Technical Manual for Drilling Works for Technical Support Plan for the Drillers in DDCA (2013)

Guideline on Hiring of Drilling Equipment

7. ESTABLISHMENT OF THE HIRING BUSINESS UNIT

7.1 JOB DESCRIPTION

DDCA will establish the Hiring Business Unit under the Business Support Department in order to

manage daily operation of the hiring service. The Unit will be responsible for tasks mentioned

below;

− To administer hiring process including appraisal and selection of the qualified hirers,

contract management, and customer care.

− To keep and update information of particulars of clients.

− To coordinate with other departments in the organization for arrangement of the technical

instructors and other required staff, maintenance of the hired equipment, and procurement of

consumables and other materials for the drilling equipment as may be necessary.

− To prepare the budget for operation of the hiring service to be included in annual budget

proposals of DDCA.

− To set/review and propose the tariff for approval by the management of DDCA.

− To prepare monthly reports on operational and financial status of the service provision.

− To coordinate with Marketing and Public Relations (PR) Section in preparation of PR

materials and communication with potential clients for business promotion.

Figure 29 shows an organigram of DDCA which includes structure of the Business Support

Department with Hiring Business Unit.

Figure 29 Organizational Structure of DDCA with the Hiring Business Unit

The Unit will involve the legal officer(s) of DDCA in contract management for the hiring service

and seek advice from the Legal Unit of MoW when necessary. The Unit will also work closely

Guideline on Hiring of Drilling Equipment

with the Procurement Section of DDCA to purchase consumables and spare parts of drilling

equipment in time for its hiring.

In the long-term, DDCA will consider if it should transform the Unit to the Hirng Business

Department. Establishment of the Hiring Business Department needs approval from Presient’s

Office-Public Service Management (PO-PSM). DDCA will follow necessary procedures for

application for establishment of the new department through MoW when it resolves to do so.

7.2 PERSONNEL ARRANGEMENT PLAN

A full-time administration officer and an assistant staff are required in the Unit to be supervised by

the manager of the Business Support Department who will serve concurrently as the head of the

Unit. DDCA is planning to reallocate existing staff to fulfill the staffing plan for the Hiring

Business Unit instead of recruiting new personnel. The staffing plan will be reviewed from time

to time according to volume of works to be involved in the Unit staff.

8. PERFORMANCE MANAGEMENT

8.1 KEY PERFORMANCE INDICATORS

Applying the key performance indicators listed below, the Hiring Business Unit will monitor

process, output and outcomes of the equipment hiring service.

Table 17 Key Performance Indicators of the Equipment Hiring Service

Means

Frequency of

Purpose

Indicators

Verification

Monitoring

1-1.Drilling equipmemt is hired in

1-1.Records for

1-1.Daily

accordance with the procedures

hiring

1-2.Monthly

established.

1-2.Maintenance

1-2.All drilling equipment for hiring is

records of

1. Process

maintained in accordance with the

drilling

1-3.Monthly

Management

maintenance plan.

eqiupment for

1-3.Internal management accounting

hiring

document for hiring is reported

1-3.Reports on hiring

periodically to the management.

service

2-1. The number of operation days of a

2-1. Records for

2-1. Monthly

drilling rig for hiring reaches to 141

hiring

days per annum on average, the

break even line of the hiring

2-2. Monthly

business⁸, by 2016.

2-2. Records for

2-2. More than 80% of the registered

hiring

water well drilling companies utilize

2-3. Each

Managemene

some forms of the technical support

hiring

t of Output of

services by 2016.

2-3. Feedback forms

conctract,

the Service

2-3. More than 80% of private drilling

from clients

Monthly

companies, which used the technical

support services provided by DDCA,

consider that the services they

received helped their business

activities.

3-1. The number of private companies

3-1. Records for

3-1. Annually

3. Management

which use the technical support

hiring, Water

of Outcomes

services of DDCA and participate in

Sector MIS

drilling works in WSDP increases by

⁸ See Section 11.3 for an estimation of the break even line of the hiring business.

Guideline on Hiring of Drilling Equipment

Means

of Frequency of

Purpose

Indicators

Verification

Monitoring

122% by 2018, compared to the

status before official launch of the

3-2. Annually

service provision.

3-2. MoW Annual

3-2. The number of wells planned in

Water Sector

WSDP is constructed by 2015.

Status Report,

Water Sector

MIS

8.2 PERFORMANCE MONITORING REPORT

The Hiring Business Unit will prepare the following reports to be submitted to the management

team of DDCA and MAB;

− Monthly report to be submitted not later than 10 days after the end of the month

− Annual report to be submitted not later than 14 days after the end of the year

The above reporting procedures notwithstanding, DDCA shall report promptly to the Ministry on

any major event likely to affect efficient and effective utilization of the equipment.

9. OUTLINE OF THE BUSINESS FLOW

The hiring service will be operated in a Plan-Do-Check-Action (PDCA) cycle as described in

Figure 30. It starts from preparation of annual operation plan and budget of the hiring service

which is to be incorporated into the annual budget of DDCA. Rental fees as well as placement of

drilling rigs and other equipment for hiring at DDCA headquarters and/or its zonal office(s) should

be decided in the course of formulation of the annual operation plan and budget. The

implementation stage involves various administrative procedures in accordance with the process of

equipment hiring described in detail in Figure 31. Procedures instituted should be followed and

recorded properly to ensure accountability and transparency. The performance of the hiring

service will be monitoring from time to time to check;

− if there are any gaps between what has been planned and implemented, and

− if the expected output and outcomes are realized.

Actions should be taken to solve problems and improve the process management based on findings

from the monitoring. These improved solutions should also be reflected in the planning stage of

the subsequent cycle.

Guideline on Hiring of Drilling Equipment

10. BUSINESS PROMOTION

DDCA will promote the launch of technical support services including the equipment hiring to

potential clients. While the priority target is those which are classified into Group A and Group B

according to the results of the baseline survey, identification of new potential clients needs to be

conducted simultaneously. As mentioned in Section 3.3.3, there are 10 companies which were not

interviewed in the baseline survey although it was confirmed that these were also operating drilling

works. These companies should also be included in the target of the business promotion.

Means of the business promotion to be employed include mailing brochures explaining the service

contents to identified companies, introducing it to participants in regular and/or extraordinary

meetings of Drilling Association of Tanzania (DAT) and CRB, and publicize on newsletters to be

issued by CRB for its members.

11. FINANCE

11.1 BUDGET PREPARATION

The Hiring Business Unit is responsible to prepare budget for operation of the hiring service to be

incorporated into the annual budget of DDCA. For the budget prepration, reference should be

made to accounting manuals of DDCA.

(1) Expenditure

Table 18 in the next page shows an estimated annual expenditure of the hiring service for the case

that depreciation cost of the hiring equipment is considered. Approximately Tsh 912 million will

be required for annual operation of the service. Cost items considered in the estimation can be

categorized into the direct cost and indirect cost. The direct cost consists of 1) maintenance cost

of equipment, 2) fuel and lubricants, 3) consumables for drilling rigs, 4) allowance for staff to be

attached to the drilling rigs, and 5) depreciation of the equipment. The indirect cost, i.e. selling,

general and administrative expenses, include 1) allowance for the management team for monitoring,

2) allowance for mechanics for repair works of the equipment on site, 3) advertisement cost, 4)

stationery, and 5) other expenses such as staff salaries, utilities, office rent, and cost for staff

training. For comparison purpose, the estimated annual expenditure without depreciation cost is

indicated in Table 19. Basis of the estimation is explained below;

1) Maintenance Cost of Equipment

3.5% of the equipment price is considered as the annual maintenance cost for drilling rigs, air

compressors, mud pumps, and pumping test units. The percentage is based on historic costs for

maintenance of existing drilling rigs by DDCA.

As mentioned in Section 4.2, rig accessories, casing tools, and direct mud circulation drilling

tools and accessories contain i) items which are permanently provided with the drilling rigs and

ii) consumables which use is optional for the hirer. Maintenance costs are considered for those

which are equipped with drilling rigs permanently.

3.5% of the price of each item is applied as

the maintenance cost for these accessories and tools. Remaining parts are considered as

consumables. Also, all items in the category of steel working casing are regarded as

consumables, hence no maintenance cost included in the budget.

Guideline on Hiring of Drilling Equipment

2) Fuel and Lubricants

Costs for fuel and lubricants are considered for i) carrier trucks for drilling rigs for those

transportation between DDCA’s yard and client’s site as well as from one drilling site to the other

and ii) vehicles for monitoring visits by the management team.

Fuel costs for operation of the rig plant and other equipment are not included in the budget as

hirers are responsible to put in fuel on the hired equipment as they use.

3) Consumables for Drilling Rigs

Items included as consumables are bits, DTH hammers, stabilizers, casing shoes, steel work

casing, and drill pipes. Hirers can decide if they use their own stocks of these items for drilling

works or they buy necessary tools and accessories from DDCA. The cost of consumables

considered here is, therefore, to have some stocks of these items to be sold to the hirers when

necessary. As there would be some cases that the hirers use these items which they keep or

procure new ones from other suppliers, 70% of the required quantity of consumables for

one-year operation of six drilling rigs is included in the budget.

4) Allowance

One technical instructor and driver for carrier truck for rig plant will be attached to each drilling

rig. Their field allowances are considered as a part of the direct cost of the hiring service.

