MATERIALS MANAGEMENT PLANNING GUIDE

Implementation Resource 257-3

CII Member Companies
Abbott AMEC
Air Liquide AZCO
Air Products and Chemicals Aker Solutions
Ameren Corporation Alstom Power
American Transmission Company Apex Engineering
Anheuser-Busch InBev BIS Frucon Industrial Services
Aramco Services Company Baker Concrete Construction
Archer Daniels Midland Company Bateman Engineering
BP America Bechtel Group
Barrick Gold Corporation Bentley Systems
Bristol-Myers Squibb Company Black & Veatch
CITGO Petroleum Corporation Bowen Engineering Corporation
Cargill Burns & McDonnell
Chevron CB&I
ConocoPhillips CCC Group
The Dow Chemical Company CDI Engineering Solutions
DuPont CH2M HILL
Eastman Chemical Company CSA Group
ExxonMobil Corporation Coreworx
GlaxoSmithKline Day & Zimmermann
Hovensa Dresser-Rand Company
International Paper eProject Management
Irving Oil Limited Emerson Process Management
Kaiser Permanente Faithful+Gould
Eli Lilly and Company Flad & Associates
Marathon Oil Corporation Fluor Corporation
National Aeronautics & Space Administration Foster Wheeler USA Corporation
NOVA Chemicals Corporation GS Engineering & Construction Corporation
Occidental Petroleum Corporation Grinaker-LTA/E+PC
Ontario Power Generation Gross Mechanical Contractors
Petroleo Brasileiro S/A - Petrobras Hargrove and Associates
Praxair Hilti Corporation
The Procter & Gamble Company JMJ Associates
SABIC - Saudi Basic Industries Corporation Jacobs
Sasol Technology KBR
Shell Global Solutions US Lauren Engineers & Constructors
Smithsonian Institution McDermott International
Southern Company M. A. Mortenson Company
Teck Resources Limited Mustang
Tennessee Valley Authority Omniware
TransCanada Corporation Oracle USA
U.S. Architect of the Capitol Parsons
U.S. Army Corps of Engineers Pathfinder
U.S. Department of Commerce/NIST/ Pegasus Global Holdings
Building and Fire Research Laboratory S&B Engineers and Constructors
U.S. Department of Energy SNC-Lavalin
U.S. Department of Health and Human Services The Shaw Group
U.S. Department of State Siemens Energy
U.S. General Services Administration Technip
URS Corporation
Victaulic Company
Walbridge
Wanzek Construction
WorleyParsons
Zachry
Zurich
Materials Management Planning Guide

Prepared by
Global Procurement & Materials Management Research Team

Construction Industry Institute

Implementation Resource 257-3

November 2010
© 2010 Construction Industry Institute™

The University of Texas at Austin

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 Contents

Chapter Page

Introduction 1

I. Materials Management and the Project Execution Plan 3

Elements 3
Responsibilities 4
Organizational Structure 5
Material Types 6

II. Preparing the Materials Management Plan 7

A. Personnel and Organization 7
B. Materials Requirements Planning 7
C. Project Acquisition Strategy 12
D. Purchasing 14
E. Subcontracting 15
F. Expediting 16
G. Supplier Quality Management 18
H. Transportation and Logistics 20
I. Site Materials Management 23
J. Materials Management Planning for Operations and Maintenance 29
K. IT Systems 30

Conclusion 33

RT 257 Participating Organizations 35

 Introduction

This implementation resource provides guidelines for preparing a materials

management plan for a specific project, based on its project execution plan. It is
divided into two sections:

I. Materials Management and the Project Execution Plan

II. Preparing the Materials Management Plan
A. Personnel and Organization
B. Materials Requirements Planning
C. Project Acquisition Strategy
D. Purchasing
E. Subcontracting
F. Expediting
G. Supplier Quality Management
H. Transportation and Logistics
I. Site Materials Management
J. Materials Management Planning for Operations and Maintenance
K. IT Systems.

1
 I. Materials Management
and the Project Execution Plan

Elements
The Materials Management Plan must fit within the overall framework of the Project
Execution Plan and take into account the following considerations:

• overall project strategies

• limitations
• constraints.

The following are among the general project descriptions and parameters that
define the Project Execution Plan:

• project type
• project size
• project location
• facilities to be constructed
• existing facilities.

Following are some of the more significant strategic elements that affect the
Materials Management Plan:

• use of existing materials

• approach to procurement of critical equipment
• use of existing owner, engineer, or constructor strategic supplier relationships
• acceptability of international/global supplied materials
• bulk material quantification—take-off/estimate
• approach to procurement of engineered materials
• timing for first bulk materials take-off and subsequent take-offs
• approach to and supply of materials for prefabrication
• schedule implications/expediting support
• responsibility for procurement of bulk materials, both the first buy and the
subsequent purchases
• inspection
• shipping terms
• approach to materials shorts, changes, damages, and surplus
• spare parts philosophy, including commonality of equipment with existing
plant and other contractors

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I. Materials Management and the Project Execution Plan

• responsibility for procurement of materials for temporary facilities

• extent of field warehousing, considering use of available supplier inventory
systems
• role of subcontractors in procurement of materials
• use of min-max warehousing versus buying from take-offs
• design/procurement freezes
• just-in-time (JIT)
• interfaces: EDI, Internet, and communications
• logistics/materials staging/distribution
• construction plan (subcontract versus direct-hire labor).

Responsibilities
It is important to realize that the owner and contractor on a project must participate
in the activities that make up the materials management cycle. A major effort of project
materials management planning is the establishment of specific responsibilities for
materials and equipment. Owners must determine these responsibilities in the front end
planning phase, in conjunction with project priorities, goals, and contract strategies.

According to previous research, successful construction contracts are characterized

by thorough preparation by the owner before the contract is let. All elements of
the owner’s organization that have an impact on a project should be represented.
Responsibilities that should be brought to owners’ attention include the following:

• Contractually determine and define the scope of materials-related services

for each contractor.
• Ensure that materials management is recognized as a critical project
management function by both their organizations and by the engineering and
construction contractors they hire.

Responsibilities for all materials management activities should be defined during

the planning effort. All participants should be consulted, including the following:

• owner
• prime contractor or managing contractor
• engineering contractor
• construction contractor
• shop fabricators
• suppliers
• field subcontractors.

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 I. Materials Management and the Project Execution Plan

A responsibility matrix should be developed to consider the following project

materials:

• process equipment and engineered items

• bulk materials
• prefabricated materials
• construction infrastructure (including temporary facilities).

Specific attention should be given to the roles of the construction contractor

and the subcontractors in the “gray area” between direct materials and construction
consumables. Project participants’ responsibilities should be well defined for these
gray areas. These responsibilities include the following:

• developing specifications
• materials take-off
• inquiries
• purchasing
• inspection
• expediting
• shipping
• invoicing
• close-out.

Developing a detailed matrix that is based on input from all participants can have
a significant impact on the success of the project. The benefits this matrix provides
for the project include the following:

• All participants understand their respective materials management

responsibilities.
• Effective communication is easier, since all participants understand their
respective roles.

