Reforming Supplier Relationships

When CII expanded its membership to include suppliers, it recognized the key role they play in pursuit of project goals. However, complex engineered equipment and systems essential for project performance are typically designed, manufactured, and delivered by suppliers who are outside the traditional “circle of cooperation” between owner and contractor. The expertise embedded in the design of this equipment is frequently lost or underutilized. To explore and enhance the contributions suppliers make to the EPC process, CII established RT-130, Reforming Supplier Relationships.

RT-130 found that there clearly was an opportunity for a step change in supplier involvement in the EPC process, one which brings suppliers of strategic items into the “circle of cooperation,” involves them much earlier in the project delivery process, and enables using their expertise in all phases of the project lifecycle. RT-130 concluded that such a breakthrough must start with the procurement process, and envisioned a new project delivery model in which “big P” (complex engineered equipment and systems essential to project success) and “little P” (the balance of items to be procured) are separated and integrated into a new PEpC project delivery model.

The team adopted and used the sophisticated simulation model of project performance developed by RT-125, (IR125-2, Determining the Impact of Process Changes on the EPC Process) to assess the potential benefits of the PEpC delivery model. Simulation results suggested significant overall project cost and schedule savings were possible. Case studies of four projects employing PEpC-like characteristics corroborated the simulation results. Both the simulation and case study results show that adopting the PEpC model prolongs several early activity durations, but that these are more than recovered by schedule savings in later project activities.