Construction Management Services--brown & Root Inc.

EXHIBIT 10.48


Contract


[LOGO]


C/G The Carbide/Graphite Group, Inc.


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Plant 3 Modernization Project


Engineering, Procurement and Construction
Management Services


St. Marys, Pennsylvania
June 1996


- -------------------------------------------- Process & Manufacturing Industries


[LOGO OF BROWN & ROOT]


[LOGO OF BROWN & ROOT]


Brown & Root Post Office Box 3 Power And Manufacturing Houston, TX 77001-0003


- -------------------------------------------------------------------------------- Y. F. Boutros (713) 676-8727 General Manager FAX: (713) 676-3239 Engineering


June 5, 1996


Mr. Arthur Martin Project Manager The Carbide/Graphite Group, Inc. 800 Theresia Street St. Marys, Pennsylvania 15857


Subject: Contract to Provide Engineering, Procurement, and Construction
Management Services for the Plant 3 Modernization Project


Dear Mr. Martin


Brown & Root is pleased to submit this contract document to provide engineering, procurement, and construction management services for the subject project per a verbal agreement reached between Brown & Root and Mr. Mike Supon per a telephone conversation on June 4, 1996.


The contract document includes a project description, scope of work, plan of work, and a commercial offering outlining an Incentive Program to achieve the project completion within the overall project budget and schedule.


Please return an original signed copy of the Terms and Conditions attached to this document to authorize Brown & Root to proceed with the work.


Very truly yours,


/s/ Y. F. Boutros


for Y. F. Boutros DNA


YFB /kls:2801-004


A Halliburton Company


THE CARBIDE/GRAPHITE GROUP, INC.


PLANT 3 MODERNIZATION PROJECT


ST. MARYS, PENNSYLVANIA


CONTRACT TO PROVIDE

ENGINEERING, PROCUREMENT, AND CONSTRUCTION MANAGEMENT
SERVICES


BROWN & ROOT, INC.
4100 Clinton Drive
Houston, Texas 77020-6299


[LOGO OF BROWN & ROOT]


2801-006


TABLE OF CONTENTS


1.0 PROJECT DESCRIPTION


2.0 SCOPE OF WORK BY BROWN & ROOT


3.0 PLAN OF WORK


4.0 SCOPE OF SERVICES BY THE CARBIDE/GRAPHITE GROUP, INC.


5.0 COMMERCIAL OFFERING


6.0 TERMS AND CONDITIONS


ATTACHMENTS


. Engineering, Procurement, and Construction Management Organization


. Division of Responsibilities - Construction Management


. EPC Schedule


. Terms and Conditions


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1.0 PROJECT DESCRIPTION


The C/G Group, Inc.'s (C/G's) Plant 3 Modernization Project at St. Marys, Pennsylvania, includes the following:


. 48-inch press system will have a complete redesign of coke screening and
sizing, automatic batch weighing and carbon paste mixing, cooling, and
pollution controls systems for this project. The equipment arrangement for
an alternate case which uses a continuous bucket conveyor to convey coke
fractions to the mixer system will be used as outlined in Brown & Root's
study titled Conceptual Design and Capital Cost Estimate dated April 19,
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1996.


. The equipment arrangement will be generally in accordance to Drawing Nos.
350-085-01A, Revision B, and 350-085-02A, Revision A, indicating the plan
and sections through the Mill Mix Building.


. 25-inch press system - The existing milling and screening system for the 48-
inch press will be used for the 25-inch press once a new mill mix facility
for the 48-inch press is commissioned.


. New Plant air compressors which will have new air dryers, air receivers, and
other miscellaneous components required to replace the plant's compressed
air system which was sold to SGL.


2.0 SCOPE OF WORK BY BROWN & ROOT


Brown & Root will provide the following Engineering, Procurement, and Construction Management (EPCM) services for C/G's Plant 3 Modernization Project at St. Marys, Pennsylvania.


2.1 Engineering Services
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During this phase of the contract to provide EPCM services, the following discipline engineering deliverables will be prepared.


