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PETROFAC LIMITED

12
Case Study: Proposal Execution Model
Implementing ERP to Attain and Sustain Growth
Davidson, Kitson
El-Makkawi, Ahmad
Syed, Tabish

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Executive Summary
Engineering, Procurement and Construction (EPC) business in Oil and Gas (O&G)
industry has become more competitive than ever. Therefore, effective proposal execution has
become vital for securing new business opportunities. Petrofac generates most revenues through
lumpsum EPC contracts of Onshore Engineering and Construction projects. Petrofacs current
proposal execution process has been its critical successful factor in being awarded tenders.
However, there are a few inefficiencies built into the proposal execution method that can be
improved through implementation of an Enterprise Resource Planning (ERP) system. ERP is
getting popular among big organizations around the world due to its ability to reduce and
eliminate inefficiencies and redundancies in the working process. The purpose of this research
paper is to improve the efficiency of the proposal execution model at Petrofac through
implementation of an ERP system.
Firstly, this research includes companys background and the current proposal execution
model. This will include the activities and the disciplines involved in the preparation of an EPC
proposal. Also, the loop holes in the execution model will be discussed briefly. Then, a brief
literature review of ERP and its implementation is included. Finally, the improvements that can
be made in the proposal execution model through implementation of ERP. This will also include
how to successfully implement ERP at Petrofac and the factors that could hinder its
implementation like organizational culture, resistance to change, time span and data migration.


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Table of Contents
1. Company Overview ..................................................................................................................5
1.1. Companys Vision and Business Strategy .................................................................................... 5
1.2. Companys Values ........................................................................................................................ 5
1.3. Company Background................................................................................................................... 5
1.4. Business Structure ......................................................................................................................... 6
1.4.1. Onshore Engineering & Construction (OEC) ......................................................................... 7
1.4.2. Offshore Projects & Operations (OPO) ................................................................................. 7
1.4.3. Offshore Capital Projects (OCP) ............................................................................................ 7
1.4.4. Engineering & Consulting Services (ECS) .............................................................................. 7
1.4.5. Developments ....................................................................................................................... 8
1.4.6. Production Solutions ............................................................................................................. 8
1.4.7. Training Services ................................................................................................................... 8
2. Acronyms & Definitions ..........................................................................................................9
2.1. Acronyms ...................................................................................................................................... 9
2.2. Definitions ..................................................................................................................................... 9
3. Proposal Execution Process ....................................................................................................10
3.1. Bid Decision Process .................................................................................................................. 14
3.2. Proposal Planning Process .......................................................................................................... 15
3.3. TQ Clarification Process ............................................................................................................. 16
3.4. Preparation and Submission of Bid Documents.......................................................................... 17
4. Issues in Proposal Execution methodology ............................................................................21
5. ERP Literature Review ...........................................................................................................23
6. ERP Implementation...............................................................................................................24
7. Improvements in the Proposal Process through ERP .............................................................28
8. Conclusion ..............................................................................................................................31
9. ERP Literature Review ........................................................... Error! Bookmark not defined.
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10. Improvements in the proposal process through ERP .............. Error! Bookmark not defined.
11. List of Figures .........................................................................................................................35
12. References .............................................................................. Error! Bookmark not defined.


