procurement in the engineering, procurement & construction...

A SunCam online continuing education course

Procurement in the

Engineering, Procurement & Construction Industry

by

Sharjeel Aslam Faiz

Procurement in the Engineering, Procurement & construction industry


www.suncam.com Copyright 2015 Sharjeel Aslam Faiz of 25

Table of Contents

Introduction ..................................................................................................................................... 4

Department organization ................................................................................................................. 5

Scope of work ................................................................................................................................. 5

Schedule .......................................................................................................................................... 6

Approved vendor list ...................................................................................................................... 7

Inquiries .......................................................................................................................................... 8

Bid process .................................................................................................................................... 10

Technical Bid Evaluation (TBE) .................................................................................................. 11

Commercial Bid evaluation (CBE) ............................................................................................... 14

Purchase order ............................................................................................................................... 14

Drawing Approval ........................................................................................................................ 15

Changes ......................................................................................................................................... 16

Procurement records ..................................................................................................................... 17

Expediting ..................................................................................................................................... 17

Inspection ...................................................................................................................................... 18

Site receipt .................................................................................................................................... 19

Updating the procurement scope of work ..................................................................................... 20

Project closure ............................................................................................................................... 20

Vendor payment ............................................................................................................................ 21

Appendix A-Engineering Interfaces with Procurement department ............................................. 22

Appendix B- Scope of work Activity ........................................................................................... 23

Appendix C-Project Closure Activity ........................................................................................... 24

Important points ............................................................................................................................ 25

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Definitions Bid – Vendor response to inquiry sent by the buyer. Bulk material–They have standard material specification like cables, glands, pipes etc. They are generally purchased in large quantities. Buyer – term reserved for a person engaged in procurement of goods or services. BOM – Bill of material EPC – EPC is a Project delivery option. Full form is Engineering Procurement and Construction. A company engaged in providing this type of service is known as an EPC contractor. FEED – Front End Engineering Design. MTO – Material take off Owner – The word Owner is used for the company that hires a contractor. This is for this course. Project Manager - PM Purchase order- The contract between the contractor and the vendor. Seller – A company that provides goods or services. SOW - Scope of work Sub-contractor – contractors who provides site related services. Vendor – Supplier of special items





Introduction Procurement means the acquisition of goods or services. This course deals with the procurement of goods. A contractor designs and constructs the complete facility. It has three main departments; Engineering, Procurement, and Construction. Procurement department procures the material specified by engineering. It makes the material available at the site. Hence, it is the important link between engineering and construction. In a typical project, the approximate break-up of the project cost is as follows. Engineering – 8% Procurement – 52% Construction – 40%

8

52

40

Cost, % (approximate)

Engineering Procurement Construction





Department organization Led by a department head with two or three managers. Each manager will be allotted one or two projects. Two or three engineers will report to the general manager. The expeditor will assist the Procurement Manager. Refer to the organization chart given below.

Figure 1 Organization of Procurement department

Scope of work The first task of procurement department is to list out the procurement scope of work (SOW). It will affect project schedule and cost. MTO, requisitions and scope specification are three main sources of SOW. • Engineering prepares MTO for bulk items. • When the scope of vendor consists of only supply, engineering prepares a requisition. • When the scope of the vendor ranges from design to commissioning, Engineering

prepares a detailed scope specification. Packages have a detailed scope specification. They take a long time to procure. For example, water treatment package, sewage

Head of department

Procurement manager

Procurement engineer

(mechanical)

Procurement engineer (elecrical)

Procurement engineer

(mechanical)

Expeditor





treatment plant, mechanical handling package etc. They are also known as long lead items abbreviated as LLI. Since their procurement time is large, they are ordered first.

Sample SOW is given in the table below.

