Top Ten Things You Need to Know About Equipment Procurement


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Top Ten Things You Need to Know About Equipment Procurement
Presentation by Martin Gravel at 2010 OWWA Conference, May 5, 2010 at Windsor, Ontario

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Top Ten Things You Need to Know About Equipment Procurement

  1. 1. Top Ten Things You Need to Know About Equipment Procurement Martin Gravel, P.Eng., GENIVAR Andrew Farr, P.Eng., Region of Peel
  2. 2. Outline <ul><li>Equipment Procurement 101 </li></ul><ul><li>Things to Keep in Mind Before You Buy Stuff </li></ul><ul><li>Top 10 Procurement Issues </li></ul><ul><li>Summary </li></ul><ul><li>Questions and Answers </li></ul>
  3. 3. Equipment Procurement 101 <ul><li>Definition : </li></ul><ul><ul><li>Purchasing Equipment Ahead of Time for Later Installation by Others </li></ul></ul><ul><li>Why We Do It: </li></ul><ul><ul><li>A Project Management Tool to Mitigate Potential Issues with Quality and Delivery of Equipment within the Project </li></ul></ul><ul><li>Scope: </li></ul><ul><ul><li>From $100k up to +$50M </li></ul></ul>
  4. 4. Things to Keep in Mind Before You Buy Stuff <ul><li>Hire A Good Engineer </li></ul><ul><ul><li>Real Experience and Knowledge </li></ul></ul><ul><ul><li>Customize To Your Needs </li></ul></ul><ul><ul><li>Knows Contracts/Warranty </li></ul></ul><ul><ul><li>Must Build Trust with your Procurement Engineer </li></ul></ul><ul><li>Know What You Want </li></ul><ul><ul><li>Do the Research in Advance! </li></ul></ul><ul><ul><li>Consult with Your Vendors </li></ul></ul><ul><ul><li>Don’t Be in a Position of Being “Educated” Later </li></ul></ul>
  5. 5. Things to Keep in Mind Before You Buy Stuff <ul><li>Remember that this has been done before and for every horror story: </li></ul><ul><ul><li>There are 100 good stories! </li></ul></ul><ul><ul><li>And a back story you need to understand </li></ul></ul><ul><li>You Need to Pay for What You Want </li></ul><ul><li>and….. </li></ul><ul><li>You Get What you Pay For! </li></ul>
  6. 6. Top Ten Procurement Issues <ul><li>Limited Liability </li></ul><ul><ul><li>The Vendor wants to cap their liability up to a specified sum…cannot be open ended </li></ul></ul><ul><ul><li>Does not want to be liable for consequential, incidental, special, punitive or other indirect damages </li></ul></ul><ul><ul><li>Vendors want to put a $ to the risk being transferred </li></ul></ul>
  7. 7. Top Ten Procurement Issues <ul><li>Capping of LDs and Performance Damages </li></ul><ul><ul><li>The Vendor also wants to cap their liability for Liquidated Damages and Performance Damages up to a specified sum </li></ul></ul><ul><ul><li>Will want “sole and exclusive remedy” as per the Contract </li></ul></ul>Who Me?
  8. 8. Top Ten Terms & Conditions Issues <ul><li>Evaluation Criteria </li></ul><ul><ul><li>The Vendor wants to know how their bid is going to be evaluated so that they can figure out if they can “win” by providing the best value </li></ul></ul><ul><ul><li>Can be a hard financial assessment or a hybrid of soft and hard financial criteria </li></ul></ul><ul><ul><li>Be prepared that Vendors will walk away or even manipulate a weak “fill in the blanks” evaluation method </li></ul></ul>
  9. 9. Top Ten Terms & Conditions Issues <ul><li>Maintenance Warranty Period </li></ul><ul><ul><li>The Vendor wants their warranty period to start based on equipment delivery to site rather the installation contract’s start-up schedule </li></ul></ul><ul><ul><li>Owners must either adapt their approach or ask upfront for additional warranty provision at an extra cost </li></ul></ul><ul><ul><li>Value of extended maintenance warranties sometimes questionable </li></ul></ul>LimitedTime Offer
  10. 10. Top Ten Terms & Conditions Issues <ul><li>Intellectual Property </li></ul><ul><ul><li>The Vendor wants to protect their own rights of their proprietary IP </li></ul></ul><ul><ul><li>Owners may ask solely for royalty-free non-exclusive license for the products being delivered </li></ul></ul>
  11. 11. Top Ten Terms & Conditions Issues <ul><li>Termination Clauses </li></ul><ul><ul><li>Owners typically want to right to stop a supply contract at no cost </li></ul></ul><ul><ul><li>Vendors want to be compensated for work executed to date, costs to stop the work and in some cases, loss of O&P on work not done </li></ul></ul>
  12. 12. Top Ten Terms & Conditions Issues <ul><li>Substitutions and Quality </li></ul><ul><ul><li>Owners must buy what they want and protect themselves from future substitutions </li></ul></ul><ul><ul><li>Vendors are really in two businesses ie. get the business and then deliver it at the lowest cost (make money) </li></ul></ul><ul><ul><li>Vendors want to supply their own OEM equipment without customization </li></ul></ul>
  13. 13. Top Ten Terms & Conditions Issues <ul><li>Payment Structure </li></ul><ul><ul><li>Owners must provide sufficient cash flow to Vendor for execution of Contract </li></ul></ul><ul><ul><li>Vendors must be reasonable with pre-delivery payments requested </li></ul></ul><ul><ul><li>Owners must holdback sufficient security beyond delivery </li></ul></ul>
  14. 14. Top Ten Terms & Conditions Issues <ul><li>Insurance </li></ul><ul><ul><li>Owners typically request general liability insurance including injury, death, property damage and automobile insurance as additional named insured </li></ul></ul><ul><ul><li>Vendors are making more exceptions to these standard clauses such that coverage does not extend to liability arising out of the owner’s own negligence </li></ul></ul>
  15. 15. Top Ten Terms & Conditions Issues <ul><li>Level of Protection </li></ul><ul><ul><li>Size Matters! </li></ul></ul><ul><ul><li>Suit the penalty clauses and other protection clauses in the terms and conditions to the size of the project </li></ul></ul><ul><ul><li>Vendors can take on risk if it is worth it to them </li></ul></ul>
  16. 16. Top Ten Terms & Conditions Issues <ul><li>Overall Contract Length </li></ul><ul><ul><li>Many types of equipment in the water industry can have consumables with extended warranties </li></ul></ul><ul><ul><li>Vendors do not like to have extended and replacement warranties go on forever </li></ul></ul><ul><ul><li>Owners need to be reasonable in only getting what they need for now to forecast operational costs </li></ul></ul>
  17. 17. Summary <ul><li>Equipment procurement can be done right and wrong </li></ul><ul><li>The value you get out of it is equal to the effort you put into it in the first place </li></ul><ul><li>Pick your level of protection and risk transfer that is equitable to both parties </li></ul><ul><li>Vendors can work with you and sometimes for just a little more $, you can get quite a lot </li></ul>
  18. 18. Email: [email_address] andrew.farr@