In the first part we listed seven big picture criteria to consider to ensure the selection of the best available quality equipment: Bids and proposals, specifications, milestone meetings, greenfield vs brownfield, new or refurbished equipment, tests, and reports and schedules. Let’s see a few more criteria.
8. Price
First cost vs maintenance cost. Although, you may have to pay a higher price for your equipment while reviewing bids, you need to also consider the cost of maintaining that equipment in your final selection of the equipment.
Downtime cost should be a factor in your selection of the successful bidder, which brings me to the OEM’s Reliability and Availability of the equipment and whether they can guarantee those percentages. You need to also consider how often the equipment has to be shutdown for a full maintenance and how long it takes to do the maintenance. That should help you with your production loss calculations during the downtime and selecting the best OEM for your application.
Next are the overhaul costs, how often they should be performed, parts and their availability from the OEM and spares considerations.
Should the first transportation of the equipment to the site be carried out by the OEM or a third party? Consider insurance responsibility and who is on point to deal with the insurance company in case of a mishap. It is not just that you would recover your loss but who would be running after the insurance to file the claim and ultimately get paid.
9.Delivery Period
Make sure you state a date. OEMs may give you x many months to deliver. If so, make sure the start date is clearly defined. Is it from the PO, Kick Off meeting between owner/user and supplier, from submittal of drawings or design review? I have seen commercial confusion when you think you have secured the delivery date by your PO but the supplier has a side note conditioning that delivery on submitting certain design data on time. You are both right but this ambiguity could still cost you at the end of the day.
If the OEM is responsible for transportation to your site, make sure you have two delivery dates identified:
- Ex-Works factory date – which tell you they are ready to ship, and
- FOB site date – which is the actual delivery date to site. If there is a delay with the first one, there could be a delivery impact at site depending on the length of the delay and variations in transportation.
Don’t forget about all the ancillary and loose-ship items that may or may not come with the package or train. Goes back to possible storage or staging at site, if shipments are not consolidated.
10.PENALTIES/BONUSES
If operation schedule is critical, you may want to consider an incentive to the supplier to FEEL your urgency by imposing penalties both on
- Issuance of drawings so you can start preparing your site installation logistics, and
- Delivery of equipment to site. And, perhaps including a bonus for an earlier delivery.
- Accuracy of the performance criteria. If you are relying on certain margins on performance (HP, KW, Efficiency, HR, Emissions, etc) in the field, you may want to impose performance LDs on the supplier to be verified during the start up and commissioning.
Make sure if the remedy to the contractual deliverables is a repair or providing a brand new (sub)system or the entire equipment, a time frame in which those repairs or exchanges have to be completed is clearly stated and agreed upon.
You can accept monetary remedies in some cases, if the shortcomings are still well within your requirements. Or, in some cases you may let the contractual deadlines slide. For example, if the OEM’s delivery is delayed but has no ultimate impact to you as your site schedule has also been skewed. Remember, it is a game of give and take. Make the supplier a partner in the process (I am not talking contractually – just in spirits). Establish trust, expect quality, be firm and demanding but compromise when you can. At the end of the day, your success depends on their performance.
11.Warranties/Guarantees
Make sure you understand the difference between warranties and guarantees. Warrantees normally are time limited.
Find out whether they can warrant Reliability and/or Availability. Don’t just rely on the percentage figures for those parameters, instead make sure you understand and agree on how the OEM calculates those parameters. I have seen major differences, depending on the formula used to come up with Availability factor. Decide whether you want one, both, or any as a contractual condition depending on the sensitivity of your operation.
Understand equipment vs Part warranties. Find out what the difference is and what impact either one has on Reliability and/or Availability.
Determine whether you need the Parts’ warranty to be the OEM’s standard, Extended (time wise) or Expanded (including labor) and who would be paying for the transportation.
Ask whether the warranty is “ever green”. Does the clock re-start after the exchange or is it a one-time deal?
Find out whether availability of the parts from the supplier could be guaranteed. Ask for a typical turn around time for the major parts. Where would the parts dispatch from and how is the priority amongst users set by the OEM?
Make sure you understand and agree on when the warranty period for your equipment starts? Is it from the start up or first beneficial use?
For critical operations, you may want to consider extended warranty, especially if there is a chance that the equipment may be stored prior to the actual installation. Also, find out what the OEM needs to inspect for an extended warranty to be issued, if added on at a later date.
12.Start up and Commissioning
Have designated personnel to coordinate receipt of all shipments from all your suppliers.