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1. Company Overview
1.1. Companys Vision and Business Strategy
[Petrofacs] aim is to be the worlds most admired oilfield service company
(Petrofac.com, 2012).
Petrofac help customers develop their energy resources; bringing world class capabilities
and delivering it locally. They promote commercial arrangements that are aligned to customers
needs, allowing them to deliver more value to the customer while increasing the returns from
their most precious asset people i.e. employees.
Their growing capabilities and expanding geographic reach in order to deliver their
financial target of doubling 2010 revenues by 2015.
1.2. Companys Values
Petrofacs key values include being safe, ethical, innovative, responsive, quality and cost
conscious and driven to deliver. These values are visible in their business structure and strategy.
1.3. Company Background
Petrofac is an Integrated Oilfield service provider company. Petrofac began in 1981 as an
engineering, fabrication and procurement firm based in Texas, catering to local as well as
international clients. Petrofac is renowned for fabricating infrastructures for the oil, gas plants as
well as refineries around the globe. In order to increase its customer base and further expand its
client base, Petrofac set up an office at the Emirate of Sharjah in the United Arab Emirates which
has become the engineering center of excellence. It caters to various oil producing countries
around the globe.
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The three main operations of Petrofac include designing and building oil & gas
infrastructure, operating, maintaining and managing assets and training personnel. Petrofac is a
very diverse company in terms of its operations and culture. It has seven operational centers in
Aberdeen, Sharjah, Woking, Chennai, Mumbai, Abu Dhabi and Kuala Lumpur and a further 24
offices and 14 training facilities worldwide.
1.4. Business Structure
Petrofac has divided its business in two main divisions and seven business units. Figure
1 below shows Petrofacs business structure.


PETROFAC LTD.
Engineering, Construction,
Operations & Maintenance
(ECOM)
Integrated Energy
Services
(IES)
Onshore Engineering &
Construction
(OEC)
Offshore Projects &
Operations
(OPO)
Offshore Capital
Projects
(OPO)
Engineering &
Consulting Services
(ECS)
Developments
Production
Solutions
Training
Services
Figure 1: Petrofac Business Structure
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Petrofac offers wide range of services through its various business units. These business
units are created to meet customers need and Petrofacs vision. All business unit are interlinked
but operate independently under different leadership. Each business unit operates in a different
market segment. However, the purpose is to provide a one stop shop to its customers for all their
needs. Below is a brief description of each business unit.
1.4.1. Onshore Engineering & Construction (OEC)
OEC is a single business with highly effective resource allocation. OEC is the platform
which supports Petrofacs regional approach to project management. It delivers a diverse range
of onshore engineering, procurement and construction projects. OEC is mostly involved in
green-field contracts which require building of new facilities and equipments. The key target
market for OEC business is middle-east.
1.4.2. Offshore Projects & Operations (OPO)
OPO focuses on brownfield projects and the provision of operations, maintenance and
engineering services worldwide, to both on and offshore projects.
1.4.3. Offshore Capital Projects (OCP)
Offshore Capital Projects (OCP) focuses on acquiring and executing all of Petrodacs
engineering, procurement, installation and completion (EPIC) projects.
1.4.4. Engineering & Consulting Services (ECS)
ECS provides consultancy, conceptual design, FEED and PMC across all sectors
including renewable and CCS from offices in Woking, UK, Houston, USA and three operating
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centers in India; Mumbai, Chennai and Delhi. ECS is the centre of technical engineering and
excellence.
1.4.5. Developments
Developments business integrates engineering and project management capability to lead
the development of a customers asset working under commercial models which aligns Petrofac
with the resource holders' needs.
1.4.6. Production Solutions
Production Solutions provides customers with a wide range of services to help improve
production, profitability, operational efficiency, asset integrity and the ultimate recovery from
their reserves.
1.4.7. Training Services
The Global training business, which manages14 facilities in six countries, trains around
55,000 delegates annually. It operates on an integrated approach, working with customers to
assess capability needs and to build programs to develop competent, safe and efficient
workforces.

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2. Acronyms & Definitions
2.1. Acronyms
OEC Onshore Engineering & Construction
BMS Business Management System
ITB Invitation To Bid
ITT Invitation to Tender
ITB Invitation to Bid
SPOC Single Point of Contact
CEE Cost Estimation Engineer
CBT Commercial Bid Tabulation
TCR Techno-Commercial Offer
PER Project Execution Review
IT Information Technology
KOM Kick-Off Meeting
MOU Memorandum Of Understanding
BOQ Bill of Quantity
MTO Material Take-off
FEED Front End Engineering Design
MR Material Requisition
RFQ Request For Quotation
TQ Technical Query
RAR Risk Assessment Review
EPC
Engineering, Procurement &
Construction

