King Fahd University of Petroleum and Minerals
College of Environmental Design
Construction Engineering & Management Department
Procurement Process In
Construction Industrial Project
CEM 515
Done by: Abdulkarim Sulais
1
Outline
1.
2.
3.
4.
5.
6.
7.
2
Definition
Objective
Procurement process
Performance indictor
Improvement
Benefits
Conclusion
Procurement Process

3
Definition
It is the process required to supply
equipment , material , service and other
resources needed to carry out a project
that satisfy customer
Industrial Project Cost Distribution
Item Description
4
Weight
1
Engineering
5%
2
Equipment / Material
65%
3
Construction
15%
4
Testing and Commissioning
10%
Objective
1-Setting procurement process required to
supply equipment , materials and other
resources to carry out in constructing
industrial project right the first time and
every time.
2- Monitoring performance indictor to help
manager to prevent and reduce problem that
can affect the procurement process.
5
Procurement Process :
1.
2.
3.
4.
5.
6.
7.
6
Planning
Documentation
Product Evaluation
Awarded
Administration
Inspection
Delivery
Begin
Planning
Documentation
Product Evaluation
Awarded
Inspection
7
Delivery
1- Procurement planning

Input
1.
2.
3.
4.
5.
8
Scope of work
Specification and drawings
Company resource
Signature mandate
Product estimated value
1- Procurement planning

Output
1.
2.
3.
Product list
Product supplier list
Type of procurement contract
1.
2.
3.
4.
5.
9
Sole source
Single source
Competitive bids
Estimated product value
Approval to proceed with procurement
2-Documentation


Tender documents
Standardized forms
–
–
–
–
–
10
Inquiry
Invitation letter
Purchase order
General terms and condition
Filing system
3-Product Evaluation
1.
2.
3.
4.
5.
6.
7.
8.
Price
Delivery time
Financial capability of supplier
Type of product
Historical of supplier
Supplier approaches
Workload existing and anticipated
Customer feedback


11
Reference
Approval
4-Contrcat Award
1.
2.
3.
12
Notify successful tender and unsuccessfully
tender of outcome
Compile contract documents
Formally accepted tender offer
5-Contract Administration





13
Monitor supplier progress
Inspection
Shipment and delivery
Payment
Check compliance with quality
Performance indicators of PP
1.
2.
3.
14
Cycle times
– The different activities within PP
Milestone events
– Issuing R.Q - PO
– Approval of drawings
– Inspection
– Customs clearance
– Delivery
Management
– Project police
– Project Organization
Performance indicators for PP
4. Cost Indicator
– No of days in warehouse
– No of days in customs
– No of days correction / repair
– No of changes to air transportation
– Time from arrival till installation
5. Referential values
– Amount of PO
– No and amount of change orders
– Delivery / invoicing
15
1- Cause – Effect for long cycle times
16
Materials Non conformity Report
1.
2.
3.
4.
5.
17
Shortage of materials
Out of specification
Incomplete delivery
Excess of materials
Damage and defective
Materials Non conformity Report
18
Evaluation of the Procurement Process
–
–
–
–
–
19
Whether the procurement satisfied the stated
objective
Whether needs and expectation have be meets
Whether the procurement process should be
improve
How external factors such regulation , standard
component have change
Whether the process improve cost saving
Evaluate of procurement process




20
Review of performance indicator
Review pf non conformity report
Effect analysis regarding delays
Costs and time cycles
Evaluation and Improvement (QFD)
21
Benefits of Procurement process
Quality management
1.
2.
3.
4.
5.
6.
7.
8.
22
Improve company and project reputation name
Achieving customer satisfaction and increase
market share
Reduce rework and mistake
Standardized forms
Reduce warranty period
Increase profit
Lower insurance cost
Improve cash follow
Finding and Conclusion
The problem present on procurement are of different types and origins.
The most detected problem :
Planning
–
–
Delay on issuing specification for quotation
Delay on informing supplier
Supplier
–
–
–
23
To many obstacles and clauses delay
negotiations
Poor explanation about items
Later purchase makes system expensive , air
freight and urgent
Finding and Conclusion
1.
2.
3.
4.
5.
6.
7.
Delay at delivery
Delay on ordering
Delay on engineering drawings ( errors)
Repair and replacement at job site
Poorly planned inspection
Lack of information on site about arrival for some supplier
Changes to air transportation to make faster delivery
Using PP indicator and periodical report is tools to monitor and
prevent delays
Using IT ( email , scheduling etc ) will help in reducing delay and
closely monitor the product progress for necessary action .
24