Module 9 - Managing Project Procurement - Facilitator Guide Rev 2
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Description
Managing Project Procurement Facilitator Guide Module 9
© 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
A
Initial draft
1
Reissued for Use
2
Reissued for Use
Review
WorleyParsons Approval
Date
Jane Woodhead
Greta Ooms
Mike Reilly
7/12/07
Mike Reilly
Greta Ooms
Mike Reilly
30/10/08
Orig Joslin Guest
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 Summary and Feedback ........................................................................................... 27
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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:
Rev 2
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
¾
Module 10
Construction Management and Management of Site Contracts
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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 For a sample Agenda, see page, see page 4.
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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 Chocolate for prizes (optional)
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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 Introduction About this training session ) Learning Objectives ) 20 mins Learning Outcomes ) Agenda – Module 9 Managing Project Procurement ) Overview of Procurement What is procurement? ) What does procurement involve? ) 30 mins What is the role of procurement in a project ) Responsibilities for Procurement WorleyParsons’ procurement capability ) 15 mins Procurement Resourcing ) Commencing the Procurement Process/Procurement Planning Commencing the Procurement Process for a Project 15 mins Procurement Planning ) 20 mins Procurement Strategy ) Break (15 mins) Procurement Strategy (continued) ) Project Procurement Plan ) Materials Management Planning ) 60 mins Contracts Planning ) Approving the Project Procurement Plan ) SmartPlant Materials Using SmartPlant Materials to record and track projects ) Setting up SmartPlant Materials ) 45 mins SmartPlant Materials Training ) Lunch (60 mins) Procurement Reports Procurement Status Report ) 30 mins Procurement Expedition Report ) Procurement Initiation Procurement initiation ) Purchasing initiation ) 25 mins Contracts initiation )
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Managing Project Procurement
Time 9.00-9.20
9.20-9.40
9.40-9.55
9.55-10.10 10.10-10.30 10.30-10.45 10.45-11.45
11.45-12.30
12.30-1.30 1.30-2.00
2.00-2.25
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Topic 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 ) Case study — Group Discussion 30 mins Break (15 mins) Procurement Close-out Responsibilities for close-out ) Materials management close-out ) 45 mins Contracts close-out ) Summary and Feedback Summary and Feedback 15 mins
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Time 2.25-2.45
2.45-3.15 3.15-3.30 3.30-4.15
15 mins 4.15-4.30
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INTRODUCTION Welcome to Worley Parsons Project Management Process (WPMP) Training
Slide 1
Module 9 – Managing Project Procurement
1
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
Managing Project Procurement About this training session
Slide 2
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
Agenda Write agenda on flipchart (before the session starts) and walkthrough topics.
2
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Learning Objectives
Slide 3
Present and discuss learning objectives.
On completion of this module, you will be able to: Identify and understand the procurement methodologies and tools available to Project Managers for the management of EPCM projects
X
3
Learning Outcomes
Present and discuss learning outcomes.
On completion of this module, you will be able to demonstrate an understanding that:
Slide 4
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
4
Procurement in WorleyParsons
Slide 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
Ask participants to explain what they think procurement is. Discuss procurement in WorleyParsons.
5
Transition
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We have covered our Introduction, and now we will move on to discuss an overview of Procurement.
Managing Project Procurement
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OVERVIEW OF PROCUREMENT Overview of Procurement
Ask participants what each aspect means. Discuss answers.
What is procurement?
Slide 6
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 & Risk
6
Overview of Procurement
Ask participants what does procurement involve?
What does procurement involve?
Slide 7
…the acquisition of materials, equipment or third-party services: 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
7
Procurement and Capex
Slide 8
X
X
Ask participants what are the elements of Capex.
The Capital Expenditure (Capex) of a Project can be split into a few elements:
• •
Engineering and design – approx. 10% of Capex
•
Balance is owners’ costs, insurance, land purchases etc
Procurement: − Materials and equipment – approx. 30 to 45% of Capex − Contracts – approx. 30 to 45% of Capex
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
8
Overview of Procurement What is the role of procurement in a project?
Slide 9
X
Ask participants what ‘the bridge between Engineering and Construction’ means. Discuss answers.
