Successful Project Procurement Practices Stephen Weatherley Partner, McCourts Project
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McCourts Successful Project Procurement Practices Stephen Weatherley Partner, McCourts Project Seminar, London 14th July 2004 B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Introducing myself…….. Stephen Weatherley Consultant, McCourts Background: 32 Years with ICI 25 years project management and procurement management experience Project director of ACTIVE initiative for 3 yr ECI director of UK operations from 2001 Partner, McCourts Project from 2002 B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Project Improving Practices Is Project Management an Art or a Science? B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Project Improving Practices Project Management is both! Science Cost Time Design Engineering Statistics Technology etc Art Uncertainty Relationships People Perceptions Expectations Behaviours etc B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Project Improving Practices PROJECT COST REDUCTION 2% Total Project 40% Cost Cost Reduction 12% 2% Concept 44% Opportunity Design Procure McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 Construct Commission B alancin g T hought & Action McCourts GENERIC PROJECT PROCESS OWNERSHIP AND MANAGEMENT S T A G E Project Concept Project Definition G A T E S Project Execution Project Handover D E L I V E R A B L E S MEASUREMENT AND ASSESSESSMENT Project Review B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Project Improving Practices Stakeholder Buy-in Project Objectives SH&E Policy Risk Assessment Team Building Project Definition Value Analysis Contract Strategy Design Effectiveness Constuctability HOW THEY ADD VALUE Definition Procurement Management Team Integration Project Control Project Review Execution B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Improving Project Purchasing Why is project purchasing performance more important now than ever before? History - 20 years ago: Operating companies had in-house project resources projects managed and controlled internally management of staff was the issue the focus was on internal communications contractors employed for specific tasks supply chain relationships generally adversarial purchasing relationships more arms length B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Improving Project Purchasing … then in the 1980’s and 1990’s: Operating companies began to restructure: shareholder value becomes the driver the focus shifts to core activities only outsourcing of non-core activities lean management organisations migration of project staff to contractors greater dependence on supply relationships B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts The need for Change! B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Criticality matrix High Strategic Security Tactical Acquisition Strategic Critical Relationship Purchasing Tactical Cost Catalogue Purchasing Low Low McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 COST High B alancin g T hought & Action McCourts Characteristics of Tactical Acquisition • Low cost products or services • Easily defined • High degree of standardisation • Many suppliers • Quality easily measured • Failure not critical Purchasing Strategy: Minimise cost of acquisition B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Characteristics of Tactical Cost • • • • • • High cost products or services Relatively easily defined High degree of standardisation Several potential suppliers Quality easily measured Failure not critical except in cost terms Purchasing Strategy: Minimise number of suppliers to maximise volume discounts McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 B alancin g T hought & Action McCourts Characteristics of Strategic Security • • • • • Low cost products or services Quality of product or service is critical Good customer service is essential Usually only one or two suppliers Failure will damage your business Purchasing Strategy: Close working relationship with supplier B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Characteristics of Strategic Critical • • • • • High cost products or services Highly customised or bespoke Usually difficult to define requirements Few suppliers Failure will be expensive and damage your business Purchasing Strategy: Develop a partnering type relationship B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Relationship Purchasing Tactical Acquisition ‘Arms Length’ Relationship Catalogue Purchasing Tactical Cost Discount Relationship Catalogue Purchasing Strategic Security Quality Relationship Relationship Purchasing Strategic Critical Partnering Relationship Relationship Purchasing B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Characteristics of good relationship purchasing • Price is not necessarily the only measure of value • Best results are achieved when both parties win • The objectives of both parties are largely aligned against agreed measures • Communications are good • Behaviours on both sides are cooperative and supportive B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts PRICE AND VALUE It is unwise to pay too much but it’s worse to pay too little. When you pay too much, all you lose is a little money. When you pay too little, you risk losing everything because what you bought is incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot: it cannot be done. John Ruskin (1819-1900) B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts PRICE AND VALUE A man who knows the price of everything and the value of nothing. Oscar Wilde (1854-1900) So what is Value? B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Manufacturing Supply Chains INDUSTRY SECTOR SUPPLY CHAIN Manufacture Etc. Food & Drink Utilities Power Oil & Gas Chemicals CLIENTS CONTRACTORS SUPPLIERS McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 ASSET MANAGEMENT SUPPLY CHAIN B alancin g T hought & Action McCourts Project Improving Practices £ + 0 Time Construct Operate Decommission INVESTMENT NPV CURVES McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 B alancin g T hought & Action McCourts PROJECT STAKEHOLDERS Client Shareholders Client Business Client Customers Works Management Project Team Contractors PROJECT Regulatory Authorities Employees Competitors Suppliers McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 Local Community B alancin g T hought & Action McCourts VALUE CATEGORIES ECONOMIC COST Whole life costs, NPV, IRR etc DURABILITY Life required, reliability etc TIMING Delivery, Programme End Date etc FUNCTIONALITY Operating Requirements etc QUALITY Standards, image etc COMPLIANCE Regulatory requirements etc McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 B alancin g T hought & Action McCourts Whole Life Value Model Economic Cost Compliance Durability Value Quality Timing Functionality B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts OPTION EVALUATION MATRIX VALUE Durability Economic Cost Functionality Compliance Quality STAKEHOLDER Timing B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts VALUE PROFILE Economic Cost Compliance Durability Quality Timing Functionality B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Changing the Culture: Corporate behaviour • • • • • • • Key Customers Preferred Suppliers Framework Agreements Partnerships Alliances Joint Ventures/Consortia Mergers B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Changing the Culture: Personal behaviour • • • • • • Trust Fairness Transparency Attitude Communications Rewards B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts Partnering Relationships • Secure Long Term Relationship • Staff continuity • Repeatable design approach • Captured learning • Benchmarked performance • Delivery track record • Aligned business objectives McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 B alancin g T hought & Action McCourts Partner Selection • Is this a buying or selling process? In a true partnership it will be both B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts SUPPLY CHAIN RELATIONSHIPS In the past….. Master and Slave B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts SUPPLY CHAIN RELATIONSHIPS In the present….. Parent and Child B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts SUPPLY CHAIN RELATIONSHIPS In the future? Consenting Adults B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555 McCourts QUESTIONS? B alancin g T hought & Action McCourts Project B alancin g T hought & Action McCourts, Holme Lodge, Holme on Swale, Thirsk YO7 4JE Tel: 01845 567555