2.2. Definitions
Lumpsum Contract: It is type of contract in which the contractor bids a single price for entire
work process without requiring a cost break-down.
Man-hour: 1 hour of 1 persons time. It is used to allocate resources i.e. man power and
scheduling based on the amount of man-hours required for a certain activity.
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Brown field engineering: A Brown field project is defined as a project where in part or whole
engineering, construction and commissioning activities for the project are to be performed in an
existing operating plant.
Green Field Engineering
3. Proposal Execution Process
The OEC business unit of Petrofac has been the key in generating revenues. Petrofacs
strength lies in delivering successful Green field engineering EPC projects to customers all over
the world. EPC contracting market is becoming very competitive due to the global nature of the
business.
In an EPC contact the responsibility of Design, Procurement and Construction scope of
work lies with the contractor. The EPC contractor acts as a single point responsibility for
delivering the complete facility which includes extensive interfacing with client, sub-contractors
and suppliers. The EPC contractor has to guarantee that the completed facility is to be designed
as per the specification of the client, suitable for the intended use and free of defects and
malfunctions.
New EPC projects are achieved from clients through a competitive bidding process.
Petrofac among other global contractors are invited to bid through ITT or ITB. Therefore, the
proposal process is a very crucial process in securing new green field EPC projects as the project
is awarded to the lowest bidder with technical acceptance. The cost and resources required for
the project are estimated during the proposal stage and a lumpsum bid is submitted to the client.
What also makes the proposal stage very critical is that any missed cost for an item or an activity
or a risk that is unaccounted will be a loss to Company. Therefore, it is very important to capture
all commercial and technical aspects in the bid documents to as to minimize future risks and also
provide a competitive cost to the customer.
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The proposal preparation and submission process for an OEC project of OPO division is
briefly summarized in figure 2 below.


Proposal engineering is the process of receiving, evaluating and preparing bid documents
for a received proposal. A proposal is received through an ITT or an ITB from a client. Proposal
department plays a key role in this process and determines the efficiency of the process. The
proposal comes with a deadline for submission within which all the related activities i.e.
estimating cost, preparing deliverables and assessing risks for the bid submission must be
No Bid
Regret
Letter
Bid
Receipt of
ITT

Bid / No Bid

Prepare Proposal
Summary
Assign Proposal
Manager
KOM
TCR PER RAR
Proposal
Submission
Formation of Task
Force
Figure 2: Process Flow Diagram
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completed. The project cost consists of three parts; Engineering cost, Material cost and
Construction cost. Proposal preparation and submission includes following departments:
Engineering Department (consists of various disciplines like Electrical, Civil etc.)
Construction Department
Contracts Department
Procurement Department
Each department is responsible for providing specific inputs to the proposal department
as decided during the KOM. The proposal department gathers all the information, compiles the
documents and prepares the final bid submission documents. The proposal department acts a hub
for internal and external interfacing. The Context and the Level-0 DFD in figure 3 and 4
summarizes the proposal preparation process.



Figure 3: Context Diagram - Proposal Execution
Client
Bid Decision & Signed TCR
Proposal
Task Force
Vendors
ITT
Technical Clarifications
RFQs
Vendor
Offers
Final TQs
0

Proposal
Engineering

TQs to Client
Formatted Clarifications
Material Estimates
ISL Reports & TQ Status Reports
Nominations & Manhour Budget
& TQ Formats & Comments &
Qualifications & Standard Cost
Formats & RFQ Formats

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BID
Decision
1.0

Decide to
Bid / No Bid

Nominations
2.0

Plan
Proposal
ITT
Client
BID
Decision
Manhour Budget
Proposal
Schedule
TQs to
Client
Formatted
Clarifications
Final TQs
TQ Status Reports
TQ Formats & Comments
TQ Clarifications
4.0