Organizational Structure
The responsibility and position of all key personnel for each project participant is
best illustrated on organizational charts developed for the specific project. These charts
promote a better understanding of the different organizational groups participating in
the work. They also allow a clearer understanding of the authority of key personnel,
including the line of command.

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I. Materials Management and the Project Execution Plan

Material Types
To appropriately manage materials acquisition activities, project materials are
categorized into three groups: engineered materials, bulk materials, and prefabricated
materials.

Engineered Materials
Broadly defined as items with uniquely assigned numbers, or tags, that permit
identification and location throughout the entire life of the project, this group is often
further divided into two subcategories:

• major equipment, such as tanks, heat exchangers, and pumps

• minor equipment, such as control valves, instrumentation, and specialty
items.

Bulk Materials
Bulk items are materials that are manufactured to industry standards and purchased
in quantity. These materials include such items as pipe, fittings, wiring, and cable.

Prefabricated Materials
Prefabricated items are typically engineered and fabricated according to engineered
specifications at a fabrication shop/site that is separate, sometimes distant, from the
construction site.

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 II. Preparing the Materials Management Plan

A. Personnel and Organization

The appropriate selection of materials management personnel and the formation of
them into an effective organization are fundamental to the success of any construction
project. Basic considerations affecting both skills selection and organizational
configuration are the following:

• project size
• contracting strategy and schedule
• type and volume of materials
• site location
• availability of advanced material management IT systems.

B. Materials Requirements Planning

Within the project environment, the materials requirements planning function
includes the activities associated with the definition and quantification of all project
materials. The function encompasses both owner and contractor organizational groups.
The materials requirements process includes the following activities:

• defining and selecting materials based on constructability, availability, and

economics; best accomplished by the combined efforts of engineering and
construction
• planning for and managing toward schedule requirements for all projects
materials
• controlling and managing toward minimum materials surpluses, while meeting
project schedule requirements
• procuring and distributing strategies that, because they are highly
interdependent, must be considered in the planning phase.

Planning for Engineered Materials

The basic objective of planning for engineered materials is to ensure that they
are acquired and delivered to meet the overall construction schedule. Planning for
engineering materials includes the following activities:

• determining needed items

• developing specifications
• establishing the relationship of the materials to the project schedule
• planning for initiating the acquisition of the materials.

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II. Preparing the Materials Management Plan

The first step in planning for engineered items is a determination of the engineered
items required for the project. Although equipment specifications may not be completed
until the detailed engineering phase, it is important that planning for these items begin
during conceptual engineering, since these items will drive the entire project schedule.
During the conceptual engineering phase, a major equipment list should be developed
to which lead times for supplier data, fabrication, and delivery should be added. This
list can be used as input to the development of the engineering schedule so that long
lead items can be specified early, and the overall project schedule can be optimized.

Another item that must be accomplished early on is the development of the actions
required in the acquisition cycle of engineered items. Establishing these in the most
precise terms possible is important to meeting project needs and should be a joint
effort between the owner and contractor. A method of monitoring and reporting against
these milestones must also be planned.

During planning for acquisition of major equipment, the team should consider the
acquisition of the materials related to the basic equipment. Such ancillary materials
acquisition involves special considerations, including the following:

• Spare parts – Is there a need to acquire start-up and/or operational spare

parts?
• Supplier assistance – Is supplier assistance needed for installation, start-up,
or training?
• Warranty/guarantee – What operational or functional guarantees are required?
• Supplier data – What supplier documents are required?
• Inspection – What is the approach to inspection, testing, or other quality
assurance methods?
• Transportation – Will cost of shipment be covered by the buyer or the
supplier?
• Commercial terms – What are requirements for retainage and payment
schedule?
• Master manifest – What will the receivables be and how will they be billed?
• Preventive maintenance – Will the requirements be defined prior to shipment?
• Early involvement – Is there a process in place for early involvement with
suppliers of equipment critical to the success of the project?

All of these items will become specific at inquiry and purchase order time. However,
contractual arrangements between owner and contractor should establish the ground
rules for many of them, and the overall philosophy should be set during the planning
stage. As specific items reach the inquiry stage, specific terms and conditions should
be selected with inputs from the owner and contractor.

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 II. Preparing the Materials Management Plan

Once the basic plan, approach, and philosophy are all established, the details of
specific forms and procedures should be planned and established. The owner and
contractor will generally use forms that are already in place or that have been used
on previous projects—perhaps modified to meet the specific needs of the project.

Planning for Bulk Materials

Planning for bulk materials may be more complex than it is for engineered items.
Quantities required are never exactly known until the job is over. Additionally, changes
in design often invalidate all or at the least part of the plan and nullify any associated
efforts that might have been undertaken to acquire those materials. Existing (owner-
furnished) materials must also be taken into account during planning for bulk materials’
acquisition and must be considered in the light of the overall project schedule. The
plan will be influenced by the following factors affecting materials:

• availability
• market conditions
• storage facilities
• transportation
• material sourcing
• cash flow.

Experience and judgment play a significant role in planning bulk materials acquisitions
for a project. The use of strategic suppliers may also provide significant advantages
in acquiring bulk materials and reducing surplus materials at the end of the project.

In an optimal environment for bulk materials planning, all engineering will have
been completed and the actual bills of material will have been created. The overall
project schedule would allow sufficient time for consolidating the required materials
and then getting them purchased and delivered to the jobsite before construction even
begins. This optimal environment, however, is far from the reality on most projects.
Frequently, construction begins long before total engineering is complete. Materials
requirements’ planning is caught in a schedule window that requires a significant
amount of front end planning.

The starting point for planning bulk materials acquisition begins with an examination
of the project schedule and an assessment of the bulk materials required over time.
As with engineered items, the steps required in the acquisition of bulk materials,
including the review and approval points, must be planned. Once all project parties
are in agreement, the steps should be documented and published as part of the
Materials Management Plan.

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II. Preparing the Materials Management Plan

The material requirements plan must specify which method of quantification

should be applied to the various types of bulk materials. To determine which method
to employ, the schedule of the downstream level of control, acquisition lead time, and
the cost of shortages must all be considered. Moreover, cost and accuracy should also
be factored into this determination. For materials that have relatively low unit costs,
relatively high usage, and that are readily available (e.g., common bolts and small bore
pipe) the cost of quantification may not be warranted. For these materials it may be
best to employ a min-max system through which an established maximum quantity is
acquired and then re-ordered when the warehouse supply reaches a predetermined
minimum quantity.

For projects on which construction begins before engineering is complete, bulk

material items will need to be on hand for installation before total project quantities
are known. In this case, an initial bulk-buy will have to be made from estimates of
quantities. The timing for the first buy of bulk materials may be critical. This initial
effort, if not followed up with later frequent and automatic quantity checks, can result
in excessive surpluses or shortages.

