Quality Progress - November 2015 - (Page 64)

BACK TO BASICS BY ASHWANI KUMAR KHARE Deconstructing Risk Tips to reduce procurement risks in projects AN ENGINEERING, procurement and detailed and clearly written requirements. TPIAs now hire freelance inspectors who may not be competent or provide reliable construction (EPC) project is designed to 2. The project management team (PMT) transfer risk from clients to their contrac- must set up and audit its review and tors despite clients' exposure to indirect approval processes during procurement. risks, such as project delays, commis- The processes should cover the entire ed by the customer. Organizations can sioning failures or significant operational supply chain, the review process, inter- consider posting a few in-house expert en- issues. In EPC projects, construction or face management (identifying, monitoring gineers at key locations where the majority engineering contractors implement the and recoding project interfaces), change of procurement manufacturing will take project's design, procure needed equip- management (managing project require- place. This must be subjected to a cost and ment and materials, and construct a cli- ment changes) and responses to technical ent's asset or facility.1 queries raised by the EPC contractor or Project complexity and aggressive schedules require EPC contractors to include sufficient project contingencies in inspections. * Determine what must be directly inspect- benefit analysis conducted by the PMT. * Judiciously review inspection and test specification-concession management. plans to address quality risks. 3. Review and implement lessons learned * Monitor main vendor outsourcing from previous projects. activities closely, and identify additional quality risks. their lump-sum prices to cover potential 4. Ensure EPC procurement engineering estimation errors, price escalation, pro- deliverables are reviewed thoroughly, ductivity losses, delays and other project and consult actively with the end user risks. When highly competitive bidding and subject matter experts (SME). occurs, there is increased potential for 5. Establish equipment criticality ratings reviewed by the customer. Involve the end and pay attention to factors such as user and SMEs in the review or approval of underquoting to secure the contract. * Plan in advance and prioritize the audits by risks. 8. Ensure critical vendor documents are process safety, and manufacturing and key vendor documents. It's crucial for all Overcoming the risks inspection complexities. Criticality also involved parties that stakeholders ensure a Procurement is the area where contractors should be established for equipment's key timely turnaround of these approvals. De- spend the most money, and it's also where components and subassemblies. lays affect a project schedule and vendor's substantial cost savings can be realized if 6. Review technical bid evaluation (TBE) budget, as well as overall quality. Vendors things go wrong elsewhere due to competi- reports. Check a vendor's recent perfor- that are forced to shorten manufacturing tive bidding. To meet unplanned overexpen- mance on similar equipment, and involve time could compromise product quality to ditures incurred in design or construction, the end user and SMEs in TBE approval. meet delivery deadlines and budgets. EPC contractors will try to cut expenses on procured items, often promoting their 7. Define your purchase order inspection strategy: preferred vendors to keep project timelines * Identify quality risks in critical purchase on track. Clients, however, must be careful orders, and involve the PMT and SMEs. that this does not affect product quality. To * Create a procurement management sub- overcome this procurement risk, a client's group in the PMT, and assign account- management team should consider these 10 ability within the team for packaged or points in the procurement process. bulk items. 1. Provide a robust front-end engineer- * Decide on the extent of inspection to be ing design (FEED) definition of your conducted by a third-party inspection requirements. Open, missing or ambigu- agency (TPIA). Organizations must un- ous requirements should be minimized. derstand that TPIA business models have Generally, the end users of the equipment, changed significantly in last two decades. project management engineers and FEED They no longer have skilled, in-house re- consultants should collaborate to prepare sources to conduct inspections, and most 64 QP * www.qualityprogress.com 9. Promptly share vendor-related incidents that affect product or service quality with other involved projects. 10. Ensure a product is preserved well during shipment and storage until it's commissioned. QP REFERENCE 1. "EPC-Engineering Procurement Construction," EPCengineer.com, http://tinyurl.com/epcengineer. ASHWANI KUMAR KHARE is a project quality assurance advisor at the Abu Dhabi Marine Operating Co. in the United Arab Emirates. He has a bachelor's degree in mechanical engineering from the Indian Institute of Technology Kanpur in India. A senior member, Khare is an ASQ-certified manager of quality/ organizational excellence and a certified project management professional from the Project Management Institute. http://www.EPCengineer.com http://www.tinyurl.com/epcengineer http://www.qualityprogress.com

Table of Contents for the Digital Edition of Quality Progress - November 2015

Up Front
LogOn
Expert Answers
Keeping Current
Mr Pareto Head
Pop Culture
On the Horizon
Shatterproof
To Measure is to Know
Measure for Measure
Innovation Imperative
Quality in the First Person
Career Corner
Statistics Roundtable
QP Toolbox
QP Reviews
One Good Idea
Back to Basics

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