NATIONAL INSTITUTE OF CONSTRUCTION MANAGEMENT AND

RESEARCH (NICMAR),
PUNE

Assignment in;
Procurement Management In Case Of Pipeline Project

Submitted by,
Submitted to,
Vijaydatta Patil (P91119)
Prof. Totala
Siddhant Patil (P91119)
Dated-12th Dec2014.
Saurabh Pant

PEM 9, Sec II
Note:- For the sake of this assignment Ive assumed/considered a subsea piping
project.

Procurement Management:
Procurement management in such a case will be such that main focus will be on
timely delivery and execution because there is a huge loss of profit at expense of,
late start up. Second term that will be considered on prime basis will be the cost
factor because of huge capital cost require and the third important thing will be
reliability and the time span or the life of the system which is to be desired.

Project
Procurement
Plan

Plan
Procurements

Conduct
Procurements

Administer
Procurements

purchasing
decisions

obtaining seller
responses

managing
procurement
relationships

specifying
approach

selecting a
seller

managing
contract
performance

awarding a
contract

making
corrections and
changes as
needed

identifying
potential sellers

Close
Procurements

completion of
project
procurement

Let us assume the following structure for the purpose of following subsea pipeline
project.
XYZ
XYZ

{EPC
{EPC
contractor
firm
contractor
firm
with
the
whole
of
with
the
whole
of
offshore
oil
&
gas
offshore
oil
&
gas
project}
project}

ABC
ABC

{
A
{
A
firm
with
the
firm
with
the
project
for
laying
project
for
laying
the
required
the
required
subsea
pipeline}
subsea
pipeline}

DEF
DEF

{A
{A
company
that
company
that
manufactures
the
manufactures
the
required
grades
of
required
grades
of
pipes}
pipes}

PQR
PQR

{A
{A
transportation
transportation
firm
that
firm
that
transports
the
transports
the
requir
ed
pipes}
required
pipes}

Step 1] Plan Procurement:

Inputs:
Scope Baseline:
It gives the scope of the project. In this case it will determine the route across
which the company ABC will lay the pipeline that was previously engineered
by XYZ. This will include;
i.
Product scope description (the route)
ii.
Service description (S lay/J lay methodology to be followed)
iii.
List of deliverables (pipeline component along with instrumentation,
re-boosting stations etc)
iv.
Acceptance criteria (quality standards to be met, code to be
followed)
v.
Technical issues (process requirement, external environment,
pressure, corrosion)
vi.
Plus it will consist of a WBS as to which who is to do what work and
what are the scopes of different departments involved.
Requirements Documentation:
i.
Important information about project
ii.
Grade X70, X80 required
iii.
Licences , permits, environmental clearances, IPR, HSE norms
iv.
Trenching or back filling required, etc.
Teeming Agreements:
i.
Between all the firms & companies involved.

ii.
iii.

Scope of work.
Competition requirements, etc.

Risk register:
i.
Risks related to delays
ii.
Risk during transit of pipes
iii.
Risks related to delays in getting clearances
iv.
Risks related to non-conformance, etc.
Risk related contract decisions:
i.
Majorly deals with who will shoulder what risks.
ii.
In context, company ABC may impose some liquidated damage for
delays made by DEF and PQR during transit or manufacture of pipes.
Activity resource requirements:
i.
Number of pipes required.
ii.
Control valves, re-boosting stations required
iii.
ROVs/AUVs, the laying ships, labour, barges, tugboats that are
required.
iv.
Instrumentation, labour required
Project schedule:
i.
The timelines that need to be followed and the delivery dates for pipes
ii.
Delivery date for pipeline to be laid
iii.
Expected rate of workmanship
iv.
Deadlines to be met.
Activity cost estimates:
How much each activity will cost
i.
Of material
ii.
Of workmanship
iii.
Of transportation
iv.
Of laying
v.
Of testing and inspection
vi.
Of commissioning, etc.
Cost performance baseline:
What is the planned budget for all these activities.
Enterprise environmental factors:
i.
The environmental norms to be followed
ii.
Some local factors such as say commercial transport, fishing activities

iii.

Players in market, their past track records

Organisational process assets:

i.
Procurement policies employed
ii.
Contracts to be followed.

Tools and Techniques:

Make or buy analysis:
For example the laying firm ABC decides that it is not that efficient with
transportation of pipes bought from the company DEF and employs another
firm PQR to manage the transportation, since they already have established
expertise in it. Which again, developing that kind of expertise or operating at
that level would take lot of time and many resources would be kept tied up.
Expert judgement:
i.
Regarding which activities are critical
ii.
How much will they cost
iii.
Which are efficient methodologies to be followed (go for S-lay or J-lay)
iv.
Go for in house or out sourced.
Contract type:
i.
Generally contract that will be followed by XYZ will be of turnkey basis,
various liquidated damages clauses, incentive clauses for some share
in profit, if work accomplished before designated time.
ii.
Contract that is followed by ABC will be again covered by liquidated
damages and EPCC nature.
iii.
Contract followed by PQR will be covering CIF, FOB, liquidated
damages as deemed fit by the transportation firm.
iv.
Contract followed by supplier company DEF will be item rate covering
liquidated damages to account for delays in production and also clause
that deals with price escalation.

Outputs:
Procurement management plan:
Includes guidance for;
i.
Types of contracts to be used
ii.
Risk management issues
iii.
Whether the independent estimates will be considered during
evaluation
iv.
Standardised procurement documents needed
v.
Managing multiple suppliers (say the pipe requirement was high and
was divided into two or more firms)

vi.
vii.
viii.
ix.
x.

Synchronising time required to manufacture and deliver pipes with

project schedule
Estimate activity resources and develop schedule processes for
efficient time management
Identifying requirement of performance bonds & insurance
Procurement metrics to be used
Establishing a WBS

Procurement statements of work:

Clear complete and concise baseline for project stating
i.
ii.
iii.
iv.
v.
vi.
vii.

Specifications
Quantity desired
Quality levels
Performance data
Period of performance
Work location
If O & M is to be included in scope

Make or buy decision:

Document supporting the made decision regarding out sourcing
i.
Transportation
ii.
Laying
Procurement documents:
i.
Bids
ii.
Tenders
iii.
Quotations
Source selection criteria:
i.
Quoted price
ii.
Technical competence
iii.
Experience on similar projects
iv.
Past track data
Change requests:
Any changes required in the procurement plan

Other steps to follow will be as follows;

Step 2] Conduct Procurements:

All responses to the bid are collected and evaluated. Finally the vendors ABC, PQR
and DEF will be finalised from the vendor pool and the contract will be signed.

Step3] Administer Procurements:

Procurement relationships are managed, contract is monitored and changes are
made as and where necessary

Step 4] Close Procurements:

Finally the entire pipe line project will be inspected for quality conformance and
after it has been tested & commissioned the procurements will be closed.