Scope of work (sample) Item Size MOC Qty Crude oil tank 60m x 20 m Carbon steel 7 nos. Light Fuel oil tank 60m x 20 m Carbon steel 1 no. Air compressor package 990 cu. m/hour Refer specification 1 No Nitrogen generation system 50 cu. m /hour Refer specification 1 no. Sewage treatment plant 5 cu. m /day Refer specification 1 no. HVAC system As per drawing Refer specification 1 no. Knock out drum 3 m diameter x 6 m (T/T) carbon steel 1 no. Cartridge filter 1 m diameter x 2 m (T/T) Carbon steel 1 no. 1. The scope of work consists of design, fabrication, installation, pre-commissioning,

commissioning of all items mentioned above. 2. Graded land will be provided to the contractor. 3. All temporary structures are in the scope of the contractor. These structures will be

dismantled by the contractor and site cleared. 4. The Contractor needs to maintain good housekeeping. Items that have a requisition or specification can be identified. MTO items cannot be easily identified. Each drawing will have a bill of material. When BOM of all the drawings is added, it leads to the MTO. Schedule

The schedule lists the start and the end dates of the procurement process. Procurement starts when engineering releases deliverables. Procurement ends with the material receipt at the site. If the material reaches site earlier, it will be subjected to warehousing, deterioration and theft. There could be a loss of warranty. The money will be spent at the wrong time.





When the material gets delayed, it results in excessive expediting costs. It could lead to project delays and damages. The start and the end date has to follow the schedule. Approved vendor list

Every project has a vendor list. It is also known as approved vendor list or approved bidders list.

Approved vendor list (sample) Category Item name Vendor name Mechanical

Pumps Flowserve Grundfos Goulds Sulzer KSB

Compressors Ingersoll Rand

Atlas Copco

Piping-specialized fitting Weldolet Bonney forge Electrical Switchgear Schneider ABB If items are not present in this list, the contractor might propose a new vendor. The contractor needs to send an official proposal to the client by issuing a past track record (PTR). The PTR provides the client with the technical, financial and past history of the vendor. The procurement engineer should visit new vendors before a PTR is sent to the client. The client will review and either approve or reject the PTR. Once the PTR is approved, the names of the vendors should be added in the client’s approved vendor list. The intent of updating the approved vendor list is to officially proclaim a vendor as approved for commercial and inspection purposes.





A PTR is an excellent tool to include genuine vendors who have introduced new and better products. Inquiries An inquiry communicates the engineering requirement to the vendor. The procurement department needs clear inputs from engineering to place the inquiry. Inquiries should be sent to the vendors listed in the approved vendor list. Inputs from engineering generally take three forms.

• MTO • Material Requisition • Scope Specification

Material take-off Bulk items will be procured from a material take-off. A substantial cost is concentrated in the bulk materials. Examples of bulk materials are pipes, fittings, cables, structural items, gratings, glands etc. Material Requisition If the scope of the vendor consists of supply, then a requisition is prepared. Dispatch of the item will be the final activity of the vendor. For example, valve, transmitters, etc. Scope specification Scope specification is prepared when the vendor is required to supply, install, and start an item. For example, procurement of water treatment plant, sewage treatment plant etc. Contents of a requisition or specification • Project information like location, client, nearness to sea, environmental conditions etc. • Data sheet – This helps the vendor to actually size or design the equipment. • Scope split – What is and what is not included in the scope of vendor. Sample scope split

is shown after this section below.





• Inspection • Painting • Final vendor documents. For example, as-built drawings, operations manual etc. These

need to be submitted by the vendor along with the dispatch of material. • Safety requirements • Quality requirements • Approved vendor list • Spares requirement • Project closure If any of the above contents are not sent to the vendor, then the vendor can ask for additional price later. As a rule, any new requirement sent to the vendor after the issue of the purchase order could lead to additional costs. A requisition/specification contains a large number of documents. There could be conflict between two or more documents. In that case, it should be clearly pointed out which document will prevail over the other. Generally, the purchase order has more importance.