The degree of control required will affect all aspects of planning for bulk materials
and can range from little or no control to maximum control. When little or no control
is required, all bulks are established as min-max items, with minimum quantities
maintained in stock. Quantities are also issued to construction craft workers with no
verification of actual requirements and no record of items issued. When maximum
control is required, all bulks are taken off from “issued for construction” drawings and
issued materials are verified against the take-off and then recorded.

Obviously, the best approach to establishing the proper level of control for a given
project is somewhere between the two extremes. Materials that are readily available
and inexpensive will require fewer controls than materials that are less available, have
longer lead times, and are more expensive. The degree of control to be exercised must
be determined so that appropriate resources (procedures, systems, and people) can
be planned. Volume also will have an impact on the selection of the right approach to
controlling bulk materials. A small project may be handled adequately through manual
record-keeping and summarizing. Greater volume requires the use of a computerized
materials control system.

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 II. Preparing the Materials Management Plan

Planning for Prefabricated Materials

Prefabricated materials typically include packaged equipment, modules, and
preassemblies. Materials management planning is usually more complex when a project
requires extensive prefabrication, since prefabricated materials require another level
of control and come from a separate site, the fabricator’s shop. Packaged equipment
skids are usually based on a single significant piece of process equipment that comes
with required support items. These support items are normally all designed by the
principal equipment supplier. All the materials take-offs and procurement for these
packages are normally handled by the fabricator.

Modules and preassemblies require special consideration because of the level

of design and the amount of bulk materials involved. Highly prefabricated facilities
can involve hundreds of modules. The proper approach to fabrication begins with a
determination of what will be fabricated in the field and what will be fabricated in an
off-site shop. Additionally, the off-site fabrication may be divided between shops,
according to categories of modules or types of preassembly (e.g., a division of pipe
spools into carbon steel spools and alloy spools, or pipe greater than 12 inches
and pipe 12 inches and smaller). A decision must be made regarding the level of
engineering effort to be handled by the fabricators as opposed to being handled by
the engineering contractor(s). Factors that must be considered in making this decision
include the following:

• owner’s specifications and flexibility

• contractor’s capabilities and resources
• schedule limitations
• fabricator’s capabilities and resources
• costs
• propriety and ownership of design.

In the case of a pipe fabrication shop, the usual, most economical approach is to
have the spool sheet developed by the fabricator from the engineer’s drawings. These
drawings become the basis for development of required bulk material quantities in
the same manner and with the same considerations as planning for bulk materials.

There are three approaches to acquiring bulk materials for prefabricated materials:

1. The prime contractor buys the bulk materials and delivers them to the
fabricator.
2. The fabricator supplies the bulk materials in the same way it supplies
fabrication services.
3. A mix of the above two approaches.

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II. Preparing the Materials Management Plan

Considerations in determining which of these three approaches is appropriate for

a project are as follows:

• cost of materials
• materials availability and lead times
• volume of quantities required
• uniqueness of materials (e.g., fiberglass, plastic-lined pipe)
• level of control desired (especially for high-cost materials)
• auditability and record keeping.

Whether the prime contractor or the fabricator supplies the material, the same
considerations apply to determining bulk requirements and initial buying as apply to
other bulk materials.

C. Project Acquisition Strategy

The project acquisition strategy is an integral part of the project overall Materials
Management Plan. The acquisition strategy for a project should be based on the
project location, business considerations, constraints, project goals, and other outside
factors that might affect the sourcing decisions. The first phase of preparing the
project acquisition strategy is defining the buying responsibilities of both the home
office and field location materials management organizations (for both the owner and
the contractors). The second phase is the identification of the sourcing philosophy for
the project. The third phase is the preparation of the recommended suppliers’ list, a
process that involves the consideration of factors such as past supplier performance,
safety track record, financial status, capacity, and labor relations. Materials managers
are encouraged to maintain a current, accurate list of suppliers, along with evaluations
of their performance. Bid lists should be developed from such supplier ratings, and
appraisals should be made using checklists and some predetermined rating scheme.

Global Sourcing
The highly competitive nature of the construction business has forced companies
to consider alternative sources from low-cost countries. Ignoring global sourcing could
be devastating to the future viability of an organization; therefore, it is an issue that
needs special attention. The opportunities to strengthen an organization’s position
through global sourcing are available if the company will invest in them.

While a global sourcing process is a mechanism of identifying cheaper global

sources, it is also becoming a step toward the global expansion for companies. Global
sourcing advantages extend to identifying alternate supplier sources, utilizing buffer

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 II. Preparing the Materials Management Plan

capacities, and taking advantage of specific geographical talent pools. The associated
risks include the following:
• use of hazardous material
• quality issues
• currency fluctuation
• uncontrolled or unpredictable labor costs
• transportation cost and delays
• intellectual property issues
• inadequate foreign governmental support
• foreign laws
• cultural differences.

Suppliers’ Strategic Relationships

The increasing world population, growing raw materials scarcity, and decreasing
fuel sources all lead to the current tightness in the supply pool. In this environment,
strategic supplier relationships are proving to be one of the best ways of completing
projects with the requisite degree of certainty. Different organizations give these
strategic relationships different names. Some call them company-wide agreements
(CWA), some simply call them suppliers’ alliances, some call them strategic alliances,
and others use the term preferred suppliers agreements.

Supplier strategic relationships can be used to minimize some of the problems

previously outlined. Examples include the following:

• Company-wide agreements: Agreements that are put into place by

companies with their preferred suppliers. Under such agreements, certain
items or commodities and their pricing structures can be selected and
agreed upon ahead of time, in the same manner as terms and conditions of
sales, delivery, warrantee, and other pertinent points of agreement. These
agreements, usually made for bulk and non-engineered items, are most
common and most widely used types of agreements in the industry.

• PEpC (Procurement, Engineering, procurement and Construction): An

approach to procurement that is defined by CII as “an innovative project
delivery system which makes it possible to utilize supplier expertise in all
phases of the project life cycle by developing an advance procurement strategy
and reaching agreement with suppliers on strategic procurement items and/ or
systems prior to the associated project engineering activities.” The change in
its simplest form “takes the big P for procurement of strategic items in the EPC
process and places it before the E for engineering so that supplier expertise
can be integrated into all phases of the project from the very beginning.”

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II. Preparing the Materials Management Plan

D. Purchasing
The first phase of preparing the purchasing section of the Materials Management
Plan is defining the buying responsibilities of the different project team members.
After defining purchasing responsibilities, the Approved Manufacturers List (AML)
and/or Approved Suppliers List (ASL) must be prepared. This list should be reviewed
and approved by both the owner and contractor(s). Many companies have basic
ASLs prepared, but each project’s ASL must be refined to account for its specific
requirements. Factors to be considered include the following:

• past supplier performance

• current financial and operating conditions of all potential suppliers
• supplier shop capacity to meet quantity requirements in a timely manner
• socio-economic factors
• governmental requirements
• geographic location of the suppliers
• supplier labor relations.