Prepare &
Submit BID
Documents
Formatted
Clarifications
Material
Estimates
3.0

Issue TQs
for
Clarification
Task Force
Proposal
Signed TCR
Qualifications &
Standard Cost Formats
RFQ Format
RFQs
Vendors
ISL Reports
LEVEL-0 DIAGRAM
Vendor
Offers
Figure 4:Level-0 DFD
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Following is a brief description of activities and process involved at each stage of
proposal preparation.
3.1. Bid Decision Process
Upon receipt of ITT from client, the Head of Proposals appoints a Proposal Manager who
forms a proposal team and assigns proposal number for referencing in the administrative system.
The IT department will then create a proposal folder on company server wherein proposal
administrator uploads the ITT documents and provides access to the proposal task force.
The proposal manager issues a proposal summary with details such as general project
information, scope of work, contractual/commercial risk review, sales considerations and general
risk factors for BID/NO-BID decision.
The BID/NO-BID decision is taken by the top management and it advised to the
proposal manager. If NO-BID is decided then a regret letter is sent to client declining to bid.
Figure 5 summarizes the data flow in Bid decision making process.


FEED
BID
Decision
1.1

Announcing
of Proposal

1.2

Appoint
Proposal
Manager
Project
Info.
1.3

Decision for
Bidding

ITT
Nominations
1.3

Prepare
Proposal
Summary

Proposal
Guidelines
LEVEL-1 DIAGRAM
Figure 5: Level-1 DFD for Bid Decision Process
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If it is decided TO-BID, the proposal manager will then hold the overall responsibility
for completion and timely delivery of proposal to Client.
3.2. Proposal Planning Process
Depending on the scope, size and complexity, the proposal manager provides an
estimated manhour budget for proposal preparation. The manhours are monitored by the
proposal manager on a weekly basis.
Within the first week from start of the proposal, the proposal manager will form a
proposal task force comprising of discipline engineers and commercial analysts. A KOM is
arranged for the proposal task force. The objective of KOM is to appraise the attendees on the
project scope and proposal preparation schedule including proposal key dates and critical internal
target dates for proposal deliverables. KOM is also a forum for the Task force to clarify their
concerns. The proposal department then issues a proposal preparation schedule with an activity
list, due dates and responsibility to the proposal task force. Figure 6 below indicates the data
flow during the planning process.



Proposal Summary
2.1

Proposal
Planning
2.2

Kick of
Meeting
Manhour
Budget
Proposal
Schedule
BID Decision
LEVEL-1 DIAGRAM
Figure 6: Level-1 DFD for Proposal Planning Process
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3.3. TQ Clarification Process
Engineering discipline leads will coordinate, review and control the deliverables of
respective engineering discipline. Each department reviews client requirements provided in ITT.
They issue TQs to proposal department in the specified format to obtain missing/additional
information and clarify ambiguities/inconsistencies. The errors/inconsistencies found during
FEED verification are either raised as query to client or qualified as exceptions/clarifications in
the technical proposal. The queries are compiled in lots and further reviewed by proposal
department before forwarding it to Client for clarifications.
Proposal department also issues client communication such as client responses to
queries/clarifications, tender bulletins/addendums to the task force. Proposal Manager through
Proposal Administrator shall maintain a log of all queries issued and clarifications received from
client. Proposal Administrator will file in proposal folder all the aforesaid documents. Proposal
Manager will seek a confirmation on action taken by all disciplines/departments in reflecting the
requirements of TQ response, tender bulletins/addendums by either qualifying in technical
proposal or including the cost implication into the estimate. The data flow in the TQ clarification
process is summarized in Figure 6.
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3.4. Preparation and Submission Process of Bid Documents
Each engineering discipline is responsible for issuing of MRs to procurement for
receiving costs from vendors. Vendor offers are then reviewed to check their compliance to
proposal specifications and TQs are issued to vendor for clarification through procurement
department. After the review of vendor offers, Material Cost Estimate is prepared by all
engineering disciplines. All engineering disciplines should also issue MTOs and BOQs for
construction purpose. The deliverables for engineering disciplines also include preparation and
submission of FEED verification document to validate ITT information.
3.1

Prepare &
Compile
Queries
3.2

Review &
Issue
Queries
3.5

Receive and
Distribute
Responses
TQ Formats
Formatted
TQs
Comments
Final TQs
TQ
Clarification
s
Formatted
Clarifications
TQs &
Clarifications
D1
3.4