Scope Split (sample)

Sr. no Scope clause EPC contractor Package vendor Client 1 Civil 1.1 Foundations X 2 Electrical 2.1 Feeders X 2.2 Motor control center X 2.3 Cabling between MCC

and motors X

2.4 Grounding inside package X 3 Instrumentation 3.1 All instruments as per

package P&ID X

3.2 Grounding for instruments X 3.3 Instrument calibration X





Scope Split (sample) Sr. no Scope clause EPC contractor Package vendor Client 4 Mechanical 4.1 Mechanical erection of

vessels X

4.2 Cranes for mechanical work

X

5 Piping 5.1 Supply and installation X 5.2 Hydro test X 5.3 Water for hydro test X 6 Statutory clearances X The client and the contractor are bound by the prime contract. Relevant contract clauses need to be filtered and sent to the vendors. Irrelevant clauses lead to increased prices. If relevant clauses are missed out, they lead to disputes between the client and the contractor. It is worthwhile to study the contract and make a list of all contract provisions related to procurement. This list can be filtered and relevant provisions be attached to each purchase order. Bid process The vendor will work on the inquiry and send a bid to the contractor. Engineering will review the bid. If the vendor’s bid is in agreement with the contract, it will be accepted. Or it will be rejected. If the vendor’s bid is incomplete, engineering will issue a technical query to the vendor. The vendor needs to respond to the technical query or send a revised bid. A vendor’s bid could contain deviations. Serious deviations will be rejected. The contractor’s engineering will send genuine deviations to the client. This is done using a document known as deviation request. If this is not done, it will be found out during detailed vendor drawing review. The client will insist on the specification while the vendor will cling to the deviation. This will lead to a delay in project execution.





A vendor’s bid could throw light on an area not present in the contract. In such a situation, the contractor’s engineering will issue a technical query to the client. Engineering will inform procurement if the bid is in agreement with the contract. Procurement will then invite priced bids from the vendors. Abnormally low bids A procurement engineer might receive an abnormally low bid. This could be due to various reasons. • Vendor’s mistake in understanding project scope. • Incomplete bid inquiries • Deliberate price reduction by the vendor. Procurement engineer can compare the bid with historical data to determine whether the bid is high or low. Apart from this, engineering can provide approximate prices. The procurement engineer should refer to the contractor’s company procedure and take suitable action. Technical Bid Evaluation (TBE) A project can have hundreds of items. Each item will have at least three vendors. If bids are not complete, they will have emails seeking clarification. The process will generate a lot of information. This information is collected by Engineering and assembled in the form of a technical bid evaluation. If any vendor has not given complete details, a technical query (TQ) is sent by engineering to procurement. In some case, it is known as RFI (request for information). Vendor should respond immediately to TQ either with a reply to TQ or with a revised bid. Sample TQ is shown below.

Technical Query Vendor name – XYZ Client – SAF Oil company Item name - Centrifugal pump Contractor – FAS LLC Project - C-60 terminal Reference – vendors quotation no. 123





As per specification Vendor response Pump scope Foundation bolts In vendor’s scope Vendor to confirm Base plate In vendor’s scope Vendor to confirm First fill of lubricants In vendor’s scope Vendor to confirm Mandatory spares In vendor’s scope Vendor to confirm Mating flanges In vendor’s scope Vendor to confirm Fasteners In vendor’s scope Vendor to confirm Gaskets In vendor’s scope Vendor to confirm When all TQ are closed, engineering can proceed with TBE. TBE is done for all items. Generally, each item that has a material requisition will have a TBE. Bulk items will not have TBE. Important items like packages will require multidiscipline review and vendor clarification meetings. A TBE is made by a discipline engineer and is checked by a lead engineer. The discipline engineer will list all specification clauses in the TBE. Clauses will logically follow a sequence. These will be listed strictly as per client or contractor specification. For example, projection information will be placed first followed by design data. Electrical or mechanical details will be next, followed by scope and delivery. Against these specification clauses, vendor’s replies will be entered. The engineer will check whether vendor has received the correct specification for bidding. All vendor deviations will be highlighted. Information contained in a typical TBE is shown below.

