Managing Project Procurement
© Copyright 2007 WorleyParsons Services Pty Ltd
This document has been prepared on behalf and for the exclusive use of WorleyParsons.
This document may not be reproduced without the express permission of the Business
Process Owner
Level 12, 333 Collins Street
Melbourne Vic 3000 Australia
Telephone:
+061 3 8676 3500
Facsimile:
+061 3 8676 3505
www.worleyparsons.com
WorleyParsons Services Pty Ltd
ABN 61 001 279 812
Facilitator Guide Module 9 Managing Project Procurement
Rev Description
Orig
Review
WorleyParsons
Approval
Date
A
Initial draft
Joslin Guest
1
Reissued for Use
Jane Woodhead
Greta Ooms
Mike Reilly
7/12/07
Rev 2 30/10/08
Managing Project Procurement Page i
Managing Project Procurement
About this Facilitator Guide... 1
Before You Start... 2
Preparation ... 2
Planning ... 2
Resources... 2
Agenda... 2
Resources Checklist ... 3
Agenda... 4
Introduction ... 6
Overview of Procurement ... 8
Responsibilities For Procurement ... 10
Commencing the Procurement Process/Procurement Planning... 11
SmartPlant Materials ... 18
Procurement Reports ... 20
Procurement Initiation... 21
Procurement Execution ... 22
Procurement Close-out ... 26
Rev 2 30/10/08
Managing Project Procurement Page 1
ABOUT THIS FACILITATOR GUIDE
The Managing Project Procurement Facilitator Guide has been designed to assist
facilitators to effectively deliver the training module. The guide provides support and
guidance in how to engage the participants and work through the training materials in an
effective way.
This module is the 9th module in the suite of WorleyParsons Project Management Skills
Development Training. The modules in the suite are:
¾
Module 1
Project Initiation, Scope Management and Project Close-out
¾
Module 2
Project Controls and Commercial Management
¾
Module 3
Managing Project Risk
¾
Module 4
Business Management Systems
¾
Module 5
HSE Management
¾
Module 6
Proposals
¾
Module 7
Managing Project Quality
¾
Module 8
General Management and Leadership
¾
Module 9
Managing Project Procurement
BEFORE YOU START
Preparation
Read the module 9, Managing Project Procurement several times to thoroughly
understand the content and be able to answer participants’ questions.
Planning
Plan to arrive at the training venue one hour before your presentation is due to start. Use
this time to set up and check the technology, set out the materials and greet participants
when they arrive. If you are well-prepared this will help create a relaxed environment that
is supportive of learning.
Resources
For Resources Checklist, see page 3.
Agenda
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Managing Project Procurement Page 3
RESOURCES CHECKLIST
Resources
9
Training materials
Managing Project Procurement, module 9 Participants Manual (one copy per participant)
Managing Project Procurement Module 9 Facilitator’s Guide (one copy for facilitator)
Managing Project Procurement Training Module 9 PowerPoint Presentation
Prepare flipcharts (Agenda)
Handouts—Activity:
• Procurement Status Report
• Procurement Expediting Report
Attendance List
Evaluation sheet
Equipment
Tables and chairs in U-shape
Laptop with presentation loaded (and extra copy on CD)
Data show
Projection screen
Flipchart
Flipchart paper
Flipchart pens
Whiteboard
Whiteboard pens
Water and glasses
Minties in bowls
AGENDA
This is a sample agenda for the Managing Project Quality Training Module. This agenda
assumes a 9.00am start and 4.30pm finish.
Topic
Time
Introduction
About this training session
)
Learning Objectives
) 20 mins
Learning Outcomes
)
Agenda – Module 9 Managing Project Procurement )
9.00-9.20
Overview of Procurement
What is procurement?
)
What does procurement involve?
) 30 mins
What is the role of procurement in a project
)
9.20-9.40
Responsibilities for Procurement
WorleyParsons’ procurement capability
) 15 mins
Procurement Resourcing
)
9.40-9.55
Commencing the Procurement Process/Procurement Planning
Commencing the Procurement Process for a Project 15 mins
9.55-10.10
Procurement Planning
) 20 mins
Procurement Strategy
)
10.10-10.30
Break (15 mins)
10.30-10.45
Procurement Strategy (continued)
)
Project Procurement Plan
)
Materials Management Planning
) 60 mins
Contracts Planning
)
Approving the Project Procurement Plan
)
10.45-11.45
SmartPlant Materials
Using SmartPlant Materials to record and track projects
)
Setting up SmartPlant Materials
) 45 mins
SmartPlant Materials Training
)
11.45-12.30
Lunch (60 mins)
12.30-1.30
Procurement Reports
Procurement Status Report
) 30 mins
Procurement Expedition Report
)
1.30-2.00
Procurement Initiation
Procurement initiation
)
Purchasing initiation
) 25 mins
Contracts initiation
)
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Managing Project Procurement Page 5
Topic
Time
Procurement Execution
Materials Management Execution
)
• Materials Management Pre-Award Process
)
• Materials Management Award Process
)
• Materials Management Post-Award Process
)
Contracts Execution
) 20 mins
• Contracts Pre-Award Process
)
• Contracts Award Process
)
• ContractsPost-Award Process
)
Purchase Order and Contracts Variation
)
2.25-2.45
Case study — Group Discussion
30 mins
2.45-3.15
Break (15 mins)
3.15-3.30
Procurement Close-out
Responsibilities for close-out
)
Materials management close-out
) 45 mins
Contracts close-out
)
3.30-4.15
Summary and Feedback
15 mins
INTRODUCTION
Slide 1
1
Welcome to Worley Parsons Project Management
Process (WPMP) Training
Module 9 – Managing Project Procurement
Welcome
• Start on time.