Prepare TQ
Status
Reports
TQ
Status
Final TQs
TQ Status
Reports
3.3

Update TQ
Status Log
Clarifications
Received
Updated
TQ Log
TQs to
Client
Updated
TQ Log
Proposal
Schedule
LEVEL-1 DIAGRAM
Figure 7: Level-1 DFD for TQ Clarification Process
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Procurement department is responsible for preparing and issuing RFQs to vendors. They
also expedite vendor offers, update and maintain an inquiry status log (ISL). After receiving
vendor offers they distribute vendor offers to engineering disciplines. They are SPOC between
vendor and engineering disciplines. They communicate with vendors to issue TQs and on receipt
of TQ responses, they distribute vendor TQ responses and revised offer to concerned discipline.
Construction department will be responsible to visit site location for data collection and
prepare strategy for field works. They are also responsible for providing a construction cost and
manhour estimates to the BOQs/MTOs provided by engineering disciplines for Construction
Management. Also, logistics cost estimate are provided by construction department to the
proposal department.
Contracts department is responsible for preparing commercial qualifications / exceptions
/ clarifications and contractual / commercial documents and provide it to the proposal document.
In addition to these, proposal department also organizes various TCR, PER and RAR
with the concerned members of task force to identify any issues that would require higher
management intervention, identify key risks as early possible to allow participants suggest and
recommend mitigating actions. (Add note in DFD for not including risk reviews). All
departments shall participate in design review and risk review meetings to assess the technical
and executions risks involved in the project. For example, procurement department will provide
inputs on procurement related risks like price inflation, material shortages etc. and construction
department will provide inputs on construction related risks like site accessibility and conditions.
After receiving cost estimates and deliverables from all departments, Proposal
department compiles cost in Petrofacs standard cost estimate formats and transfer them into
client price schedules, update and prepare the final bid documents. The complete cost,
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MTOs/BOQs, qualifications/exceptions and risks are reviewed and discussed with concerned
departments by the proposal department. The cost is updated, if required, by the proposal
department based on the discussions.
Finally, the Bid it is submitted to the client after signatures from respective parities. The
bid to client is submitted in two parts being technical and commercial. The technical bid includes
the engineering documents and the commercial bid includes the price schedules and supporting
qualifications. Contractual details forms part of the commercial bid. Figure 8 gives a brief
overview about the complex data flow that occurs during the bid preparation and submission
process. Following Figure 8 is Figure 9 which is a Level-2 DFD for the interface with vendors on
receiving and evaluating vendor offers.
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Figure 8: Level-1 DFD for Bid Preparation and Submission Process
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4. Issues in Proposal Execution methodology
Although the complete proposal execution process seems immaculate, there are few
things which need improvement. Following is the list of process that can be improved through
implementation of better IS strategies and IT.
There is no client database that records the technical preferences, risks and contingencies
and other assumptions from previous proposals of the same client. Each proposal, even from the
same client, is started from scratch and all the same activities are performed again and again for
all proposals. There is storing of data in a company wide database so as to eliminate
redundancies from the proposal process and standardize certain tasks like issuing MRs and RFQs
to increase efficiency and reduce cost.
The process of raising RFQ and MR is done for each proposal that is received from
client. There is no process of storing these quotations in a database so that these costs can be
4.4.3

