Success of Supplier Alliances for Capital Projects

Energy sector capital projects typically cost hundreds of millions and even billions of dollars. Managing the engineered equipment is important not only because of their high dollar value but also because the long manufacturing lead times often drive the overall project schedules. In recent years, several supplier alliances have been successfully implemented on such projects leading to initial price savings in the range from 6 to 10%. This paper presents the result of a study to assess the opportunities and barriers with such partnerships. Interviewed company executives perceived that time savings and quality improvements, mostly due to the suppliers’ specialized expertise, are of much greater value than a lower bid price. Most surprisingly, very few companies use metrics to measure performance, thus leaving them in the dark on the question of how well an alliance worked or why it failed. The relevance of the presented work is in the amount of actual field data that has been generated and processed.