• Welcome participants to the WorleyParsons Project
Procurement Management training.
• Introduce yourself and your role at WorleyParsons.
• Check that everyone has a copy of the Participants Manual.
• Explain that the Participants Manual is a valuable resource
during the training and for the future.
• Explain that the training will be interactive and encourage
participants to interrupt with questions and contribute
examples from their experience.
Expectations
• Ask participants to introduce themselves (ask for a volunteer
then go round the room) – name, role and expectations of
the training.
• Document participants’ expectations on the flipchart
(optional).
Agree Ground Rules
Say that it’s useful to establish ground rules for the session, and
write on flipchart:
• Switch mobiles to off or silent
• Start and finishing on time
• Listen to others
• (Ask participants to contribute other Ground Rules).
• Ask for agreement to Ground Rules.
Safety Moment
Explain the emergency procedures
Slide 2
2
Managing Project Procurement
X Introduction
X Overview of Procurement
X Responsibilities for Procurement
X Commencing the Procurement Process \Procurement Planning
X SmartPlant Materials
X Procurement Reports
X Procurement Initiation
X Procurement Execution
X Procurement Close-out
About this training session
Agenda
Write agenda on flipchart (before the session starts) and
walkthrough topics.
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Managing Project Procurement Page 7
Slide 3
3
Learning Objectives
On completion of this module, you will be able to:
X Identify and understand the procurement methodologies and tools available to Project Managers for the management of EPCM projects
Present and discuss learning objectives.
Slide 4
4
Learning Outcomes
X Early involvement of the Procurement function in project planning is essential
X The project’s procurement strategy and procurement plan must align with the overall project strategy
X Clear definition of the objectives of the Procurement Process is critical for the project team
On completion of this module, you will be able to demonstrate an understanding that:
Present and discuss learning outcomes.
Slide 5
5
X Procurement is an integral part of the WorleyParsons’ growth strategy
X Procurement shall support the company to compete more successfully as a leading provider of professional services worldwide
Procurement in WorleyParsons
Ask participants to explain what they think procurement is.
Discuss procurement in WorleyParsons.
Transition
We have covered our Introduction, and now we will move on to
OVERVIEW OF PROCUREMENT
Slide 6
6
Overview of Procurement
X Procurement is the process by which materials, equipment and third-party services are acquired for projects
X Key procurement interfaces include:
•
Project Management•
Engineering•
HSE•
Quality•
Cost Estimation•
Project Controls•
Construction Management•
Legal & RiskWhat is procurement?
Ask participants what each aspect means. Discuss answers.
Slide 7
7
Overview of Procurement
X At the best possible total cost of ownership
X In the right quantity and quality
X At the right time
X In the right place
X For the direct benefit of the customer
What does procurement involve?
…the acquisition of materials, equipment or third-party services:
Ask participants what does procurement involve?
Slide 8
8
Procurement and Capex
X The Capital Expenditure (Capex) of a Project can be split into a few elements:
•
Engineering and design – approx. 10% of Capex•
Procurement:−Materials and equipment – approx. 30 to 45% of Capex
−Contracts – approx. 30 to 45% of Capex
•
Balance is owners’ costs, insurance, land purchases etcX The above is indicative only and dependent on the type and location of a project. However, on average the Capex element managed by procurement ranges between 60% and 90% of the overall project value
Ask participants what are the elements of Capex.
Slide 9
9
Overview of Procurement
X Procurement is the bridge between Engineering (design) and Construction (execution)
What is the role of procurement in a project?
Ask participants what ‘the bridge between Engineering and
Construction’ means. Discuss answers.
Slide 10
10
Overview of Procurement
X Materials Management
•
Purchasing, Expediting, Materials Control, Coordination of Inspection (liaising with Quality), Traffic/Logistics, Warehousing/ Inventory Control etc•
Legal agreement used is a Purchase OrderX Contracts
•
Acquisition and management of third-party services•
Legal agreement used is a ContractX Both Purchase Orders and Contracts are written and binding legal agreements between relevant parties to supply either goods or services against agreed conditions
Procurement is divided into 2 functions
Explain that there are 2 key functions in procurement.
Explain what:
• Materials Management involves.
• Contracts involves.
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Managing Project Procurement Page 9
Explain that contracts and purchase orders regulate procurement
activities.
Ask participants if they know what the difference is between a
contract and a purchase order.
Discuss participants’ answers.
Slide 11
11
Procurement Executive Directive
X To minimise risk exposure, procurement services are usually provided for and on behalf of Customers, in the Customer’s name or “on Customer paper” – this is the company’s preferred position
X However, this does not preclude provision of procurement services in WorleyParsons’ name or on “WorleyParsons’ paper” – requires CEO to proceed in any event where additional supplier-related risks and liabilities are assumed (eg warranty obligations, delivery commitments, product liability, etc)
X In most instances, procurement services are provided on behalf of the Customer, requiring active interaction with the Customer and their various approvals to proceed
Continue discussion of Contracts.
Slide 12
12
EMS Workflows and Procedures 1/2
X Contracts services cover the provision of third-party services such as construction labor, inspection services, painting and sand blasting
X The provision of contract services is governed by the Contracts Workflow in EMS containing a number of procedures, guidelines, forms and templates
X Preferred Terminology:
•
ITT = Invitation to Tender•
Contract = legal agreement for the provision of servicesContracts
Explain that Contracts is governed by by guidelines, procedures
and forms and is available on EMS V3
These:
• Appiy to all contract situations and cover tendering, bid
evaluation, award, variations, administration, invoicing,
payments, and close-out
• Set out the key interfaces in WorleyParsons between
Engineering; Quality Management; Healthy, Safety and
Environment (HSE); Construction; contractor and
cost-control accounting
Slide 13
13
EMS Workflows and Procedures 2/2
X Materials Management includes the purchasing of goods and equipment, subsequent expediting, inspection and receipt.