Plan and allocate real estate for staging or storing various shipments while waiting for the rest to arrive. If long-term storage becomes a reality, determine which equipment has to be in an AC-controlled environment, enclosed or as a minimum protected by a tarp cover. I have seen multi million dollar packages damaged simply due to improper storage in the rain or flood when they are only suitable for indoor installation. How about the requirement to rotate the generator? In case of generator set packages, some alternators have to be rotated every 6 to 12 months, if in storage. If so, what are the set up and power requirements to do so? You may invite the OEM to perform that task to ensure performance. Oh, and do NOT forget about your batteries. Shelf life is usually 3 to 6 months (with 6 months really pushing it). Make sure you do not have depleted batteries before you are even to start. If you know there will be a delay at site, you may ask the OEM to ship the batteries at a later time closer to your installation period.
Who is responsible for ensuring all deliverables are delivered at site? Make the supplier part of the process. Have their Rep be present at site and at the time of delivery with one of your own Reps, to count all shipments against the bill of lading. Do not open sealed and/or preserved boxes, if you are not planning to use them right away.
Insist on at least one meeting prior to equipment arrival amongst all the players including owners/users, suppliers, contractors, electricals, civil, etc to agree who is responsible for what as well as line of communications and interfacing amongst the suppliers. See “Meetings” above.
Make sure you understand, agree, and allocate each of your suppliers’ start up time requirements. Identify which tasks could be performed in parallel and whether and when multi suppliers should be at site at the same time for better communication amongst the players. The devil is in details – in this case interface amongst the equipment and systems.
Ensure all necessary permitting is ready before the equipment arrival and after the commissioning is completed and find out what the OEM can do to support your permitting efforts ahead of time.
13.Maintenance and User Support
Ask and familiarize yourselves with the OEMs’ maintenance requirement of your invested multi million dollar equipment. Do they require monthly, quarterly, half yearly, and yearly? And, how does that compare with your plant operations, scheduled shutdown, etc?
Find out whether they offer any monitoring systems for their equipment or overall plant. You may want to compare that with your existing (SCADA) system and decide to take theirs as is or feed some of the sensitive variables into yours.
Find out which maintenance requires a complete shutdown of the equipment vs those that could be performed while unit is running.
Have the OEM identify critical parts for their equipment and decide what spare parts should be allocated at site and which could be provided from their factory. Ask for a commonality parts report if you have more than one unit from the same supplier.
Ask the OEMs on their plan for obsolete parts which would be collecting dust in your spare parts storage as you upgrade/uprate your equipment or as the OEM switches parts and sub-systems. I have seen multi million dollar investments in spare parts that eventually became mostly obsolete. Come to an upfront agreement with the OEM on a program should that happen. Make it a time bound criteria to make it fair to both sides as you do want technological advances but not so rapid that makes your spares meaningless. For example, what can they take back, what triggers are in place to notify you as your purchased spares become obsolete say within 3 years (or whatever you agree upon) of purchased parts.
Ask the OEMs on what basis their overhauls are. Is it a time or condition based trigger? If it is based on condition of the equipment, they should include reports as they perform scheduled maintenance and provide a trending report.
Ask for intelligent systems to alert you before a shutdown occurs amongst major suppliers. For example, if your gas turbine is feeding an HRSG, make sure heat and mass flow are measured/calculated, accurately and alarms are set with sufficient margin to react. Or, if the fuel gas compressor is feeding your turbo machinery consider the location of the fuel pressure or dew point measurements – at the source or destination, or both? Make sure there are enough margins in dedicated alarms to react before it reaches a shutdown condition.
14.TRAINING
Ask for an O&M training of your operators by the OEM at site and after the equipment is up and running. You may also want to consider classroom type trainings at the OEM’s depending on the experience and expertise of your operators.
Make sure you understand how many shifts or max students can be included. And, make sure ample time is allocated for question and answer sessions to ensure interactive and optimum comprehension.
Ask if you could send your star operator(s) during critical portion of the factory test to shadow the OEM’s technicians/mechanics on a non-interference basis. This may be the best hands-on training you could provide to your employees and note that it should be at no extra cost to you from the OEM.
15.30-YEAR LIFE CYCLE SUPPORT
Ask for the OEM’s 30-year life cycle support of your multi-million dollar investment. This should also be considered during the bid and proposal and selection of the successful OEM candidate.
Ask what power uprates are available within the existing package frame for your rotating equipment. Ask for what upgrades are available for major sub-systems within your Turbo Machinery equipment such as Fuel, Controls, and emissions.
Ask for a plan for obsolescence or compatibility of the OEM’s on their aging or upgraded controls’ platforms or other sub systems.
In summary, at the end of the day, you should be able to treat your Turbo Machinery packages as separate “black boxes”, if careful considerations are made upfront. Once it is specified, interfacing amongst the “black boxes” identified and set up correctly, you can and should be able to treat each of your major equipment (gas turbines, driven equipment, various balance of plant equipment) as a “black box” while ensuring the inputs to your multi-million dollar investments such as fuel, air, oil, power, pressures and flows are met. Then, the OEMs should be accountable for the output deliverables of each of their perspective “black boxes”. It is a partnership between you and your suppliers that will determine your success and secure your investment.
The author is a consultant to the turbomachinery industry
