Reforming Owner, Contractor, Supplier Relationships: A Project Delivery System to Optimize Supplier

Literature surveys, written questionnaire responses, and structured interviews identified instances where owners, contractors, and/or suppliers had employed innovative, atypical relationships within the EPC project delivery model. Key findings from this work include the following (RS130-1, p. 4):

1. The need exists to bring suppliers of strategic components and systems into the “circle of cooperation” between owners and contractors, and precedents for doing so exist.
2. In numerous cases, suppliers served an expanded project role (status and/or time involvement beyond that expected) despite narrowly and traditionally-defined business and commercial relationships.
3. Pockets of innovation existed and provided strong anecdotal evidence of cost and time savings for doing so.
4. Two industries—automotive manufacturing and micro-electronics fabrication—had improved results through expanded supplier involvement.

The fundamental charactistic of the PEpC project delivery model is that procurement of the most project-critical components (the “big P”) is completed prior to all but the most preliminary engineering efforts. This enables these items to influence and define subsequent detailed engineering, and enables their suppliers to deliver their core competencies directly into the project and not indirectly via the owner or contractor. For these items, the procurement process must be on a broader and more conceptual basis and must focus on the supplier’s ability to deliver greater value to the project (versus just lower price). (RS130-1, p. 6)

A three cornered or triangular allocation of competencies is required to bring suppliers into the circle of cooperation between owner and contractor. Assignments of project roles should be based on the particular needs of a particular project and the actual competencies of the actual project participants (owner, contractor/s, and supplier/s). (RS130-1, p. 12) 

Ten independent simulations of the application of the PEpC delivery model to RT 125’s baseline EPC project performance model indicated potential schedule reductions of 5.6-19.6% and cost savings of 0.3-17.8%. Four case studies of projects implementing PEpC-like characteristics showed schedule reductions of 5.6-18.6% and cost savings of 0.0-6.6%. (RS130-1, p. 17) 

RS130-1, PEpC Implementation Steps

RS130-1, proposes a process for implementing the PEpC project delivery model, illustrating how it integrates with other project plan deliverables such as the business plan, facility scope, and project exeuction plan. PEpC must begin with and be incorporated into the earliest pre-project planning processes to be successful. Each implementation step is described in detail.