the path forward climate of concern - joc.com...... the path forward..... climate of concern . p e g...

John F Mika

Senior Vice President of Procurement

CH2M HILL

............ Climate of Concern ............The Path Forward

PEG

Procurement Executives Group

Discussion Topics

• Procurement Executives Group (PEG)

• Global Economic Environment

• Supply Market Landscape

• EPC Industry Landscape

• Concerns and Threats

• Questions and answers

2

PEG



3

AMEC, Peter Jessup

Bechtel, David Hammerle

Black & Veatch, Mike Gammill

Burns & McDonnell, Matt

Nordhus

Burns & Roe, Michael Clark

CB&I, Dan Kinsey

CH2MHill, John Mika

Fluor, Jim Scotti, Ed Ruane

Foster Wheeler USA, John

Crockett

McDermott, Ryan Siebenkittel

Jacobs, Harry Breijaert

KBR, John Townsend

Kiewitt, Christopher Gonzalez Kvaerner Americas Inc., Jeanean

Slamen

Mustang, Ted Kelly

S & B, Kent Malone

Shaw, Gary Dellesky, Jim Malone

Technip USA, Art Wardlaw

The Industrial Co., Michael

Chambers

URS, Joe Christopher, Larry

Dinger

Worley Parsons, Tom Brock

Zachry, Glenn Kloos

2011 Membership Profile ENR Rankings

•Top Contractors

6 of top 10 are PEG

10 of top 25 are PEG


•Top Design Firms 7 of top 10 are PEG



•Top International Contractors


4

PEG


The Procurement Executives Group

(PEG) serves as a forum for the

executive leadership of procurement

and supply management in the

engineering and construction

industry. We seek to represent,

promote, and improve the

contributions of our profession to the

industry we serve. In fulfilling this

mission, PEG and our member

company representatives are

committed to a set of Core Values….

5

• Ethics and Integrity

• Safety

• Quality

• Diversity

• Sustainability

• Collaboration

• Leadership in

Procurement

Excellence

Charter Core Values

For more information, visit http://peg-eci.org/

http://peg-eci.org/

http://peg-eci.org/

http://peg-eci.org/

http://peg-eci.org/

PEG


Headlines • Concern around a double dip recession

• US and European expansion anemic – Consumer and business confidence

– Sovereign worries

– Fiscal tightening

– Gridlocked US government

• Emerging markets fairing better – Best growth

– Best pricing potential, selling or buying

• Projects – “Giga Projects” is the new landscape

6

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7

Global Recovery: Diminished Expectations

2009 2010 2011 2012 2013

United States -2.6 2.9 1.5 1.8 2.3

Eurozone -4.1 1.7 1.8 1.2 1.6

United

Kingdom -4.9 1.4 1.1 1.9 2.3

Japan -6.3 4.0 -0.2 3.9 1.8

China 9.2 10.3 9.2 8.3 8.9

India 9.1 8.8 7.5 8.1 8.6

Brazil -0.6 7.5 4.2 4.6 5.2

World -1.9 4.1 3.0 3.6 4.0

Real GDP Growth

Source: IHS Global Insight

PEG


8

U.S. Economic Growth by Sector

2010 2011 2012 2013

Real GDP 3.0 1.5 1.8 2.3

Unemployment Rate 9.6 9.1 9.2 8.9

Consumption 2.0 2.1 1.9 1.8

Light Vehicle Sales (Millions) 11.6 12.5 13.5 15.0

Industrial Production (growth) 5.3 3.7 2.0 2.9

Housing Starts (Millions) 0.58 0.60 0.67 0.94

Business Fixed Investment 4.4 7.8 4.3 5.7

Fed Government 4.5 -2.3 -2.9 -3.6

CPI 1.6 3.2 1.6 1.8

10 yr Treasury Yield 3.2 2.8 2.7 2.9

Oil Prices (WTI, $/bbl) 79 94 98 106

(Percent change unless otherwise noted)

Source: Global Insight

PEG


30

35

40

45

50

55

60

65

2006 2007 2008 2009 2010 2011

United States Eurozone China

PMI Manufacturing Indexes values over 50 indicate expansion

9

Purchasing Managers‟ Indexes: Manufacturing Slowing Down


PEG


10

-6

-4

-2

0

2

4

6

830

35

40

45

50

55

60

65

2005 2006 2007 2008 2009 2010 2011 2012

6 Month Lag, PMI Component Index - Delivery Times (Left Scale)

Year over year change, PPI, Intermediate and Capital Goods (Right Scale)