Number of days considered for one person is a total of operation days and time to be taken for

transportation of a drilling rig.

5) Depreciation of Equipment

The depreciation of the equipment is regarded as a part of the direct cost to operate the hiring

service. The annual depreciation rate of 10% is applied to fixed assests, i.e. drilling rigs, air

compressors, mud pumps and pumping test units, in accordance with the Executive Agencies

Project, Drilling and Dam Construction Agency, Accounting Manual - IFMS (2002). A

straight-line method is applied to calculation of depreciation to write off the cost of these assets

for a 10-year economic life.

6) Selling, General and Administrative Expenses

The allowance for the management team for monitoring visits is calculated with the basis of six

days per quarter per person. It is assumed that two senior staff members will visit the hirers’

drilling sites in a team or separately to oversee services provided by the technical instructors.

The indirect cost also includes the allowance for mechanics who will attend repair works and

services of the hired equipment on site when necessary. It is estimated that the mechanics will

be involved in these field works for 30% of the operation days of six drilling rigs.

Other expenses such as staff salaries, utilities, office rent, and cost for staff training are

calculated as the proportion to the direct cost so that the total of the indirect cost accounts for

approximately 30% of the direct cost. It is difficult to estimate more accurate amount of the

selling, general and administrative expenses at this stage as the current practice of cost

accounting by DDCA does not consider how the indirect cost is distributed to each type of

service the Agency operates. The budgeting method of the indirect cost should be reviewed

based on the actual cost accounting by services as well as departments.

Guideline on Hiring of Drilling Equipment

(2) Revenue

The revenue is estimated as shown in Table 20 based on the proposed rental fee and operation days

of each equipment for hiring. The expected revenue from the hiring service is approximately Tsh

1,545 million.

Table 20 Estimated Annual Sales

Annual Sales/

Annual Total

Item

Q'ty

Unit (Tsh)

Sales (Tsh)

Truck mounted drilling rig

154,933,408

929,600,448

Trailer mounted air compressor

23,207,440

116,037,200

Trailer mounted mud pump

18,255,072

91,275,360

Trailer mounted pumping test unit

55,969,488

279,847,440

Rig accessories

12,075,312

72,451,872

Casing tools

3,772,944

22,637,664

Fishing tools

820,336

4,922,016

Direct mud circulation drilling tools &

accessories

4,822,896

28,937,376

Total

273,856,896

1,545,709,376

11.2 PRICING POLICY

Rental fees of the equipment for hiring is set with considering costs, as listed below, for operation

of the service and a certain percentage of markup. Decpreciation cost will also be recovered from

the rental fee so that DDDCA will put aside a certain proportion of fund for replacement of the

equipment in the future.

− Maintenance costs of the equipment

− Fuel and lubricants

− Consumables

− Allowance

− Advertisement

− Stationary

− Depreciation

− Other administrative expenses

Market prices for hiring of drilling rigs and other construction machinery in Tanzania are aslo

referred in order to check if the proposed rental fees are kept at a reasonable level in comparison

with competitors. Figure 32 shows a formula used for calculation of the rental fees. Table 21

and Table 22 further indicate acquisition costs of the equipment and proportion of the hiring service

cost, respectively. The proportion of the service cost is calculated to obtain the ratio of

management cost, i.e. fuel and lubricants, consumables, and allowance for technical instructors and

drivers, to the unit cost of equipment and that of the selling, general and administrative cost to the

direct cost.

The daily rental fee of each item of the equipment is proposed in Table 23, which cost structure is

shown in Table 24. The prices are set at daily basis and to be charged to for the hiring period

which starts when the equipment is moved out from DDCA’s yard and ends when the same is

retuned to the Agency. The hirer has to pay the rental fee during the hiring period even if the

equipment is not operated on site. This is due to consideration of the opportunity cost of the

equipment as well as personnel cost for technical instructors and drivers.

Guideline on Hiring of Drilling Equipment

The rental fees without inclusion of depreciation of the equipment and those cost structures are also

provided in Table 25 and Table 26 for reference. It is desired that the investment cost for the

equipment is recovered from the rental fees by including the depreciation cost into the price

calculation since DDCA needs to secure own funds for replacement of the equipment for hiring

even though there is no allocation of subventions from MoW.

Taking the following points into account, DDCA will review pricing of the rental fees and set

strategically appropriate prices;

− Willingnes to pay by different types of potential clients for the hiring service

− Level of reasonable profit to sustain the business

− Measures to minimize costs to secure the reasonable profit within the price set in

consideration of the willingness to pay by potential clients

Figure 32 Formula for Pricing of Rental Fee

Table 21 Acquisition Cost of Equipment for Hiring

Item

Unit Cost (US$)

Q'ty

Total (US$)

Note

Truck mounted drilling rig

260,894.00

1,565,364.00

Trailer mounted air compressor

39,081.00

195,405.00

Trailer mounted mud pump

153,700.00

768,500.00

Trailer mounted pumping test unit

94,247.00

471,235.00

excluding items categorized as

Rig accessories

39,558.73

237,352.38

consumables

excluding items categorized as

Casing tools

10,580.65

63,483.90

consumables

Fishing tools

2,538.39

15,230.34

Direct mud circulation drilling

tools & accessories

13,522.34

81,134.04

excluding items categorized as

Total

3,397,704.66

consumables

Table 22 Proportion of Hiring Service Cost

With Depreciation

Without Depreciation

Category for Pricing

Note

Amount (Tsh)

Proportion

Amount (Tsh)

Proportion

Depreciation

381,712,640

41.9%

Maintenance Cost

155,323,200

17.0%

155,323,200

37.2%

Fuel & lubricants,

Management Cost

165,383,217

18.1%

165,383,217

39.6%

consumables, and allowance

Selling, General &

Administrative Expense

209,588,145

23.0%

96,904,540

23.2%

Total

912,007,202

100%

417,610,957

100%

Ratio of Management Cost

to Equipment Cost

3.0%

Ratio of SGA to Direct Cost

29.8%

30.2%

Guideline on Hiring of Drilling Equipment

Table 23 Rental Fee of Drilling Equipment (with Depreciation Cost Considered)

(a)

(b)

(c )

(d)

(e)

(f)

(g)

(h)

(i)

(X)

Rental Fee

Unit Cost of

Risks for

Daily

Economic

Maintena

Managem

Operation

Net

Daily Rental

per

Item

Equipment

Depreciation

Exchange

SGA

Rental Fee

Life

nce Cost

ent Cost

Day/Year

Profit

Fee (USD)

Borehole

(US$)

Rate

(Tsh)

Truck mounted drilling rig

260,894.00

100%

3.5%

3.0%

10%

197

30%

10%

491.54

786,464

4,718,784

Trailer mounted air

compressor

39,081.00

100%

3.5%

3.0%

10%

139

30%

10%

104.35

166,960

Trailer mounted mud pump

30,740.00

100%

3.5%

3.0%

10%

30%

10%

193.38

309,408

Trailer mounted pumping

test unit

94,247.00

100%

3.5%

3.0%

10%

30%

10%

506.97

811,152

Rig accessories

39,558.73

0.6%

3.0%

10%

197

30%

10%

38.31

61,296

367,776

Casing tools

10,580.65

2.9%

3.0%

10%

197

30%

10%

11.97

19,152

114,912

Fishing tools

2,538.39

1.4%

3.0%

10%

30%

10%

6.49

10,384

Direct mud circulation

drilling tools & accessories

13,522.34

2.9%

3.0%

10%

30%

10%

51.09

81,744

(Exchange Rate: 1USD = Tsh 1,600)

Rental Fee of a Drilling Rig with Rig Accessories and Casing Tools per Borehole: Tsh 5,201,472

Item 5), 6) and 8) above contain only accessories and tools to be attached to the drilling rigs for hiring. Consumables are not included.

Table 24 Structure of Rental Cost of Drilling Eqiupment (with Depreciation Cost Considered)

Depreciation

Maintenance

Management

Risks for Exchange

Annual Total

Daily Rental Fee

Item

SGA

Net Profit

Cost

Rate

Cost

(USD)

Truck mounted drilling rig

26,089.40

9,131.29

7,936.88

26,089.40

20,661.95

6,924.70

96,833.62

491.54

Trailer mounted air compressor

3,908.10

1,367.84

1,188.92

3,908.10

3,095.09

1,037.30

14,505.35

104.36

Trailer mounted mud pump

3,074.00

1,075.90

935.17

3,074.00

2,434.51

815.91

11,409.49

193.38

Trailer mounted pumping test unit

9,424.70

3,298.65

2,867.17

9,424.70

7,464.05

2,501.52

34,980.79

506.97

Rig accessories

237.35

1,203.45

3,955.87

1,610.26

539.67

7,546.60

38.31

Casing tools

306.84

321.88

1,058.07

503.31

168.68

2,358.78

11.97

Fishing tools

35.54

77.22

253.84

109.39

36.66

512.65

6.49

Direct mud circulation drilling

tools & accessories

392.15

411.37

1,352.23

643.23

215.58

3,014.56

51.09

Guideline on Hiring of Drilling Equipment

Table 25 Rental Fee of Drilling Equipment (without Depreciation Cost Considered)

(a)

(b)

(c )

(d)

(e)

(f)

(g)

(h)

(i)

(X)