X The provision of Materials Management services is governed by the Materials Workflow in EMS containing a number of procedures, guidelines, forms and templates
X Materials Management activities are managed and tracked through SmartPlant Materials, WorleyParsons’ Materials Management system which starts from creation of the requisition through to final material reconciliation on site
X Preferred Terminology:
•
RFQ = Request for Quotation•
Purchase Order (PO) = legal agreement for the supply of goodsMaterials Management
Discuss Materials Management.
Slide 14
14
Overview of Procurement
WorleyParsons procurement process
Pre-award Activities * Materials Management * Contracts
Obtain quotations Select the preferred suppliers Project Procurement Plan
Determine procurement requirements Procurement Initiation Identify potential suppliers Post-award Activities Manage the supplier Administer POs and contracts Manage POs/ contract variation Expediting / Inspection Materials Field Administration
Activities Field Purchasing Transport/ Logistics Receipt on site Warehousing Close-out Activities Conclude the engagement of the
suppliers Record the performance against
each order & contract
Explain that:
• The slide shows the procurement process for Materials
Management. The process for Contracts is essentially the
same. The differences will be explained in the training
where relevant.
• WorleyParsons delivers procurement services through a
suite of well defined business processes.
These processes are listed on page 6 of the Participants Manual.
Transition
We have covered an overview of Procurement. Now we will
RESPONSIBILITIES FOR PROCUREMENT
Slide 15
15
Responsibilities for Procurement
X As Project Manager, you are responsible for the overall management of procurement activities associated with the project
X You are not responsible for the execution of procurement activities That is the responsibility of your Project Procurement Manager
X To fulfill your responsibilities, you should work closely with the Procurement Manager
Explain the Project Manager’s role and responsibilities for project
procurement.
Tell the participants that the Project Manager’s specific
responsibilities are listed on page 9 of the Participants Manual.
Explain that execution of procurement is the responsibility of the
Project Procurement Manager.
Ask the participants to turn to page 9 of their Participants
Manuals. Discuss.
During discussion emphasize the necessity and benefits of taking
advantage of the Procurement team’s knowledge, experience
and world-wide supplier contacts.
Slide 16
16
Responsibilities for Procurement
X Procurement specialists in each region
X Detailed procurement procedures, guidelines and associated documentation
X Deployment of SmartPlant Materials as the company-wide materials control system to record, track and report on procurement activity
X Global supplier database for materials, equipment and services
X Global Sourcing initiatives
X Supply arrangements with key suppliers
WorleyParsons’ procurement capability
Explain WorleyParsons’ procurement capability.
Slide 17
17
X Procurement staff managing the Materials Management and Contracts activities usually:
•
Work either from a core Procurement group in a key company location or•
Form a part of a dedicated project procurement teamX Procurement activities on the project are usually led by an experienced Project Procurement Manager
X Where warehousing staff are required for specific customers or projects, they are usually located on site
X Inspection may involve in-house or third-party inspectors, depending on the location of the inspection activities
Procurement resourcing
Responsibilities for Procurement
Explain WorleyParsons’ procurement resourcing
• At point 1 explain that specialist Procurement staff should be
retained in key company locations.
• At point 2 explain that operationally, the Project
Procurement Manager reports to the Project Manager for
direction of day-to-day matters relating to procurement.
Transition
Get the group to suggest answers to the review questions on
Page 15-16 of Participant’s Manual.
We have covered responsibilities for Procurement. Now we will
move on to discuss commencing the Procurement
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Managing Project Procurement Page 11
COMMENCING THE PROCUREMENT
PROCESS/PROCUREMENT PLANNING
Slide 18
18
Procurement Process
X Establish exactly what the customer requirements are andwhat WorleyParsons has committed to do
X Establish your procurement team and set out their responsibilities
X Procurement to participate in the Project Risk Assessment and ensure that risk mitigation is included in the Procurement Plan to be developed
X Procurement to incorporate appropriate flow-down conditions from the Prime contract (the agreement between Customer and WorleyParsons) in the Project Conditions to ensure compliance and alignment (e.g. including customer’s confidentiality requirements, alignment of warranty periods etc.)
X Procurement to develop the project procurement procedures, based on EMS but incorporating as appropriate Customer’s requirements (e.g. approval interfaces)
X Arrange to have the project set up on SmartPlant Materials
X Ensure WBS is established
Commencing the procurement process for a project
Explain that Project Managers are setting the basis under which
procurement activities will be conducted.
Explain that the details that need to be considered for the
procurement plan include:
• Major items of materials, equipment and third-party services
that will be required
• The criticality and value of the goods and services that need
to be procured
• Major risks mitigation measures that need to be developed
• Market pressures that might impact on delivery times of
critical equipment and hence priority of procurement
activities.
Slide 19
19
Procurement Planning
X Planning is at the crux of all project activities
X Procurement is no exception
X The aim of procurement planning is to:
•
Know what needs to be procured, when, where and how•
Identify critical long lead items and services•
Establish order and consistency in the way the procurement activities are performed•
Understand the risks involved in the project environment and identify mitigating actionsX The Project Procurement Plan is part of the Project Execution Plan
Planning
Emphasize the:
• Importance of planning
• Criticality of project procurement planning in overall project
planning.
Slide 20
20
Procurement & Risk Management
X Procurement is an integral part of risk management on the project
•Develop appropriate procurement/ contracts/ materials management strategies, identifying the various risks (market, forex, local content requirements, taxation and importation issues, logistics complexities, etc. to be managed)
•Use EMS procurement procedures to the largest extent, however, recognize Customer requirements in the project specific procedure.