TBE (sample) Vendor name - XYZ Client – SAF Oil company Item name - Centrifugal pump Contractor – FAS LLC Project - C-60 terminal Sr. no

Clauses of specification

Specification requirements

Vendor name

XYZ Floway Trans-sea Vendor quotation no. Not Applicable 123 Adb/123 Hgf/568 Quotation date Not Applicable 1-10-14 6-10-14 5-10-14 1 Project Information Site at Turkey Confirmed Confirmed Deviation in

temperature





2 Design Data Flow-50 cu m/hr Confirmed Confirmed Confirmed 3 Mechanical details Side suction, top

discharge Confirmed Confirmed Not

Confirmed 4 Electrical details Voltage 415 V Confirmed Confirmed Not

Confirmed 5 Scope of work Pump, driver,

base plate Confirmed Confirmed Not

Confirmed 6 Inspection By vendor Confirmed, at

additional cost

Confirmed, at additional cost

Not Confirmed

7 Vendor data

requirements Pump drawing, motor drawing, qap, spares list

Confirmed Confirmed Confirmed

Engineering

recommendations Acceptable Acceptable Not

acceptable TBE is important for the following reasons 1. It informs Procurement department about the acceptability of a vendor. 2. It highlights major deviations of a vendor. 3. It brings together all the vendor information in one document. 4. It provides assurance to the client that the technical part of procurement process has been

carried out as per the contract. The pre-award meeting is held for important packages and costly material. This meeting helps resolve the differences between the contractor and the vendor. This meeting should be held with a proper agenda. Involvement of senior personnel is necessary. The vendor should ensure that the marketing and technical personnel attend the meeting. The contractor should ensure that the procurement, project and technical personnel attend the meeting.





Though the Owner’s representative does not generally attend this meeting. However, his presence could help smooth execution of the project. A pre-award meeting can be preceded by a technical clarification meeting. Commercial Bid evaluation (CBE) Vendor proposals are evaluated in a two-step process. Vendors that clear technical part are evaluated for commercial details. The CBE will consist of commercial clauses. The vendors will now be compared with respect to price, payment terms, bank guarantee, liquidated damages and delivery conditions. After completion, relative position of each vendor will be obtained. During this period, vendors are more receptive. Procurement should ensure that the scope and risk are proportional to the vendor’s capability. Purchase order The contractor will give a purchase order (PO) to the qualified vendor. Some companies take out a precursor to a PO. It is known as Letter of Intent. This is done so that the vendor can start work immediately. Procurement issues formal PO later. Procurement should insist that the vendor should return a signed copy of the PO. A purchase order will be the important document in case of conflict. Purchase order should be clear about what is to be procured. It should mention the item description. If it is a package containing various sub-items, details about the sub-items need to be included. Details of sub-items are needed during inspection, dispatch and receipt at site. PO will be referred during the entire process. A typical PO will contain the following information. - Contact details of buyer and seller representative. - Duties and responsibilities of the vendor along with detailed scope of work - Inquiry number, and the vendor’s bid number. - PO should include any commitment done before order finalization. - Dispute resolution mechanism - Amendment mechanism - Penalties





- Payment terms - Inspection - Details of the documents that will be submitted by the vendor during dispatch. Once PO is issued, it should be distributed to all concerned. A distribution matrix is shown below. It ensures proper distribution of the PO to the project participants.

PO distribution and tracking matrix Sr. no Item

name PO number

PO revision

Proc Enginering Projects Quality Site

1 Pump 100657 1 x x x x x Pump 100657 2 x x x x x 2 Blower 100658 1 x x x x x Drawing Approval As soon as PO is placed, vendor’s drawing submission has to be expedited. Information from vendor provides input to many important drawings. For example, the size of pressure safety valve is shown on the P&ID. The first submission of vendor drawings takes approximately seven to eight days. Engineering reviews and comments on vendor documents. If the document has minor comments, it is sent to the client. The vendor document is rejected if major deviations are present. Based on the severity of comments, engineering assigns a comment code. These codes may differ from company to company. Sample codes are given below. Code Meaning Explanation 1 Approved. Vendor drawing is totally acceptable after review and is in line with

specifications. 2 Approved

with comments.

