Running head: MAT PROCUREMENT 1

Mat Procurement
William Taylor Pittman
PJM400-1 Project Procurement and Contract Management
Colorado State University Global Campus
Professor Clara Spenny
June 26, 2014














MAT PROCUREMENT 2

Mat Procurement
Introduction
Industrial timber mats are used largely on pipeline and natural gas construction projects.
Placed adjacent to the pipe being laid in order to position equipment, mats are essential in the
construction process. Their importance and cost are both drivers in the buyers procurement
strategy. The procurement process of industrial mats can be outlined in seven stages:
requirements, requisitions, solicitations, awards, administration, contracts incentives and risks,
quality, and closure.
The intention of this paper is to provide an analysis of a hypothetical mat procurement
process. The procurement goal is to secure the purchasing or renting of mats for an upcoming
pipeline construction projects.
Requirements - Planning the Procurement
Directly gathered from the information phase, comes much of the information required to
develop the scope of a mat purchase. The hypothetical project will require three-thousand mats
to be purchased for use on the project. These demand for mats on site follows a bell curve and
allows for delivery in increments. Incremental delivery is often preferred because of cost
implications and space restrictions on the building site. The scope will include quantities, terms
and conditions, lead time, and specifications. A quality control methodology will also be
established in this phase
Specifications. There are two types of specifications involved with procuring mats that
must be specified within the scope development phase. These specification types are functional
specifications and performance specifications. Functional specifications describe what something
is intended to do while performance specifications describes the parameters of actual
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performance (Semank & Sollish, pg. 29). The functional specification are important because
different types of mats exist for different conditions and equipment. The performance
specification relate to a mats life span and is important to consider whenever buying new or used
mats.
Assessing Costs. Requirements for mats are documented in written specifications. The
lack of customization helps creates tight specifications while keeping costs low. Mats are
generally shipped on as needed basis or as determined by a pre-defined schedule. This is done so
for two reasons on the buyer side. First, Ordering smaller quantities of material more frequently
minimizes the locked-up capital in material inventories ( Optimizing material procurement and
storage on construction sites). Secondly, space is often limited on job sites and is too precious to
store mats.
In the article Optimizing Material Procurement and Storage on Construction Sites, a
critical analysis of the trade-off between cost, storage, and delivery is given. Key points can be
taken from this article applicable to mat procurement. Gathered from the article: Costs should
not only be considered, but delivery, lock-up, and risk.
Mat prices differ based on market conditions, availability of mats, location, and
relationship to name a few factors. Mat prices generally range from one-hundred fifty for used
mats to over four-hundred for new mats. The buy-back terms when acquiring new mats are
essential if no successor project is in sight. Properly forecasting mat prices at project completion
can minimize total mat cost to a project.
Requisitions - Conducting the Procurement
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Once a scope has been developed the next task is to select which vendors you would like
to solicit a request for quotation (RFQ). There are many variables to consider when selecting
suppliers. Some key items of consideration in mat procurement include: location and the
associated shipping costs, size, and capability.
Location and the Associated Shipping Costs. The location of a vendor in relation to a
project is key in finding the best price for mats. Shipping costs can account for up to half the
total cost for mat procurement. This helps the procurement department expand their vendor list
by constantly seeking new vendors when working in new areas.
Size. The size of both the vendor and the job need to be assessed with one another in
order to determine if the order can be filled efficiently without risk.
Capability. The capability of a vendor to fill and order properly depends on its size and
its ability to operate and maintain shipping schedules.
Competition. Once vendors have been selected as acceptable for bidding, it is then
necessary to establish the type of competition available or that you wish to establish. Co-sources
are often used to fulfill the complete mat need. A mat procurement of the size in consideration
would make this a feasible option. At Whc- Inc., a pipeline construction company, open
competition is generally encouraged for mat procurements of more than five-hundred mats.
Solicitations - Requesting seller response
Solicitations to vendors are submitted via RFQ for mat purchases. The RFQ for mat
procurements includes the price per mat, the buy-back terms, shipping requirements,
specifications, and conditions.
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The negotiation Process. The ultimate goal of the negotiation process is to achieve
mutual agreement of offer and acceptance. Negotiation requires planning, research, and good
execution to work effectively. One must assess the negotiation environment, gather info and
analysis and prepare for the negotiations. Assessing the negotiation environment considers
competitiveness and current marketplace condition. The competition present or created by bids
solicited can provide leverage in the buyers position. In order to properly prepare for
negotiations one most also gather information about the vendor(s). Information to be gathered in
order to prepare yourself for negotiations includes the financial needs of the supplier, the
relationship with the supplier, position in the marketplace, priority, and the urgency of the order.
Generally negotiations for mats are brief, if they take place at all. It is rare to have a face to face
negotiation for a mat procurement.
Awards - Selecting sellers
Qualifying Suppliers. Qualifying suppliers occurs before selection and determines
which suppliers are suitable for doing business with. Qualifying suppliers assesses order
processing and fulfillment, operations/capacity, quality systems, cost control, finance, and