Rental Fee

Unit Cost of

Risks for

Daily

Economic

Maintena

Managem

Operation

Net

Daily Rental

per

Item

Equipment

Depreciation

Exchange

SGA

Rental Fee

Life

nce Cost

ent Cost

Day/Year

Profit

Fee (USD)

Borehole

(US$)

Rate

(Tsh)

Truck mounted drilling rig

260,894.00

3.5%

3.0%

10%

197

30.2%

10%

307.18

491,488

2,948,928

Trailer mounted air

compressor

39,081.00

3.5%

3.0%

10%

139

30.2%

10%

65.21

104,336

Trailer mounted mud pump

30,740.00

3.5%

3.0%

10%

30.2%

10%

120.85

193,360

Trailer mounted pumping

test unit

94,247.00

3.5%

3.0%

10%

30.2%

10%

316.82

506,912

Rig accessories

39,558.73

0.6%

3.0%

10%

197

30.2%

10%

38.41

61,456

368,736

Casing tools

10,580.65

2.9%

3.0%

10%

197

30.2%

10%

12.01

19,216

115,296

Fishing tools

2,538.39

1.4%

3.0%

10%

30.2%

10%

6.51

10,416

Direct mud circulation

drilling tools & accessories

13,522.34

2.9%

3.0%

10%

30.2%

10%

51.23

81,968

(Exchange Rate: 1USD = Tsh 1,600)

Rental Fee of a Drilling Rig with Rig Accessories and Casing Tools per Borehole: Tsh 3,432,960

Item 5), 6) and 8) above contain only accessories and tools to be attached to the drilling rigs for hiring. Consumables are not included.

Table 26 Structure of Rental Cost of Drilling Eqiupment (without Depreciation Cost Considered)

Depreciation

Maintenance

Management

Risks for Exchange

Annual Total

Daily Rental Fee

Item

SGA

Net Profit

Cost

Rate

Cost

(USD)

Truck mounted drilling rig

9,131.29

7,936.88

26,089.40

13,040.48

4,315.76

60,513.81

307.18

Trailer mounted air compressor

1,367.84

1,188.92

3,908.10

1,953.42

646.49

9,064.77

65.21

Trailer mounted mud pump

1,075.90

935.17

3,074.00

1,536.50

508.51

7,130.08

120.85

Trailer mounted pumping test unit

3,298.65

2,867.17

9,424.70

4,710.83

1,559.05

21,860.40

316.82

Rig accessories

237.35

1,203.45

3,955.87

1,630.66

539.67

7,567.00

38.41

Casing tools

306.84

321.88

1,058.07

509.68

168.68

2,365.15

12.01

Fishing tools

35.54

77.22

253.84

110.77

36.66

514.03

6.51

Direct mud circulation drilling

tools & accessories

392.15

411.37

1,352.23

651.38

215.58

3,022.71

51.23

Guideline on Hiring of Drilling Equipment

11.3 BREAK-EVEN ANALYSIS

The break-even point in sales is obtained to estimate the minimum requirement of the annual

operation days of one drilling rig. Table 27 shows the estimated income and profit based on the

revenue and expenditure indicated in Section 11.1. Items in the sales cost and administrative

expenses are further categorized into the fixed cost and variable cost. The break-even point in

sales can be calculated with the formula mentioned below;

Break-Even Point (in Sales) = Fixed Cost / 1 - (Variable Cost / Total Sales)

In case of the proposed business operation model, the break-even point in sales is approximately

Tsh 733.4 million which is equivalent to the sales from hiring of drilling rigs for 846 unit days.

The minimum requirement of the operation days of one drilling rig is, therefore, 141 days per

annum to meet the break-even point. The business operation would suffer a loss if the hiring

period of a drilling rig falls below 141 days a year. Figure 33 shows estimated sales cost as well

as profit or loss according to increase of the total of sales.

Table 27

Estimated Income and Profit

Fixed

Variable

Proportion

Item

Amount (Tsh)

Cost

to Sales (%)

Revenue from Hiring Service

1,545,709,376

Total of Sales

1,545,709,376

100%

Depreciation of Equipment for Hiring

381,712,640

24.7%

Maintenance Cost of Equipment

155,323,200

10.0%

Fuel and Lubricants

9,586,657

0.6%

Consumables for Drilling Rigs

9,306,560

0.6%

Allowance

146,490,000

9.5%

Total Cost of Sales

702,419,057

45.4%

Gross Profit

843,290,319

54.6%

Allowance for Management Team for

Monitoring

3,120,000

0.2%

Allowance for Mechanic

15,975,000

1.0%

Advertisement on New Service

600,000

0.0%

Stationery (A4 paper)

240,000

0.0%

Other expenses

189,653,145

12.3%

Total of Administrative Expenses

209,588,145

13.6%

Net Operating Profit/ Loss

633,702,174

41.0%

Total of Fixed Costs

572,205,785

Total of Variable Costs

339,801,417

Variable Cost Ratio

22.0%

Break Even Point (in Sales)

733,442,250

Break Even Ratio

47.5%

No. of Operation Days of Drilling Rig to Achieve BEP

846

days

No. of Operation Days of 1 Drilling Rig to Achieve BEP

141

days

Draft2 Guidelines for Hiring Equipment Maintenance System

Figure 33 Break-Even Point in Sales

11.4 ACCOUNTING

DDCA is responsible to open and operate a special account for all transactions related to the

equipment hiring service. The account shall be audited by Controller and Auditor General (CAG)

or his appointee. In order to comply with Regulation 29 of Public Finance Act, the draft annual

accounts should be ready latest by 15^th September every year. The Annual Accounts shall be

prepared on accrual basis in accordance with international/national standard format specified in the

accounting manual.

In addition to the financial accounting required by the relevant laws and regulations, it is desired

that DDCA will employ cost control as well as calculation of profits and losses by activity as a part

of the managerial accounting.

11.5 INVESTMENT PLAN

Sustainable operation of the hiring service requires both augmentation and replacement of the

equipment to respond to demand by potential clients. Although MoW has not yet made it clear

about a plan to purchase the remaining 12 units of drilling rigs in the subsequent phases of WSDP,

it will be an opportunity for DDCA to increase available service options. DDCA will analyze

demand of different types of clients and review combination of options of the equipment hiring and

technical instruction. The Agency should approach MoW to procure appropriate types and

specificaitons of equipment which will meet such service options.

Table of Contents

1. Purpose and Intended Users of the Manual

2. Planning

2.1 Preparation of Annual Plan

2.2 Budgeting

3. Business Promotion

4. IdentificatIon of Clients

5. Process of Equipment Hiring

6. Appraisal of Applications

7. Contract Management

8. Allocaiton of Staff to be Attached to the Hired Equipment

9. Maintenance

9.1 Demarcation of Responsibilities in Maintenance of the Hired Equipment

9.2 Preventive Maintenance

9.3 Inspection and Maintenance of Returned Equipment

10. Handling of Accident

10.1 Insurance

10.2 Handling of Accident Cases

11. Information Management on Client

12. Financial Management

12.1 Accounting

12.2 Reporting

13. Asset Management

13.1 Procurement of Consumables

13.2 Replacement Procurement of Drilling Equipment

14. Performance Monitoring

List of Tables

Table 1 Parameters for Calculation of Standard Operation Days of Equipment

Table 2 Formula for Calculation of Standard Operation Days of Equipment

Table 3 Cost items to be Considered in Expenditure Budget

Table 4 Procedures of Equipment Hiring

Table 5 Performance Indicators of the Equipment Hiring Service

Manual on Hiring of Drilling Equipment

1. PURPOSE AND INTENDED USERS OF THE MANUAL

This manual is intended to describe the business flow and procedures of daily operation of the

hiring service of drilling equipment. It supplements the Gudelines on Hiring of Drilling

Equipment which explains the business model and operation principles of the hiring service by

DDCA.

This manual is the property of DDCA and to be used by authorized officers of the Agency only.

Amendments and additions on the manual will be issued from time to time by the Business Support

Manager after approval by the management of DDCA and Ministerial Advisory Board (MAB).

Hiring Business Unit is responsible to keep all editions of the manuals approved.

2. PLANNING

2.1 PREPARATION OF ANNUAL PLAN

The annual plan of the hiring service is the basis for budgeting the business operation in the year.

Annex 1 shows a form for annual plan of operation of hiring service. The plan should include,

but not limited to, the following contents;

(1) Basis of Calculation of Standard Operation Days of Equipment

The standard operation days of each type of equipment shows the estimated number of days for

which one item of the equipment is to be hired annually. These are calculated in order to estimate

expenditure budget. Parameters to be used for calculation of the standard operation days of

equipment are shown in Table 1. Historical records of the business operation are important

reference data to set these parameters in order to make the plan more accurate.

Table 1 Parameters for Calculation of Standard Operation Days of Equipment

Parameter

Reference Data

Calculated Annual Operation Ratio per Rig

No. of days for maintenance per year

Historical records

No. of days for transport between sites per year

Historical records

Standby period of the equipment at DDCA yard per year

Historical records

Total of non-operation days per rig per year

= 1.1) + 1.2) +1.3)

Operation days per rig per year

= 365 days - 1.4)

Average No. of days required to drill a well

Baseline survey (6 days/well),

Historical records

Average No. of wells which can be drilled per one rig per

= 365 days / 1.6)

year

Assumption of Number of Hiring Contract per Rig

No. of wells to be drilled in one contract

Historic records

No. of contract per rig

= 1.7) / 2.1)

Assumption of Proportion of Drilling Method to be

Applied

Use of DTH method

Historical records

Use of mud drilling method

Historical records

Success rate of borehole drilling

Historical records

(2) Standard Operation Days of Equipment

Once the basis of calculation is set, the standard operation days of each item for hiring can be set as

mentioned in Table 2.

