So…you need project-specific procurement support
November 19, 2019
The question is, how are you going to get it?
Picture this: you’re a senior executive who is constantly planning to expand your company’s production. You’re also keeping an eye on capital investments and expansion of production intelligently to create increased cash flow, manage growth, to gain a competitive advantage in their respective markets.
Then, your company decides that expansion for a “greenfield” project is warranted, a replacement or upgrading existing facilities are necessary due to a variety of reasons. And suddenly, capital procurement becomes a bigger part of your world—because it’s crucial to the success of any project, but also because your procurement team isn’t sufficiently staffed to handle this.
What’s the issue?
Procurement acts subliminally as the central hub for several stakeholders: finance, operations, maintenance, engineering, as well as the company’s project management. Your company’s procurement department is likely more geared to manage operating expenditure, which focuses on the expenditure associated with the operation and maintenance of those specific capital goods, not the creation or expansion of them.
If you’re in that situation, you might consider hiring additional staff. But hiring staff takes time, costs money, and once the project is complete, you’re left with a team that might not be required any longer. Another option is to reach out to the engineering consultant or perhaps a construction firm for procurement support. This approach can fill an immediate need with expertise for the specific project equipment.
Challenges of outside support
The unique challenge for an outside procurement group is the ability to quickly assimilate within the client’s structure and become a trusted partner. They need to provide a seamless and transparent support system that can rapidly adhere to the client’s internal processes, provide immediate support to meet the demands of the project schedule and milestones.
Companies tend to have different ERP systems, SAP, ARIBA, ORACLE or some home-grown procurement software. They have different policies, procedures and approval systems, and supplier qualification requirements. Any outside procurement group must be flexible enough to match the client’s needs and must have the ability to carefully listen to the needs of the client and zero in on the project’s key objectives.
Case in point
Most recently, POWER worked with a midwestern electric co-op on a super-efficient natural gas-fired peaker plant. The client needed the plant to be online within 16 months to accommodate some intermittency in their renewable portfolio. This, of course, was a fast-tracked schedule, and the co-op’s internal procurement team wasn’t staffed to handle this kind of expense.
As an outside consultant and the project’s owner’s engineer, we were able to collaborate with our engineering team to help the client manage the entire procurement cycle. We mobilized a team, helped them prioritize equipment packages by critical delivery, manages the entire commercial negotiation and contracts within budget—freeing up the client’s resources to focus on the best design and getting power to their customers.
The plant energized on time, despite the tight schedule, and has since earned the client an award from POWER magazine for one of the top natural gas plants of 2019.
Go ahead, reach out
No matter what capital expansion you’re planning—a plant-based protein facility, an overseas geothermal power plant project, a gas turbine power plant, a wind farm, a microgrid, a PV solar plus battery storage, or anything else—it never hurts to have a solid, experienced procurement team as a value-added contributor to the success of a project.
John Jablonski is a capital procurement specialist for POWER Engineers, an Idaho-based engineering and consulting firm. For more information on how POWER can assist with procurement support, please contact him at firstname.lastname@example.org.