Projekt-CAPEX in the Energy Sector
Stefan Benett, Managing Director of INVERTO, on why Strategic Risk Management is Essential in Project Procurement
What are the biggest challenges facing the energy sector?
Planning cycles for these investments are very long-term. Life cycle planning often stretches over decades. Reasonably realistic planning therefore requires key risk factors to be identified early. An adequate timeframe for critical procurement decisions, the most specific requirement planning possible, detailed construction phases, and sub-projects to complete the design stage are all crucial from a procurement point of view.
To meet the planned requirements on time and in line with specifications, the timeframes for strategic procurement processes and critical delivery must be taken into consideration from the outset as part of project planning. Despite a relatively high degree of maturity in project management and capital goods procurement in energy companies, there is often still work to be done in timely, cross-functional cooperation.
What other factors play an important role?
In spite of high volumes of regular investment, gaining optimal benefit from the experience of previous projects is often neglected, something that is due mainly to low staff continuity. In addition, project processes, including involvement in procurement, are insufficiently standardized. This begins with determining the optimal project structure for construction phases and signing appropriate agreements to incentivize partners in terms of crucial objectives, such as the date of commissioning. Procurement, as part of the project team, should help shape relationships with key partners from the outset, ideally using project-related managers. This includes actively monitoring the change process in projects in order to minimize any additional demands by using effective follow-up management.
How can procurement ensure compliance with planning values?
Strategic risk management is essential for this. To estimate the impact, a model-based evaluation of the effects of strategic procurement on project efficiency, complexity, and scheduling is crucial. The risk of delay can then be evaluated financially, and any possible additional costs, for example from changing suppliers, can be calculated, in order to make the right decisions.