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www.mcconnelldowell.com
22 April 2015
OIL & GAS PROCUREMENT
PROJECT PROCUREMENT & BEYOND
ANDREW MCFARLANE
GROUP PROCUREMENT MANAGER
About McConnell Dowell
Project Procurement Challenges
Beyond Project Procurement
Introduction
ABOUT MCCONNELL DOWELL
Group Summary
• Average annual revenue of $2.5
Billion
• Deliver individual infrastructure
contracts circa $1 Billion in value
• Experienced in all contract delivery
models, including PPP projects and
equity participation
• Employ over 8500 office and
project staff
• Operate in 23 locations – Australia,
Asia, New Zealand, Pacific Islands
& the Middle East
• Over 50 Years of Creative
Construction 1961 - now
Group Brands
Two strong brands and a strong supportive parent…
McConnell Dowell – The Creative Construction Company, building better communities
through safe, smart, efficient infrastructure.
www.mcconnelldowell.com | Operating in: Australia, Asia, New Zealand, Pacific Islands and
Middle East.
Built Environs – The building brand of the McConnell Dowell Group. Delivers everything from
small scale refurbishments through to major developments. Leading the industry in
functionally efficient, architecturally stunning and environmentally sustainable facilities.
www.builtenvirons.com.au | Operating in: Australia
Aveng - Over 125 years our parent company has evolved in character, capability and reach.
The group has expertise in steel, engineering, manufacturing, mining, concessions, public
infrastructure and water treatment.
www.aveng.co.za | Operating in: South Africa
SECTORS & CAPABILITIES
Capability / Sector Matrix
OPERATIONS &
GEOGRAPHIC REACH
Centres of Operations
We operate
Fabrication Facilities
We operate
20 Hectares of land
10,000 m2 of
workshop area
5,500 m2 of covered
blast & painting
15 hectares of open
assembly area
2 hectares of precast
yard area
Fabrication services
spans –
Structural steel
Mechanical steelwork
& process piping
Process modules
Pre-assembled rack
Marine structures
Concrete structures
Fabrication Yard – Batam (Singapore)
ExxonMobil
Structural Steel/Pipe Spooling
Pipenet
Structural Steel
BHP
Structural Steel (Marine)
7 Hectares of land
10,000 m2 of
workshop area
2000 m2 of covered
blast & painting
Fabrication services
spans –
Structural steel for
industrial & process
plant
Chutes, bins & tanks
Process modules
Mechanical piping for
oil & gas, mining &
industrial
Fabrication Yard – Thailand
Dutco McConnell
Dowell
4.5 Hectares of land
8,500 m2 of workshop
area
Fabrication services
spans –
Structural steel
Process piping
Tanks/bins
Chutes & platework
Fabrication Yard – Dubai
PROJECT EXPERIENCE
Major Infrastructure Projects
South East Queensland Water Grid, QLD – A$1.6Bn
Adelaide Desalination Plant & Pipeline, SA – A$1.4Bn
Waterview Connection Alliance, NZ - NZ$1.2Bn
QCLNG Export Pipeline & Narrows Crossing, QLD – A$1Bn
Gold Coast Light Rail, QLD – A$1Bn
APLNG EPC Pipelines, QLD – A$800M
RGP5 & 6 Marine Works, WA – A$650M
KOMO Early & Airfield Works for PNG LNG, PNG – US$665M
Hay Point Marine, QLD - $A540M
Rio Tinto Marine works in the Pilbara, WA – A$500M
Roy Hill Iron Ore, WA – A$455M
Te Mihi Geothermal Power Station, NZ – A$400M
Webb Dock – Maritime Infrastructure Works, VIC – A$375M
GLNG Upstream Roma Hub and Pipelines, QLD – A$370M
Fortescue Metals Group Phases 1-3, WA – A$400M
Stronger Christchurch Infrastructure Rebuild, NZ – NZ$400M
Sydney Desalination Plant Distribution Network, NSW – A$650M
Beauty World Station and Tunnel, Singapore – A$260M
PROJECT PROCUREMENT
CHALLENGES
Team Structure & capability
Still transactional?
Free issue Goods
What is the ideal procurement structure for your organisation?
