Overview
Procurement is often the domain of specialists. Many procurement professionals become expert in very narrow fields. But complex procurement requires a holistic approach. We bring something different – an explicit focus on the bigger picture.
Strategy
Projects and businesses operate within a complex web of stakeholders and constraints. The right procurement and contracting strategy is fundamental to success for a business or project. Any business undergoing change needs to consider its strategic approach. We have worked with organisations on feasibility studies, construction projects, business transformation, offshoring and cost reduction programmes.
External constraints often drive procurement strategy. These can include:
- State-mandated preferential procurement or industry-specific legislation;
- Restriction of some activities to nationally-registered companies;
- Tax concessions tied to local content quotas;
- Tariff protections applied to local industry;
- Employment and contracting commitments in project agreements;
- Constraints on regional infrastructure;
- Regional and national skills shortages;
- Natural and social risks: extreme temperatures, earthquake, floods, monsoons, armed conflict, government expropriation;
- Physical constraints on the movement of freight.
We are used to developing procurement strategy under constraints. We have worked with projects in some of the poorest and most remote regions in the world.
Procurement and contracting constraints have an important and under-valued impact on option viability. Strategic decisions taken in the early study stage may pre-determine execution approach. Contracting strategy needs to be considered as early as possible. We prefer to work with teams in concept and pre-feasibility, while options are still open. We can recommend appropriate delivery methods and execution approach for the project context. It is often difficult for principals to embed their CSR obligations into their procurement planning. We can help project principals with early strategies that support CSR and sustainability objectives. See, for example, some proven techniques for creating SME opportunities in major projects.
Risk management
It is not unusual for risk assessments and reviews to concentrate on technical and HSE risk to the exclusion of other, less familiar risks. Procurement, contractual and commercial input is often neglected in risk reviews. This leaves projects exposed to risks such as:
- Supply chain delays;
- Bribery and corruption;
- Collusion and anti-trust;
- Contractor insolvency;
- Claims and disputes; or
- Predatory or monopolistic behaviour by vendors.
We have participated in many risk reviews, and are able to identify key risks in our areas of expertise. We support teams needing to radically redirect their contracting approach in response to crisis or to major change. We have deep international experience in working through events such as project cancellation, acceleration, suspension and restart, sale, acquisition, change in business objectives, or in senior leadership. We work with teams to manage exposure to specialist or incumbent contractors by:
- Identifying and developing alternatives;
- Developing risk-allocation, remuneration and incentive models that foster positive behaviour; and
- Creating options in the procurement process to lower the risk of being ‘locked-in’ with one contractor.
Work packaging
Project procurement planning and work packaging is a standard task for an EPCM or other project managing contractor (PMC), performed as part of the feasibility study. But it is not a common skill for principals. EPCMs and PMCs, though competent to deliver their direct scope of works, often struggle to meet their principal’s broader objectives because of their lack of familiarity with the principal’s context and constraints. Drawing on our experience in packaging scope for projects from small in-house construction projects up to megaprojects of over $5bn, we can work with the principal (either directly or through the EPCM or PMC) to translate the feasibility study report and/or the project scope of works into marketable and manageable contract packages that will help deliver the principal’s sustainability and social responsibility objectives as well as meeting the primary project objectives of time, quality and cost.
Scope development
Writing the scope of work for a work package is a basic project engineering competency. But writing the scope of services for a project managing contractor (PMC) requires a different set of skills. In a management contract, the actual technical scope of work is a small part of what the managing contractor must be directed to do. It is critical to remember that a management contract is essentially a professional services contract. The focus of a managing contractor’s scope of services should be:
- Setting the principal’s expectations for the project;
- Defining the boundaries of the managing contractor’s role and responsibilities;
- Identifying when the managing contractor must return to the principal for direction or approval;
- Setting out what the managing contractor must do when it is managing other contractors on the principal’s behalf.
A common challenge faced by both principals and managing contractors is reaching a common understand of the limits of the management authority. Typically:
- The managing contractor is engaged as a principal’s project manager;
- The managing contractor has a contract only with the principal;
- The managing contractor’s contract with the principal gives the managing contractor authority to manage the other contractors for the principal;
- The contract sets out exactly what the managing contractor can and cannot do in the name of the principal;
- The principal can give more authority to the managing contractor or take it away at any time; and
- The managing contractor cannot increase or decrease its authority without permission.
We have worked with many clients and contractors in developing and clarifying their management scope. We are experienced in developing the managing contractor scope to ensure the managing contractor delivers the Client’s obligations and the scope of works as set out in the study report.
Bid management
It is easy to underestimate the amount of effort it takes to properly evaluate a schedule of rates or a cost-reimbursable bid when it comes in. Often the bid team gives more attention to the technical and capability assessment than to the quantitative. But a well-designed pricing template can cut many hours off bid evaluation time – invaluable when the team is under pressure. When services bids come in, whether reimbursable or rate-based, some common issues make it difficult to compare them:
- Inconsistent classification of roles;
- Differing remuneration structures; and
- Differing assumptions about rosters, assignment conditions, allowances, etc.
Detailed planning and intelligent design of bid templates can save a bid team many hours during the high-pressure bid evaluation period. Having a clear idea at the beginning of what information will be collated and how it will be presented for approval contributes to a high-quality recommendation and a greater probability that it will be accepted the first time.
We have extensive experience on both client and contractor-side in preparing bids, and in leading competitive tender processes for individual supply, construction and professional services contracts greater than $100M in value. Detailed planning and intelligent design of bid templates can save a bid team many hours in the high-pressure period of bid evaluation. Having a clear idea at the beginning of what information will be collated and how it will be presented for approval contributes to a high-quality recommendation and greater probability that it will be accepted first time.
We are experienced in all aspects of major bids, including:
- Managing the flow of requests for information (RFIs) and technical queries (TQs) between bidders and technical reviewers;
- Assessing the comparative cost and value of bidders’ proposals;
- Evaluating the commercial and other implications of bidders’ assumptions, exclusions and qualifications;
- Working with the principal’s legal and finance functions to assess and mitigate commercial risks; and
- Preparing award recommendations and summary presentations for executive and board-level decisions.
Category management
We are experienced in professional services category management. We understand the commercial structures, motivations and business drivers of professional services firms (especially engineering, project management and ICS). We have worked with our clients to better understand their service providers, manage charge rates in line with the market, and optimise their commercial arrangements. We manage exposure to specialist or incumbent contractors by:
- Identifying and developing alternatives;
- Developing risk-allocation, remuneration and incentive models that foster positive behaviour; and
- Creating options in the procurement process to lower the risk of being ‘locked-in’ with one contractor.
We also work with category leads to develop their category strategies in our areas of expertise, including:
- Industry trends and analysis;
- Demand factors (spend profiles, characteristics of end-users, organisational needs); and
- Assessment of the company’s current contractor ecosystem (scale, distribution, relationships, ownership, engagement, potential).