•Ensure that the project specific procurement procedures are approved by the customer and shared with the project procurement team
•Develop the procurement schedule early, in line with the overall project schedule, resulting in correct priorities to achieve the Required on Site Dates
Continue discussion of planning.
Slide 21
21
Procurement Planning
What you need to plan for
Discuss the procurement bridge with regard to component
activities in:
• Planning.
• Materials Management.
• Contracts.
Slide 22
Discuss the strategy development and detailed plan development
phases of procurement planning.
Slide 23
23
Procurement Planning
X Project Procurement Strategy (PPS) is the:
•
Process for identifying and documenting the procurement opportunities applicable to the project•
First step in developing the Project Procurement PlanX Typically, the PPS is first developed during the scoping stages of a project
X Sometimes the customer provides the initial procurement strategy for further development in the Project Procurement Plan
Project Procurement Strategy
Introduce the concept of a Project Procurement Strategy.
Slide 24
24
Procurement Planning
X Purchasing activities can involve long lead times
X Certain materials and equipment may be particularly critical to a project’s success
X Purchasing activities usually involve multiple countries (infrastructure and logistics, local legislation etc.)
X Market and technology developments can impact on the success of a project and therefore need to be monitored on an ongoing basis
During the development of the PPS, the following factors need to be considered:
Project Procurement Strategy
Discuss the factors that need to be considered when developing
a Project Procurement Strategy.
Slide 25
25
Procurement Planning
X The PPS is a hierarchical matrix covering the entire work scope of a project, broken down into separate ‘work packages’
X Only the major critical items are separately identified as work packages
X These packages are created and identified according to:
•
Unique technical and commercial attributes of the work activities they comprise•
Methods by which they are to be executedProject Procurement Strategy
Continue discussion of the factors that need to be considered
when developing a Project Procurement Strategy.
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Managing Project Procurement Page 13
Slide 26
26Procurement Planning
Example of a PPS matrix N/A Contract Part of Supplier B Purchase Order Part of Supplier A Purchase Order Commissioning / Start-up AssistancePart of Project Management Services Specialist Quality Contract – All-in
rates – $10m Quality Inspection
Installation Contract – Lump Sum – $10m Construction / Erection Services
Materials Control Construction Contract –Reimbursable Cost and Equipment Rates with Incentives Fee - $100M total Fabrication Specialist Supplier B – Lump Sum Purchase Order – $100m total Specialist Supplier A – Lump Sum Purchase Order – $200m total Procurement
Facilities E & P Contract – Reimbursable Costs with Fixed Fee – $30m total Design Contract – Lump Sum – $10m Design
Project Management Services Contractor – Reimbursable Costs with Incentives Fee – $ 70m total
Project Management Civil Works Balance of Plant Special Equipment Item B Special Equipment Item A Components Physical ⇒ ⇓ Discipline
Explain purpose and structure of the Project Procurement
Strategy.
Explain that
• The PPS should be structured in a manner and contain
information that allows it to be used to:
o
Develop alternative ways of structuring work packages
and executing the project.
o
Analyze trade-offs between the size of work packages,
resource availability and the number of interfaces
required.
o
Interpret and illustrate the interfaces between various
work packages and those responsible for executing
them.
• It must show how the project’s procurement activities
(Materials Management and Contracts) interface with other
work activities of the control, organization, technical and
construction functions.
Explain that a Project Procurement Strategy template is included
in the Project Procurement Plan Template (PPF-0102) EMS V3.
Slide 27
27
Procurement Planning
X The structure of the PPSdepends on the:
•
Scope of work•
Nature and complexity of the project•
Requirements of the customerX The PPS assists in:
•
Administrative and commercial planning•
Cost/schedule control functions of a projectProject Procurement Strategy
Discuss the other uses of the Project Procurement Strategy.
Slide 28
Summarize by explaining the benefits of developing a Project
Procurement Strategy.
Explain how the Project Procurement Strategy:
• Can be used to facilitate communication between the
various project disciplines/departments
• Provides strategic input to the cost estimating, scheduling
and supplier administration activities.
Invite questions and/or ask review questions on page 21 of the
Participants Manual.
Slide 29
Explain at what stage of the WPMP the Project Procurement
Plan is developed.
Slide 30
Discuss what sort of planning takes place in the various WPMP
phases to emphasise the role/difference between the Project
Procurement Strategy and the Project Procurement Plan.
Slide 31
31
Procurement Planning
X Documents the basis for obtaining and managing materials, equipment and third-party services required for project execution
X Addresses relevant aspects of both materials management and contracts for the project
X Maps out the various anticipated risks and constraints and identified mitigating actions
X Identifies critical supplies (see also Procurement Strategy) and outlines general strategy
X Ensures that the procurement activities align with the overall project schedule
Project Procurement Plan
Explain that the Project Procurement Plan:
• Identifies the materials, equipment and third-party services
required to execute the project
• Specifies the methodologies and commercial basis for
procuring third-party services
• Provides procurement input to other parts of the project,
such as scheduling, cost estimating, finance and risk
assessment to enable completion of their Identify, Evaluate
or Define phase deliverables
Discuss the components of the Project Procurement Plan:
• The Project Procurement Strategy (PPS)
• Identification of the materials, equipment and third-party
services required (with emphasis on long-lead and critical
items)
• Review of the current market situation, supply options,
foreign exchange considerations, etc for the materials,
equipment and third-party services identified
• Identification of the procurement organizational structure
• Early preparation of project vendor and contractor bid lists
• Identification of major procurement risks or issues, and
mitigation measures that can be put in place
• Other deliverables specified by the customer.