Manual on Hiring of Drilling Equipment

Table 2 Formula for Calculation of Standard Operation Days of Equipment

Item

Calculation*

Truck mounted drilling rig

= 1.5)

Trailer mounted air compressor

= 1.6) x 3.1) x 1.7)

Trailer mounted mud pump

= 1.6) x 1.7) x 10%

Trailer mounted pumping test unit

= 1.7) x 3.3) x 3 days/ well

Rig accessories

= 1.5)

Casing tools

= 1.5)

= 40% of the operation day of drilling rig

(The percentage should be reviewed based on

Fishing tools

hiritorical records.)

Direct mud circulation drilling tools &

accessories

= 1.6) x 1.7) x 3.2)

* The numbers in the column refer to the ones in Table 1.

(3) Equipment Arrangement Plan

Allocation of drilling rigs and other equipment among the headquarters and zonal offices should be

decided with considering the following points;

− Geographical distribution of offices of potential hirers

− Geographical distribution of demand of construction of boreholes

− Capacity of each zonal office to attend repair and maintenance works

Information on the equipment arrangement plan will be used to estimate revenue and expenditure

by station of the equipment.

(4) Pricing

The rental fee of each item for hiring is set with applying the formula shown in Figure 1. Factors

listed below should also be considered to finally decide the prices;

− Willingness to pay by different types of potential clients for the hiring service

− Level of reasonable profit to sustain the business

− Measures to minimize costs to secure the reasonable profit within the price set in

consideration of the willingness to pay by the potential clients

Reason why these additional factors should be taken into account is that the cost-based pricing

would result into decrease of sales itself if costs are reduced. In this situation, incentives to

minimize costs are undermined during the business operation. Therefore, willingness to pay by

different types of potential clients should be considered to set conditions of the service options

including the rental fees for each type of client.

Figure 1 Formula for Pricing Rental Fee

2.2 BUDGETING

The budget for operation of the hiring service is to be included in the annual budget proposal of

DDCA. For the budget preparation, reference should be made to accounting manuals of DDCA

for overall guidance. Items listed in Table 3 should be considered as expenditure budget. The

Manual on Hiring of Drilling Equipment

revenue budget should be prepared based on estimation of sales from hiring of each item of the

equipment with taking the standard operation days and proposed rental fees into account.

Table 3 Cost items to be Considered in Expenditure Budget

Cost Item

Note

Direct Cost

Maintenance Cost of

Approximately 3.5% of the equipment price is applied while the

Equipment

percentage should be reviewed based on historical records of the

maintenance cost.

Items consisting of rig accessories, casing tools, and direct mud

circulation drilling tools and accessories are categorized into 1) items

which are parmanently provided with the drilling rigs and 2)

consumables which use is optional for the hirer. Maintenance cost

should be considered for items grouped into 1) for these accessories

and tools.

Fuel and Lubricants

The cost is to be considered 1) to drive carrier trucks for drilling rigs

between DDCA’s yard and client’s site as well as from one drilling

site to the other and 2) to conduct monitoring visit by the

management team.

Fuel cost for operation of the rig plant and other equipment do not

have to be included in the budget as hirers are responsbile to put fuel

on the hired equipment as they use.

Consumables for Drilling

Items categorized into 2) mentioned in 1. Maintenance Cost are

Rigs

considered as consumables for drilling rigs. These items include

bits, DTH hammers, stabilizers, casing shoes, steel work casing, and

drill pipes.

DDCA will procure these items to keep as stocks for reselling to

hirers when necessary.

Minimum level of stock of each item should be decided based on

demand and historical records on sales of these items.

Salary and Allowance for

Salaries and allowances for the technical instructors and drivers for

Staff to be Attached to Rigs

carrier trucks for drilling rigs are to be considered.

Working days on site is calculated as a total of standard operation

days and time to be take for transportation of drilling rigs.

Depriciation of Equipment

The annual depreciation rate of 10% is applied to drilling rigs, air

for Hiring

compressors, mud pumps, and pumping test units in accordance

with the accounting manual of DDCA. The straight-line method is

applied to culculation of depreciation.

II.

Indirect Cost - Selling, General and Administrative Expenses

Allowance for Management

- Frequency of the monitoring visit by the management team should be

Team for Monitoring

decided to estimate required amount of allowance.

Allowance for Mechanic

- The cost is considered for the cases that mechanics are called for

repair and maintenance of the equipment on site.

- The number of working days on site should be estimated based on

historical records of such maintenance activities.

Advertisement cost

- For printing brochures, advertising in newspaper or any other media

Stationery

Other Indirect Cost to be

Costs to be considered include, but not limited to, the following;

Partly Covered by Sales

- Salaries of administrative staff at the Hiring Business Unit and other

from the Hiring Service

departments/sections who are involved in administration and

management of the hiring service.

- Utilities

- Office rent

- Cost for training of staff of the Hiring Business Unit including the

technical instructors

Hiring Business Unit should formulate the annual operation plan including equipment allocation,

pricing and budgeting in consultation with Accounts Section, Procurement Section, Marketing and

Public Relations Section, Maintenance Section, and zonal offices.

Manual on Hiring of Drilling Equipment

3. BUSINESS PROMOTION

Business promotion of the hiring service should be planned in the way that particular information

reaches to specific (groups of) clients rather than treating the whole potential clients in same

manner. Messages to be delivered and media to be used for the publicity should be chosen with

considering characteristics of the potential clients.

Options of media for the advertisement are as follows;

− Mailing brochures to identified companies

− Introducing the service contents in regular and/or extraordinary meetings of Drilling

Association of Tanzania (DAT) and Contractors’ Registration Board (CRB)

− Advertising on newsletters of CRB for its members

− Advertising on newspaper

After deciding messages to be delivered to potential clients and means of publicity, materials for

the advertisement should be designed and produced. Annex 2 shows a sample brochure of the

hiring service which is meant to be used during the lead time for launch of the service once all the

details on the equipment and rental fees are confirmed.

Hiring Business Unit should prepare the plan for business promotion in cooperation with

Marketing and Public Relations Section.

4. IDENTIFICATION OF CLIENTS

Annex 3 contains a contact list of private drilling companies and other entities which operate

drilling works. These organizations were identified through the baseline survey of the private

drilling companies. Although some of them were confirmed to be no longer in operation of the

drilling works or not found about the status of their business due to unavailability of contact

addresses, information on the list should be updated if there are any changes observed in the

process of business promotion.

While iformation on the identified potential clients are maintained and updated, new clients should

also be cultivated continuously. Information listed below can be referred to identify new potential

clients;

− List of drilling companies holding water well drilling license issued by MoW

− CRB Directory

− Advertisement on newspaper

− Telephone directory

− Information from zonal offices of DDCA on drilling companies operating in respective zones

5. PROCESS OF EQUIPMENT HIRING

Figure 2 shows process of the equipment hiring starting from inquiries from potential clients up to

return of the rented items. Administrative procedures to be followed in each stage of the process

are summarized in Table 4.

Manual on Hiring of Drilling Equipment

Table 4 Procedures of Equipment Hiring

Process

Procedure

Confirm if the requested equipment is available for the period inquired.

1. Prepare

Provide a quotation if the item is available or write an advice on available

Quotation

period of the equipment if it is to be occupied.

Receive an order and application form from a client.

2. Examin

Make an appraisal of the application based on the checklist to confirm if

Application

the client satisfies qualifications.

Advise restuls of appraisal to the client.

Prepare a rental contract.

If some conditions need to be changed or added to the standard contract

3. Sign a Rental

form, consult with a Legal Officer on the conditions.

Contract

Explain terms and conditions to the client.

Sign two originals of the contract and give one to the client while the

oher to be filed.

4. Charge and

Prepare a bill for an advance payment.

Collect Advance

Confirm receipt of an advance payment.

Payment

5-1. Organize

Inform a driver and technical instructor on the hiring period of the

Personnel to be

drilling rig, drilling sites, and particulars of the cllient.

Attached to the Rig

Make arrangement of allowance for the staff.

Submit a hiring equipment order form to Maintenance Section to inform

of the equipment to be hired, the hiring period, drilling sites, and

particlulars of the client.

Install necessary accessories and tools according to the order.

5-2. Prepare Rental

Refuel the carrier truck for rig palnt.

Equipment

Check conditions of the equipment according to the equipment checklist.

Make sure that the equipment is services, cleaned and ready for hand

over to the client.

Take photos of the equipment to be hired to record its condition before

hiring.

6-1. Mobilize

Receive a signature from the client on the hiring equipment order slip

Drilling Rig to

and equipment checklist.

Client’s Site

Start with the client to drilling site.

Receive a signature from the client on the hiring equipment order slip

6-2. Hand Over

and equipment checklist.

Other Equipment to

Hand over all items ordered.

Client at DDCA

Provide the client with a maintenance manual for hirer with daily service

Yard

check sheet and explain salient points on the daily service.

6-3. Provide

The technical instructor gives advice on drilling works to the team from

Technical

the client.

Instruction on

The technical instructor records observations on skills of the drilling

Operation of

team and management of the drilling works by the client in an on-site

Drilling Works

checklist of drilling technical level.

