Top Ten Things You Need to Know About Equipment Procurement

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Top Ten Things You Need to Know About Equipment Procurement …

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