Unlocking Pocurement Excellence
Enhancing transparency, accelerating sourcing procedures, and actively driving savings targets on large CAPEX for energy transmission players and contractors
Operators of energy transmission grids, as well as their major contractors, face significant challenges in delivering strategic projects that enable the European energy infrastructure on time and on budget. Due to tight supply chains, new solutions must be found within the partnerships between project owner and the contractor. While the underlying contracts and delivery models allow flexibility and risk-sharing, a strategic shift in both players’ procurement is required to address rising complexities, escalating costs, and overcome a lack of transparency, particularly in managing major contract partners and important contract awards.
Energy
Transforming procurement for ambitious energy projects
In the rapidly evolving energy sector, strategic procurement and effective partnership management are crucial differentiators for success. When a major energy company embarked on an ambitious project spanning nearly ten years — from awarding to delivery — they partnered with a specialized contractor to leverage technical expertise and ensure high-quality project execution.
In addition to the main cost of the project, a flexible arrangement was selected to allow for adaptability, risk-sharing, and access to specialized resources — essential for pioneering a project of this scale and complexity.
These projects, often representing multi-billion CAPEX investments with a high share of external spend, require energy firms to make significant investments in networks and infrastructure to address evolving demands. However, rising costs, a lack of transparency and risk exposure soon necessitated a transformative approach to procurement.
Here, we illustrate how proactive strategies can turn procurement challenges into greater transparency and long-term stability, paving the way for sustainable future projects.
Why a flexible arrangement with a specialized contractor?
Two main factors led to the decision to award the contract to a specialized partner:
- Addressing resource and skill gaps: The partnership model provided access to the contractor’s expertise, resources, and supplier network, filling critical gaps in the company’s internal capabilities.
- Mitigating execution risks through outsourcing: By transferring procurement and subcontractor management to the contractor, the model reduced the company’s liability and ensured flexibility to adapt to evolving project needs.
Within this partnership, the decision to adopt a flexible arrangement was driven by the uncertainties inherent in the project.
The design was unclear in the early stages, with evolving technical requirements, and the market conditions were volatile, including fluctuating supplier pricing and resource availability.
These uncertainties necessitated a flexible contract model that could adapt to changing circumstances while maintaining the project’s momentum. Such flexible arrangements are increasingly common and reflect the current market situation, where partners often no longer accept EPC turnkey arrangements.
Despite the strategic benefits of the flexible arrangement, unforeseen cost escalations and operational inefficiencies soon emerged
Costs exceeded initial projections significantly, driven by evolving technical requirements, limited visibility into cost drivers, and associated risks. An unclear governance framework with undefined or partially agreed-upon terms led to misaligned priorities, rushed decisions, and delays that impacted the timeline.
Communication issues added to the difficulties. Poorly established channels and incomplete contractor updates left the company with minimal visibility into the procurement status and procurement progress. Geographical and language barriers further hindered trust, delayed decisions, and restricted oversight. Additionally, unique technical demands and incomplete designs caused contractor underperformance.
Procurement often proceeded alongside evolving designs, creating cycles that reduced vendor interest and, at times, led to reliance on single-source suppliers.
Strategic goals for procurement transformation
To mitigate these issues, the project outlined key goals aimed at achieving sustainable and measurable improvements in procurement efficiency:
- Procurement transparency: Establish full visibility over procurement activities, including transparency on costs, key milestones, and related overall project risks, enabling informed decision-making and financial control.
- Governance and contract clarity: Implement clear governance structures and contract frameworks, defining roles, responsibilities, and decision-making processes to ensure procurement excellence.
- Cost optimization: Curb rising costs through strategic procurement tactics, aiming to optimize spend.
- Robust financial controls: Design a streamlined process for cashflow projection, consolidation of tender awards, and invoice verification, as well as cost tracking, reducing financial uncertainty.
- Knowledge transfer and sustainability: Develop tools, resources, and best practices to equip the company’s team with lasting capabilities in project procurement, cost+, and contract management.
A proven path to success: multi-dimension strategy and hands-on support
Our team adopted a multi-dimension approach, tackling transparency, controlling, governance, and decision-making simultaneously. Acting as an extension of the company’s team, we worked across both owner and contractor locations to align all stakeholders and drive impactful improvements.
We prioritized procurement by focusing on several high-impact packages, including key infrastructure components. A hands-on, risk-based approach enabled the company to track costs, risks, and procurement status, allocate resources strategically, and mitigate cost escalations.
In order to streamline the procurement process, we introduced structured workflows and checkpoints, reducing bottlenecks and delays while improving information flow. Cost optimization efforts, such as diversifying suppliers and leveraging market insights, unlocked significant cost savings, while collaborative negotiations strengthened financial stability without compromising quality.
Robust governance frameworks, collaborative tools, and integrated dashboards provided continuous visibility into flexible contracts, reinforcing control over procurement spending. To ensure lasting impact, we developed a comprehensive manual consolidating best practices for managing such contracts, equipping the company’s team to sustain procurement efficiency and transparency.
This multi-front strategy delivered sustained improvements across transparency, governance, and cost control, positioning the client for continued success.
Cost
optimization
Substantial savings, along with the projection of actual costs and risks, bolstered financial flexibility and ensured the delivery of the project according to initial plans and financial objectives.
Improved governance and transparency
Advanced tools and frameworks ensured full visibility into costs, risks, and procurement operations.
Stronger partnerships
A new collaborative model reinforced long-term alignment between the client and contractors.
Sustainable
impact
The comprehensive guide provided a practical framework for sustaining efficiency and transparency in future projects.
Fostering a sustainable governance structure establishment
The project established a foundation of governance, continuous improvement, and resilience, equipping the company with resources and insights to sustain cost control beyond the project’s scope. The collaborative structure fostered a mindset focused on transparency and efficiency, positioning the company’s procurement function for sustained success.
Reflections on partnership and collaboration
This successful transformation was grounded in strong, collaborative engagement across all levels. Our on-site presence and proactive problem-solving approach bridged initial communication gaps, enabling alignment of goals and fostering trust between the company and contractor.
This partnership-based model ensured accountability, fostered transparency, and empowered the company with sustainable tools for ongoing procurement excellence.
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