6-4. Supervise Use

The technical instructor gives advice to the drilling team from the client

and Maintenance of

on daily maintenance activities and safety measure to operate the

Equipment on Site

equipment.

The technical instructor informs Business Hiring Unit of damages on the

equipment which requires repair works by a mechanic from DDCA.

6-5. Dipatch

Inform Maintenance Section of condition of the equipment and other

Mechanic and

details.

Repair Equipment

Make arrangement of allowance and means of transport for the mechanic.

on Site

Send the mechanic to client’s site.

The mechanic attend the repair works and record the works conducted in

the maintenance record of the equipment.

7-1. Demobilize

The driver demobilizes the drilling rig from the site.

the Eqiupment

Receive all the equipment from the client at DDCA yard.

Back from Site and

Manual on Hiring of Drilling Equipment

Process

Procedure

Receive at DDCA

Yard

Receive a signature from the client on a returning slip.

Check condition of the equipment according to the equipment checklist

and record any defects which were not observed before hiring.

7-2. Check

Take photos of the equipment to record its condition after hiring.

Condition of

Confirming the condition of the equipment by comparing the “hiring

Returned

equipment check list (before and after hiring)” and the photos of the

Equipment

hiring equipment (before and after hiring)

Receive a signature from the client on the equipment checklist which

describes condition of the equipment after hiring.

Wash and clean the equipment.

8. Conduct

Inspect the equipment in accordance with the periodic service checklist.

Equipment

Repair damages or defects on the equipment.

Maintenance/

Inform Business Hiring Unit of necessity of procurement of accessories,

Repair

tools, or spares of the equipment, if any

Prepare a bill for remaining payment including repair cost incurred due to

misuse of the equipment by the client, if any.

9. Charge and

Send the bill to the client together with 1) feedback form from the client

Collect Balance of

and 2) a copy of hiring equipment checklist and photos showing

Contract Amount

condition of equipment before and after hiring in case that there are any

defects on the equipment caused from misuse by the client.

Confirm receipt of the payment.

10-1. Get Feedback

Collect a feedback form filled by the client.

from Client

Check if any acitons should be taken to claims raised by the client.

Collect the on-site checklist of drilling technical level and report from the

10-2. Get Report

technical instructor.

from Technical

Confirm with the technical instructor if any actions should be taken to

Instructor

improve service provision.

6. APPRAISAL OF APPLICATIONS

Hiring Business Unit will make an appraisal of each application form for the equipment hiring

submitted by clients. The purpose of the appraisal is to screen qualified drilling companies which

satisfy conditions mentioned below;

 To possess a valid water well drilling permit issued by MoW.

 To be registered as the specialist contractor at CRB.

 To have at least one permanent employee among the drilling staff to be on site

with the hired equipment and to receive the technical instructions from DDCA.

Annex 6 and Annex 8 show an application form for the equipment hiring and checklist for

appraisal of applications, respectively. In case that the applicant does not meet the conditions on

possession of drilling permit and/or registration at CRB, Hiring Business Unit should give advice

to the company to consult with the respective authorities for required procedures.

7. CONTRACT MANAGEMENT

Manual on Hiring of Drilling Equipment

The contract management involves the following procedures;

− Preparation of the standard contract form

− Preparation of a contract for each case of hiring

− Signing of the contract

− Billing and collection of payment

− Check of fulfillment of terms and conditions by both parties

− Claim on implementation of obligations of the hirer

Preparation and revision of the standard contract form should be done in consultation with Legal

Officers of DDCA. Further advice can also be obtained from Legal Unit of MoW when

necessary.

Once the appraisal of the application form is completed and the hirer is selected, Hiring Business

Unit prepares a rental contract of the equipment. A sample contract form is attached in Annex 9.

Particulars on the hirer, equipment to be hired, hiring period and charges should be filled in the first

page of the contract form while general conditions of the contract is to be stipulated in the

following pages.

8. ALLOCAITON OF STAFF TO BE ATTACHED TO THE HIRED

EQUIPMENT

One driver and technical instructor will be attached to each drilling rig to be hired. Roles of these

personnel should be referred to the Guideline on Hiring Drilling Equipment. The technical

instructors will provide guidance and advice to the drilling team of the client on operation of

drilling rigs and implementation of the works on site in accordance with the Capacity Development

Support Plan for the Private Sector and Technical Manual for Drilling Works.

The technical instructors should record the on-site checklis of the drilling technical level based on

observations of works conducted by the client’s drilling team. The technical instructors should

also prepare a report on technical instruction to be submitted to Hiring Business Unit after

completion of the hiring period. Annex 10 shows a report from on technical instruction

9. MAINTENANCE

9.1 DEMARCATION OF RESPONSIBILITIES IN MAINTENANCE OF THE HIRED EQUIPMENT

DDCA will be responsible for preventive maintenance and repair works of the equipment before

the equipment is hired and after the items are returned from the hirer. Maintenance Section

conducts necessary maintenance works in accordance with the guidelines, plan and manuals for

maintenance system of the equipment for hiring which are formulated separately.

On the other hand, the hirer will conduct routine maintenance of the hired equipment on site under

supervision of the technical instructor from DDCA. DDCA will provide the hirer with a

maintenance manual for hirer with daily service check sheet which describes procedures of daily

maintenance check and safety measures. The hirer wil bear the costs to be incurred for routine

maintenance and repairs required during operation of the equipment on site.

For any mechanical troubles which cannot be attended by the drilling staff from the hirer or

technical instructor, DDCA will send a mechanic to the site either from the headquarter or the

nearest zonal office. When any damages or defects occur on the equipment and repair works by

the mechanic are required, the technical instructor will inform Hiring Business Unit of details on

Manual on Hiring of Drilling Equipment

condition of the equipment upon confirmation with the hirer. Costs to remedy damages or defects

caused on the equipment by misuse of the hirer should be borne by the hirer.

9.2 PREVENTIVE MAINTENANCE

Maintenance Section is responsible to conduct preventive maintenance of the equipment for hiring

to keep it in good condition. The Maintenance Guidelines and Manual should be referred to for

implementation of the preventive maintenance works.

9.3 INSPECTION AND MAINTENANCE OF RETURNED EQUIPMENT

Using the equipment checklist (Annex 11), Maintenance Section will check condition of the

equipment to be hired before handing over to the hirer and after receiving it. Pictures of the

equipment should be taken to record condition of before and after the hiring in order to check if any

damages or defects occur on the equipment during the hiring period.

Maintenance Section will send a mechanic to the client’s site to attend repair works when Hiring

Business Unit requests it upon receipt of notice of breakdown of the equipment. The mechanic

will fill in the maintenance record describing problems, causes, repair works conducted, and spares

replaced.

In case that the hiring period extends more than one month, Hiring Business Unit will make an

arrangement to dispatch a mechanic to the client’s site to get the equipment serviced even if there is

no breakdown or defect reproted.

10. HANDLING OF ACCIDENT

10.1 INSURANCE

This section will be finalized after DDCA decides demarcation of responsibility on insurance cost

based on consultation with MoW and Ministry of Finance and Economic Affairs.

10.2 HANDLING OF ACCIDENT CASES

The equipment to be hired should have a sticker on its body to clearly indicate that it belongs to

DDCA.

This section will be finalized after DDCA decides demarcation of responsibility on insurance cost

based on consultation with MoW and Ministry of Finance and Economic Affairs.

11. INFORMATION MANAGEMENT ON CLIENT

Hiring Business Unit will keep and update particulars of the clients and comments from them about

services provided by DDCA. Information to be maintained by the Unit includes, but not limited

to, the following;

− Name, physical address and contact of the organization

− Name and position of the representative person for contact

− Year of acquisition/ renewal of the water well drilling permit issued by MoW

− Registration No. of the specialist contractor at CRB

− Records of equipment hired and hiring period

− Contract amount

Manual on Hiring of Drilling Equipment

− No. of boreholes drilled (both successful and unsuccessful) with the hired equipment,

drilling sites

− Feedback from (Annex 12) from the client on technical instruction, condition and capacity of

equipment, rental fees, etc.

12. FINANCIAL MANAGEMENT

12.1 ACCOUNTING

Accounts Section is responsible for the financial accounting of the hiring service, which is

supposed to be conducted in accordance with the accounting manuals of DDCA. In addition to

the financial accounting required by the relevant laws and regulations, the cost control as well as

calculation of profits and lossess by the hiring service should be conducted by Business Hiring Unit

in conjunction with Accounts Section as a part of the managerial accounting.

12.2 REPORTING

Hiring Business Unit will compile the financial status of the hiring service based on sales and

expenditure records at Accounts Section and included it in the monthly reports.

13. ASSET MANAGEMENT

13.1 PROCUREMENT OF CONSUMABLES

Maintenance Section will report it to Hiring Business Unit when there is necessity to replace spare

parts and/or purchase accessories and tools of the equipment for hiring. Hiring Business Unit will

inform details on required items to Procurement Section for further arrangement to purchase them.

A procurement plan of the consumables should be prepared to ensure timely arrangement of the

required items.

13.2 REPLACEMENT PROCUREMENT OF DRILLING EQUIPMENT

Hiring Busienss Unit will make a plan for replacement of the equipment or procurement of new

items in consultation with Procurement Section and Accounts Section. Replacement of the

equipment should be implemented based on procedures for depreciation of the equipment and plant

stipulated in the accounting manual. For investment for new items of equipment, Hiring Business

Unit will analyse which type of equipment is required by different groups of clients.