management aligning with you own business ethics.
Order Processing and Fulfillment. The records of order processing and fulfillment can
provide concrete data related to a suppliers reliability and capability. These records originate
from the supplier side and are sometimes shared among friendly businesses procuring from
similar or same sources.
Operations/Capacity. The operations, or how much they are operating, and capacity are a
valuable variable to analyze when qualifying a seller. The operations/capacity shows the
suppliers ability and ease of which it can fulfill an order. In mat procurement you want their
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capacity to be much larger than what your need is. You do not want to rely mats not in current
inventories.
Quality systems. A suppliers quality systems are very important to assess when
performing qualifications on a supplier. The quality systems determine how quality of mats are
assessed and what tools and techniques are used to track their use. The quality of the mats is
important their procurement as it relates to the remaining useable life.
Finance. A suppliers financial situation must also be considered when trying to qualify
them. Suppliers in bad financial situations are to be avoided as their ability to operate effectively
is compromised. Suppliers in good standing with their finances represent a strong cost control
system, which generally implies similar efficiency in other areas.
Seller Selection. Selection of sellers requires due-diligence; analyzing responsiveness,
capability, and competitive value. A vendor is judged upon whether they can meet the scope,
delivery date, and conditions. The previous relationship with the vendor will also come into
consideration as well as their qualifications.
Responsiveness, Capability, and Competitive Value. The responsiveness of a vendor
shows many thing to a procurer. It shows the priority or urgency of your need as well as help
forecast future service experience. A vendor must be capable of fulfilling the order. This can be
assessed by a site visit or reviewing of financial statements. You do not want a vendor to struggle
to meet your order. This can result in quality issues, partial fulfillment, among others. The value
in comparison to other vendors must also be taken into consideration in selecting a seller. This is
known as the competitive value.
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Meeting Scope, Delivery Date, and Conditions. Selecting sellers also encompasses a
vendors ability to meet your scope, delivery date, and conditions. The delivery dates of the mats
to be procured are essential in that delays in delivery will cause direct delays in work progress. In
mat procurement, this is one of the biggest variables to consider when selecting a seller. The
single most important condition in a procurement contract for mats is the buy-back option. The
buy-back option can either guarantee a price at which they will buy the mats back or guarantee to
pay market price at the time of reverse sale.
Previous Business Relationship and Qualifications. The previous business relationship
with a vendor can help mitigate much of the risk involved with mat procurement. A good
working business relationship generally imply that their ethics and objectives are in line with you
own. A good relationship also shows that they have fulfilled their contractual obligations in the
past successfully.
Administration
Written contracts include mutual agreement, legal consideration, and capacity. These
elements are all required for a contract to be legally enforceable. A contract, once legal, must
then be monitored and controlled by both the supplier and seller. Continuous supplier evaluation
and performance must be performed in relation to the contract.
Legal requirements. Legal requirements for a mat procurement include but are not
limited to, insurance, liability, liquidated damaged, and must comply the regulated materials
codes implemented by the EPA.
Liability. Liability must be considered in mat procurement in relation to damages that
can potentially be cause in the shipping or unloading process. Liability for mat procurement is
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generally shared for damages caused during shipping while the liability lye with the procurer
during unloading.
Regulated Materials. Regulated materials applies to mats in the procurement process.
There are high disposal fees implemented by the EPA because of the chemicals used to treat the
wood. It is legally required to have a section concerning hazardous waste in a mat procurement
contract.
Monitoring and Control. To be monitored and controlled are the quality and delivery
aspects of the procurement. Quality will be assessed on site when conducting a field inspection
of the procured mats. Delivery will be monitored to eliminate any delivery delays and in order to
help predict any future delays.
Contracts, Incentives and Risks.
The types of contracts used in mat procurement are purchase orders and are fixed price.
Incentives to this contract include the buy-back option or seller disposal of mats after use. Risks
include the value at the buy-back time being less than anticipated, and the quality of the mats.
Quality and Closure
Quality must be assessed throughout the fulfillment of the procurement need. As
shipments of mats begin to arrive to a project, quality control begins, Quality control includes
monitoring the mats deteriorative factor, performing durability spot tests, and assessing the initial
conditions of the mats. The initial conditions of the mats are compared to final conditions to
determine quality.
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After confirmation that all mats have been delivered and perform to spec. the contract is
then closed. The close out procedures for mats is rather straight forward and includes payment of
open commitments, and demobilization of the mats.
Conclusion
The mat procurement process is rather straightforward because of its lack in
customization and curvilinear shipping requirements. With the proper tools and planning, one
can ensure to obtain not only the best competitive value, but minimize risk, and optimize
operations simultaneously.


















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References
Semanik, J. Sollish, F. (2012). The Procurement and Supply Managers Desk Reference. New:
John Wiley & Sons, Inc.
Said, H., & El-Rayes, K. (2011). Optimizing Material Procurement and Storage on Construction Sites.
Journal of Construction Engineering & Management, 137(6), 421-431.
doi:10.1061/(ASCE)CO.1943-7862.0000307