorations. PhD thesis, the American
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