About Procurement on EPC (Engineering-Procurement-Construction)
Procurement process in Oil and Gas EPC projects is usually structured and follows several main stages
The stages include
(1) Plan and Strategy of Procurement
This initial phase involves the project team determining what, when and where the materials and services are needed, and then where they will be sourced. They also develop a strategy for selecting the most competent vendors (suppliers) or contractors. Careful planning is crucial, as mistakes at this stage can significantly impact the project's schedule and cost.
(2) Request for Quotation (RFQ)
Once the list of materials and services has been created, Procurement team will send RFQ's to qualified vendors. This document contains detailed technical specifications, required quantities, delivery schedules, other commercial (terms and conditions) and technical requirements. This ensures vendors can provide accurate and comprehensive price quotes.
(3) Quotations Evaluation
Procurement, along with the Technical team (Engineers in multi-discipline), will evaluate all incoming bids. This evaluation focuses not only on price but also on technical aspects (whether the product or service meets specifications or not), the vendor's track record, product quality and delivery schedule. This assessment often uses a scoring system to ensure objectivity.
(4) Negotation and Vendor Selection
Selected vendors will be engaged in negotiations to reach the best possible agreement. Negotiations may include final price, payment terms, delivery schedule, scope of works & supply and other contractual terms. Once an agreement is reached, Procurement team will select the best vendor and begin the contracting process.
(5) Issuance of Contract and Purchase Order
Once a vendor is selected, Purchase Order (PO) or Contract will be issued. This document serves as a formal agreement between the EPC company and the vendor. The PO lists complete details such as material descriptions, quantities, prices, delivery schedules, and other special conditions. This PO serves as the basis for the vendor to begin production or delivery of goods.
(6) Delivery Management (Expediting)
Once PO is issued, Expediting team will closely monitor the vendor to ensure goods are produced and delivered on schedule. They will visit the vendor's factory, monitor production progress, and resolve any issues that may arise. This is crucial because delays in material delivery can halt the entire construction work on the project site.
(7) Goods Received and Inspection
When materials arrive at the project site, Quality Control (QC) team will inspect the goods. They verify that the goods meet the specifications requested in the Purchase Order, are any undamaged detected, and/or have the required certifications. If there are any discrepancies, the goods may be rejected or returned to the vendor.
Various Departments in EPC Projects
The Sections or Departments (or Divisions, whatever they call it) involved in EPC projects may vary greatly, but in general they will include the following
Engineering
Consisting of several Engineering disciplines, including (at least) Civil, Mechanical, Electrical, Instrumentation and Process.
Procurement
Consisting of several disciplines (or scopes), including (at least) Purchasing, Expediting and Traffic & Logistic.
Construction
Responsible for direct supervising all construction activities in field, including supervising and monitoring work of several sub-contractors involved.
Project Control
Tasked with creating and supervising the implementation schedule and costs incurred for the project to ensure it runs according to plan.
Quality Control
Ensure that all materials and services supplied for the project meet all technical requirements according to the project's needs.
HR and Finance
Managing recruitment process (from the administration and distribution side), training and recording the flow of money in and out related to project needs.