If comments on vendor drawings are minor, drawings should be approved with minor comments. The vendor will revise and resubmit them. The vendor can proceed with manufacturing but the comments need to be considered.

3 Rejected, to be

If a vendor drawing is found totally unacceptable or at huge variance with client specification, then it should be rejected. The vendor will





Code Meaning Explanation resubmitted. resubmit and will not proceed with manufacturing.

4 Retained for information.

This code is used when the vendor documents are standard and do not require review.

It is a good practice to have a thorough review of vendor document and comment on it only once. Frequent commenting annoys the vendor and delays the project. On the other hand, the vendor should refrain from submitting documents in parts. Submitting all documents makes design review effective and complete. Changes Changes can be made by the contractor. These occur due to revised specifications. The vendor will then modify the design. Sometimes, the material would have been manufactured. Price and time may increase. It will up to procurement engineer to take stock of the situation and resolve the situation. Engineering changes in bulk MTO are critical and reconciliation has to be done by Projects or procurement department. Engineering will issue the MTO. They will not take part in reconciliation. If any MTO is received after procurement is done, reconciliation has to start. A typical reconciliation statement is given below.

Material reconciliation statement (sample) Sr. no

Valve type Size, inch First MTO Qty.

PO qty. Second MTO Qty.

Balance to order (Second MTO minus PO qty.)

1 Gate 1 10 7 7 0 2 2 20 14 10 -4 3 6 60 42 50 8 Changes can occur due to the vendor. For example, faulty design, bid mistakes etc.





Client changes can arise from various sources. a. Comments on vendor documents b. Contractual letters c. Meetings d. Revised specifications received after issue of purchase order. Procurement records Procurement department should maintain accurate records. Procurement status It will provide a status of all the ordered items. Sr. no Item name Vendor

name Planned PO date

Actual PO date

EDD % complete

Remarks

1 Pump Floway 1 Jan 15 4 Jan 15 6 Sep 15 10 On schedule 2 Blower Fluent 4 Jan 15 4 Jan 15 4 Apr 15 20 Behind schedule Vendor contact database It shows the contact details of all vendors. Sr. no

Item name

Vendor name

Contact person

Mobile Landline Address Email

1 Pump Floway Mr. Joe 9870669 650772 306 Axis street, Turkey

[email protected]

2 Blower Fluent Mr. Dave 9006669 650550 501 Bridges street, Singapore

[email protected]

Expediting Expediting is defined as the process of tracking vendor progress and ensuring prompt execution of a purchase order.





Expediting is important due to the below reasons. 1. A construction project faces many issues. Issues get lost if they are not tracked.

Expeditors highlight important issues. 2. A construction project is a collective effort with internal and external teams. There are

times when communication stops. Expeditors increase communication by cutting across department borders.

3. Issue resolution needs continuous monitoring. The project team needs a dedicated individual who can devote time to resolve these issues. Expeditors ensure prompt action is taken on the issue.

There are four major types of expediting. • Desk-based expeditors work from home office and follow up with phone and email. • Field-based expeditors perform field visits. • Major industrial centers have area-based expeditors. Their work is restricted to a

particular area. • Site expeditors work as per site priority. Expeditors not only expedite vendors, but they will expedite with any department. Depending upon the project, one or more types of expediting will be present. Apart from the above, the Owner will have its own expeditors. Telephone calls and emails are enough to expedite bulk items. The expeditor needs to make at least one field visit for items like transmitters, valves etc. Frequent visits and close monitoring is required for long lead items. Before order placement, expeditors expedite bids, queries and responses. Once an order is issued, drawing approval is expedited. After drawing approval, manufacturing is expedited. Expeditors obtain purchase orders, vendor or sub-vendor schedule. The expediting report provides details of their activities. Once inspection is over, they expedite the transportation of the material to the site. Inspection Inspection department is concerned with the inspection of the goods as per approved quality assurance plan and drawings.





