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The BP Oil Spill: The Critical Role of Procurement in Managing this Disaster

I had lunch today in Houston, and sat with a BP procurement manager.  We spent some time discussing the BP Oil spill, which is making headlines all over the world.

What much of the press does not cover is the “behind the scenes” view of what BP is all about, and the complexity of deep sea oil drilling.  I have worked with BP for a number of years, and have seen for myself the importance of safety and the environment in every manager and subcontractor’s actions.  Safety is emphasized above all else, including profits and revenue.  This has come directly from the top – Tony Heyward their CEO completely reorganized the entire supply chain group with global supply chain leaders, with the understanding that safety was their primary mandate. 

It is also becoming increasingly clear that the technical challenges assocaited with this type of event are unpredictable.  There are now some discussions going around of a massive natural gas bubble that caused the blowout – the size of which no anti-blowout valve would be able to contain using any available technology.  This surely qualifies as a “black swan” – one with astronomical impacts…

I have a hard time picking up the paper these days and reading about the event.  Much of the press and the Obama administration is critical of BP and the oil and gas industry, painting a picture of careless, sloppy, greedy executives who are willing to kill off a shrimping industry and cover sealife and birds with oil all in the name of profits.  Nothing could be further from the truth.  BP now has thousands of  employees who are working 24 hours a day, 7 days a week on this spill.  They have hired thousands of fishermen to help in their work, as well as a huge amount of third party experts and engineers to work on this issue.  The work of the procurement organization to enable this effort is nothing short of heroic. BP procurement managers are working weekends and nights to extract data, add new vendors who are working on the cleanup effort, and work on payments and invoices.  The costs of this work is astronomical, and when it is all said and done, will run well above the $75M cap required by law..

What is interesting is the attitude that the BP supply chain team has adopted during this process.  They are determined to do everything that is humanly possible to stop the oil, and clean up the mess.  The procurement team has meetings, and are documenting all of the actions and steps they are taking, so that they can conduct a post-mortem to review the plans, what went right, what went wrong, and work in a partnership with other oil and gas companies to drive joint learning around black swan events of this nature (see prior posts).  The supply chain team knows that they will come out of this, and that the clean up will be effected, and that everyone is intent on doing the right thing.  The learning from this event will surely make the industry safer and benefit all companies who seek the black gold at the bottom of the ocean…