Centralised
Decentralised
Centre Led
Procurement structure
Centralised Procurement
Pros
Managed by HO
Spend leverage
Consistency in processes
Cons
Added red tape hence longer
turn around time
Large team (overhead costs)
Lack of local supply base
Challenging to manage
procurement on remote jobs
Decentralised Procurement
Pros
Autonomy for projects
Quicker
Access to local/regional
supply base
Project based teams (minimal
overhead costs)
Cons
Lost opportunities for spend
leverage
Inconsistency in procurement
processes
Lack of information sharing
Centre Led Procurement
Procurement CoE at HO
Regional procurement drives
sourcing on projects
Smaller team size (lower
overheads)
Information sharing and
opportunities to leverage spend
Procurement structure at
McConnell Dowell
Head Office
Procurement
CoE(dedicated team of procurement professional
developing and managing best practices and
policies/governance)
Regional Office
Procurement (small team of dedicated procurement
professional planning and driving procurement
on projects in their region)
Regional Office
Procurement (small team of dedicated procurement
professional planning and driving procurement
on projects in their region)
Site based
Procurement
Site based
Procurement
Site based
Procurement
Site based
Procurement
Everyone thinks they can do procurement
Procurement is more than seeking quotes and placing orders
Planning, planning, planning!!
Procurement professional skills
Industry experience – is this really mandatory?
Tendering
Negotiations & contract execution
Planning
Strategy formation
Analytics
Driving Change - Challenge the Status Quo!
Managing conflicts
Influencing stakeholders – get in there!!
Questions to consider
Does the team consists of only engineers or only procurement specialists or is it a mix?
Is the team split up by technical and commercial or are there any common / interchangeable skill
sets?
Team capability
Skills that are
generally considered
Skills that can really
add value
Challenges
Procurement as a profession can still be very transactional on some projects
Procurement function once seen as paper pushers or PO raisers
Lack of engagement with stakeholders
Procurement team lacking “strategic thinking” capability
Strategies
Get the right procurement team set up at the start of the project
Professionals with strategic procurement capabilities
Procurement planning at the start
Early stakeholder engagement
Use of latest tools and technologies to drive efficiencies in the process
Remember – Procurement function will continue to be seen as transactional until Procurement steps
up and adds value!
Still transactional?
Challenges
Delays in delivery of free issue goods
Delay associated costs - coordinating logistics and QA
Limited Value Engineering opportunity
Transitioning is often challenging
Opportunities
Assisting clients in their Value for Money assessment
cost savings from free issue vs associated risks from delays
Option of supply by Contractor
Free issue of Goods
BEYOND PROJECT
PROCUREMENT
Procurement strategies are usually developed at tender stage
Is the Procurement function involved in developing sourcing strategies rather than just
seeking price?
Is Procurement driving Value Engineering / Innovation from suppliers?
Does Procurement lead the “P” in EPC?
Opportunities
Seamless integration from tenders to projects, i.e. developing procurement / sourcing
strategies to implementation
McConnell Dowell is an experienced EPC provider in the Oil & Gas sector and
delivered technically challenging and complex projects in ANZ and APAC region.
Procurement as a function involved on EPC tenders but opportunity exists to drive
further innovation and add greater value.
Beyond Project Procurement
Analysis of various cost drivers in assessment of modularise vs stick built
Is Procurement involved or drives this analysis?
Modularise vs stick built
Onsite costs
P&E
Logistics
Offsite Fabrication
Total Cost
ModularisationStick Built
Co
st
*Not to Scale
At McConnell Dowell...
Procurement lead/drives planning and sourcing of major and critical goods, services
and subcontract.
Procurement structured around centre-led model - lean structure with lower overhead
costs.
HO and RO Procurement team consists of specialists with significant experience in
procurement/sourcing/category management.
Procurement involved at tender stage in seeking offers from the market and identifying
value engineering opportunities.
Seamless integration from tender to project procurement.
Further opportunity exists…..
To be more influential on tenders and projects
Own and drive the development of procurement strategies at tender stage
Own and drive the “P” in EPC!
Thank You
Summary
THROUGH SAFE, SMART & EFFICIENT INFRASTRUCTURE
McConnell Dowell Corporation Limited
www.mcconnelldowell.com
Building | Civil | Electrical | Fabrication | Maintenance | Marine | Mechanical | Pipelines | Rail | Tunnel & Underground
