Document Detail

Title: RS130-1 - Reforming Owner, Contractor, Supplier Relationships: A Project Delivery System to Optimize Supplier
Publication Date: 6/1/1998
Product Type: Research Summary
Status: Tool
Pages: 34
Summarizes the work of the Reforming Supplier Relationships Research Team. Introduces the concept of PEpC, which fundamentally puts purchases of major equipment ahead of detailed engineering and puts the suppliers in the owner's and contractor's 'circle of cooperation.'
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By expanding its membership to include suppliers, CII recognizes that suppliers of key engineered systems and components can and should play a significant role in the pursuit of CII goals. CII, therefore, established the Reforming Supplier Relationships Research Team to explore the potential for reforming traditional owner/contractor/supplier relationships in engineer-procure-construct (EPC) projects to enhance the ability of suppliers to contribute more meaningfully to this process.

Believing that a breakthrough approach would be required to facilitate such a reformation, this research team concluded that if the role of suppliers of the most critical components and systems in a project is to be enhanced, then one must both enhance and prioritize the point of definitive contact with those suppliers: the procurement process. A new project delivery system was envisioned that divides the procurement process into “big P”—strategic procurement items, including complex engineered equipment and systems essential for project performance, and “little p”—the balance of items to be procured; and then reconfigures the traditional EPC model into Procurement, Engineering, procurement, and Construction, or PEpC.

In traditional EPC, procurement follows engineering, both sequentially and in the fact that engineering specifies and defines the items to be procured. In PEpC, the most strategic and project-critical procurement transactions occur prior to detail engineering, and those procured items then influence and define subsequent detailed engineering. Further, the core competencies of the supplier, which are often unique and beyond those possessed by either the owner or contractor, are provided directly into the project delivery system.

Utilizing a sophisticated simulation model of the classic EPC process, the research team compared the impact of a PEpC approach to project execution with traditional EPC. In both theoretical and field implementations, the results indicated that PEpC could produce savings in excess of 10 percent to 15 percent of the time and four to eight percent of the cost of the traditional EPC process.