Parsons Corp.: Contract equipment purchasing requires team-based focus
Engineering firm Parsons outlines its project buying strategies for its work with Lonza.
By William Atkinson -- Purchasing, 2/12/2009 2:00:00 AM
Most procurement professionals feel they have their hands full buying products and services for their domestic facilities. But imagine you've been charged by your company to source one-of-a-kind equipment from U.S. and European suppliers to be delivered to and installed at manufacturing facilities that are being built in Asia—for another company. And, by the way, the number of suppliers that manufacture this specialized equipment is limited, making it more difficult to work within budget and find a way to get the equipment from the suppliers in the Western Hemisphere to the construction sites in the Eastern Hemisphere on time.
For Bernard Doherty, procurement and materials manager at Parsons Corp., it's just another day on the job.
Parsons is one of the largest architectural, engineering and construction companies in the U.S. Eight years ago, Parsons was contracted by Lonza Biologicals to handle the design, engineering, and construction of many of its plants around the world, as well as the procurement of the specialized equipment for these plants. Lonza, a Swiss life science company, operates about 25 production and R&D facilities in eight countries.
"One of our roles is to act as the agent for Lonza in the procurement of process equipment for these facilities," explains Doherty. More specifically, Parsons is responsible for procuring the equipment, providing project expediting, and ensuring that the equipment gets delivered to the sites to meet construction schedules. On the process side, this includes equipment for fermentation, purification, and CIP (clean in place). On the utility side, this includes generators, HVAC systems, and related equipment.
"The goal is to have the right products show up in the right place at the right time, so the construction schedule can be met, and doing all of it under budget," says Richard Levasseur, a sourcing lead who works as Lonza's procurement overseer in the equipment procurement, through the procurement services from Parsons. Doherty and Levasseur work together on these projects.
There are at least five specific challenges for working on overseas projects. One is dealing with a unique supply base, which leads to limited ability for competitive bidding. A second is dealing with global commodity availability and pricing. A third relates to the make-to-order specification requirements. Another is that leadtimes can sometimes be 16 weeks. Finally, there is the challenge of global logistics (sourcing in one country and delivering final product to another country). That is, it's not just sourcing and buying the equipment that poses challenges.
Doherty says the "three Cs" are what make the process work: cooperation, coordination, and communication. "It is difficult if the client [Lonza] and the contractor [Parsons] have different ways of doing things," he explains. "I have found that Parsons and Lonza have given a lot of leeway to each other. Both of us have also established a good team of people."
Levasseur agrees. "We have to make sure procurement and engineering are in close communications and make sure everyone knows what we are buying, when we are buying it, and how we are buying it."
To streamline communication and document the process for future use, the members of the procurement team created a six-step process: Establish requirements, develop RFQs, create an RFQ log, commercial and technical evaluation, award the P.O. and ongoing management. Additional keys to keeping the procurement processes cost-effective include proper document control (RFQ documents, correspondence, etc.); tracking savings; negotiating extended warranties; and maintenance of expedited activities to ensure on-time status.
"We also have to stay abreast of commodity prices," says Levasseur.
The movement of materials from U.S. and European suppliers to two new projects in Singapore has been particularly challenging. A critical step was selecting the freight forwarders to could handle the job, says Doherty. First, they designed an RFQ, then went out and interviewed the five freight forwarders that had international experience and had either done work in the Far East, or more specifically had imported into Singapore.
"We needed to make sure that they understood all of the requirements for the exportation and importation of very large and expensive equipment," he says. "We also had to deal with all of the shipping lines."
Shipping also involved delineating specific responsibilities and requirements to the manufacturers and forwarders. For equipment manufacturers, these included packaging and crating requirements, such as proper restraints, cradles, shrink wrap, shipping drawings. For the freight forwarders, it involved responsibilities and requirements for trucking, containers, tarps, straps, port fees, surcharges, storage, scheduled ocean shipments, customs.
Overall the results have been successful. The goal has been to have the right products show up in the right place at the right time, so the construction schedule can be met, and doing all of it under budget. "We have succeeded very well in all of these areas," he states.
Overall shipping times have been, on average, faster than expected, with container shipments taking place in four to six weeks, break-bulk shipments taking place in 10-12 weeks, and no customs clearance issues.
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