. Process


- Block Flow Diagrams


- Process Flow Diagrams with Material Balances


- Engineering Flow Diagrams


- Utility Flow Diagrams


- Major Equipment List


- Description of Facilities


- Process Descriptions


. Mechanical Layout/Piping Design


- Plot Plan


- General Arrangement Drawings with Plan and Sections


- Piping Layout Drawings and Sections


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. Mechanical


- Mechanical Equipment Specifications with Data Sheets


- Piping Specification


- Insulation Specification


- Coating Specification


. Electrical


- Electrical Equipment Specifications


- Electrical Load List


- Cable, Conduit, and Termination Schedule


- Electrical Installation, Legends, and Symbols Drawings


- Motor Elementary Diagrams


- One Line Diagram for New Additions


- One Line Diagrams for New MCCs and Switchgears


- Underground Duct Bank Drawing


- Cable Tray Plan Drawings for Mill Building


- Grounding and Lighting Plan Drawings


- Power and Instrument Conduit Plan Drawings


- Short Circuit, Motor Starting, and Load Flow Studies


- Fire Protection System Plan Drawings


. Instrumentation and Control


- PLC Control System Specifications


- Instrument Specifications/Data Sheets


- Instrument Index


- Instrument Location Plans


- Instruments Installation Details


- Loop Diagrams, Interconnect Diagrams, and Wire Lists


- Control Room Layout Plan


- Logic Diagrams


. Architecture


- Architectural Specifications

_ Architectural Drawings


. Civil


- Civil Specifications


- Civil Drawings


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. Concrete


- Concrete and Reinforcing Steel Specifications


- Foundation Drawings


. Structural


- Structural Specifications


- Structural Drawings


. HVAC/Plumbing


- Heating, Ventilating, and Air Systems Specifications


- Ventilating Equipment Specification


- HVAC Drawings


. Plumbing


- Plumbing System Specifications


- Plumbing Drawings


. Environmental


- Ductwork Specification


- Baghouse Specification


- Induced Draft Fan Specification


- Fume Incinerator Specification


- Ductwork Process Flow Diagram


. Fire Protection


- Fire Protection Design Criteria


- Fire Pumps Specification


- Fire Detection and Alarm System Specification


- FM2OO Systems Specification for Control Room Fire Protection


- Dry Pipe Sprinkler and Standpipe System Specification


- Underground Firewater Piping Specification


2.2 Procurement Services
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Procurement activity will be based in Houston. Procurement activity will be based on the equipment list and specifications prepared by Brown & Root engineers. Procurement personnel will be assigned to the project staff to inquire, evaluate, and place purchase orders after review and approval by the originating engineer and C/G's designee. Procurement personnel will also expedite the delivery of equipment/supplies in accordance with the project schedule.


Procurement personnel will also issue subcontract purchase orders and provide the required expediting services.


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2.3 Construction Management Services
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Brown & Root proposes to provide an experienced team of construction management professionals to provide complete project construction management services for C/G's modernization project at the St. Marys' facility.


To assist C/G's project personnel as to how we envision the responsibilities of all parties that will be involved in this project, we are providing a Division of Responsibilities matrix which is attached.


This matrix is the most appropriate method of establishing a baseline to clearly define the services that Brown & Root proposes to provide C/G for the construction management requirements for this project.


Our estimate is based on a reasonable contracting approach using a lump sum approach for major discipline packages. Our plan is also based on using our Construction Manager and Technical Services Manager for constructability reviews and coordination with engineering needs and activities. Our experience shows that the familiarity of the engineer's activities and personnel by these two key people will greatly enhance communications during the life of the project.


We have marked-up the matrix with our understanding of C/G's needs and are prepared to meet and discuss this in more detail.


3.0 PLAN OF WORK


For this project, Brown & Root will assume the role of EPCM contractor reporting to C/G's Project Manager who will be available full time with authority to make decisions and approve all the work. The engineering and procurement work other than construction management will be performed in our Houston offices where the project team will be assembled. Refer to the attached organization chart indicating the project team.