Terms and Conditions

Purchase order terms and conditions (T&Cs) should be developed for use on the
project. A variety of questions must be addressed, including the following:

• Are indemnity clauses, Alternative Dispute Resolution clauses, warranties,

and performance requirements adequate?
• Is the project fully funded, or do special cancellation clauses need to be
added?
• Is patented technology being procured that requires special clauses?
• Are requirements for onsite supplier service representatives clearly
explained?
• Will purchasing be handled by contractor as agent for owner?
• How will back charges be handled?
• Will restocking be permitted, and what will the charges be?
• Have the commercial requirements from the prime contract been included?
• Are the terms and conditions consistent with the laws of the host country?

Following a thorough consideration of the T&Cs and a legal review, final approval
should be obtained from the owner and contractor for implementation. Purchasing
should discuss the invoice payment procedures with accounting personnel to
eliminate misunderstandings.

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 II. Preparing the Materials Management Plan

Forms and Procedures

A decision is needed concerning whether to use the owner’s or the contractor’s
forms and procedures for all steps of the materials management process. A flow
diagram should be prepared illustrating, as a minimum, the following items and
responsible parties:

• preparation of the materials requisition for quotation (MRQ)

• approval levels and forms for MRQ
• preparation and mailing of the request for quotation (RFQ) to suppliers
• preparation of commercial and technical evaluations
• approval levels
• preparation and submittal of the materials requisition for purchase
• placement of the purchase order (PO).

All forms and required approval levels must be formalized by the owner and
contractor before the purchasing phase begins. This will minimize procedural problems
during project plan implementation.

Another point to be addressed in this section is document control and confidentiality.

These points should be spelled out in the materials plan and agreed to by all parties.
Alliances and partnerships that have been previously established with contractors
and suppliers go a long way towards reducing the paper work necessary for a project.

Field Purchasing
The basic split between home office and construction site purchasing responsibilities
needs to be indicated. Normally, procurement at the construction site should be
limited to non-engineered bulks and consumable materials. The often fast pace of
the construction process does not usually accommodate the value engineering or
planned negotiations required for capital and engineered items. Blanket purchase
orders should be established ahead of field construction needs and should be based
on estimated materials requirements. It is imperative that, during the project planning
stage, a clear buying responsibility between the groups be established.

E. Subcontracting
When the Materials Management Plan is developed, it is important to itemize the
services and materials to be subcontracted. A subcontracting strategy can then be
developed for each item. The subcontracting planning process is similar to that of
purchasing. An Approved Suppliers’ List first must be prepared, terms and conditions
should then be reviewed, and forms and procedures should be updated and reviewed.

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II. Preparing the Materials Management Plan

Many of the terms of the prime contract between owner and contractor are passed
along to the subcontractor even though there is no direct responsibility between
subcontractor and the owner. Work schedules of the subcontractor must be monitored
to ensure that the project schedule needs are met.

Subcontractors are more efficiently administered from the construction site. As in

purchasing planning, a decision should be made regarding home office versus field
subcontracting responsibility. The results of this decision should be spelled out in the
Materials Management Plan.

Projects for which most field activities are subcontracted have unique scheduling
requirements that must be considered in the Materials Management Plan. Engineering
should be completed in work packages according to the subcontracting strategy,
thus allowing for timely inquiries and release of subcontracted work. Materials and
equipment identified and purchased for the subcontractor must be delivered to meet
subcontractor mobilization and field need dates to avoid subcontractor claims for
delays. The level of and approach to monitoring subcontractor purchased materials
must also be considered and planned. Not planning properly for these needs can have
disastrous impact on delays and cost overruns in project execution.

F. Expediting
The primary goal of expediting on the project is to ensure that materials are
delivered to the construction site when needed. The construction schedule and its
material requirements must be reviewed in depth to evaluate the project’s need for
expediters. The level of expediting required will depend on materials types, project
characteristics, market economic conditions, and shop loads. There are three basic
approaches to expediting: status reporting, Level 1 expediting, and Level 2 expediting.

Status reporting is the least labor intensive of the three types of expediting. Telephone
contact is made with the supplier on a scheduled basis to ascertain any problems, with
the resulting information being disseminated as required. By definition and practicality,
this method is not actual expediting. Rarely does utilization of the telephone contact
with the status update technique result in accelerating the process or progress of the
purchase order. If progress is achieved, it stems from making occasional contact as
opposed to not calling or expediting at all, as is the practice with some companies.
This technique is commonly utilized when supplier-promised materials delivery dates
are significantly in advance of the construction effort.

Level 1 expediting is more labor intensive than status reporting. Contact is made
with the supplier during the manufacturing phase of the materials, but the activity tends

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 II. Preparing the Materials Management Plan

to focus more on data gathering as opposed to problem resolution. As the scheduled

delivery date approaches, shop visits may be scheduled to ensure compliance with
shipment promise dates. Problems are resolved if they appear to affect deliveries
seriously. Progress is more frequently reported with some of the proactive techniques
being utilized as needed.

While Level 2 expediting is the most labor intensive of the three approaches, it
is also the most productive. In this approach, the expediter initiates early supplier
contacts and maintains these contacts throughout the project. Supplier shop visits are
scheduled to monitor the early phases of the materials engineering and manufacturing
processes. The expediter sees that engineering drawings are submitted according
to the schedule and that critical materials are ordered in a timely manner by the
supplier. The expediter often expedites the other project personnel to resolve supplier
questions that may impede manufacturing progress. The expediter monitors delivery
of subcomponents or other critical operations (e.g., casting or forging) to determine
whether the supplier can remain on the promised delivery schedule. Assistance may
be given to the supplier in expediting sub-suppliers as necessary. Level 2 expediting
may, therefore, be quite labor intensive and, thus, potentially more expensive; but on
certain projects or for specific critical materials, the cost of these activities may prove
minor compared to the potential cost of disruption to construction or fabrication at
the work site due to the unavailability of materials.

Two viable options are possible for preparing the expediting plan. One approach
is for the entire expediting plan to utilize one of the above categories exclusively. The
approach chosen should be based upon overall project requirements. The second
approach is to use a combination of the three, whereby different strategies are
established for each purchase order, depending on its criticality.

Project Interaction
Expediting provides a significant data gathering and data distribution function
for the project. Functionally falling between engineering and construction, expediting
requires a strong interface between both organizations. Expediting must be made
aware of any changes to the project schedule. Since the schedule ultimately directs
the expediter’s workload and efforts, any schedule change may have a significant
impact on the expediting function. Since supplier data as well as materials delivery
can affect the engineering and construction efforts, the dialogue between expediting
activities and engineering and construction supervisors must be two-way. In addition
to updates to the Materials Management Plan, expediting information should provide
specific problem notification and alternatives.

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II. Preparing the Materials Management Plan

Purchasing activities can assist expediting by exerting influence to resolve

problems (e.g., by not granting further business to poor performers). Suppliers that
are cooperative and perform as promised should likewise be reported for favorable
future considerations.

G. Supplier Quality Management

Construction quality relies on accurate, clearly stated quality control requirements,
arrived at by translating user needs into specifications and project quality plans and
programs. These become the basis of control plans for contractors and suppliers.
Several studies have shown that, although most non-conformances occur downstream
(e.g., in fabrication or testing), the ultimate source of materials management failure
or success is planning. Planning can prevent unpleasant surprises and delays due to
quality breakdowns in the materials management system. Poor quality can be a source
of some of the most irritating and far-reaching materials problems.