Receive TQ
Responses
& Updated
Offers
4.4.2

Issue
Vendor TQs
Vendor TQs
Cost
Estimate
TQ Response
4.4.4

Update BOQ
& MTO
Vendor
Offers
4.4.1

Review
Vendor
Offers
MRs
Inquiries
Received
LEVEL-2 DIAGRAM
Revised
Offers
Figure 9: Level-2 DFD for Offer Evaluation Process
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used in other proposals. This makes the process very inefficient as a lot of manhours are wasted
on preparing RFQs for every proposal. Also, since there is no storing process, there is no way of
validating the costs received from vendor.
In addition to the interface with Proposal department and Procurement Department, the
engineering disciplines also co-ordinate closely with each other to complete their deliverables.
For example, Electrical team depends on Instrumentation team for the electrical loads of
instruments so as to design and procure a power generator that meets the project needs. Another
example of inter-discipline dependency is when civil team request information about the details
of equipment sizes and weights from mechanical team and electrical team so as to finalize the
foundations details required for these packages and release the foundation drawings to the
proposal department to be incorporated in the technical bid. Most of this information exchange is
done through emails and files are stored on a proposal server for easy access.
This process of requesting and receiving information is very inefficient as sometimes the
mails are lost, people leave the company and the data is gone with them as it was stored in their
mail. Inter-disciple engineers chase each other for their required information as mails are
overlooked due to a tight and demanding schedule. There should be database that can store such
information and can be retrieved by anyone when required.
The problem of retaining information stays even after a proposal is converted to a project,
which is usually a process that takes several months. Also, the project execution team is often
different from the proposal task force . Therefore, the project execution team depends heavily on
the proposal team to provide them with the background information of the proposal. This
becomes a burden for the proposal task force to find and retrieve all the proposal information as
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information gets misplaced due to storing data on personal computers and takes a long time to
locate. Basically, there is no proper handover of proposal information to the project execution
team. For every information that is wrong or is missing, proposal team is blamed and not the
system.
Even the inquiry requisitions that are used during proposal preparation are not used and
additional manhours are spent in preparing new requisitions.

5. ERP Literature Review
Information technology plays a vital role in the delivery of the proposal. Effective use of
IT solutions is the key to deliver an error free proposal, in a timely and cost effective manner.
Clients are more demanding than ever, and are asking contractors to take on more risk, compete
more aggressively on price while sustaining the highest quality and safety standards. (Halvorsen
M, 2009)
One of the most sought after solutions nowadays are ERP systems. ERP is getting
popular among big organizations around the world due to its ability to reduce and eliminate
inefficiencies and redundancies in the working process. Typically companies prefer to buy a
system rather than going through the tedious process of developing it from scratch. The most
commonly available software in the market are; SAP, Oracle, Sage group, PeopleSoft.
ERP is used to integrate the external processes of the organization with the internal
processes to improve the efficiency of all the processes in the company as a whole. (Bidgoli. H,
2004) ERP system was first introduced for manufacturing processes only, however, the
efficiency of the system was much in demand that it found its way into the management side of
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the operations as well. (Spanw. N, 2010) The ERP system functions as a facilitator to the flow of
information between all departments within the company and with external parties. Robers
(2011) mentioned that an ERP is a software that combines both the inner and exterior operations
of information across the entire organization. ERP systems are integrated and do not require
periodic updating, since they operate in real time. They provide a database that is common, and
that supports customized list of applications. (Bidgoli. H, 2004) According to Pearlson and
Saunders (2003), ERP system is a useful tool that provides centralization of operations and
decision making.
5.1. ERP Implementation: Factors to Consider
The following section covers the critical points in which a company should be aware of
prior to implementing ERP;
The most important thing prior to any implementation is that all parties implementing the
ERP solution, both the buyer and seller, should have a deep understanding of the business
model. It is important to achieve a high degree of fit and consonance between the priorities and
activities of the IS function and the strategic direction of the firm (Piccoli, 2007). Trying to
implement a system without knowing a business model can be very dangerous. A failed case
that is often referred to is New York City (NYC) Vs. SAP. NYC tried to implement an ERP
system, which cost them about $600 million, where it was originally budgeted for $10
million. They eventually had to sue SAP for bad consultancy. Though SAP was charged as
the guilty party, there was major negligence on NYCs part as they in the first place did not
fully comprehend the consequences of implementing an ERP system, and more importantly
they did not have a clear understanding of their own business model. (Kimberling E, 2012).
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Another important aspect of ERP implementation is getting all affected employees involved
in the whole process of implementing ERP, as they will have a proper understanding of their
system, keeping them motivated and less resistant to the changes that will occur. According
to Spector (2010), employees resist change because they see it as a threat feeling that it will
aversely affect them. This can be eliminated by encouraging employee participation in the
changing process and informing them of the change so that they feel part of the process.
Normally, the organizations culture plays a big role in the rollouts of such systems, where
everyone get directly or indirectly affected. Old timers in the company tend to strongly resist
any change, since they are pleased with the results they are bringing in using the current
system, and do not want to have to learn and test with a new system. Hence, the involvement
of Senior Management of the company is essential as they will need to adopt the change, and
spread the awareness through all channels to all the employees of the benefits and results that
are expected from the new implementation.
There should always be a test rollout of the system on a small scale, to ensure that the system
is not lagging or is bugging. This reduces the risk of downtime when the system is first
launched, since it has been tested. (Refer border state industries)
One of the biggest challenges in an ERP system implementation is to migrate existing data
into the system. This will require a lot of resources dedicated to this task. However, this fixed
cost will pay off once all new proposals/projects/activities are directly inputted into ERP,
making the whole process automated.
Beyond the cost of the software package there are a lot of hidden costs that the company
should be aware of, such as training, customization, data conversion, data analysis,
consultants and maintenance costs. Moreover, there will always be opportunity cost, where
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there will be a never ending debate on whether the funds used could have been put for
another project that could of brought in bigger revenues and more value to the company.
Hence, whenever a company budgets for ERP it should overestimate the budget required.
(Leon, A. 2008)
5.2. ERP Implementation: Steps
There are five general steps involved in the implementation of an ERP system. If these
steps are followed effectively with the above factors taken into consideration, then the
implementation down time can be reduced and the budget can be kept tight within limits.
(Spanw. N, 2010)
Planning and requirement analysis
Design (configuration)
Detailed design (customization)
Implementation
Maintenance
5.2.1. Planning and requirement analysis
This is the first step in the implementation of the ERP, where the company decides if they
have to implement ERP, who is going to implement it and how are they going to implement it.
The ERP team should understand the companys business model, business strategy and
effectiveness of each process in the organization. (King, W. 2005). The team should then select
an ERP system that will help its organization. (Yusuf et. al, 2004)
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5.2.2. Design (configuration):
This is the step where the consultant from the software company works with different
departments in the organization and understands the system. The consultant also tries to know
the best practices followed in the organization and tries to develop a framework for the
organization. (Spanw. N, 2010)
5.2.3. Detailed design (configuration):
This is the step wherein the consultants determine which processes in the organization
needs customization and which do not.