Immediately upon C/G's approval to proceed with the project, Brown & Root will commence planning the sequential activities to complete engineering, procurement, construction, start-up, and commissioning of the proposed process facilities within a 20-month schedule.


Brown & Root recommends that the following subcontracts be issued immediately to support engineering and the overall schedule:


. Jenike-Johanson's Report (physical properties testing for coke fractions)


. Geotechnical survey


. Site survey


Engineering and procurement items requiring long lead-time will have priority to provide momentum to the engineering and procurement schedule. The 12-month delivery items, such as Eirich's mixer system and automatic batch weighing system, will be placed on order within the first month.


Brown & Root and C/G personnel will meet with Eirich Machines Company to finalize the requisition for the scope of supply and reconfirm the pricing of the mixer system. Evaluation


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of Eirich's capability to engineer and supply an automatic batch weighing system will also be important before issuing the purchase order to Eirich.


Purchase orders will be issued for the mixer system and automatic batch weight system within the first month since early receipt of supplier's process and engineering data and drawings will be essential in achieving the overall schedule.


Next, the flour mill and the electrical substation equipment items will be placed on order since their delivery schedule will be seven to eight months. Other equipment will be placed on order and expedited in accordance with the attached EPC schedule.


For construction of this facility and through obtaining competitive bids, the following three major subcontractors specialized in performing the work efficiently, on schedule, and under the budget will be selected:


. Civil/Architectural (C/A)


. Mechanical/Piping/Insulation/Structural (M/S)


. Electrical/Instrumentation (E/I)


Also, specialized construction work in engineering, equipment/material supply, and construction capability will be awarded to selected subcontractors through bids for turnkey installation basis for the following:


. Fire protection


. Elevator


. Electrical substation and switchgear building


. Impedance heating


The above subcontract activities are depicted on the EPC schedule included in our Conceptual Design and Capital Cost Estimate Study dated April 19, 1996.


4.0 SCOPE OF SERVICES BY THE CARBIDE/GRAPHITE GROUP, INC.


C/G will assign a full time Project Manager who will review and approve our work and will be authorized to make timely decisions for C/G. We will need ready access to this individual at all times during the working hours.


Brown & Root will prepare technical documents necessary to perform site survey and geotechnical investigation. Purchase orders for these services will be issued to surveying and geotechnical engineering firms in order to obtain these reports within the first month.


C/G will obtain necessary environmental and construction permits for this project. Brown & Root understands C/G's environmental department is handling permitting for the project. We would like to point out that Brown & Root has an Environmental Engineering staff that could provide assistance to the C/G. The cost of these services are not included in this proposal.


C/G will prepare operation instructions and training manuals which are not included in our estimate.


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C/G will provide timely access to all current facilities and provide the necessary data on existing facilities.


5.0 COMMERCIAL OFFERING


Brown & Root offers to provide engineering, procurement, and construction management services for performance of the scope of work set forth within this proposal on the basis described in this Section.


Brown & Root will provide all supervision, labor, equipment, materials, tools, and all other services necessary for complete engineering, procurement, and construction management services for C/G's Plant 3 Modernization Project at St. Marys, Pennsylvania, as more fully described in Brown & Root's Conceptual Design and Capital Cost Estimate Report dated April 19, 1996 (the Report).
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5.1 Project Budget
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The budget estimate as set forth in the Report for engineering, procurement, and construction management (EPCM) services is as follows:


Engineering and Procurement $3,000,000


Construction Management $ 606,000


Construction Management Fee $ 200,000
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Total Budget Estimate $3,806,000
(original from Basic Design Study)


The estimated TIC Project Budget as set forth in the Report, including the EPCM estimate above, is $26,400,000.


Since this estimated total installed cost (TIC) for the project budget set forth in Report does not include any Contractor's contingency, this budget amount henceforth will be termed "Total Project Challenge Budget."