Design Phase
Project quality requirements start in the specifications, where designers must employ
current, realistic standards that reflect the needs of the owner. Quality specifications
rely on recognized industry standards, but for specific projects, engineers must read
the standards, determine whether they are still in effect, and be certain they fit the
project requirements. Design quality reviews are needed and submittal requirements
must be clearly delineated.

In the early stages of a project, it is important that quality-related terms and

conditions be reviewed to ensure that the contract with the supplier stipulates the
correct terminology and requirements. It is important that such terms be realistic and
enforceable. Suppliers will seek to waive certain provisions, substitute their own, or
neglect to comply with them. Such failure, if condoned, can result in non-enforceable
terms. If quality provisions are not promptly and universally enforced, there is danger
of losing control of the entire quality process.

Pre-award Phase
On certain purchases, particularly those involving equipment, formal supplier
quality evaluations are needed. These consist of surveys that include visits to supplier’s
plants. Owner/engineer evaluators must agree on the basis for ratings before entering
into an evaluation process. Suppliers should be informed that their quality program is
a major factor in award selection.

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 II. Preparing the Materials Management Plan

Materials management personnel must maintain a current, accurate list of

suppliers and their performance. They should develop bid lists from such supplier
ratings and appraisals, using checklists and some predetermined rating scheme.
Quality requirements must be easy to communicate to potential suppliers. Quality
requirements must enforce warranties and tests, apprising design engineers of the
schedule and cost effects of such requirements. In the pre-award stages of a purchase,
potential suppliers must be made aware of the importance of quality in the selection
of a potential supplier—not only on the current award, but on future work. Buyers
must carefully explain requirements for testing, certifications, and submittals so that
suppliers know exactly what is expected of them.

Post-award
It is essential that supplier coordination continue into post-award, prior to fabrication.
Several points need to be clarified:

• Timely submittals—Supplier information is frequently needed to design

engineered components.
• Test coordination—Although the specification may establish the general
requirements, the buyer and the supplier must work out the details (e.g.,
articulate a managed approach to scheduling shop visits based on
predetermined quality check points).

The Inspection Plan

Planning for inspection evolves through the design, pre-award, and post-award
phases and includes the following general functions:

• Evaluating the need for in-plant inspections

– determination made early in engineering and procurement cycle, during
materials specifications
– types of items that require in-plant inspection
► engineered items
► permanent plant equipment
► critical fabricated materials
— complex and/or costly
— critical to the safe and reliable operation of the facility
— deemed essential to construction and start-up schedule; inspectors
are not expediters; in-plant inspection prevents delays due to
shipment of nonconforming equipment or materials

► quality-critical items by suppliers with no history of such operations.

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II. Preparing the Materials Management Plan

• Evaluating the level of inspection needed

– Level can vary from one-two visits to having a permanent resident inspector
at fabricator site.
– The most critical items require the highest degree of inspection.
– Supplier’s past performance influences level of inspection planned.

• Using in-house or contract inspection services

– special skills available and needed
– location and accessibility of the plant to inspection
– desirability of maintaining a permanent inspection staff
– availability and quality of inspectors for the particular procurement

• Selecting inspectors and arranging funding and administrative support

• Coordinating details of inspection during and after purchase order award

– notification of test dates and schedules of visits
– access for inspectors
– logistical support for inspectors
– agreement on forms and certifications
– agreement on requirements set out in technical specifications.

A coordination meeting at the supplier’s shop is one technique to help ensure that
quality requirements are understood and followed by supplier shop personnel.

H. Transportation and Logistics

The primary objective of transportation and logistics (T&L) is to plan, control, and
execute the movement of materials to the project jobsite in the most effective manner
possible. T&L operations should be consistent with project cost and other goals and
should follow engineering, procurement, and construction schedule requirements.

The transportation and logistics group typically drafts a preliminary planning

evaluation, which outlines potential routes, conditions/requirements, and carrier
services available for getting material to the jobsite. It addresses the heaviest and
largest items, the estimated total project cargo volume, the composition of the freight
commodity items, the schedule, and other particulars. The evaluation also addresses
known constraints, logistics risks, and the planned approach for further research.

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 II. Preparing the Materials Management Plan

Following are some of the more important transportation and logistics planning
considerations:

• remoteness of the jobsite

• locations of in-transit fabrication facilities as applicable
• sensitivity of cargo
• routings, carriers, transit schedules, and transportation services available
• freight forwarder(s), export packer(s), and freight consolidator(s)
• port conditions and other destination conditions
• local customs formalities
• potential for use of bonded customs yards
• inland transportation (port of entry to jobsite)
• limitations on size and weight of loads
• availability of transportation equipment
• intermediate control points
• insurance
• coordination with construction forces
• export/import compliance
• security requirements.

Because not having the necessary material and documents onsite when they are
needed is so costly, early transportation planning should consider field need dates of
materials and equipment. The more complete and detailed the planning, the greater
the likelihood that delivery will be on time and that expenditures for transportation
and logistics service will be within the budget. Care should be taken to consult local
governmental authorities about initial logistics plans to ensure that those plans do not
adversely affect local transportation patterns. Additionally, early involvement of local
authorities often ensures cooperation throughout the project’s schedule. Moreover,
coordination, cooperation, and alignment are as important with customs officials as
they are with the local authorities.

Special Loads
Special loads include oversized/excessive weight shipments and shipments
requiring delicate handling or a controlled environment. The latter requirement is
often the byproduct of site location (e.g., polar or desert regions). Needs should be
identified and compared with available transport equipment. Intermediate warehousing
and marshalling areas must also be suitable in all respects for their intended use.

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II. Preparing the Materials Management Plan

In order to determine the maximum size envelope for special loads (i.e., vessels,
skids, packaged equipment, and modules), it is necessary to determine requirements
for route permits and/or clearances from manufacturers’ facilities to the jobsite. Utilizing
the services of reputable transportation (truck and rail) company personnel who are
familiar with the routes can greatly reduce the time required to accomplish this task.

Specialized truck and rail equipment is usually available in only limited quantities
and must be reserved months, perhaps a year, in advance. Planning and design of
oversized shipments of plant equipment should be reviewed for compatibility with
loading plans and transportation equipment. The cost and risks of moving extremely
large modules may offset many of the anticipated advantages of modularization, and
thus should be considered during the project’s front end planning, its engineering
phases, and its prefabrication planning.

International Shipments
The United States, its principal trading partners, and other countries have rules
governing exports from their borders. Government regulations sometimes prohibit
exports of certain goods and sometimes prohibit shipments to certain countries.
Governments require special export license applications and approval prior to
exporting certain commodities and equipment. Pariah states are sometimes the
targets of international trade embargoes. Export control rules and regulations must
be carefully observed, since violations of export administration regulations carry
both civil and criminal penalties. These can include large fines, loss of a company’s
privilege to export, and prison sentences. One can be held criminally liable for export
control law violations.