However customization has its own drawbacks like:
The amount of time taken for implementing ERP becomes longer. (Meg F, 2010)
The more we customize the system is, the more the company would be falling
back to its own legacy system which reduces the competitive advantage.
It also has its own benefits like:
Improved customer friendliness; employees can use the new system with relative
ease. (Meg F, 2010)
Competitive advantage by having exclusivity to the business flow.
5.2.4. Implementation:
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After the detailed design phase is the implementation of the ERP. In this phase the
existing data is converted to the companys new ERP system. (Spanw. N, 2010) The consultant
receives feedback from the organization and tries to reduce the bottle necks and fixes the errors
in the software and finally implements ERP.
5.2.5. Maintenance:
This phase is a never-ending phase where the organization is in constant touch with the
software provider for any customer service issue, and uses them for maintenance of the systems
in the organization. (Spanw. N, 2010)
6. Improvements in the Proposal Process through ERP
Due to the growing size of Petrofac and the need to take on more projects/proposals that
are bigger in size and complexity, the implementation of an ERP system has become a necessity,
rather than a luxury, to mitigate and control huge risks carried with such projects.
ERP is a viable solution to many (if not all) the problems/risks facing the Proposal
department which holds processes that are information-intensive. There are numerous benefits of
implementing an ERP system to manage the Proposal process. The Proposal department is the
blood line of Petrofac; if no proposals are awarded, the company will simply have to layoff
employees, and shrink to the extent of shutting down.
As seen in Section 3, there are several inefficiencies in the proposal execution process
that should be addressed. The areas that will certainly be positively affected, and have the most
favorable impact are: (Halvorsen M, 2009)
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Materials management
Interfacing
Forecasting and projecting- accounting
Historical Data
Resource Requirement
Material management:
An EPC contractor requires procuring many packages/materials from different sources
and locations. The ERP system will ensure the proper monitoring of all the RFQs that are sent to
the vendors/suppliers of materials, which enables the Proposal manager to liaise the progress of
the Procurement department in receiving firm quotes for all the materials required in accordance
with the technical specification requested by the client. Moreover, the Procurement engineer will
be much more efficient since he/she will be able to access the database on the ERP system of
previous proposals worked on, and will be able to focus his/her communication on the right
suppliers for the material.
Moreover, the ERP system will reduce errors in the data. In the initial stage of the
proposal, the part numbers required are all inputted into the ERP system, which are then revealed
to all the relevant parties; to the Engineering department to initiate their designs and drawings,
and the Procurement department to send out RFQs and receive quotes, and the Proposal
department who monitor the progress.
The ERP system will create boundaries and structure to data. The ERP system will not
allow certain parameters to exceed a certain value, or be neglected when inputting the data. Such
conditions raise the quality assurance of the work in accordance with the Best Practices (BP).
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Best Practices (BP) are the most effective ways in which a process is performed/executed. BPs
are built-in into the ERP system in order to maintain the quality and integrity of the system. BPs
are like the benchmark in which if the company operate on would lead to a reduction on time
consumed in project tasking, documentation, and execution. BPs reduced risks affecting
companies by 71% when compared to other software implementations. (Martin S, 2004)

