New IPA Committee to Highlight Procurement’s Value to Capital Projects

Independent Project Analysis (IPA), Inc. is standing up a new Industry Benchmarking Consortium (IBC) committee to discover the unquantified value of the procurement function in capital project systems. The inaugural meeting will take place December 12 to 13, 2018 in The Woodlands, Texas.

Guided by its IBC member company procurement representatives, the Procurement and Contracting Committee (PCOM) will create metrics to quantify relationships between industry procurement practices and capital project performance. According to IPA Project Research Division (PRD) Director Michael McFadden, procurement professionals belonging to the PCOM will learn about Best Practices that drive improved capital project effectiveness, including cost and schedule outcomes. In addition, the PCOM will establish a Procurement Effectiveness Index to assess the competitiveness of capital project procurement process performance among PCOM member companies.

“We want to demonstrate the capital procurement group’s value to capital projects,” McFadden said in a recent interview. The capital procurement group is small but influential, he said, noting that some procurement groups fall under a company’s finance division rather than belonging to a projects organization. “We’re going to help the procurement function demonstrate and quantify its value over the entire project work life cycle.”

Negotiating and securing lower unit costs for project equipment, materials, and services is important, but the work processes procurement professionals follow affect cost and schedule performance beyond just unit costs.

The procurement function’s value is seen as being many times larger, McFadden explained. “It is not a trade-off. Procurement can negotiate lower unit costs and drive cost effectiveness throughout the entire delivery process.”

Procurement slip disrupts the management of services and materials which degrades capital project effectiveness, McFadden said. “Decisions that undermine timeliness in the field can deteriorate capital effectiveness at the end of the day.”

Like members of IBC’s cost engineering committees—the Cost Engineering Committee (CEC) and Upstream CEC (UCEC)—PCOM member companies will benefit from metrics developed from IPA’s proprietary database of more than 18,000 capital projects. The PCOM will gather for an annual conference to review new procurement research data and trends and share ideas for improving project outcomes.

For more information, please visit IPA’s Research page.


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