14. PERFORMANCE MONITORING

Business Hiring Unit should prepare monthly reports on business operation not later than 10 days

after the end of every month. The report describes operational and financial status of the hiring

service. Annex 13 shows a monthly report form. The Unit should compile an annual report

based on the monthly reports and submit it not later than 14 days afte the end of every year.

Performance indicators listed in Table 5 should be used for monitoring and reporting.

Table 5 Performance Indicators of the Equipment Hiring Service

Frequency of

Purpose

Indicators

Means of Verification

Monitoring

1-1. Drilling equipmemt is hired in

1-1. R

1. Process

accordance with the

Management

procedures established.

1-2. All drilling equipment for

Manual on Hiring of Drilling Equipment

Frequency

Purpose

Indicators

Means of Verification

Monitoring

hiring is maintained in

accordance with the

maintenance plan.

1-3. Internal management

accounting document for

hiring is reported periodically

to the management.

1-2. M

ill

1-3. R

2-1. The number of operation days of a

2-1. Records for hiring

2-1. Monthly

drilling rig for hiring reaches to 141 days

per annum on average, the break even

2. Managemenet

line of the hiring business¹, by 2016.

2-2. Records for hiring

2-2. Monthly

of Output of

2-2. More than 80% of the registered water

the Service

well drilling companies utilize some

forms of the technical support services by

2-3. Feedback forms

2-3. Each hiring

2016.

from clients

conctract,

2-3. More than 80% of private drilling

Monthly

¹ See Section 11.3 for an estimation of the break even line of the hiring business.

Manual on Hiring of Drilling Equipment

Annex 1 Form for Annual Plan of Operation of Hiring Service

Annual Plan of Operation of Hiring Service for (Year)

1. Items to be Hired and Equipment Arrangement Plan

Item

Specification

Qty

Station

2. Basis of Calculation of Standard Operation Days of Equipment

Calculated Annual Operation Ratio per Rig

1) No. of days for maintenance

days/year

2) No. of days for transport between sites

days/year

3) Standby period

days/year

4) Total of non-operation days

days/year

=1)+2)+3)

5) Operation days

days/year

6) No. of days required to drill a well

days/well

7) No. of wells which can be drilled

wells/rig/year

Assumption of Number of Hiring Contract per Rig

1) No. of wells to be drillied in one contract

wells

2) No. of contract per rig

/ year

Assumption of Proportion of Drilling Method to be Applied

% of total number of wells to be

1) Use of DTH method

drilled

% of total number of wells to be

2) Use of mud drilling method

drilled

3) Success rate of drilling

3. Standard Operation Days of Equipment

No. of

Item

Qty

Operation Days

Calculation

per Annum

A-1

Manual on Hiring of Drilling Equipment

Annex 2 Sample Brochure of Hiring Service (Front)

Drilling and Dam Construction Agency (DDCA)

We offer hiring service of drilling equipment

for water well construction

Truck Mounted Drilling Rig

Trailer Mounted Air

(6 units)

Compressor

(5 units)

Picture of the

Rotary cum DTH

650CFM, 246 psi

Equipment

Maximum drilling depth 150m

Trailer Mounted Mud Pump

Trailer Mounted Pumping Test

(5 units)

Unit

(5 units)

Picture of the

20kg/cm², 600 l/min.

Generator, riser pipe, submersible

Equipment

pump

 Bits, DTH hammer, drill pipes and other consumables are on sale from our stocks if you

need them.

 The truck mounted drilling rig will be hired with a truck driver and technical instructor who

provides technical assistance and guidance on operation of the rig to your drilling team

including a rig operator on site. Per diem for the truck driver and technical instructor is

included in the rental fee. The owner (DDCA) is responsible for fuel for the carrier truck

of the rig plant during mobilization from and demobilization to DDCA’s yard and for

transportation among hirer’s sites.

 The hirer (client) is responsible for fuel as used during the operation of the rig plant on site.

 The hirer is also responsible to arrange carrier trucks and fuel for transportation of the

compressor, mud pump, and pumping test unit when these items are hired.

Support for Capacity Development of Your Drilling Team

Our technical instructors are specialized in providing hands on training

and guidance to drilling teams in various technical areas related to

Picture of technical instructors

drilling works. Such areas include drilling techniques, borehole

providing guidance to a drilling team

logging, casing program/ installation, gravel packing, well development,

on site

well investigation, tool fishing, well rehabilitation, puming test, and

water quality analysis. The technical instructors will help your staff

members in the drilling team enhance their skills to conduct quality

works with efficiency.

A-3

Manual on Hiring of Drilling Equipment

Annex 2 Sample Brochure of Hiring Service (Back)

- Conditions for Use of DDCA’s Equipment Hiring Service -

The drilling equipment for hiring was procured by the Ministry of Water to facilitate participation

of private drilling companies in works for exploratory drilling and development of production wells

under the Water Sector Development Program (WSDP) aiming at increase of water supply

coverage to 90% in rural area and 100% in urban area by 2025. DDCA operates the hiring service

of these drilling rigs and other equipment as a part of the technical support service for private

drilling companies. In the light of this background and expected outcomes from utilization of the

procured equipment, those who would like to use this hiring service are expected to satisfy the

following conditions as the hirer;

[Requirements to Applicants]

1. To possess a valid water well drilling permit issued by the Ministry of Water.

2. To be registered as a specialist contractor at the Contractors Registration Board (CRB).

3. To have at least one permanent employee among the drilling staff to be on site with the hired

equipment and to receive guidance from a technical instructor attached from the owner.

[Use of the Equipment]

The first priority is given to those who are going to use the equipment for drilling works funded by

WSDP or any other government-funded water supply projects. The equipment will also be made

available to those who work for borehole drilling financed by the private sector including

individual households.

Please consult with the Ministry of Water and CRB, respectively, for procedures required for

acquisition of a water well drilling permit and contracotor’s registration.

Submit

Receive

Mobilize

Return

Confirm

applicatio

Sign a

Settle

equipme

condition

Request

n form &

Settle the

rental

advance

nt at

nt and

nt to

quotation

order

balance

contract

payment

DDCA's

operate

DDCA's

equipme

form

yard

on site

yard

Process of Equipment Hiring

For further information:

Hiring Business Unit

Drilling and Dam Construction Agency (DDCA)

Tel: +255-22-2410430 / 255-22-2410299

Fax: +255-22-2410430

Email:

P.O. Box 55658 Ubungo, Off University Road, Kinondoni, Dar es Salaam

A-4

Manual on Hiring of Drilling Equipment

Annex 4 Form for Request for Quotation

Drilling and Dam Construction Agency

Request for Quotation

Business Entity

Name

Mailing Address

Physical Address

Region:

District:

Ward:

Street:

Plot No.:

Telephone/Mobile

5. Fax

E-mail

Contact Person

Name

Position

Phone

Hiring of Drilling Equipment

Hiring Period

Please

Item

Q’ty

Total

tick

Start

End

Days

Truck mounted drilling rig

Trailer mounted air compressor

Trailer mounted mud pump

Trailer mounted pumpint test unit

Rig accessories*

Casing tools*

Fishing tools

Direct mud circulation drilling

tools & accessories*

* Please refer to the attached list for items included in rig accessoris, casing tools and direct mud circulation

drilling tools and accessories.

Purchase of Consumables

Please

Description

Q’ty

tick

Drill pipes 41/2’’ 0.D flush type with API 31 1/2’’IF BOX and pin joints

furnished with wrech squares and steel made protectors,6m long/pc

DTH Hammer assembly for 6 1/4’’(150mm) hole drilling API 3 1/2

Regular pin and 8’’ to 10’’ hole drillling

DTH Hammer assembly for 12’’(300mm) hole drilling API 3 1/2 Regular

DTH Button bit for 6 1/4’’(159mm) hole drilling

DTH Button bit for 8 1/4’’(216mm) hole drilling

DTH Button bit for 10’’(254mm) hole drilling

Tricone roller bits 6 1/2’’ dia

A13

Manual on Hiring of Drilling Equipment

Please

Description

Q’ty

tick

Tricone roller bits 8 1/2’’ dia

Tricone roller bits 10 1/2’’ dia

Tricone roller bits 12 1/2’’ dia

Roller bits 8 1/2’’ dia

Roller bits 10 1/2’’ dia

Roller bits 12 1/2’’ dia

Roller bits 14 1/2’’ dia

Drag bits three winged 8 1/2’’ dia

Drag bits three winged 10 1/2’’ dia

Drag bits three winged 12 1/2’’ dia

Stabilizer for 6 1/4’’ hole body dia,1.5m long API 3 1/2 IF BOX and pin

joints furnished with wretch squares and steel made thread protectors on

both ends

Stabilizer for 8 1/2’’ hole 5’’ body dia,1.5m long API 3 1/2 IF BOX and pin

joints furnished with wretch squares and steel made thread protectors on

both ends

Casing shoe for 8’’ casing

Casing shoe for 10’’ casing

Casing shoe for 12’’ casing

Any special instructions, comments, and other inquiries

Signature

Print Name

Date

RFQ No.

Date (Received)

Date (Replied)

Name

A-14

Manual on Hiring of Drilling Equipment

List of Rig Accessories and Tools Attached to the Drilling Rig

No.