Interfacing
One of the biggest concerns of any department is the internal interfacing with other
departments. The ERP system records all communications between departments, where any
relevant party can access the information and communication, solving the frequent issue of
employees not being available, or employees going on leave or leaving the company taking all
their emails (which are the only channel of communication used) with them.
ERP will solve the issue of interfacing between the Proposal Team and the Project
Execution Team, where the system will hold all the information needed for a proper handover of
Proposal data to the Project Execution Team.
Forecasting and Project accounting:
The ERP system can be designed in such a way that it calculates a budget in the most
efficient way, as it is most likely that the lowest price bidder is awarded the project. The ERP
system should also have the feature of projecting the future performance of the project, giving an
insight based on historical data that is stored on the system. (Halvorsen M, 2009)
Historical Data
The ERP system will store all the previous proposals, where any person working on the
proposal can easily compare the deliverables of similar proposals, which leads to elimination of
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duplicating the same work over and over again, and provides a sanity check for the values and
figures in case there are any discrepancies.
Resource Requirement
ERPs implementation generally leads to some restructuring on a departmental level as
well as on an organizational level. It is likely that the system will lead to the reduction of
resources required to do the same activities, since it the entire process has become more or less
automated.
7. Conclusion
Like everything in technology, ERP has its pros and has its cons. The ERP will definitely
cost Petrofac a considerable amount of money, resources and time. The success rate of ERP
rollouts is as low as 49% in the industry (Gioia R 2001), hence, the number of contractors
implementing ERP systems is low.
Nevertheless, in todays world of mega projects and enormous competition, a company
such as Petrofac would need to take all possible steps to gain advantage over it competition, and
at the same time reduce the risks in the liabilities that are carried by EPC contractors. A
milestone step that would certainly turn it all around for Petrofac is a properly constructed ERP
system. However, it does not stop there, as Petrofac will need to measure the gains of the ERP
solution against a set of Key Performance Indicators (KPIs), in which there will be a before and
after comparison, since the ERP system can be modified as much as possible in order for the
company to reach its targets.
Nowadays, companies boast about their ERP systems, since ERP shows that the company
is serious about the quality of their products and services, and about reducing wastages. There
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are certain clients which would not contract with a party that does not have an ERP system
implemented. Petrofac can reap the benefits of being one of the first movers in implementing
ERP, since it is evident that the whole industry will embrace such solutions in the near future.

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8. References
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Spanw Newbie, (2010). ERP Implementation Steps - Planning, Design and Implementation.
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Pearlson, K. E., & Saunders, C. S. (2003). Managing and Using Information Systems: A
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Robers, D. (2011). Business Growth And The Role Of The ERP. Retrieved July 15, 2012, from
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Pearson Prentice Hall.

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9. List of Figures