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Commissioning new coating plant. What happens to the final 10% payment? Chris Gummer of Ipurtech.com takes a detailed look at commissioning a new coating plant.

Over the fast few years I have had first hand knowledge or been made aware of contracts which have not been completed satisfactorily due to poor commissioning or poor preparation to commission. Some of the issues have arisen because the lead contractor or "turnkey" supplier had not asked all the questions he should have. This article is an attempt to promote better understanding and avoid confrontation.

In the powder coating industry very few installations are in fact commissioned properly. By properly I mean generally in line with the list, at the end of this article.

In theory, correct commissioning will be part of a "turnkey" installation. "Turnkey" is a legally binding understanding that the supplier has done his utmost to find out from the client exactly what they are aiming for. This of course includes the simple requirements such as rate of output of processed parts and test requirements of finished items.

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Is it reasonable for the supplier to find out about the maximum temperature the component should withstand? Is it the turnkey suppliers' function to draw the client's attention to the hardness of the water or the toxicity of the proposed chemical pretreatment? If issues arise about any of these points the letter of the "turnkey law" could find the supplier in breach of his duty to the client. When the final payment is due these things tend to come to the fore!

In a turnkey business transaction, different entities may be responsible for setting up a plant or a part of it. A complex project involving, say, a chemical plant or a powder coating line demands expertise which is not available within the customer's organisation. The customer may organize the overall project with a "turnkey firm". This firm is likely to be one of the equipment suppliers, and the client receives the project on its completion from this lead supplier and can then start to operate it. The 'agents' of the customer are: this principal engineering firm, service subcontractors (e.g. electrical contractor) and other minor suppliers. The principal contract, however, is the one that binds the customer and principal engineering firm. The buck stops there.

Outside the metal finishing industry, where many millions of pounds may be spent on an installation, companies employ an engineering consultancy group to take on the project from design to completion They have hundreds of staff and in-house experts on every aspect of the job. They insure themselves, (for many millions of pounds) against getting it wrong. They control their installation companies and pin them down to quality and delivery times. This "turnkey" approach can easily represent 30% of the total contract price.

In the UK powder coating world we expect a "turnkey" job to be free of charge? We don't want to pay for a squad of commissioning engineers, weekly progress meetings with minutes, drawing reviews and especially extra cost notifications. Has a quotation included a premium for "turnkey" alongside the price of the oven?

The result is that the number of companies left who offer a "turnkey" package is now less than six. Some of these being one or two man operations who have reformed from the ashes of very damaging "turnkey" arguments.

What does each party expect from turnkey commissioning?

The simple answer is each party should expect only that which is agreed beforehand in the contract documents. To be pedantic, each party will sign each meaningful clause; and there may be twenty clauses. Unless separately agreed there should be no new target or requirement other than that enshrined in the contract. The client cannot expect the supplier to be clairvoyant. Easily said but much harder to do, as no small company has the resources to offer a "turnkey" package anyway. If they do it will end in an unpaid bill. This is why most quotes are based on not receiving the final payment.

I'm no lawyer, as you've already spotted, but I realise that more and more often, companies are leaning on the legal profession to wave a stick at suppliers. These suppliers rarely keep records of their responses to the client, visit dates, actions, minutes of discussions and certainly not commissioning data. They rely on hearsay and unsubstantiated, non-documented remedial actions to any problems. Waste of time!

The client should expect the following at the outset of the contract:

1. The supplier to have sufficient knowledge and experience of the process they are offering.

2. That the supplier has the experience to ask all relevant questions of the customer to make the process viable. It should be assumed that the client is not an expert

3. The supplier will physically check that what the client says is correct and not simply accept the claims. The onus is on the supplier. These points to be confirmed in writing. (e.g. Is there enough, power/gas as is it at the right pressure. Does the client have discharge consents etc.)

4. The supplier and client will itemise and agree all design criteria. Any "standard" design compromises made, for whatever reason, will be pre-agreed by both parties and signed off. The client, in particular, should be made aware of the consequences of these compromises in writing. The supplier should be aware that if he agrees to something that jeopardises the efficient running of the plant he may be culpable in law.

5. A full set of dimensional design drawings which will be agreed and recorded as "THE DESIGN"

6. A complete commissioning schedule with targets and agreed commissioning forms to be completed by the commissioning team. The names of the commissioning team to be agreed at this point to avoid any other person not involved in planning being involved in commissioning. This may be up to twenty pages,

7. A full quotation specifying the plant construction in sufficient detail. This to include all sizes of motors, heaters and pumps. All materials used in construction and a list of spares which are recommended. The client may need to take outside advice at this stage to determine if he has sufficient detail or not.

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Turnkey commissioning requirements.

Some points to ponder:

* Large-scale plant integration of multiple vendors can be a fertile ground for misunderstandings about who is commissioning what and who is responsible for interfacing between packages.

* It is a disciplined activity involving careful testing, calibrating and proving of all systems, software and networks within the project boundary.

* There should be a written commissioning pian that covers the entire project and this plan is normally approved before an order is placed.

* Commissioning teams should be comprised of specialist engineers, vendors, electrical instrumentation technicians, electricians, client engineers, maintenance personnel and, lastly but no less important, the production personnel.

* A full set of drawings, complete with the latest changes, is required for commissioning. This set must be available for multiple photocopying.

Specifically for powder coating or paint installations. (non-exhaustive main points)

Other than the standard project commissioning routes for all process control points of motors, pumps, relays etc (Applying to all installations) a few extras for paint plant related issues are:

1. Does the time to reach correct air temperature agree with commissioning agreement? (Ovens and tanks) Record these times.

2. Does the hourly gas use for an empty oven correspond with the commissioning agreement?

3. Does the product, (agreed as the standard component/part) achieve its target temperature at a time, air temperature and track speed stated in the commissioning agreement?

4. Is the standard product, (agreed prior to contract) produced in a cleaned and dry form at the paint application booth?

5. Is the part processed within the upper and lower temperature limits agreed at the commissioning agreement?

6. Is the level of chernical migration from the pretreatment and between stages as per the commissioning agreement?

7. Does the output still conform to the quality standard when production runs at half speed? As agreed in the commissioning agreement.

8. Do the standard product jigs carry the standard item successfully around the process without issue whilst achieving a conformant coating?

All successes or failures to be recorded in the commissioning manual and the remedies, if required, listed with dated actions. This has to be signed by both parties.

The commissioning agreement will contain a section for minor snagging to be noted. Once these are agreed and signed as agreed by both parties then an action plan is noted and dated.

Obviously this is not exhaustive and each plant will have different criteria. It is essential however when parties are giving and receiving many [pounds sterling]100,000's that there is a detailed "prenuptial agreement." When a contract is awarded it is often to the company you get on with. The good guys! As over 80% of contracts end in contention it is fair to both parties that each knows exactly where they stand and the only way of doing that is a lot of work prior to contract.
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Title Annotation:FEATURE
Author:Gummer, Chris
Publication:Finishing
Date:Nov 1, 2011
Words:1489
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