Export control requirements vary depending on the sensitivity of technology involved

and the destination country. Time required to obtain licenses may be as much as six
months depending upon the type of equipment being exported and the destination
country. Therefore, identification of these items early in the project may be critical to
obtaining export licenses in a manner consistent with schedule requirements.

Planning should determine what modes of transportation will be utilized in moving

foreign source materials and equipment to the jobsite. Export preparation should be
tailored to the most rigorous elements for each segment of the journey. Additionally,
consideration must be given to storage requirements in transit or at the jobsite.

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 II. Preparing the Materials Management Plan

Hazardous Materials Shipment

Numerous laws and highly detailed regulations govern the shipment of hazardous
and restricted materials. The regulations cover packaging, labeling, modes of
transportation, training, safety, reporting, bonding, insurance, licensing, and
documentation requirements. The regulations govern shippers, carriers, regulating
agencies, and emergency response organizations. Fines and imprisonment can result
if shippers willfully mislabel or fail to adequately describe hazardous materials.

I. Site Materials Management

The objective of site materials management is to keep a project on schedule by
ensuring that materials are available when required. This involves close communication
and coordination with client, engineering, craft, and project management personnel.
The primary activities of site materials management include receiving, warehousing,
inventory control, issuing materials, surplus materials disposal, and procurement and
expediting for all materials and equipment required for project completion.

The degree of pre-construction site materials management planning is dependent

on the size and type of project and the time available. For construction contractors,
this time frame is the period between award of contract and field construction start
date. Since this may be a relatively short time, it is desirable for the owner to do
as much planning as possible before contract award. This planning should begin
as soon as certain basic information is available. Plot plans, major equipment lists,
estimates, and engineering-procurement-construction (EPC) schedules contain the
information needed for basic planning. The plot plan should be studied from the
viewpoint of plant location; location of major equipment and structures, location of
electrical transmission towers and corridors (if applicable), relation of site to highways,
capabilities of highways to handle expected traffic, relation of site to railroads, and
other factors. Equipment lists and estimates should provide preliminary sizes and
quantities for planning storage facilities. The delivery dates and installation dates
shown on the schedules are needed in order to properly size and plan the efficient
use of space in laydown areas and warehouses. This is especially important on
projects on which limited space is available and areas have to be reused as the
project progresses.

Site Access/Security
The project’s load limits and the access highways, roads, and bridges it will use
all play an important part in pre-construction planning. The immediate adjoining
access road may have to be upgraded, widened, and/or have turning lanes and traffic
signals installed. The roads that this road connects with may also have to be altered.

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II. Preparing the Materials Management Plan

Some adjoining roads may have to be declared off-limits to heavy loads to preclude
obligating the owner for their maintenance or rebuilding. If bridges cannot handle
the expected delivery loads, it may be necessary to build a new bridge or apply for a
grade crossing, which could involve signals. The height of underpasses should also
be checked for trailer clearance.

The railroad(s) nearest to the project should be checked for general condition and
load limits on bridges. It is also important to know about spur availability. The proximity
of the main line and number of tracks will determine whether a track for switching can
be on railroad company trackage or on site.

Water access, if available, has to be evaluated on a cost-benefit basis, considering

the following factors:

• depth
• water current velocity restrictions
• waves created by ships
• boats
• barges
• environmental impact.

Once it is clear that there is or will be a barge unloading facility, it is important to

determine what equipment should be delivered by rail or barge.

A map of the project site in relation to local, state, and/or federal highways, large
towns, or airports should also be developed. The project map can be scaled if the
project is close enough to fairly well known landmarks and if a large scale map is
available. If no map is available, an aerial photograph should be used. This is important
not only for directing personnel to the site but also as an effective document to be
included with bidding inquiry packages.

In order that security during construction can be effectively enforced, site security
planners should determine the best location for perimeter fencing, gates, security
lighting, parking, and other facilities. The main security concerns of site materials
control are protection of tools, equipment, and materials from theft; admittance and
direction of delivery vehicles to receiving areas; and procedure for removal of materials,
tools, and equipment from the site (i.e., the project’s gate pass procedure). Materials
personnel should be involved in the development and review of security procedures
to make certain their concerns are adequately addressed.

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An effective communications system between security, materials control, and

construction personnel is essential for the efficient direction of incoming deliveries,
the unloading of crews and equipment, and the routine communication between craft
workers and the warehouse.

Receiving
Thorough receipt inspections of critical equipment and materials can be valuable in
preventing costly schedule delays. Although it is not practical or desirable for the quality
control organization to inspect all materials, certain critical items should be identified
during project planning to ensure that inspection is part of the receiving process. On
the surface, the materials receiving process would appears to be a routine activity,
but is in fact one that can cause a multitude of problems if not properly planned and
executed. Incorrect, missing, or damaged materials that are undetected at receiving
will go unnoticed until needed for construction, at which time they are likely to have
a severe impact on the construction schedule. Also, enforcing warranties and back-
charging suppliers for necessary field rework may depend on a well-documented,
timely receiving report.

Shipping bills of material (manifests), packing lists, and purchase order copies are
probably the ideal itemized documents to have for receiving; however, other documents
such as piping spool sheets, pipe hanger sketches, bar bending schedules, materials
lists, and valve lists are all useful and, in most cases, absolutely necessary for receiving.
In order to get required documents from suppliers, it will be necessary to make them
a purchase order requirement.

Storage Facilities

Laydown area planning

Once the permanent structures and major equipment items have been located on
plot plans or general arrangement drawings, outside laydown areas can be planned.
This work must be closely coordinated with the design of temporary facilities, the
layout of prefabrication areas, and the design of temporary roads. A carefully planned
laydown area is essential for efficient materials storage and handling. Access into and
out of these areas by construction equipment and craft personnel requires good roads
and adequate drainage. Poorly designed, crowded, unmaintained laydown areas will
hinder movement of materials, increase the probability of lost materials, increase labor
costs, and may even result in safety problems or construction claims.

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II. Preparing the Materials Management Plan

Adequate laydown and fabrication areas should be identified for specialty

contractors who provide their own materials and for furnish-and-erect type contractors
(e.g., HVAC, insulation, and metal siding). This planning can be based on discussions
with prospective bidders or from experience on previous projects. Historic records of
past projects are valuable in developing statistics for planning storage requirements.

Warehousing facilities and storage

Planning warehouse space and layout is influenced by a number of variables.
Some owners elect to install permanent warehouses early, for contractor use during
construction. Consideration must be given to exactly when the owner needs to occupy
the permanent warehouse facility. Other owners leave warehousing entirely to the
discretion of the contractors. Whatever approach is used, advance planning by the
owner and contractors can have a significant positive impact on the project.