Slide 32
32
Procurement Planning
X The Project Procurement Plan:
•
Must clearly define the deliverables of the procurement process•
Needs to be ‘fit for its purpose’ Project Procurement PlanDiscuss the criteria for a good Project Procurement Plan.
Explain fitness for purpose, ie, the degree of details should
reflect the:
• Scope of the work
• Nature, requirements and scale of the project
• Requirements of the customer, WorleyParsons’ scope of
work and the nature and complexity of the project.
Slide 33
33
Procurement Planning
X The Project Procurement Plan may also include details about the targeting of procurement efforts
X The Project Procurement Manager will consider the assessment in the strategy development
Criticality-Value Assessment
Project Procurement Plan
Bottleneck, e.g. special alloy steel grade Ensure continuity Develop alternatives Revise specifications
Critical, e.g. turbine compressor Form closer relationships Direct negotiations
Routine, e.g. piping bulk blanket orders Simplify procurement process Automate Rationalise supplier base
Leverage, e.g. customer’s standard agreement Maximise commercial advantage Competitive tender Standardisation Criticality Low Low High Value Potential High
Explain that the Project Procurement Plan needs to assess the
criticality of procured items.
Show the Criticality-Value matrix. Discuss.
Explain the criticality-value assessment for procurement is
different to the engineering criticality assessment that determines
the levels of inspection. Discuss.
Invite answers to review questions on Page 25 of Participants
Manual.
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Managing Project Procurement Page 15
Slide 34
34
Procurement Planning
Project Procurement Plan
XWhere the complexity and / or size of the project warrant it, the Project Procurement Plan may be further developed in separate plans:
•
A detailed Project Materials Management Plan•
Separate detailed Project Contracts Plan for major contract packages•
Separate detailed Procurement Plans for key procurement packages• Explain that the Project Procurement Plan has 2
components, to deal separately with:
o
Materials and equipment (Materials Management)
o
Third-party services (Contracts)
• Explain that for large or complex projects a Project
Procurement Plan may need to be broken separate:
o
Project Materials Management Plan(s)
o
Project Contracts Plan(s)
Slide 35
35
Procurement Planning
The various elements of the Procurement Plan are further defined in the Materials Management Plan, including:
X Specific strategies for buying materials and equipment
X Associated activities for managing the expediting, traffic/logistics etc
X The materials control and reporting systems
X Prioritization of procurement activities and associated engineering deliverables in line with the ROS (Required on Site dates) as defined in the project schedule
Materials Management planning
Explain the purpose of the Materials Management Plan.
Explain (again) that the Materials Management Plan:
• Can be a subset of the Project Procurement Plan or
• For complex projects, can be a separate plan.
Slide 36
36
Procurement Planning
X Level of procurement effort based on cost, schedule, criticality, and other relevant factors
X POs/activities already executed and/or underway prior to engagement of WorleyParsons
X Transition of early purchase agreements from the customer
X Material control systems
X Quality management, verification and inspection, which includes an outline of inspection to be undertaken
X Site materials management plans
Materials Management planning (cont’d)
Discuss what Materials Management planning focused on.
Discuss criticality in terms of:
• Schedule
• Financial profitability
• Safety
• Design/execution efficiency
• Manufacturing complexity.
Explain that consolidation can be within the project or with other
projects.
Slide 37
37
Procurement Planning
Subsets of the Material Management Plan
X Engineered equipment planning
X Bulk materials planning
X Prefabrication planning and modularization
Materials Management planning
Explain that prioritization and level of procurement effort based
on cost, schedule, criticality, and other relevant factors.
Introduce the categories of materials and equipment that need to
be considered separately in the development of the Materials
Management Plan.
Slide 38
38
Procurement Planning
X The primary objective is to ensure that items are acquired and released in time to meet the overall project schedule
X The dates on which items are required on site to meet construction needs drive the engineering and procurement planning and activity for engineered equipment
X A major equipment list for the project needs to be developed early
Engineered equipment planning
Briefly discuss engineered equipment planning.
Explain some of the drivers for engineered equipment Planning
• ROS dates
• Lead times for supplier data and fabrication
• Milestones required in the acquisition process for
engineered items
Slide 39
39
Procurement Planning
X Planning for bulk materials can be more complex than planning for engineered equipment
X Bulk materials control starts with an examination of the project schedule to assess:
•
What bulk materials are required over time•
Critical required on site (ROS) datesBulk material planning
Briefly discuss bulk materials planning.
Explain that quantities required are never exactly known until the
job is complete.
Explain that planning for acquiring bulk materials should also
evaluate opportunities to consolidate purchases and establish
POs to take advantage of volume discounts.
Slide 40
40
Procurement Planning
X Procurement planning:
•
Is usually very complex for extensive prefabrication•
modularization often involving multiple sitesX An extensive prefabrication program demands an early procurement planning effort that addresses the interfaces between vendors, fabricators and site construction
Prefabrication planning and modularization
Briefly discuss prefabrication planning and modularization.
Slide 41
41
Procurement Planning
X The Contracts Plan can be:
•
Subset of the Project Procurement Plan or•
Separate plans—complex projectsX The main focus of project contracts planning is the selection the best contractor under the best available terms and conditions
X Needs to:
•
Analyze the options and the marketplace for the required services•
Define the number, type, scope, timing, interfaces, compensation basis, etc of major contracts to be developed for the project from early planning through start-upContracts planning
Explain the purpose of the Contracts Plan.
Invite answers to review questions on Page 28 of Participants
Manual.
