Capital Procurement

The capital projects group exist as separate, largely autonomous entities in most corporations. With limited collaboration with operations and procurement functions, projects seldom capture the full benefits from leveraging the corporation’s operating standards and purchasing scale economies.

Once a capital project is approved, a team is assembled with two key objectives: get the project completed on time, and, under budget. While the time frame is often aggressive, the budgets generally contain a multitude of safety factors and risk contingencies. The result is a compromise between the quality of procurement activity and speed to commissioning. This approach seldom leverages the corporations’ full leverage with suppliers – many of whom are also supplying sustaining capital and OPEX material and services. Additionally, capital project managers tend to attempt to de-risk their programmes by using approaches, standards and suppliers that have served them reliably in the past (often with different companies).

PIP’s solution to this dynamic is to implement processes that link projects to operations and the competitive supply market by focusing on:

  • Assuring that the corporations’ total spend and scale is leveraged during capital project procurements.
  • Identifying and communicating standard specifications.
  • Collecting and syndicating to the project’s team operating performance to assure accurate total cost of ownership (TCO) calculations are computed.
  • Ensuring operations support the project’s procurement transaction activities.
  • Driving continuous improvement and sharing procurement best practices.

The benefits of improved procurement in capital projects go beyond budget performance within individual capital projects and often include lead-time reduction of critical path componentry, reduced operating cost and differential access to key supplier services and technologies through the enhanced relationships with key business partners. Read more about our work on supply chain & procurement here

Managers are saying: I wish I had this [Roadmap] when I started. This has been a springboard for people to communicate what good looks like. The language in project teams has changed towards the EPCM; managers are now telling EPCMs, you should be accountable.ANDREA RIGHETTI

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