Quality Progress - November 2015 - (Page 64)
BACK TO BASICS
BY ASHWANI KUMAR KHARE
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
* Determine what must be directly inspect-
benefit analysis conducted by the PMT.
* Judiciously review inspection and test
plans to address quality risks.
3. Review and implement lessons learned
* Monitor main vendor outsourcing
from previous projects.
activities closely, and identify additional
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
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
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.
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
1. "EPC-Engineering Procurement Construction,"
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.
Table of Contents for the Digital Edition of Quality Progress - November 2015
Mr Pareto Head
On the Horizon
To Measure is to Know
Measure for Measure
Quality in the First Person
One Good Idea
Back to Basics
Quality Progress - November 2015