Slide 42
42
Procurement Planning
X For Projects in the Definephase the Project Contracts Plan needs to document:
•
Critical contracting issues (e.g. labour resource constraints, market constraints) for the major contracts•
How will the impact be managed and the risk mitigated?•
What is the schedule to meet timely completion of the Project?Contracts Planning in Define Phase
Explain what types of matters need to be considered in the early
stages of developing a Contracts Strategy/Plan.
Emphasise the following points for the Define phase:
• Detailed individual contract bidder’s lists applicable to each
of the major contracts
• The number, scope, estimated value and timing for each
contract
• Critical or long duration contracts requiring special attention
• Pre-qualification approach to bidder selection
• Contractor selection criteria
• Interfaces with other functions
• Other considerations based on the latest construction
work-hour/ schedule estimates.
Summarize the major contracting issues for the project and
actions necessary to address them.
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Slide 43
43
Procurement Planning
X For Projects in the Executephase, the Project Contracts Plan review the constraints and identify mitigation measures similar to the Define phase projects but not just for major contracts.
•
All anticipated contracts are identified.•
If the project is a continuation of a Define phase project, the Contracts Plan developed for the Define phase will be reviewed and updated by the Project Procurement Manager to reflect project progress and significant new developmentsX A list of matters that typically need to be considered are listed on page 32 of the participants manual
Contracts Planning in Execute Phase
Explain that Contracts planning takes place during the Execute
phase of a project.
Slide 44
44
Procurement Planning
X The customer must approve the Project Procurement Plan as part of the Project Execution Plan
Approving the Project Procurement Plan
Explain that the Project Procurement Plan is approved by the
customer as part of the Project Execution Plan.
Invite questions and/or ask review questions on page 33 of the
Participants Manual.
Transition
We have covered commencing the Procurement
process/Procurement planning. We will now discuss SmartPlant
materials.
SMARTPLANT MATERIALS
Slide 45
45
SmartPlant Materials
X WorleyParsons uses a suite of project management systems torecord, track, control and report on projects
Introduce WorleyParsons Business Management Systems and
SmartPlant Materials.
Explain that SmartPlant Materials’ functionality is covered in
greater detail in module 4, Business Management Systems.
Slide 46
46
SmartPlant Materials
X SmartPlant Materials is used to:•
Identify•
Record•
Trackmaterials and equipment required and purchased for a project
Explain SmartPlant Materials’ functions for Procurement.
Slide 47
47
SmartPlant Materials
SmartPlant Materials has four integrated modules, which are described on page 36 of the workbook
Explain that SmartPlant Materials has four integrated modules.
Slide 48
48
SmartPlant Materials
X Maintains the Material Stock Code catalogueX Generates bulk requisitions via interface to design systems (e.g. PDS)
X Generates equipment and services requisitions
X Preparation of RFQs
X Supports bid evaluations
X Creates and, if required, amends POs
X Facilitates expediting
X Facilitates Traffic/Logistics
X Facilitates stores management
X Can undertake invoice reconciliation via Invoice Matching Interface module
Tell participants that a brief description of the modules is
provided on page 36 of the Participants Manual.
Slide 49
49
SmartPlant Materials
X SmartPlant Materials imports bills of materials from 2-D/3-D engineeringdesign software and other sources
X SmartPlant Materials supports better material planning on site and material reconciliation through the ability to track imported bills of materials from Requisition to Material Issue
X Materials are identified as being in any of the following phases:
•Requisition •RFQ •Purchasing •Expediting •Shipping •Warehouse receipt •Storage •Material Issue
Explain that SmartPlant Materials imports bills of materials from
2-D/3-E engineering design software.
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Slide 50
50
SmartPlant Materials
X SmartPlant Materials was designed as a system for controlling materials and equipment, not for administering contracts
X SmartPlant Materials can, however, be used to record basic information about contracts
Using SmartPlant Materials for recording and tracking contracts
Explain that SmartPlant Materials is used chiefly for recording
and tracking materials and equipment.
Explain that SmartPlant Materials’ functionality for contracts
tracking is limited.
Briefly explain how contracts are tracked.
Slide 51
51
SmartPlant Materials
X Each individual project needs to be set up in SmartPlant Materials so that its procurement activities can be recorded, monitored and reported
X SmartPlant Materials should be set up as soon as the Project Procurement Plan or Materials Management Plan has been approved
X You are responsible for ensuring that SmartPlant Materials is set up properly
X You work with the project Procurement Manager to identify and obtain the information for the set up
Setting up SmartPlant Materials for a project
Explain setting up SmartPlant Materials for a project.
Say this is done so that so that its procurement activities can be
recorded, monitored and reported.
Explain that two important principles apply to the setup and use
of SmartPlant Materials:
• It is important to set up SmartPlant Materials as early as is
practicable to ensure that potential critical materials
procurement issues (for example, bulk materials
requirements, control of materials from supplier to fabricator
to project site) are identified and appropriately addressed
• Clear definition of the deliverables in SmartPlant Materials
underlies effective project procurement reporting.
Slide 52
52
SmartPlant Materials—Training
X When you need to start using SmartPlant Materials, you will receive specific training on how to use it
X Contact the Business Systems Group to arrange the training
Training in SmartPlant Materials
Explain that project managers will be provided in training in how
to use SmartPlant Materials.
Invite questions and/or ask review questions on page 42 of the
Participants Manual.
Transition
We have covered SmartPlant materials. Now we will move on to
PROCUREMENT REPORTS
Slide 53
53
Procurement Reports
X Procurement activities are monitored and reviewed regularly
X SmartPlant Materials generates a range of reports which you use to monitor progress and identify actions to be taken to address issues
X Two particularly important reports for the management of procurement activities are the:
•
Procurement Status Report•
Procurement Expediting Report Procurement reportsExplain that SmartPlant Materials produces reports.
Introduce the:
• Procurement Status Report
• Procurement Expedition Report.