Procurement is the bridge between Engineering (design) and Construction (execution)
9
Overview of Procurement Procurement is divided into 2 functions
Slide 10
X
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 Order
Contracts
• • X
Explain that there are 2 key functions in procurement. Explain what: • Materials Management involves. • Contracts involves.
Acquisition and management of third-party services Legal agreement used is a Contract
Both Purchase Orders and Contracts are written and binding legal agreements between relevant parties to supply either goods or services against agreed conditions
10
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Procurement Executive Directive
Slide 11
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
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. Continue discussion of Contracts.
11
EMS Workflows and Procedures 1/2 Contracts
Slide 12
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 services
12
EMS Workflows and Procedures 2/2
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 costcontrol accounting Discuss Materials Management.
Materials Management
Slide 13
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:
13
• •
RFQ = Request for Quotation Purchase Order (PO) = legal agreement for the supply of goods
Overview of Procurement WorleyParsons procurement process Project Procurement Plan Determine procurement requirements
Slide 14 Close-out Activities
Procurement Initiation
Conclude the engagement of the suppliers Record the performance against each order & contract
Identify potential suppliers
Materials Field Administration Activities
Pre-award Activities * Materials Management * Contracts
Field Purchasing Transport/ Logistics Receipt on site Warehousing
Obtain quotations Select the preferred suppliers
Post-award Activities
14
Transition
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Manage the supplier Administer POs and contracts Manage POs/ contract variation Expediting/ Inspection
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. We have covered an overview of Procurement. Now we will move on to discuss the responsibilities for Procurement.
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RESPONSIBILITIES FOR PROCUREMENT 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
Slide 15
That is the responsibility of your Project Procurement Manager X
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.
To fulfill your responsibilities, you should work closely with the Procurement Manager
Explain that execution of procurement is the responsibility of the Project Procurement Manager. 15
Ask the participants to turn to page 9 of their Participants Manuals. Discuss.
Responsibilities for Procurement
During discussion emphasize the necessity and benefits of taking advantage of the Procurement team’s knowledge, experience and world-wide supplier contacts. Explain WorleyParsons’ procurement capability.
WorleyParsons’ procurement capability
Slide 16
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
16
Responsibilities for Procurement Procurement resourcing
Slide 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 team
X
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
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.
17
Transition
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Managing Project Procurement
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 process/Procurement planning.
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COMMENCING THE PROCUREMENT PROCESS/PROCUREMENT PLANNING Procurement Process Commencing the procurement process for a project
Slide 18
X
Establish exactly what the customer requirements are and what 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 18
Ensure WBS is established
Procurement Planning Planning
Slide 19
X
Planning is at the crux of all project activities
X
Procurement is no exception
X
The aim of procurement planning is to:
X
•
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 actions
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. Emphasize the: • Importance of planning • Criticality of project procurement planning in overall project planning.
The Project Procurement Plan is part of the Project Execution Plan
19
Procurement & Risk Management
Slide 20
X
Continue discussion of planning.
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
20
Procurement Planning What you need to plan for
Slide 21
Discuss the procurement bridge with regard to component activities in: • Planning. • Materials Management. • Contracts.
21
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Discuss the strategy development and detailed plan development phases of procurement planning. Slide 22
Procurement Planning
Introduce the concept of a Project Procurement Strategy.
Project Procurement Strategy
Slide 23
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 Plan
X
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
23
Procurement Planning
Discuss the factors that need to be considered when developing a Project Procurement Strategy.
Project Procurement Strategy
Slide 24
During the development of the PPS, the following factors need to be considered: 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 24
Procurement Planning
Continue discussion of the factors that need to be considered when developing a Project Procurement Strategy.
Project Procurement Strategy
Slide 25
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 executed
25
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Procurement Planning Example of a PPS matrix Components Physical ⇒
Slide 26
⇓ Discipline
Special Equipment Item A
Special Equipment Item B
Balance of Plant
Civil Works
Project Management
Project Management Services Contractor – Reimbursable Costs with Incentives Fee – $ 70m total
Design
Design Contract – Lump Sum – $10m
Procurement
Materials Control
Specialist Supplier A – Lump Sum Purchase Order – $200m total
Construction / Erection Services
Installation Contract – Lump Sum – $10m
Quality Inspection
Specialist Quality Contract – All-in rates – $10m
Part of Project Management Services
Commissioning / Start-up Assistance
Part of Supplier A Purchase Order
Contract
Fabrication
Specialist Supplier B – Lump Sum Purchase Order – $100m total
Part of Supplier B Purchase Order
Explain purpose and structure of the Project Procurement Strategy.
