:AACE CERTIFICATION 2009-2010:

Capital Project Procurement Planning

Get back to CCE certification business after busy time during year end closing. Restarting to write the weekly blog, I’d like to briefly share PT Inco capital project process flow how to make a planning for project procurement with a bit comparison with procurement planning on Total Cost Management Framework theory.

Total Cost Management Framework clearly stated that procurement planning is part of the project control planning process that ensures that information about resources (e.g. labor, material etc) as required for project control is identified for, incorporated for and obtained through procurement process. The term of procurement is used in TCMF here in the broad sense of the collective functions that obtain labor, materials, tools, equipment and other resources.

It’s a bit different with PT Inco organization which procurement planning is exactly only looking at the planning for materials & equipment used for the project, it doesn’t include labor and contract. Contract has its own section that looking after contract planning but however on top of the project planning, they are all in the one major planning that we call procurement and contract planning. PT Inco capital project procurement process flow as shows in the picture below is initiated in the Capital Appropriation Request (CAR) development.

The procurement planning process is started by developing of preliminary design of the project. All project materials requirements for the procurement deliverables is determined from all discipline preliminary design, continue with development of Project Work Breakdown Structure (WBS) and complete Hazard & Operability (HAZOP) review. Materials and equipment specification are stated in the Capital Appropriation Request (CAR) document as the complete procurement planning for what kind of materials going to be ordered, quantity, and lead time of delivery. In this case, the key suppliers have been established however the commitment would not be made until the CAR is approved. Procurement planning is the team effort. The team includes Project Manager, Project Engineer, Design Engineer, Project Control, Material Group, buyer and expeditor.

CAR document is the contract document which is including all project planning includes procurement planning. CAR document complete with project planning basis, execution strategy, estimate and schedule information. They are basically the input items for procurement planning.
As mentioned early above, procurement planning on the Total Cost Management Framework is the integrate planning include material, equipment, tools, labor and other services. Its more comprehensive compare with current PT Inco organization procurement planning but in general, the theory behind is the same and the different is most likely due to the company organization did not support the planning theory as mentioned in the TCMF.

Looking at the TCMF process map, procurement planning, the input process includes project planning basis, execution strategy, chart of account and information for analysis. The outputs are basic for project control, estimate and schedule, execution strategy and contract & procurement requirement for the project.

Picture 2. Process Map for Procurement Planning

The conclusion is that procurement planning at PT Inco organization is developed through development of overall project preliminary design and review of the execution strategy prior contract document called Capital Appropriation Request (CAR) is approved. The basic theory is typical with TCMF theory, however a bit different on the process that I believe more comprehensive that PT Inco has. I see there is a room for planning improvement but it needs an effort on the organization structure change.

Sorowako January 10th, 2010.

Cited:
1 PT Inco Project Engineering Business Process, Detail Engineering, Procurement & EWP Issue Page 7 of 15, Author. Muhammad Asril
2 Process Map for Procurement Planning, Total Cost Management Framework, Chapter 7.7 Procurement Planning Page 169