It is proposed that the following two budgets be established to provide incentives to control total project costs:


. Target Budget for EPCM Services - $3,500,000 + $73,278


. Total Project Challenge Budget - $26,400,000 + $439,528


5.2 Incentive Program
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Brown & Root proposes an Incentive Program in conjunction with the initial mark- up of 85% applied to direct engineering, procurement, and home office service manhours and mark-up of 55% applied to the field construction management personnel. The object of the Incentive Program is to encourage Brown & Root to perform quality engineering, procurement, and construction management work on time and within budget, and, at the same time, for the project outcome to be successful in the estimation of C/G. The available incentive awards


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shall be in accordance with the four independent provisions below and shall be determined within 30 days following mechanical completion.


The Incentive Program will consist of four components: quality, EPCM budget control, Total Project Challenge Budget control, and project completion schedule. Each of these components will be worth the amount shown in the following paragraphs.


5.2.1 Quality


The incentive award amount for Quality will be $50,000.


This portion of the Incentive Program is entirely subjective and depends solely on C/G's evaluation of the quality of Brown & Root's efforts, including work product quality, responsiveness, and effectiveness on the project.


5.2.2 EPCM Budget Control


The incentive award amount for budget control will be $100,000.


The full incentive award for this portion of the Incentive Program will be earned in the event Brown & Root's total charges for the EPCM services at the conclusion of the project are at or below $3,500,000 plus approved budget variances. Maximum limit on total charges for B&R's EPCM services will be at $3,806,000, plus approved budget variances.


If the EPCM services at the conclusion of the project fall between the $3,500,000 (Target EPCM budget) and $3,806,000 plus approved budget variances, the incentive amount will be prorated.


5.2.3 Total Project Challenge Budget


At the conclusion of the project, if the total project costs fall below the $26,400,000 Total Project Challenge Budget plus approved budget variances, then these savings will be shared 70% to C/G and 30% to Brown & Root.


5.2.4 Project Completion Schedule


The incentive award amount for project completion schedule will be $150,000.


The full incentive for this component will be earned in the event the start-up of the new facility for the 48-inch press occurs on or before January 1, 1998 or as rescheduled due to approved schedule variances.


This incentive amount will be prorated to the start-up date of February 15, 1998 or as rescheduled due to approved schedule variances.


6.0 TERMS AND CONDITIONS


Attached is the Terms and Conditions under which which Brown & Root offers to perform EPCM services.


2801-006 (Revised 06/05/96) [LOGO OF BROWN & ROOT] Page 8 of 8


TERMS AND CONDITIONS
FOR
ENGINEERING, PROCUREMENT AND CONSTRUCTION MANAGEMENT SERVICES
Engineering, Procurement and Construction Management services for The Carbide/Graphite Group, Inc. ("Owner") will be performed by Brown & Root, Inc., ("B&R"), within the requirements of the Scope of Work defined in EPCM Contractor's Proposal dated May 10, 1996, on and subject to the following terms and conditions:


1. COMPENSATION
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1.1 Owner will pay B&R for engineering and procurement services an amount
equal to (i) the product of "Direct Salary Cost" (as defined below)
multiplied by a multiplier of 1.85 (to cover "Direct Salary Cost", payroll
burden allowance, general office overhead and profit), plus (ii) "All
Other Expenses" (as defined below).


1.2 Owner will pay B&R for construction management services an amount equal to
(i) the product of "Direct Salary Cost" (as defined below) multiplied by a
multiplier of 1.55 (to cover B&R's "Direct Salary Cost", and payroll
burden allowance), plus (ii) "All Other Expenses" (as defined below).


In addition Owner will pay B&R a Fee of $200,000 for provision of
Construction Management Services, payable in equal monthly installments
during construction of project.


Owner and B&R agree to participate in an Incentive Program as described in
our Commercial Offering, Section 5.0 of the Proposal Document.


a) DIRECT SALARY COST
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"Direct Salary Cost" shall mean the direct salary and wages, including premium pay, actually earned by all personnel for time actually engaged in the services. Personnel whose time is chargeable to the services include engineers, designers, drafters, technicians, secretaries, clerks, purchasing and expediting personnel, estimators, construction managers and construction management site personnel and all other necessary employees, who are employed by B&R or by any other entities affiliated with B&R, for time directly engaged in the services. Payroll burden includes social


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