Pressures in Supply Chains are Beginning to Abate

-15

-10

-5

0

5

10

15

40

45

50

55

60

65

70

2005 2006 2007 2008 2009 2010 2011 2012

6 Month Lag, PMI Component Index - Supplier Deliveries (Left Scale)

Year over year change, PPI, Core Intermediate Materials (Right Scale)

-10

-5

0

5

10

15

2040

45

50

55

2005 2006 2007 2008 2009 2010 2011 2012

6 Month Lag, PMI Component Index - Delivery Times (Left Scale)

Year over year change, PPI, Total Industrial Products (Right Scale)

-10

-5

0

5

10

15

2040

45

50

55

2005 2006 2007 2008 2009 2010 2011 2012

6 Month Lag, PMI Component Index - Supplier Deliveries (Left Scale)

Year over year change, PPI, Industrial Products (Right Scale)

United States China

Eurozone Brazil


PEG


Supply Base Risks and Influences

• Supplier performance

• Shop capacity restraints

• Global dispersion of supply chain,

continues

• Regulation changes and compliance

• Financial condition and access

• Commodity volatility

• Energy cost and availability

• Counterfeit, fraud, and suspect items 11

PEG


Market Capital Expenditures (Capex)

• Power

• Oil, Gas, and Chemical (OG&C)

• Civil

• Mining

12

PEG


13

Global Energy Demand

0

50

100

150

200

250

300

350

400

1965 1975 1985 1995 2005 2015 2025 2035

Source: U.S. Department of Energy, International Energy Outlook & BP Statistical Review.

Fossil fuels projected to meet 80% of energy demand in 2035

Forecast

50% Growth

MM

BO

ED

Liquids

Natural Gas

Coal

PEG


14

Power Global Capex Oil, Gas & Chemicals Global Capex

Civil Global Capex Mining Global Capex


0

200

400

600

800

1000

1200

1400

1600

2010 2011 2012 2013 2014 2015 2016

No

min

al $

US

Bn

2010 2011

0

200

400

600

800

1000

1200

2010 2011 2012 2013 2014 2015 2016

No

min

al $

US

Bn

2010 2011

0

100

200

300

400

500

2010 2011 2012 2013 2014 2015 2016

No

min

al $

US

Bn

2010 2011

0

100

200

300

400

500

600

700

800

900

2010 2011 2012 2013 2014 2015 2016

No

min

al $

US

Bn

2010 2011

PEG


Total Global Capex (Power, Oil, Gas & Chemical, Civil, Mining

15


0

500

1000

1500

2000

2500

3000

3500

4000

2010 2011 2012 2013 2014 2015

No

min

al $

US

Bn

September 2010 Forecast

October 2011 Forecast

PEG


0

1,000

2,000

3,000

06 07 08 09 10 11 12 13 14 15

No

min

al $

US

Bn

Africa North America Western EuropeAsia-Pacific Middle East Latin AmericaEastern Europe

Regional Global Capex

16 Source: Global Insight

PEG


EPC Industry Landscape

17

• Strong capital expenditures 2012 – 2015

• Significant growth in EPC Spend ahead, some bow wave happening

• Global project challenges – Attracting and retaining staff – Local labor shortages – Lack of infrastructure – Remote and challenging locations – Complex scope and size

• Global sourcing – Opportunities and challenges

PEG


EPC „Crystal Ball‟ - Spend Forecast

18

Spend Forecast - Revisited

0

400

800

1200

1600

11 12 13 14 15

No

min

al $U

S B

n

Civil Mining

OG&C Power

PEG


‘Crystal Ball‟ – Part II

19

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

0

20

40

60

80

100

120

140

160

180

2011 2012 2013 2014 2015

Fre

igh

t To

ns in

Billi

on

s

Fre

igh

t S

pen

d in

$U

S B

illi

on

s Total Freight Spend

Total Freight Tons

- Revisited

PEG


…….Climate of Concern

20

Logistics is even more critical to

EPC success!

• 40% chance for double dip

• Can Washington work again in collaboration

• Can the European debt crisis stabilize

• From Arab Spring to Arab Fall

• Can we continue to be ready for impending expansion

PEG


Questions & Answers

21

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