Description

I. Rig Accessories

Drilling collars 5’’0.D,2’’IF BOX and pin joints,furnished with wretch

squares and steel protectors,6m long/pc

Hoisting swivel API 1/2’’ IF Pin joint

Hoisting plug API 1/2’’ IF Pin joint

Drill pipes collar hanger

Cross over sub API 3 1/2 IF BOX and pin

DTH Button Bit for 12’’(300mm) hole drilling

Bit sub for drill pipes/collar to 6 1/4’’ DTH Hammer API 3 1/2’’ Regular box

and API 3 1/2’’ IF Box joint

Bit sub for drill pipes/collar to 6 1/4’’ DTH Hammer API 3 1/2’’ Regular box

and API 3 1/2’’ IF Box joint

Bit

15rinder for button bit and body dressing,furnished with 15 m long high

pressure air hose

Drag bits three winged 16 1/2’’ dia

Roller bit 16’’ dia for soft formation

Stabilizer for 10’’ hole 5’’ body dia,1.5 long API 3 1/2 IF BOX and pin joints

furnished with wretch squares and steel made thread protectors on both

ends

Stabilizer for 12’’ hole 5’’ body dia,1.5m long API 3 1/2 IF BOX and pin

joints furnished with wretch squares and steel made thread protectors on

both ends

II. Casing Tools

Casing lamp with bolts,nuts,wrench and sling wire for 4’’ PVC casing ,3

pairs/sets

Casing lamp with bolts,nuts,wrench and sling wire for 6’’ PVC casing ,3

pairs/sets

Casing lamp with bolts,nuts,wrench and sling wire for 8’’ PVC casing ,3

pairs/sets

Casing lamp with bolts,nuts,wrench and sling wire for 10’’ PVC casing ,3

pairs/sets

Casing lamp with bolts,nuts,wrench and sling wire for 12’’ PVC casing ,3

pairs/sets

Casing head for 8’’ casing

Casing head for 10’’ casing

Casing head for 12’’ casing

Casing sub , API 3 1/2 IF BOX to 8 ‘’ casing

Casing sub , API 3 1/2 IF BOX to 10 ‘’ casing

Casing sub , API 3 1/2 IF BOX to 12 ‘’ casing

Casing hoist plug with sling wire for 8’’ casing

Casing hoist plug with sling wire for 10’’ casing

Casing hoist plug with sling wire for 12’’ casing

III. Direct Mud Circulation Drilling Tools & Accessories

Mud testing kit including mud balance ,marsh funnel,viscocity meter with

measuring cup sand content kit,stop watch and thermometer

Collapsible water tank with housing bag 3000 Litre capacity

Portable water level indicator,dry battery operated type,measuring

capacity of 200m

A15

Manual on Hiring of Drilling Equipment

Annex 6 Application Form for Hiring of Drilling Equipment

Drilling and Dam Construction Agency

Application for Hiring of Drilling Equipment

Section A: Applicant Information

Business Entity

Name

Mailing Address

Physical Address

Region:

District:

Ward:

Street:

Plot No.:

Telephone/Mobile

5. Fax

E-mail

Contact Person

Name

Position

Year

9. Year of Starting of

Establishment

Drilling Operations

the Organization

10.

Business Type

[

]

Sole Proprietor

[

]

Partnership

[

]

Corporation

[

]

Not for Profit

[

]

Other

(specify:

)

11.

Contractors

Registration No.

Registration

Date of Registration

Board

(CRB)

Registration

12.

Water

Well

Permit No.

Drilling Permit No.

Date of Issuance/

Issued by Ministry

Renewal

of Water

Section B: Drilling Works to be Conducted with the Hired Equipment

Owner of the

[

]

Government

[

]

Private Business Entity

Work

[

]

Individual Household

[

]

External Support Agencies

(Donor)

Outline of the

No. of Production Wells to

Work

be Constructed with Hired

Rig(s)

Use of Water

[

]

Domestic water supply

[

]

Source

Irrigation

[

]

Livestock watering

[

]

Industrial use

[

]

Other

use

(specify:

)

Planned Service

[

]

Hand Pump

Options for Water

[

]

Piped Scheme with Public Taps

Supply

[

]

Piped Scheme with House Connections

Drilling Team

No. and Position

Permanent Staff to be

Assigned in Drilling Team

Section C: Acknowledgement and Authorization

Signature

Print Name

Date

Please attach copies of CRB registration certificate and water well drilling permit.

Application No.

Date (Received)

Date (Replied)

Results of Appraisal

Name

A-17

Annex 8 Checklist for Appraisal of Applications

Checklist for Appraisal of Applications for Use of Hiring Service

The application forms submitted by private drilling companies should be checked if all the

conditions specified below are satisfied;

To possess a valid water well drilling permit issued by the Ministry of Water.

 Is a copy of the permit attached to the application form?

 Is the permit still within one-year valid period? (A permit issued/renewed in last or this

financial year should be submitted.)

To be registered as the specialist contractor at the Contractors’ Registration Board.

 Is a copy of the registration certificate from CRB attached to the application form?

 Is the applicant regisetered as a Specialist Contractor?

To have at least one permanent employee among the drilling staff to be on site with the hired

equipment and to receive the technical instructions from DDCA.

 Is there at least one permanent staff included in the drilling team?

The Hiring Business Unit should send an applicant a written notice of results of appraisal of the

application within five (5) business days from recipt of the application form. The Unit will give

advice to the applicant who does not meet the conditions to consult with MoW and CRB to obtain

necessary permit/ registration.

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Manual on Hiring of Drilling Equipment

Annex 9 Sample Contract Form

General Conditions on the Drilling Equipment Rental Contract

Article 1. General Provisions

1. The general conditions on the drilling equipment rental contract (hereinafter referred to as ‘the

contract’) determines its general provisions regarding the contractual relationship of the Owner

and the Hirer.

2. The Owner provides the rental of movable property and other related services under the

conditions stipulated in the agreement (rental and other services are hereinafter referred to as

‘rental’) to the Hirer.

Article 2. Individual Contract

1. Conclusion of a rental contract for each property

(hereinafter referred to as

‘Individual

Contract’) is done by the Hirer and the Owner in accordance to the agreement.

2. Individual Contracts will be effected when the Hirer submits a signed order sheet which clearly

defines necessary details such as the name of the property, quantity, hiring period, and place of

use, and when the Owner agrees with the request.

3. If there is a discrepancy between the conditions stipulated in the Individual Contract and the

agreement, the condition in the Individual Contract shall prevail.

4. Conditions regarding Individual Contracts will be determined by prior agreement between the

Hirer and the Owner.

Article 3. Hiring Period

1. The hiring period starts on the date the Hirer receives the property from the Owner (date of rental

commencement) and ends on the date the Hirer returns it to the Owner (date of rental

termination).

2. A written consent of the Owner is required for the extension or reduction of the hiring period.

Article 4. Rental Fee

1. The rental fee generally refers to the ‘rental charges’ of the property.

2. The Hirer shall pay the Owner the rental fee for the agreed hiring period even if there is a period

where the Hirer, for any reason or circumstance, does not, or is unable to, use the property.

3. In principle, the rental fee is charged for eight (8) hours of use of the property per day. When

the property use exceeds eight (8) hours, extra fees will be incurred.

Article 5. Guaranty Deposit

1. The Owner is entitled to request the Hirer a guaranty deposit to guarantee fulfilment of

obligations of the Hirer stated in the contract. The Hirer shall deposit the requested amount of

guaranty upon a request from the Owner. The guaranty deposit shall not incur interest.

2. When any of the items described in Article 19, under Clause 1, applies to the Hirer, the Owner

shall appropriate the guaranty deposit for settlement of the outstanding balance and financial

obligation of the Hirer, including rental fees.

Article 6. Permits

The Hirer shall at its own expense apply for and obtain any permits, licenses, certificates,

permission, or exemptions which may be required for and in connection with the entry and use of

the property on the site. The Owner shall be responsible for any permits, licenses, certificates,

permission or exemptions which may be required for legal operation of the property including any

insurance required.

Article 7. Fuel

The Hirer shall be responsible for providing fuel and oil as necessary for transportation and

operation of the property on Hirer’s site, except for the fuel for transportation of carrier trucks of

drilling rigs which shall be taken care by the Owner.

A-21

Article 8. Property Handing Over, Exemptions

1. When the Hirer receives the property from the Owner, the Owner shall issue an equipment

checklist to the Hirer, and the Hirer shall sign on it upon completion of inspection with the

Owner as specified in Article 9.

2. The Owner shall hand over the property to the Hirer on the date of rental commencement.

3. As a general rule, the handing over shall be carried out at the office of the Owner.

4. If the handing over is carried out in a place other than stated in the previous Article, the Hirer

shall bear any of the resultant costs.

5. Responsibility for accidents related to carrying, transporting, and loading and unloading of the

property shall rest with the Hirer when the Hirer conducts the work and when the Hirer requests

any other party other than the Owner to conduct the work, and with the Owner when the Owner

conducts the work.

6. The Owner shall not be liable for delay or failure of property handing over in the result of an

event such as a natural disaster and man-made events, including electricity restriction, transport

accidents, traffic restriction, conflict with employees of the Hirer or third parties, or interference

of third parties, and any other events not accountable to the Owner’s fault.

Article 9. Property Inspection

1. The Hirer shall inspect the specifications, capacity, functions and quantity of the property on the

Owner’s yard for any defects or deviations against the descriptions in the equipment checklist

issued by the Owner immediately after the receipt of the property.