Not all goods need inspection. But some goods need stringent inspection. Inspection department classifies all items in three categories based on their importance. This is known as categorization plan. A typical categorization scheme is explained below. The inspector will witness key stages of important items. For example, pressure vessels, pumps, motors, heat tracing etc. Some items will have medium importance. Inspector will witness only final inspection. For example, valves, instruments, cables, pipes etc. Some items will have low importance. Inspection is not required for welding rods, gaskets, tube fittings, cable glands etc. The client will give dispatch clearance if the document review is satisfactory.

Figure 2 Inspection process

The vendor will place Inspection call as per the quality assurance plan. At the end of the inspection, third party inspector will make an inspection visit report (IVR). This report is the key to knowing all the details. Disputes happen when the vendor does not agree with the inspector’s report. It will be the client who will decide the outcome of a dispute between the inspector and vendor. Based on client’s decision, the inspector will issue IRN. The vendor will send inspection documents to the contractor after the inspection. If all the documents are found in order, third party inspector will release IRN. Site receipt

Inspection call Inspection visit report (IVR)

Inspection release note (IRN)

Dispatch clearance





The contractor’s inspection team needs to inspect all the material before it takes custody. This includes inspection of material supplied by the Owner. The site inspection team prepares a site inspection report. This is known as Incoming material inspection report. This report becomes a basis of releasing or withholding vendor’s payment. The acceptable material will be handed over to the site store manager who will update the site receipt register. The site team will return back the unacceptable material to the vendor. The procurement engineer will impose back charges on the vendor. Updating the procurement scope of work The vendor might take deviations starting from technical query stage to the inspection stage. When the material reaches the site, it might be subjected to theft, damage, defects, improper storage etc. The instances mentioned above lead to a material deficit. They will prevent the project from getting completed on time. Even a small valve which is not ordered can stop the commissioning activities. Procurement needs to track and take suitable action. Material shortages lead to project failure. Project closure Project closure requirements related to procurement should be studied from the contract at the beginning of the project. Generally, the procurement department needs to collect the documents mentioned in the table below. Sr. No. Documents (sample) 1 Procurement management plan. 2 Procurement records 3 Vendor evaluation. 4 List of all purchase orders 5 All inspection reports and release notes. 6 No-claims certificates 7 Guarantee certificates





Sr. No. Documents (sample) 8 List of spares required during commissioning. 9 List of spares required for 2 years operations. 10 Operations and maintenance manual 11 As-built drawings 12 List of vendor contact details 13 Lessons learned 14 Statutory certificates 15 Evidence that vendors have been paid. Vendor payment Before final payment, procurement engineer should attend to the following activities. Analyze delays Delays can be during engineering or manufacturing. Delays can be analyzed by maintaining a chronology of events. Settle claims A blank format of “no claims certificate” can be sent to the vendor. This certificate says that vendor will not demand anything from the contractor and all dues related to the project are settled. The signature of the vendor will denote agreement. Settle disputes Disputes occur due to unfavorable events. But they can be prevented by prompt actions. Disputes should be settled at the earliest. Collect final vendor documents Procurement should ensure that vendor submits the latest drawings. Some drawings like P&ID and layouts have to be converted to as-built status. Guarantee certificates need to be assembled. The procurement engineer has to ensure collection of all vendor documents in a file. Generally, the contractor will withhold vendor’s part payment until this file is acceptable to the client.





Material Requisition/ MTO/Specification

Enquiry to vendor

Bid submission by vendor

Engineering raises technical query (TQ)

Engineering Evaluation

Is it acceptable to Engineering?