Warehouse space should be provided for unloading, receiving, OS&D holding,

staging, issuing, railhead receiving (if practical), and storage areas. A counter or
physical barrier between outside entrances and stored materials prevents unauthorized
entry. Inside storage areas, possibly segregated by craft, require shelving, bins, and
pallet racks, depending on the type of materials to be stored. A temperature/humidity-
controlled storage area for delicate items (e.g., electronic cabinets and instrumentation)
may be required. An adequate fire protection system should be planned. A central
staging platform for welding gas and oxygen cylinders may need to be provided in
addition to the tool room space they require.

Provisions for outside controlled storage areas also need to be considered.

Allowance for rain water or snow accumulation can have a positive impact on the
efficiency of warehouse personnel. Electrical cable, copper bus duct, stainless steel
items, and other materials subject to theft should be kept in fenced areas, preferably
adjacent to the warehouse where materials control or security personnel can maintain
tight control over access to the area. When planning warehouse space, it is important
to provide adequate facilities for office personnel.

Equipment Storage Protection/Maintenance

Plant equipment and materials require varying degrees of protection and maintenance
from the time they are delivered at the project-site until either installation or initial plant
operation. The requirements for protection of this equipment and materials should be
carefully planned so that damage and delays are minimized and supplier guarantees are
maintained. Both supplier’s requirements and standard procedures must be followed
to achieve these goals. The development of a comprehensive protection plan requires
a great deal of time and effort and should begin well in advance of site mobilization.

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The plan should be comprised of general guidelines, methods and techniques, and
specific procedures covering all permanent plant equipment and materials.

Storage methods or categories should be defined. Specific storage protection

instructions should be prepared for each piece or category of equipment and each
materials group, based on supplier’s recommendations obtained prior to release for
shipment (preferably detailed as a purchase order requirement). Initial preservation,
periodic inspection and maintenance, and preparation for start-up should be
documented for each item in order to provide a permanent record and to ensure that
the required maintenance is regularly performed.

Storage categories can be generally classified as follows:

• materials that require extraordinary protection (e.g., storage in a filtered or

temperature/humidity-controlled environment)
• materials that do not require a controlled temperature/humidity, but do
require indoor protection (e.g., storage in weather tight or ventilated spaces)
• materials that require moderate protection from the environment (i.e., indoor
storage, protection from weather and dust)
• materials that require minimal protection from the environment (i.e., outdoor
storage on dunnage protected from standing water)
• materials that are practically insensitive to the environment.

The most common preservation techniques used include the following:

• dehumidification
• oil coating
• lubrication
• oil filling
• heating
• nitrogen blankets.

Once storage methods and preservation techniques have been defined, periodic
maintenance and inspection requirements should be specified for each equipment
item or materials category, as applicable. These inspections and checks may include
the following considerations:

• motor-winding insulation resistance

• hand rotation of motor, pumps, or gear shafts to keep bearing surfaces
lubricated
• electrical motor heaters and space heaters are energized
• temporary covering, visible damage, condition of rust preventive coatings,
and condition of cribbing or other support.

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II. Preparing the Materials Management Plan

Preparations for start-up are also an important component of the protection plan
for rotating or reciprocating equipment and include some of the following activities:

• removing protective covering and wrappings

• draining the lay-up oil from gearboxes and pump casings; refilling with correct
operating oil or grease
• removing rust preventive coatings
• spot checking bearings for contamination or corrosion
• replacing coupling spacers and motor drain plugs
• checking motor-winding insulation.

Specific storage protection instructions should be prepared for each piece

or category of equipment and each materials group, based on the supplier’s
recommendations. Initial preservation, periodic inspection and maintenance, and
preparation for start-up should be documented for each item. Such systematized
documentation allows materials personnel to establish a permanent record and ensure
that the required maintenance is regularly performed.

Materials Issuance and Return

The physical arrangement and approach to materials issue must also be well
planned. Materials control will not be possible unless it begins with the first issue. An
accurate record must be kept of when and where materials were used and who signed
for them. This is usually accomplished by means of a warehouse request for issue.
The warehouse request for issue should also provide assurance that there is a need
by the requestor for the material and the specific purpose for which it will be used.
Since this document becomes the basis for inventory control and status reporting,
planning is necessary to ensure that requests for issue are approved by the appropriate
personnel, filled out correctly, and include the necessary information for accountability.

A method of handling the return of unused or surplus materials to the warehouse

should be considered in order to minimize the unnecessary purchase of materials
already available and to control critical items. The approach to proper documentation,
record keeping, cost system interface, and approval points must all be determined.

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 II. Preparing the Materials Management Plan

J. Materials Management Planning for Operations and

Maintenance
Operation and maintenance (O&M) includes all aspects of running an asset. For a
project, O&M typically begins with start-up. Following start-up of all or part of an asset,
the initial operation phase may be handed over to an owner team or remain under the
contractor’s control for an extended period prior to handover to the owner. In either
case, it is important that the team in charge of start-up has the right equipment spares
available and the appropriate personnel to maintain them per the original equipment
manufacturer guidelines. Early planning and close cooperation between the contractor
and the owner regarding O&M materials requirements will lead to more efficient project
delivery and will facilitate a smoother transition to beneficial operation.

O&M materials management for the project typically include the following activities:

• identifying parties responsible for procuring commissioning, start-up, and

initial O&M spares to prevent late costs and schedule delays at start-up and
handover
• determining contractor’s management of O&M spares field control to meet
owner’s storage or certification and traceability specifications and minimize
surpluses that result from owner’s refusal to accept materials
• providing formal guidance on O&M spares levels to mitigate the risks of
shortages and surpluses, including contract terms and conditions, lead times,
cost of shortages versus costs of storage, and excess or obsolete inventory
• determining contractor’s plans to make the right commissioning spares
available onsite for a contractor with commissioning and/or start-up
responsibilities to minimize late costs and schedule delays during those
phases
• including clear guidance in the commissioning and start-up plan(s) on roles
and responsibilities and associated costs for expediting in cases of shortages
• ensuring the owner’s access to an asset management and maintenance
software system and making it operational in time for efficient spares
handover by contractor to owner to minimize contractor surpluses
• verifying the owner’s capability of accepting early vendor data for the O&M
materials into their asset management and maintenance software system to
maximize the efficiency of handover and minimize contractor surpluses
• determining clear specifications for maintaining material integrity following
receipt at interim warehousing or at site
• specifying disposal methods for surplus material in terms of safety and
regulation compliance and maintaining clarity between the owner and
contractor on financial responsibility for materials disposal, whether
expensed or written down.

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II. Preparing the Materials Management Plan

Spares Management
It is critical to have the right O&M input during a project’s design stages to leverage
real-life experience into the spares philosophy. Bringing a maintenance planner onto
the contractor’s team early in the planning process often adds significant value to a
project; maintenance planners should take the lead in designing the materials transition
strategy—from construction to commissioning to start-up—and provide insight into
and expertise on rationalizing the quantity of spares ordered.

The owner should identify the recommended listings of spares for two-year
operations. Doing so typically requires that the owner interface with the contractor
and/or the original equipment manufacturer (OEM). The contractor may procure spares
on behalf of the owner, or the owner may procure them directly from the OEM. The
amount of spares required depends on several factors including the following:

• owner’s maintenance philosophy

• physical location and distribution
• lead times
• criticality.