Facilities E & P Contract – Reimbursable Costs with Fixed Fee – $30m total Construction Contract – Reimbursable Cost and Equipment Rates with Incentives Fee - $100M total
N/A
26
Procurement Planning
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. Discuss the other uses of the Project Procurement Strategy.
Project Procurement Strategy
Slide 27
X
X
The structure of the PPS depends on the:
•
Scope of work
•
Nature and complexity of the project
•
Requirements of the customer
The PPS assists in:
• •
Administrative and commercial planning Cost/schedule control functions of a project
27
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. Explain at what stage of the WPMP the Project Procurement Plan is developed.
Slide 29
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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 30
Procurement Planning Project Procurement Plan
Slide 31
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
31
Procurement Planning Project Procurement Plan
Slide 32
X
The Project Procurement Plan:
• •
Must clearly define the deliverables of the procurement process Needs to be ‘fit for its purpose’
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. Discuss 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.
32
Procurement Planning Project Procurement Plan
Slide 33
Criticality-Value Assessment High
X
X
The Project Procurement Plan may also include details about the targeting of procurement efforts
Criticality
The Project Procurement Manager will consider the assessment in the strategy development
Bottleneck, e.g. special alloy steel grade
Critical, e.g. turbine compressor
Ensure continuity Develop alternatives Revise specifications
Form closer relationships Direct negotiations
Routine, e.g. piping bulk blanket orders
Leverage, e.g. customer’s standard agreement
Simplify procurement process Automate Rationalise supplier base
Maximise commercial advantage Competitive tender Standardisation
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.
Low High
Low
Value Potential
33
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Invite answers to review questions on Page 25 of Participants Manual.
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Procurement Planning
•
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)
Project Procurement Plan
Slide 34
X
Where 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
34
Procurement Planning Materials Management planning
Slide 35
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
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.
35
Procurement Planning Materials Management planning (cont’d)
Slide 36
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
36
Procurement Planning Materials Management planning
Slide 37
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. Explain that prioritization and level of procurement effort based on cost, schedule, criticality, and other relevant factors.
Subsets of the Material Management Plan X
Engineered equipment planning
X
Bulk materials planning
X
Prefabrication planning and modularization
Introduce the categories of materials and equipment that need to be considered separately in the development of the Materials Management Plan.
37
Procurement Planning Engineered equipment planning
Slide 38
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
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 • Methods for vendors to report progress.
38
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Procurement Planning Bulk material planning
Slide 39
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) dates
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.
39
Procurement Planning
Briefly discuss prefabrication planning and modularization.
Prefabrication planning and modularization
Slide 40
X
Procurement planning:
• • X
Is usually very complex for extensive prefabrication modularization often involving multiple sites
An extensive prefabrication program demands an early procurement planning effort that addresses the interfaces between vendors, fabricators and site construction
40
Procurement Planning
Explain the purpose of the Contracts Plan.
Contracts planning X
Slide 41
The Contracts Plan can be:
• •
Subset of the Project Procurement Plan or Separate plans—complex projects
X
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-up
Invite answers to review questions on Page 28 of Participants Manual.
41
Procurement Planning Contracts Planning in Define Phase
Slide 42
X
For Projects in the Define phase 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?
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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 workhour/ schedule estimates. Summarize the major contracting issues for the project and actions necessary to address them.
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Procurement Planning Contracts Planning in Execute Phase
Slide 43
X
For Projects in the Execute phase, the Project Contracts Plan review the constraints and identify mitigation measures similar to the Define phase projects but not just for major contracts.
• •
X
Explain that Contracts planning takes place during the Execute phase of a project.
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 developments
A list of matters that typically need to be considered are listed on page 32 of the participants manual
43
Procurement Planning Approving the Project Procurement Plan
Slide 44
X
The customer must approve the Project Procurement Plan as part of the Project Execution 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.
44
Transition
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We have covered commencing the Procurement process/Procurement planning. We will now discuss SmartPlant materials.
