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Spectra Energy Supplier Forum: Driving Collaborative Project Management

I had the pleasure and honor of attending the 2nd annual Supplier Forum, hosted by Union Gas & Spectra Energy in Hamilton, Ontario at the end of April.  The meeting was intended to bring together senior executive’s from Union Gas’s top 100 suppliers, in a forum to open discuss how to drive improvement in the major projects that lie ahead in the next three years.

The meeting opened up with a business strategy by key executives, including Paul Rietdyk, Senior Vice President of Engineering and Construction, and Michelle George, Director of Major Projects.  This was followed by a presentation Reggie Hedgebeth, Senior Counsel, of the major growth objectives that lie ahead for Union Gas.  These executives provided an overview of the incredible growth in the natural gas pipeline structure that is being driven by the massive shale gas reserves in North Dakota, Pennsylvania, and Ohio that are driving the need for gas and LNG distribution lines.  This growth also requires that suppliers be ready to drive improvements going forward.

As part of this effort, I also shared some of the insights from a recent paper I published in the newly minted Journal of Strategic Contracting and Negotiation Management.  In this paper, my coauthors and I explored some of the key ingredients that make up the “secret sauce” for successful vs. unsuccessful complex projects in the oil and gas industry.  These presentations led to the discussion of the theme for the meeting on Focused Performance, which entailed the need to drive out inefficiencies from current operations modes.  This presentation also set the stage for some of the most important discussions of the meeting:  breakout groups held between suppliers and Union Gas executives, openly discussing the following questions:

–What are the right measures that should be included at the beginning of the contract to drive the right outcomes?

–What is the cadence for planning and review that is happening today, vs. what you think would be better?

–What are the opportunities in the sourcing process to improve planning?

–What improvements in technology can enable these to occur?

I sat in on these breakouts, after assuring supplier executives that these breakouts were in fact a safe place to openly share what they liked about the relationship with UG, as well as those issues that needed improvement.  Some of the important points that came out of the meeting included the following:

RIGHT METRICS:  In general, the right metrics include not just dollar measures of dollars spent, but true measures of Earned Value that involves measures of value that are meaningful to project stakeholders.  Daily metrics of on-time, project dollars spent versus budget, and key milestones on time, as well as the use of two-way scorecards are important.  It is particularly important to engage in discussion of the right metrics during the contract formation process.  During these discussions, an overbalanced emphasis on cost can be at the expense of other factors of value.

RIGHT PEOPLE:  As mentioned earlier, having stakeholders at the table during contract formation is key.  In addition, simply having two individuals work out the details face to face can actually be problematic.  It is far better to have systems to document performance, and have all parties aware of the activities that lead to these outcomes.  This has to occur not just on new projects, but on the core business as well.  For example, during the contract formation process attention can be called to long leadtime items, that require improved planning.  For new business and upcoming projects, early warning is key to ensure a jump on these leadtimes can occur.

RIGHT MEETINGS:  Meetings between all major parties should occur at all major milestone reviews, or at a minimum every quarter.  These meetings should have the right cadence, agenda, and structure to drive the right discussions and identification of issues that need to be resolved.  Regular reviews will lead to the right innovative solutions and identification of capabilities.  In addition, post-mortem reviews should document “lessons learned” that are integrated into future project planning activities.

RIGHT TECHNOLOGY:  Technology (in this case, a procurement technology) is causing inefficiencies for suppliers as they ramp up to the new approach.  Training and operational issues need to be addressed.  In particular, individuals at each site should be targeted to become “subject matter experts”, and handle all major transactional activity if possible.  Sharepoint was also identified as a way of improving updates and communication for technology updates, performance scorecards, and event management.

Finally, participants discussed the start/stop nature of contracting is often at odds with the spirit and advantages of developing an Alliance relationship.  As one supplier put it – “we are friends, then we go into contracting mode, and then we become friends again…”  Still more work to do…