August 2018
Joye Runfola, left, of Air Liquide and Margaret Martin of INEOS Styrolution discuss effective procurement strategies.
According to Joye Runfola, senior project logistics specialist, Americas Procurement Center for Air Liquide, procurement is most effective when it is involved from the early onset of a project and the focus is on improving productivity and cutting costs "all the way from start to finish."
Procurement, essentially, is defined by two concepts, Runfola said.
"We have to save money, but we also have stakeholders and customers that depend on us to deliver," she explained, discussing effective procurement and cost management at the Downstream Conference and Exhibition held recently in Galveston, Texas.
"Sometimes people in procurement don't understand what's going on in the field or what's going on outside the procurement world and how to better support their customers," Runfola said. "Get to know your customer base for procurement. Go to the sites and go to the projects and see what's going on. Understand how you can do better for your customer and where can you add value and savings."
Runfola said she believes when owners and managers adopt that engagement strategy, it allows the procurement role "to really function and to benefit not only the organization but also the people that they support."
The importance of early engagement with procurement cannot be overstated, Runfola reiterated, recommending initiation "as early as possible, even in the proposal development phase of a project, and carrying that involvement all the way through to the end of the project."
"We are a team, and we're all here for one common good, and that is to make the project successful," she said. "The project has to be successful at the end of the day. That's our common goal."
Further, this engagement produces cost savings and reduces delays in the field, Runfola said, adding she considers it "a very good investment" to engage procurement teams ahead of time to determine if more training is needed or "if something's not right," which would result in increasing man-hours.
"You're spending all this time in the field trying to fix it, when all the while they could be cursing their procurement person, saying, 'Why did they send me these people or these parts?'" she said jokingly.
Regarding aligning procurement with workforce contractors and their contract workface planning, Margaret Martin, procurement leader of INEOS Styrolution America LLC's Gulf Coast region, agreed with Runfola it is equally critical for all departments and disciplines to be engaged early on.
"I don't think it's just procurement," Martin said. "I think everyone feels that same urgency. I think contractors feel the same way. I think contractors say, 'If only they had gotten me involved earlier in the process,'" she said. "And I think designers feel the same way. Everybody kind of wishes, 'Man, if I had only known about this portion earlier.'"
Martin said she believes "the whole secret" of a project, whether it's a megaproject or a $100,000 project, is better communication across every phase, beginning with the project idea's inception.
"Get additional eyes on that idea, from the person who is going to be responsible for instrumentation and electrical (I&E) to design, through the phase of material management to construction to material of construction (MOC) and commissioning," she recommended. "Every person needs to start thinking about that project and the risk factors associated with it, [asking] 'What could go wrong?'"
Martin reminded listeners owners perform risk assessments for every single project, no matter the size.
"I think every function needs to do the same thing," she said, including contractors in that responsibility.
"Contractors need to do that same thing, too, asking, 'What are the potential things that could go wrong in our area of responsibility for this project?'" she said.
Owners, Martin added, would be wise to share things they've identified as "potential watch-outs."
"And the contractors need to share those with owners," she said. "It's not a weakness, and it's not saying that we know we don't do these things well. It's saying that we know there are things in projects that are inherent issues.
"All of those issues relate to costs to the owner because, at the end of the day, our project is at risk."
Overcoming the challenges
Reflecting on what she considers to be capital projects' biggest challenges from a procurement standpoint, Martin noted that often "you're dealing with contractors who may not have historically worked at that site."
INEOS Styrolution is engaging in larger and larger projects, she said, but at its existing facilities.
"And a lot of our facilities are within other owner facilities, so we're not only constricted sometimes by our own site safety rules and regulations, but also by other owner regulations," Martin said. "It may not only be our requirements from a perspective of, say, the Houston Area Safety Council."
Other regulatory compliance issues like safety regulations, drug screenings or background checks all relate "as cost to the contractor," Martin explained. "So we try to be upfront in our bid packages, on our websites, in our site safety rules and regulations, pre-bid meetings, and in our documentation about all of those things that the contractor needs to be aware of in the preparation of their proposals and their bids so that they can put that into their proposal.
"We don't want to, after they've done their proposal and we say, 'OK, you're going to get this work,' then say, 'Oh, by the way, all of your 250 employees are going to have to have all these drug tests done and CBCs [complete blood counts] for a benzene screen and all,' because that's cost to those contractors."
Runfola noted while the "bottom line" for procurement professionals is to save on cost, "what's cheapest is not always what's best."
"It's very important that safety translates all the way through," she said.
Recalling her previous experience as a construction manager in a different company, Runfola said she dealt with situations in which that organization chose lower-grade contractors "that swore up and down that they were safe and had a safe culture, and they knew what was required of them."
Their on-site performance, however, told a much different, less accomplished story, Runfola said.
"You spend more time in the field trying to bring them up to speed to your safety culture and not actually focusing on the critical craft work that needs to be done in the very beginning," she said.
"We're going to have growing pains, and that's common to any project. But having to completely teach a contractor simple safety that they said they train their employees on takes a lot of the time that's spent on the project," she said.
Runfola added spending "a little bit more money" to acquire better contractors is a more prudent investment than spending a comparable amount of money on unproductive man-hours.
The consideration of logistics
Another critical aspect of procurement, Runfola noted, is the logistics that come into play before construction, "meaning when you're erecting a plant."
"Some of our plants are very big, and I move pieces upward of 500 tons, 100 feet long, 30 feet wide and 30 feet high," Runfola said. "I've got to bring them from China. Then I've got to bring them down a road and get them onto a jobsite in a certain amount of time."
This challenging task must be executed "under budget with no change orders, which is fun," Runfola added.
"When you're dealing with projects like that that are that expensive, logistics is oftentimes one of the most overlooked but highest contributing expenses to a project," she said, estimating logistics can often easily account for 5 percent of the budget.
"If we're moving massively large equipment through certain parts of the country and the world, and we don't understand our environment in the very beginning during the proposal phase and the inception phase, then we're setting ourselves up for failure if it turns out that we can't bring that piece down the road because it's too big," she said. "Or, what do we do if we can bring it down the road but we didn't account for all the overhead obstructions that we have to move or adjust to bring the piece down the road?"
Runfola shared infrastructure in Eastern and Northeastern parts of the U.S. can be particularly challenging.
"It takes a lot to move a simple, large piece," she said. "There are a lot of low-hanging wires and old infrastructure that's time-consuming."
Moving large cargo through foreign countries also presents challenges. "Not understanding that environment and what's required to import into these countries is also another issue," she said. "If that risk is not understood upfront, that can seriously cripple a project."
Again, Runfola stressed getting procurement involved early in the planning process of projects helps mitigate these problems.
"We go to the area and we say, 'OK, what is the biggest envelope that I have to work with?' And then we try to design and do our work around what that envelope is," she said. "We don't want to have to go back and say, 'Well, we need to turn the piece on its side,' so we have to re-engineer it after it's already been engineered. So these are things that are very important to us that we have to do early on in that phase."
For ongoing industry updates, visit BICMagazine.com.