Managing Project Procurement
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SMARTPLANT MATERIALS SmartPlant Materials X
WorleyParsons uses a suite of project management systems to record, track, control and report on projects
Slide 45
Introduce WorleyParsons Business Management Systems and SmartPlant Materials. Explain that SmartPlant Materials’ functionality is covered in greater detail in module 4, Business Management Systems.
45
SmartPlant Materials X
SmartPlant Materials is used to:
• • •
Slide 46
Explain SmartPlant Materials’ functions for Procurement.
Identify Record Track
materials and equipment required and purchased for a project
46
SmartPlant Materials
Explain that SmartPlant Materials has four integrated modules.
SmartPlant Materials has four integrated modules, which are described on page 36 of the workbook
Slide 47
47
SmartPlant Materials
Slide 48
X
Maintains the Material Stock Code catalogue
X
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.
48
SmartPlant Materials
Slide 49
X
SmartPlant Materials imports bills of materials from 2-D/3-D engineering design 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:
• • • • • • • •
Explain that SmartPlant Materials imports bills of materials from 2-D/3-E engineering design software.
Requisition RFQ Purchasing Expediting Shipping Warehouse receipt Storage Material Issue
49
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SmartPlant Materials Using SmartPlant Materials for recording and tracking contracts
Slide 50
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
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.
50
SmartPlant Materials Setting up SmartPlant Materials for a project
Slide 51
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
51
SmartPlant Materials—Training Training in SmartPlant Materials
Slide 52
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
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. 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.
52
Transition
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We have covered SmartPlant materials. Now we will move on to discuss Procurement reports.
Managing Project Procurement
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PROCUREMENT REPORTS Procurement Reports Procurement reports
Slide 53
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
53
Explain 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
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Managing Project Procurement
We have covered Procurement reports. Now we will move on to discuss Procurement initiation.
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PROCUREMENT INITIATION Procurement Initiation Overview of procurement initiation
Slide 54
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:
• • X
Explain that the Project Procurement Manager is responsible for project initiation. Explain that this session is an overview of project initiation.
Purchasing initiation Contracts initiation and formulation
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.
Emphasise that when initiating procurement you need to think through your close-out requirements.
54
Procurement Initiation
Explain that the Project Procurement Manager is responsible for project initiation.
Overview of purchasing initiation (Materials Management)
Slide 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
Explain that this session is an overview of project initiation.
Establishing a project vendor list
55
Briefly describe Purchasing initiation. Procurement Initiation Overview of Contracts initiation and formulation
Slide 56
X
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 project
The main activities are:
• •
Establishing the contract types, sites conditions, HSE etc
• •
Carrying out contractor pre-qualifications
Preparing common enquiry requirements and special contract provisions
Briefly describe Contracts initiation. Discuss importance of early establishment of agreed Terms and Conditions.
Establishing the contractor list
56
Transition
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We have covered Procurement initiation. Now we will move on to discuss commencing Procurement execution.
Managing Project Procurement
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PROCUREMENT EXECUTION Procurement Execution Overview of procurement execution
Slide 57
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 impact
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.
57
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.
Procurement Execution Materials Management execution—purchasing pre-award process
Slide 58
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 58
For long-lead items some activities may occur in the Define phase
Procurement Execution
Explain the Project Manager’s and Procurement Manager’s responsibilities for procurement execution. Discuss. 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. Explain how the pre-award process is implemented.
Materials Management execution—purchasing pre-award process
Slide 59
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
Emphasise need to build all requirements (eg documentation, reporting, inspection, etc) into the RFQ. It will cost more postaward.
59
Procurement Execution Materials Management execution—purchasing pre-award process
Slide 60
Discuss the Project Manager’s and Procurement Manager’s responsibilities.
As Project Manager, you will need to ensure that the procurement team: 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
60
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Procurement Execution Materials Management execution—purchasing award process
Slide 61
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 the Procurement 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 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.
61
Procurement Execution
Discuss the Project Manager’s responsibilities.
Materials Management execution—purchasing award process You are responsible for ensuring that the award process is properly undertaken
Slide 62
You need to: 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
62
Procurement Execution Materials Management execution—purchasing post-award process
Slide 63
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 specifications
X
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.
