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Oil and Gas Companies' business objective is to generate revenue through production operations. Capital projects are prepared and generated to support that business objective. Capital Projects shall be executed on time and on budget to secure the project's economics. Procurement cost is a crucial factor, accounting for 35% of the Capital Expenditure (CAPEX) project cost. The Company procures 75% of that cost as a Long Lead Item (LLI).

The company cost estimate in procurement for LLI is described. Two different methods of escalated Historical Data and Market Assessment (MA) are described, and their key factors are identified.

Cost estimate performance is benchmarked against Industry Practices of Independent Project Analysis (IPA) research results, the International Guideline of the Association for the Advancement of Cost Engineering (AACE) and Guild of Project Control (GPC), and Company Business performance at the bid or tender phase.

The cost estimate performance of Engineering Estimate (EE) versus Approved Contract Value (ACV) in contract sourcing and Cost Optimization index at different procurement stages are presented in a graph. Then, the total estimated cost savings is measured. Clarified Market Assessments have resulted in better cost estimate performance, which is 3% lower than unclarified quotes. The Company set the Engineering Estimate on average at 9% lower, and the Approved Contract Value is 15% lower than the Market Assessment. Company cost accuracy performance is 6,1% (= EE/ ACV) or 14.5% (= Quote/ ACV) with no failed tender performance during the procurement process.

A cost accuracy performance of 6.1% at the tender phase is well within Company, Industry Practice, and International Guidelines. This strongly supports the Company's business performance in the current oil and gas industry environment.