Explain that the Project Procurement Manager is responsible for
providing these reports to the Project Manager.
Explain that the Project Manager and the Project Procurement
Manager, together, must review the reports regularly, and take
appropriate action on any issues identified.
Handout sample reports:
• Procurement Status Report.
• Procurement Expedition Report.
Discuss the sample reports.
Transition
We have covered Procurement reports. Now we will move on to
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Managing Project Procurement Page 21
PROCUREMENT INITIATION
Slide 54
54
Procurement Initiation
X The Project Procurement Manager is responsible for completing the activities that enable purchasing and contracts to be initiated
X The initiation activities should be completed during the early stages of the project
X The initiation activities are:
•Purchasing initiation
•Contracts initiation and formulation
X Part of the initiation activities is the development of the Project terms and conditions for purchase orders and contracts.
•These may be provided by the Customer as we will typically be acting on their behalf.
•The conditions shall be checked for alignment with the Prime contract.
Overview of procurement initiation
Explain that the Project Procurement Manager is responsible for
project initiation.
Explain that this session is an overview of project initiation.
Emphasise that when initiating procurement you need to think
through your close-out requirements.
Slide 55
55
X Purchasing initiation involves setting up the project base for the Purchasing documentation and databases
X The main activities are:
•
Identifying PO provisions (including standard Terms and Conditions)•
Preparing standard documentation, including Instructions to Bidders, master Request for Quotation, master purchase order document•
Carrying out vendor pre-qualification•
Establishing a project vendor listOverview of purchasing initiation (Materials Management)
Procurement Initiation
Explain that the Project Procurement Manager is responsible for
project initiation.
Explain that this session is an overview of project initiation.
Slide 56
56
X Contract initiation and formulation involves:
•
Setting up the project base for contracts documentation (including standard Terms and Conditions)•
Establishing the contracts system for the projectX The main activities are:
•
Establishing the contract types, sites conditions, HSE etc•
Preparing common enquiry requirements and special contract provisions•
Carrying out contractor pre-qualifications•
Establishing the contractor listOverview of Contracts initiation and formulation
Procurement Initiation
Briefly describe Purchasing initiation.
Briefly describe Contracts initiation.
Discuss importance of early establishment of agreed Terms and
Conditions.
Transition
We have covered Procurement initiation. Now we will move on
PROCUREMENT EXECUTION
Slide 57
57
Procurement Execution
X All procurement execution activities are undertaken by the Project Procurement Manager and the Procurement team
X You are responsible for ensuring that the procurement activities are executed in accordance with the Project Procurement Plan
X You and your Project Procurement Manager need to hold regular meetings to:
•
Review the status of procurement activities•
Identify issues early and determine the action required to minimize any adverse impactOverview of procurement execution
Explain that the Project Procurement Manager is responsible for
project execution.
Explain that this session is an overview of project execution.
Explain that project execution consists of:
• Pre-award activities.
• Award Activities.
• Post-award activities.
Explain that pre-award activities:
• Cover the technical and commercial activities in the
procurement of a project’s materials and equipment
• Span from Engineering’s specification of the requirement to
award of a PO to the selected vendor.
Explain the Project Manager’s and Procurement Manager’s
responsibilities for procurement execution. Discuss.
Slide 58
58
Procurement Execution
X The purpose of the Purchasing Pre-award Process is to award the POs under which the project’s materials and equipment are obtained
X The pre-award process ensures that all bidders are treated fairly and equitable, that the confidentiality of the information is maintained and that the recommendation to award is in accordance with the agreed evaluation criteria
•Agreed evaluation criteria may be as simple as ‘Technically acceptable, lowest cost’ or more complex ‘Total Cost of Ownership’ (TCO). Consider that TCO often requires Customer input as well.
•Competitive bidding is indicated. However, if single source is considered for purchase orders, justification must be provided. This may include proprietary technology or customer’s standardisation preference.
X Project Purchasing pre-award activities occur predominantly during the Execution phase
X For long-lead items some activities may occur in the Define phase
Materials Management execution—purchasing pre-award process
Materials management execution – purchasing pre-award
process
Explain why the Materials Management pre-award process is
critical.
Explain that the Procurement team implements the pre-award
purchasing process.
Slide 59
59
Procurement Execution
X Preparing enquiry packages, including special terms and requirements (for example, supplier data, support, spares)
X Issuing the enquiry packages and managing bid preparation and receipt process
X Managing all communications with bidders during bidding and evaluation
X Evaluating the bids
X Preparing recommendations for award, conducting post-bid negotiation and facilitating final issue
X Entering all data related to the purchases into SmartPlant Materials
Materials Management execution—purchasing pre-award process
Explain how the pre-award process is implemented.
Emphasise need to build all requirements (eg documentation,
reporting, inspection, etc) into the RFQ. It will cost more
post-award.
Slide 60
60
Procurement Execution
X Maintains the required level of confidentiality of information
X Ensures that engineering deliverables are aligned to support timely procurement activities
X Maintains the interfaces between Engineering, Quality and Construction
X Involves the Project Procurement Manager in the regular team progress meetings
X Undertakes and completes procurement activities in accordance with the Project Procurement Plan
Materials Management execution—purchasing pre-award process
As Project Manager, you will need to ensure that the procurement team:
Discuss the Project Manager’s and Procurement Manager’s
responsibilities.
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Slide 61
61
Procurement Execution
X Purchase Order documents are to be prepared by Engineering and Procurement on receipt of the approved Award Recommendation
X Kick-off meetings are arranged as required
X Post-award activities are initiated by the project procurement team
X Once internal and other approvals have been obtained to place a contract or a PO theProcurement Manager is the only person with the authority to confirm the commitment for the contract or PO with the supplier on behalf of WorleyParsons and/or our customers
Materials Management execution—purchasing award process
Materials management execution – purchasing award
process
Discuss the Procurement Manager’s responsibilities.