63
Procurement Execution
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. Explain the requirements for effective post-award performance management.
Materials Management execution—purchasing post-award process
Slide 64
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
64
Procurement Execution Materials Management execution—purchasing post-award process
Slide 65
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
65
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Procurement Execution Materials Management execution—purchasing post-award process
Slide 66
As Project Manager you are responsible for ensuring that: X
The Construction Manager involves the Project Procurement Manager in construction progress review meeting
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-todate with the project procurement needs, including any changes to the project affective procurement activities.
66
Procurement Execution Materials Management execution—purchasing materials field administration process
Slide 67
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 Explain that the post-award procurement activities include field administration.
You are responsible for ensuring that the requirements for materials field administration are included in the Project Procurement Plan
67
Procurement Execution
Contracts execution – contracts pre-award process
Contracts execution—contract pre-award process
Slide 68
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:
• • • • X
Bidders lists Enquiry packages Approved recommendations for award Contract documents
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.
Cost and schedule information provided to Project Services and contracts issues input into Risk Management activities
68
Procurement Execution
Contracts execution – contract award process
Contracts execution—contract award process
Slide 69
Discuss contractor selection.
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 the Procurement 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
69
Procurement Execution
Contracts execution – contracts post-award process
Contracts execution—contracts post-award process
Slide 70
X
The Contracts Post-award Process covers the technical and commercial activities
X
The main activities are:
• • • • •
Awarding contracts
• •
Providing cost and schedule information to Project Services
Explain the activities for Contracts post-award.
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
Identifying any contracts issues for Risk Management activities
70
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Procurement Execution
Purchase order and contracts variation
Purchase order and contracts variation
Slide 71
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
Explain the process for contract variation. Invite questions and/or ask review questions on page 54 of the Participants Manual.
71
Case study – group discussion Case study—group discussion
Slide 72
X
The scenario for the case study is on page 55 of your workbooks
Complete the case study on page 55 of the Participants Manual.
Discussion topics: X
What would you say are the key procurement issues on the project?
X
What can be done to remedy the situation?
72
Transition
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We have covered Procurement execution. Now we will move on to discuss commencing the Procurement close-out.
Managing Project Procurement
Page 25
PROCUREMENT CLOSE-OUT Procurement Close-out
Explain the responsibilities for project close-out.
Responsibilities for procurement close-out
Slide 73
X
The Procurement team completes the procurement close-out tasks
X
You are responsible for ensuring that the Project Procurement Manager and the procurement team do this
73
Explain when project close-out occurs. Procurement Close-out Materials Management close-out
Slide 74
X
Project Materials Management close-out activities generally occur late in the Execution phase
X
Close-out must follow the requirements for finalization of supply as set out in the Project Procurement Plan
X
The main objectives of materials close-out are:
74
• • • • • •
Materials reconciliation Surplus management Final inspection (this is a Quality activity) Receipt Final Vendor Documentation Claims resolution Closing out of all PDs
Explain the main activities for project close-out. Procurement Close-out Contracts close-out
Slide 75
X
Close-out must follow the requirements for finalization of supply as set out in the Project Procurement Plan
X
The main objectives of contracts close-out are:
• • • • • X
Provision of acceptance certificates Confirmation of warranties Handover of documentation Final inspections (Quality activity) Claims resolution and payment reconciliation
Demobilization of the site by WorleyParsons and the contractor does not necessarily indicate final close-out of the project
75
Invite questions and/or ask review questions on page 59 of the Participants Manual.
Transition
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Managing Project Procurement
We have covered Procurement close-out. Now we will move on to summary and feedback.
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SUMMARY AND FEEDBACK Summary and Feedback
Slide 76
X
Review learning objectives and outcomes
X
Summary
• • • • • • • •
Overview of Procurement Responsibilities for Procurement Commencing the Procurement Process \Procurement Planning SmartPlant Materials Procurement Reports Procurement Initiation Procurement Execution Procurement Close-out
X
Questions
X
Evaluation
Ask for final questions. Review agenda on flip chart to summarise topics covered. Note any issues requiring follow up. Hand out evaluation forms and ask participants to complete them. Collect evaluation forms.
76
Thank participants for their participation and contributions. Slide 77
Module 9 Managing Project Procurement Thank you for your participation
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