2. The Hirer shall immediately notify the Owner of any nonconformity, incompleteness,

insufficiency or defects. When notified by the Hirer, it is the responsibility of the Owner to repair

or replace the property.

Article 10. Warranty

1. The Owner guarantees the condition of the property at the point of handing over. The Owner is

not liable for the compatibility of the property with the purpose of the Hirer. When there is no

notification regarding defects of the property immediately after the handing over, it is regarded

that the property was handed over in good condition.

2. When the Owner is liable for damages regarding hired property in incidents of the Owner’s fault,

the maximum amount is the amount of the rental fee charged for the Individual Contract, and

also limited to the amount already paid by the Hirer.

3. The Owner shall not be liable for indirect, special, or incidental losses (such as construction

delay, idling, profit that would have been generated, profit loss, opportunity loss, etc.) inflicted to

the Hirer or third party caused by the fault of the property.

Article 11. Maintenance, Management and Monthly Inspection of the Property

1. The Hirer shall manage the property in accordance with the property’s appropriate use and

capacity, manage its safekeeping, and maintain the condition of the property for the period of the

reception of the property until the completion of the property return.

2. The Hirer must consult the maintenance manual for hirer with daily service check sheet prior to

use, carry out a start-up inspection, and conduct necessary maintenance work prior to

commencing operation.

3. Preventive maintenance and safekeeping costs of the property shall be borne by the Hirer.

4. Receiving advice from the technical instructor dispatched from the Owner, the Hirer shall be

responsible for conducting daily inspection and self-check for the properties that require them.

5. If the instalment, storage, or use of the property incurs damages to a third party, the Hirer shall

be responsible for solving the conflict, and the Owner shall not be liable.

Article 12. Examination of the Property

The Owner, with advanced notice to the Hirer, has the right to inspect the hired property’s

conditions of use and safekeeping at the site of its operation. During such events, the Hirer shall be

cooperative.

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Manual on Hiring of Drilling Equipment

Article 13. Prohibited Matter

1. The Hirer shall not engage in any act which infringes on the right of ownership of the Owner,

including taking out a mortgage on the property, or transferring it to a third party.

2. The Hirer shall not allow operation and handling of the property by anyone but qualified

persons.

3. The Hirer, without written approval of the Owner, shall not conduct any of the following actions.

(1) Attachment of new equipment, parts, or accessories to the property, or removal of already

attached items.

(2) Modification of the property, or modification of its functions and capacity.

(3) Use of the property for purposes other than what it is intended for.

(4) Transportation of the property to any other place from where the Hirer indicated in the order

sheet.

(5) Transfer of the leasing rights under an Individual Contract, or sub-lease of the property to a

third party.

(6) Establishment of the right of pledge, mortgage, or any other rights on the property.

(7) Deletion or removal of any identifying marks or displays of ownership.

Article 14. Duty to Give Notice

1. The Hirer and Owner shall contact the other party immediately by the quickest practical method,

as well as notifying the party in writing, when any of the following occur.

(1) When theft, destruction, or damage was occurs to a hired property

(2) When the Owner or Hirer’s address is changed

(3) When the Owner or Hirer’s representative is changed

(4) When there is a major change in business operation

(5) When compulsory execution or any other legal and factual infringement occurred to the hired

property by a third party

Article 15. Measures to be Taken upon Completion of Individual Contract and Return of the

Property

1. Upon completion of the Individual Contract, the Hirer shall immediately return the property to

the site stated in the contract. The Owner shall check conditions of the property upon its

reception and record it in the equipment checklist which copy shall be provided to the Hirer.

2. The cost of transport and other related costs for transfer of the property shall be borne by the

Hirer, except for fuel for the carrier trucks of drilling rigs which shall be taken care by the

Owner.

3. The return of the property shall be done in the presence of the Hirer and the Owner. However, if

the Hirer is unable to be present, the Hirer has no right to object the inspection of the Owner.

4. The property shall be returned in the same condition as when it was hired. If there is any damage,

loss, missing parts, etc., the Hirer shall be responsible for restoring the property to the original

state, or the Hirer shall pay the cost of restoration (repair cost, cleaning cost, etc.) to the Owner.

Article 16. Property Compensation

1. The Hirer shall be responsible for the obligations stated in the agreement for damages,

destruction or theft of the property, for any circumstance including natural disaster.

2. If the Owner provides repair work for the damage of the property, the Hirer shall pay the

equivalent cost amount to the Owner.

3. The Hirer shall pay the Owner the cost of replacement of the property if the property right of the

Owner is not deemed to be recovered for property which was destroyed, stolen, etc., or the

damage of the property at the point of the return is beyond repair.

4. The Hirer shall provide compensation for the business suspension damage, if the repair or

replacement of the property requires time.

Article 17. Measures and Compensation for Damages in Cases of Non-Return of the Property

1. The Hirer shall bear full responsibility to compensate for damages incurred to the Owner by

A-23

non-return of the property.

2. The Owner shall take necessary legal measures when the Hirer does not return the property

despite the completion of the Individual Contract or contract cancellation in accordance with

Article 19.

Article 18. Insurance

1. The Owner shall obtain compulsory automobile liability insurance and automobile insurance

(personal reparations, property damage liability, and passenger reparations) for all vehicles with

number plates, and liability insurance for any other property.

2. The insurance required by the previous clause does not cover damages caused by natural disaster,

negligence or deliberate misuse by the Hirer, or cases stated in the exemption clause of the

insurance contract.

3. The Hirer shall take legal measures and notify the Owner immediately when an insurable

contingency has occurred, regardless of its size, and submit documents to the Owner as

instructed.

Article 19. Contract Cancellation

1. The Owner retains the right to cancel the contract without notification, if any of the following is

applicable.

(1) When the Hirer violated the articles of this contract or Individual Contract.

(2) When the Hirer delayed fulfilling its financial obligations to the Owner, including the rental fee,

repair fee and other fees.

(3) When the check or bill issued or certified was not honoured, or when the Hirer became

insolvent or fell under the condition of suspension of payment.

(4) Disposition for failure to pay taxes and public dues, temporary restraining order for execution

of other obligations, writ of attachment, auction, or other disposition of the government authority

was received, or bankruptcy, civil rehabilitation, corporate reorganisation was declared, or when

the business operation is in de facto non-operational state, for instance, when it started

liquidation.

(5) When the Hirer does not carry out proper maintenance of the property, or when it violated the

use of the property determined by the law and other regulations.

(6) When the Hirer dissolved, deceased, or became a Person with Limited Capacity, or its address

or location became unlocatable.

(7) When an incident severely degrades the financial status of the Hirer, or such an incident is

deemed objectively imminent.

(8) When the Hirer conducts an iniquitous deed (illegal or threatening to the public order) regarding

the use of the hiring service.

2. When the Owner cancels the contract in accordance with the previous clause, the Hirer shall

return the property to the Owner without delay and shall pay the Owner the rental fee up for until

the date of property return and all the related fees.

3. If any of the items described in Clause 1 apply to the Hirer, the Hirer forfeits its right to the

hiring period, and shall pay the outstanding balance to the Owner.

Article 20. Measures for Contract Cancellation

1. The Hirer shall return the property to the determined location without delay upon a request of

property return from the Owner in accordance to the previous Article.

2. When the Hirer fails to return the property immediately, the Owner shall enter the operation site

of the property to retrieve it. If there are damages, the Hirer shall bear the cost.

3. The Hirer shall bear all costs of transport for the property return and transfer and any other

related costs, except for fuel for the carrier trucks of drilling rigs which shall be taken care by the

Owner.

4. The Hirer shall bear the cost for repair, if the property is damaged or there are discrepancies from

the original condition, at the point of property return.

5. The return of the property shall be done under the presence of the Hirer and the Owner, when the

Hirer is absent from the handing over, it is regarded that the Hirer has no objection to the result

A-24

Manual on Hiring of Drilling Equipment

of the inspection by the Owner.

6. The Hirer shall fulfil obligations stated in the contract until the property return is complete.

7. The Owner shall not be liable for damages incurred to the Hirer from cancellation of the

contract.

Article 21. Early Termination

1. Early termination during the Individual Contract period is not allowed. However, if the Hirer

requests an exemption from the Owner for a special case, and if the Owner acknowledges its

legitimacy, early termination is permissible.

2. When early termination is approved in accordance to the previous clause, the Hirer immediately

carries out the procedures in accordance with Article 14.

Article 22. Compensation for Contract Cancellation

When the property was returned in accordance with Article 19, the Hirer shall pay a predetermined

amount of compensation for damages. If it is not predetermined, it shall be determined by mutual

consent between the Hirer and the Owner.

Article 23. Joint and Several Surety

The Hirer shall appoint a joint and several surety if the Owner requests it. The joint and several

surety shall jointly and severally bear contract obligations with the Hirer.

Article 24. Exclusive Agreement Jurisdiction

If conflicts arise between the Hirer and the Owner regarding the rental contract, a court that has

jurisdiction over the address of the headquarters, or a branch of the Owner, shall be the venue for

the first trial.

Article 25. Supplementary Conditions

The Hirer and the Owner shall solve any situation that is not described in the agreement or

Individual Contract, in good faith.

A-25

Technical Manual for Drilling Works for Technical Support Plan for the Drillers in DDCA (2013) - page 6