Explain that the procurement team is responsible for ensuring
compliance with the PO contractual requirements, as consistent
with prioritized project objectives.
Slide 62
62
Procurement Execution
X Confirm that the cost of the awarded POs is within the project budget
X Provide relevant information to the project’s Cost Controls Manager
Materials Management execution—purchasing award process
You are responsible for ensuring that the award process is properly undertaken
You need to:
Discuss the Project Manager’s responsibilities.
Slide 63
63
Procurement Execution
X This process covers award of a PO through to receipt at site and financial close-out
X The purpose of the Purchasing Post-award Process is to:
•
Administer the POs to obtain the project’s materials and equipment on schedule and in accordance with specifications•
Provide cost and schedule information to Project Services•
Identify PO issues for Risk Management activities•
Liaise with Inspection to ensure compliance to specificationsX The Purchasing Post-award Process covers the technical and commercial activities in the manufacture and delivery of materials and equipment
X Ensure all meetings and vendor contact are coordinated by Procurement.
Materials Management execution—purchasing post-award process
Materials management execution – purchasing post-award
process
Explain the post-award activities.
Explain that the aim of the post-award process is to receive at
the specified location, materials and equipment, and associated
supplier data covered by the PO at the cost, in accordance with
the technical specification and on the date for delivery specified.
Slide 64
64
Procurement Execution
The main activities in the Purchasing Post-award Process are:
X Expediting (including Supplier documentation)
X Inspection coordination
X Traffic/Logistics
X Receiving on site, warehousing and preservation
X Change/Claim administration
X Invoice payment
Materials Management execution—purchasing post-award process
Explain the requirements for effective post-award performance
management.
Slide 65
65
Procurement Execution
Effective procurement performance requires:
X Use of SmartPlant Materials
X Monitoring the vendor’s engineering and manufacturing processes
X Meeting documentation obligations
X Measuring and assuring conformance to the technical specification
X Administering delivery of the materials and equipment
X Managing any changes to the PO technical and commercial provisions
X Managing any claims by the vendor for additional payment or schedule time
Slide 66
66
Procurement Execution
X The Construction Manager involves the Project Procurement Manager in construction progress review meeting
Materials Management execution—purchasing post-award process
As Project Manager you are responsible for ensuring that:
X For most items, weekly status meetings are sufficient
X For critical items, daily review meetings between the Construction and Procurement Managers may be required
Discuss the Project Manager’s responsibilities for post-award
procurement activities.
Emphasise the need for the Procurement team to keep
up-to-date with the project procurement needs, including any changes
to the project affective procurement activities.
Slide 67
67
Procurement Execution
X The Materials Field Administration Process governs the day-to-day procurement activities on site
X The actual administration is the responsibility of your Project Procurement Manager
X Materials Field Administration may include site administration, purchasing and contracting
Materials Management execution—purchasing materials field administration process
You are responsible for ensuring that the requirements for materials field administration are included in the Project Procurement Plan
Materials management execution – purchasing materials
field administration process
Explain that the post-award procurement activities include field
administration.
Slide 68
68
Procurement Execution
X The purpose of the Contracts Pre-award Process is the contracting of third-party services
X Project Contracts pre-award activities predominantly occur during the Execution phase
X For early contracts, some activities may occur in the Define phase
X The deliverables of the Contracts Pre-award Process are:
•
Bidders lists•
Enquiry packages•
Approved recommendations for award•
Contract documentsX Cost and schedule information provided to Project Services and contracts issues input into Risk Management activities
Contracts execution—contract pre-award process
Contracts execution – contracts pre-award process
Explain why the contracts pre-award process is critical.
Emphasise importance of specifying all requirements (eg HSE,
documentation, reporting, inspection, etc) in ITT. It will cost more
post-award.
Slide 69
69
Procurement Execution
Contractor selection
X A thorough prequalification process will normally be executed for major contracts, e.g. fabrication contracts. This will involve multiple disciplines to prepare the questionnaire for the relevant work scope, typically including construction, engineering, quality, HSE as well as project controls and procurement.
X Competitive, sealed bids are indicated for major contracts
X If single source is considered for service contracts, justification must be provided. This may include proprietary technology (e.g. software) or customer’s preference.
X Once internal and other approvals have been obtained to place a contract or a PO theProcurement Manager is the only person with the authority to confirm the commitment for the contract or PO with the supplier on behalf of WorleyParsons and/or our customers
Contracts execution—contract award process
Contracts execution – contract award process
Discuss contractor selection.
Slide 70
70
Procurement Execution
X The Contracts Post-award Process covers the technical and commercial activities
X The main activities are:
•
Awarding contracts•
Administering and monitoring the contractors•
Managing any changes to the contract•
Managing any claims•
Processing any payments and back charges, reconciling quantities and finalizing all contract obligations•
Providing cost and schedule information to Project Services•
Identifying any contracts issues for Risk Management activitiesContracts execution—contracts post-award process
Contracts execution – contracts post-award process
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Slide 71
71
Procurement Execution
X PO and contract variation must be processed in accordance with the Management of Project Change Process
X You and the Procurement Manager must sign-off any variances before they can take effect
Purchase order and contracts variation
Purchase order and contracts variation
Explain the process for contract variation.
Invite questions and/or ask review questions on page 54 of the
Participants Manual.
Slide 72
72
X The scenario for the case study is on page 55 of your workbooks
Discussion topics:
X What would you say are the key procurement issues on the project?
X What can be done to remedy the situation?
Case study—group discussion
