Inspection firms can benefit from new operator procurement strategy

Major oil and gas operators are changing the way in which they shortlist and award inspection contracts, and many have begun to adopt a global strategy for procurement.

The new strategy is a response to a number of high-profile incidents that have taken place in recent years. As part of this larger effort, major operators have begun to introduce more focused and coordinated approaches to managing the safety and risk profiles of their operations worldwide, including the procurement and management of inspection services.

Whereas, traditionally, regional offices might have selected and managed their own suppliers, major operators have recognized that, if they are to manage safety and risk consistently and on a global basis, they need to have a tighter control on quality and performance. For this reason, many operators have begun to consolidate and rationalize via a robust and quality-focused global procurement process their inspection suppliers from hundreds of disparate companies to just six or seven global partners.

Risk management and operational safety have always been crucial to procurement strategies; however, by rationalizing suppliers globally, operators are able to achieve an extra level of assurance that their businesses are using reputable and fully accountable suppliers throughout the world.

As a global supplier selected by a number of major operators, we are seeing a real focus on a robust and quality-driven assessment process. From the original invitation to tender to the signing of the final framework agreements, the focus has been on management accountability and auditable infrastructure – and for good reason.

In a sector that relies on global inspectors, how can you ensure that the inspectors provided by a third party are competent and experienced, that they have the necessary qualifications, and have been appropriately trained for the work? By partnering with a select number of high-quality advisors, there is a mutual interest and responsibility on both sides to ensure that the work is appropriately managed and resourced.

Of course, being shortlisted as a preferred supplier does not guarantee the award of work; however, it does give the opportunity to tender for work as one of six or seven chosen suppliers, rather than as one of a hundred. Similarly, the partnership promotes valuable insight into the company's future goals and requirements. We know, for example, that one major operator that has selected us as a global partner will award a certain value of work in the next four to five years to its shortlist of global suppliers. With that knowledge, our role then is to ensure that we have the people and processes in place to meet its needs and expectations.

Just as the major operators have shifted from a purely local approach to procurement to a global and centralized one, so too have suppliers had to reassess their approaches to managing projects. To fulfil a framework agreement as it is intended, you have to provide the same level of work consistently and on a global basis, no matter which office is contracted.

For firms that provide offshore inspection services, the key is to invest heavily in team infrastructure and project management processes. For example, GL Noble Denton has found it helpful to open regional competence centers at key locations throughout the world. The managers in these centers work closely with local teams. But, their primary role is to effectively implement and manage projects and contracts on a global basis. This helps ensure that work is in line with framework agreements; enables personnel to focus on technical quality and risk; and helps management plan ahead for upcoming projects and future requirements. This enables offices to work together as one company, using common processes, procedures, systems, and inter-company trading practices to the benefit of the client and inspection firm alike.

Several clients have told us that they expect their capex investments to rise significantly in the coming years. Under the framework agreement structure, selected suppliers can be more confident in their chances of winning some of this work. This new operator procurement strategy has enabled GL Noble Denton to put core teams in place for each region and to take on many more staff full time. Given the talent shortage in this sector, it goes without saying that it is vitally important to retain the best people.

It is not just the inspection and technical assurance sector that can derive benefits from this kind of global model. Personally, this observer expects that the whole industry will implement this approach. We are already seeing many other companies – not just in technical assurance, but also other services – entering global agreements with suppliers. It's partly a reflection of the way the industry is becoming more globalized. But in the post-Macondo era, it also reflects a widespread recognition of the need to be proactive and fully auditable when it comes to risk and safety management.

Paul Shrieve
Senior Vice President
Technical Assurance
GL Noble Denton

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