on Major Capital Programs
ADVISORY
By Bob Prieto
Jupiter, Florida
Introduction
Procurement in a program management organization represents a focused effort to improve overall program capital efficiency by seeking to capture the opportunities of leverage embedded in the program scale, simplify market complexities and risks by increasing their visibility, and enhancing management of programmatic supply risks by creating opportunities to utilize risk mitigation strategies typically not available at the project level.
Risks facing large engineering and construction programs include:
- New global sources of supply
- Increased use of module fabrication facilities
- Growing multi-country risk
- Increased competition for essential construction materials
- Constrained shop capacity for select equipment
- Broadened set of financial risks
- Common cost drivers across multiple categories of supply
- Increased importance of current supplier risk performance assessment
- Export compliance risks
- Corruption risks
- Increasing complexity of products and services
- Increased financial volatility
- Increasingly global labor markets
- Volatile energy prices
- Shifting industry structures
- Exposure to a growing number of regulatory environments
To address these challenges, procurement in program management organizations has available a wide range of strategies which, while applicable in large project settings, provide added benefits in large programs. These strategies include:
- Supplier relationship agreements
- Global sourcing
- Client Furnished Material (CFM)
- Bulk material CFM
- Material management
- Alternative contracting strategies
- Logistics management
- Emergent artificial intelligence (AI)-enabled supply chain
Supplier Relationship Agreements
A programmatic approach facilitates the development of supplier relationship agreements with quality suppliers that have the capacity to competitively meet the program’s needs. The formulation of these supplier agreements allows the program to build a partnership arrangement that brings the procurement activity and critical vendor input forward in the overall program cycle.
Value-adding inputs from these strategic suppliers can influence design decisions with an eye towards reducing overall costs and schedules. Procurement cycles are reduced or eliminated for releases after the initial agreement is put in place and quality inspection activities can be more targeted for better results.
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How to cite this work: Prieto, R. (2021). Capturing Opportunities in Procurement Management on Major Capital Programs, PM World Journal, Vol. X, Issue XII, December. Available online https://pmworldlibrary.net/wp-content/uploads/2021/12/pmwj112-Dec2021-Prieto-Capturing-Opportunities-in-Procurement-Management-on-Major-Capital-Programs.pdf
About the Author
Bob Prieto
Chairman & CEO
Strategic Program Management, LLC
Jupiter, Florida, USA
Bob Prieto is a senior executive effective in shaping and executing business strategy and a recognized leader within the infrastructure, engineering and construction industries. Currently Bob heads his own management consulting practice, Strategic Program Management LLC. He previously served as a senior vice president of Fluor, one of the largest engineering and construction companies in the world. He focuses on the development and delivery of large, complex projects worldwide and consults with owners across all market sectors in the development of programmatic delivery strategies. He is author of nine books including “Strategic Program Management”, “The Giga Factor: Program Management in the Engineering and Construction Industry”, “Application of Life Cycle Analysis in the Capital Assets Industry”, “Capital Efficiency: Pull All the Levers” and, most recently, “Theory of Management of Large Complex Projects” published by the Construction Management Association of America (CMAA) as well as over 800 other papers and presentations.
Bob is an Independent Member of the Shareholder Committee of Mott MacDonald and a member of the board of Dar al Riyadh. He is a member of the ASCE Industry Leaders Council, National Academy of Construction, a Fellow of the Construction Management Association of America and member of several university departmental and campus advisory boards. Bob served until 2006 as a U.S. presidential appointee to the Asia Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC), working with U.S. and Asia-Pacific business leaders to shape the framework for trade and economic growth. He is a member of the Millennium Challenge Corporation advisory board where he had previously served. He had previously served as both as Chairman of the Engineering and Construction Governors of the World Economic Forum and co-chair of the infrastructure task force formed after September 11th by the New York City Chamber of Commerce. Previously, he served as Chairman at Parsons Brinckerhoff (PB) and a non-executive director of Cardno (ASX)
Bob serves as an honorary global advisor for the PM World Journal and Library and can be contacted at rpstrategic@comcast.net
To view other works by Bob Prieto, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/bob-prieto/