YES

NO

Procurement sends to Engineering

Vendor responds to TQ

Technical Bid Evaluation

Vendor submits drawings/documents

Procurement issues Purchase order

Resubmission by vendor

Comments on vendor documents


YES

NO

Manufacturing

Inspection

Vendor raises change notification


YES

NO

Change for vendor as well as contractor

Change notification is rejected

Inspection visit report

(IVR)


YES

NO

Deviations observed in IVR

Dispatch clearance given

Vendor to rectify

Engineering

Procurement

Vendor

Note Interfaces flow from MR stage to final dispatch.

Deviations are not always

technical. If related to contracts, legal etc.,

send to respective

department.

Appendix A-Engineering Interfaces with Procurement department

1

1





Engineering scope of work (SOW)

Understand the overall scope of work. It is EPC for a storage tank.

Appendix B- Scope of work Activity

1

Understand the design basis.

2

Understand the mechanical data sheet. It gives you an overview of the overall scope. Scope is procurement of plates, flanges, pipes, and fasteners.

3

From the data sheet, detailed drawings are produced like GA drawing, fabrication drawings, tank nozzle drawings.

4

All items are collected into Material Take Off (MTO). This is procurement scope of work.

5

You are the procurement manager. You company is executing an EPC project. The scope of this project is engineering, Procurement and construction of an oil storage tank. How would you derive the Procurement scope of work? Hint: Please exclude all other department scope of work Consider only mechanical procurement as scope of procurement.

Engineering SOW

Mechanical design basis

Data sheet

Fabrication drawings

GA drawing

Tank nozzle layout

Calculation

MTO

Problem

Engineering SOW

Procurement SOW

Construction SOW

Procurement SOW is derived from engineering SOW.

6

6

5

3

4

2

1

Solution

Procurement scope of work (SOW)





Appendix C-Project Closure Activity

You are the procurement manager of an EPC contractor. You company is executing an EPC project. You have just joined this company. The project is getting completed and the only activity remaining is the project closure. Documents related to Procurement department have not been submitted and there is chaos as contractor’s payment is not getting released. How would you start this activity? How would you report progress of this activity?

Problem Solution

There could be hundreds of items in a project. However, for the sake of understanding, we are considering only two items. Study the contract provisions related to procurement project closure. Make a list of items.

1 Contract clauses po number

item name

final documents received

guarantee certificate received

as built drawings received

no claims certificate received

operations manual received

2010 vessel 2011 pump

List the contract clauses horizontally. List the Item name and PO numbers vertically.

2

Assign milestone factors to contract clauses. These are given in contract or you can arbitrarily take them.

3

Fill in the actual status of each item. For example, if final documents are received, it will earn 30%. If not, then 0%.

4

Contract clauses Milestone 30 10 20 30 10

po number

item name






2010 vessel 30 10 0 0 0 2011 pump 30 10 20 0 0

Contract clauses Milestone 30 10 20 30 10 A B C D

po number

item name






Actual total weight (Σ all weights)

PO value, US $

PO weight (PO value/Total PO value)

Actual % complete (A*C*100)

2010 vessel 30 10 0 0 0 40 1000 0.33 13.33 2011 pump 30 10 20 0 0 60 2000 0.66 40

Total 3000 1.0 53.33

4

Project closure related to vessel is 40% complete, whereas for pump, it is 60% complete. This is obtained by adding all weights achieved.

5

5

Weight of each PO is also found out. PO for pump carried more weight than PO for vessel. Closure of pump documents should be prioritized.

6

6

Project closure activity is 53.33% complete. 5

1

2

2



Important points • Safety is important. • Vendors are responsive if their issues are taken on priority. • Keep changes to the minimum. • Client expeditors have the same goal. Contractor expeditors should work with them. • Every issue needs to be understood technically. • Client meetings are an effective tool to sort out issues. • Everyone should work in the interest of the project. • Lessons learned need to be maintained.