In addition, the contractor is typically tasked with identifying and procuring spares
for commissioning and start-up. Depending on the type of contract and the facilities
handover plan, the contractor may also need to identify and procure early operations
spares or consumables. Prior to handover, joint owner and contractor reconciliation
should ensure that all required and surplus spares are catalogued and procured.

K. IT Systems
One of the tasks of the planning phase of materials management is to define
the materials management systems that will be utilized on a project, specifying how
they are to be used. Typically, these automated tools should be an integrated set
of computer systems or programs that identify, track, report, and facilitate control
of project materials, from quantity take-off through the engineering, procurement,
construction, and start-up phases of the project.

Defining System Requirements

Defining the requirements of the materials management systems begins with a
good understanding of the materials scope. This includes both the volume or amount
of materials and the materials management goals and objectives for the project. The
materials scope of work is significant because it defines the size and complexity the
project’s automated materials management systems. Further, the materials scope is
a factor in determining computer and hardware requirements.

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 II. Preparing the Materials Management Plan

Typically, a complete materials management system supports all phases of the

materials management process. For the system to be most effective, the programs
should be fully integrated. The materials requirements and data entered into the
management systems in the early phase of the project support the planning, control,
and reporting requirements of later project phases. Therefore, during the planning
phase, the materials management team must define the specific control and reporting
requirements of the materials management systems for each phase of operation. This
information, along with the materials scope, allows the IT staff to properly select the
system components and define the hardware necessary to meet the requirements of
the materials management team.

System and Component Selection

As discussed above, the materials management system is actually an integrated
set of computer systems that identify, track, report, and allow for planning and control
of materials, from engineering take-off through start-up. As such, desirable features
of the materials management system usually include the following:

• centralized control of materials

• up-to-date and timely materials quantities and status information
• automatic generation of printed specifications, bills of materials, purchase
orders, quantities, and dimensions
• integration with CAD systems and project management software
• flexibility in materials reporting
• sensitivity to construction materials requirements and problems
• immediate access to current data for all users, i.e., project, engineering,
materials management, and construction personnel
• sufficient operating flexibility.

The automated materials management system should include the following primary
project capabilities for the following project phases:

• materials requirements planning and project acquisition strategy

– specification development
– materials take-off and control
– development of bills of material and requisitioning
– assignments/allotments of materials
– handling of changes, shorts, and surpluses
– supplier qualification and management

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II. Preparing the Materials Management Plan

• purchasing, subcontracting, expediting, supplier quality management,

transportation, and logistics
– document and data tracking
– document generation (e.g., inquiry, purchase order, or contract)
– commitment reporting
– inspection plans and reports
– materials tracking
– back-charge and close-out status check
– expediting

• site materials management

– receiving reports, inventory control, and OS&Ds
– materials (work) availability planning
– site materials requisitioning
– warehouse min-max system operation
– preventive maintenance
– staging/distribution/usage/field requirements and change management
– interface with project controls.

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 Conclusion

The project materials management process begins with the Materials Management
Plan, a document that is incorporated into the Project Execution Plan. Decisions on
purchasing and controlling materials that are made in the early stages of a project are
critical to project success and, if properly executed, present considerable opportunity
for cost savings. Materials planning is continuous and extends through the entire project
life cycle—from the front end planning requirements to the day-to-day operation at
the plant.

To be successful, materials management planning must be pro-active; that is,

it must be initiated concurrent with or ahead of engineering and construction and
must be an essential feature of the Project Execution Plan. Materials management
planning activities must be integrated organizationally so that materials management
responsibilities are understood and performed by personnel in both the “materials” and
“non-materials” organizations; for example, engineers should consider the impact of
available surplus materials in their designs. The plan should clearly identify the people
in the organizational structure who are responsible for the successful performance of
the materials management functions.

Materials management planning will vary from project to project, but certain
planning functions are applicable to all materials—whether engineered, fabricated,
or bulk. Although engineered equipment is the most visible, costly, complex, and
quality-critical, bulk materials planning is more difficult. The difficulty is due to the
problem of controlling quantities and to the labor-intensive nature of bulk materials
installation. (Indeed, installation of bulk materials can consume 80 percent of the direct
labor effort-hours.) Project management must make important decisions regarding
lead times, bulk materials purchases, and the extent of line item control.

Scheduling the entire materials management activity is essential to meeting

the project timetable. Materials schedules are as critical as those of engineering
and construction and span all phases of the project—from definition and approval
of requirements to purchasing, supplier lead time, logistics, and site management.
International materials management should include time for transportation, import
licensing, and customs clearance.

This planning guide is deliberately general. A project’s materials management

plan will be more specific and tailored to its particular needs. It will reflect factors
such as owner/contractor responsibilities, site location, existing facilities, method of
contracting, project schedule, cash flow, and decisions to prefabricate or modularize.

33
 RT 257 Participating Organizations

Owners
AES Corporation NASA
Amgen Nova Chemicals
Anheuser Busch In-Bev Ontario Power Generation
Air Products Petrobras
BP America Progress Energy
Cargill Sasol Technology
Chevron Sunoco
ConocoPhillips Technip
Eastman Chemical Company Tennessee Valley Authority
Intel The Procter & Gamble Company
International Paper Company U.S. General Services Administration
Eli Lilly and Company U.S. Steel
Marathon Oil

Contractors

ABB Lummus Jacobs

Aldinger JMJ Associates
AZCO Kiewit Construction Group
BE&K Mustang
Bechtel R. J. Mycka
CB&I Pathfinder
CH2M HILL S&B
Chapman SNC Lavalin
CSA Group URS Corporation
dck worldwide, LLC Walbridge
Fluor Washington Group
GS Engineering & Construction WorleyParsons
Harper Industries Zachry
J. Ray McDermott

35
Global Procurement & Materials Management
Research Team

David J. Brokish, Emerson Process Management

* Gene Budler, dck worldwide, LLC, Co-Chair
* Carlos H. Caldas, The University of Texas at Austin
Thomas W. Carroll, The Shaw Group Inc.
Bobby D. Coker, Mustang
John M. Cook, S&B Engineers and Constructors, Ltd.
Daniel Enloe, Intel Corporation
Glenn L. Gundy, Fluor Corporation
Mark E. Hodson, Eli Lilly and Company
Mark G. Hood, Marathon Oil Corporation
Rennard G. Lee, J. Ray McDermott, Inc.
* Cindy L. Menches, The University of Texas at Austin
* Laure Navarro, The University of Texas at Austin
* Stuart D. Rettie, BP America, Inc., Co-Chair
* Pedro M. Reyes, Baylor University
Omar Riad, URS Corporation
James Sullivan, WorleyParsons
Daniel M. Vargas, The University of Texas at Austin
Barbara Wade, URS Corporation
Mark T. Watts, Bechtel National, Inc.

* Principal authors

Editor: Jacqueline Thomas

 Construction Industry Institute
The University of Texas at Austin
3925 W. Braker Lane (R4500)
Austin, Texas 78759-5316
IR 257-3