You're facing project delays in Oil and Gas. How can you negotiate with suppliers to stay on track?
Project delays can be a thorn in the side, but strategic negotiations with suppliers can keep you on track. Here's how to approach them:
How do you handle negotiations when project timelines are at risk?
You're facing project delays in Oil and Gas. How can you negotiate with suppliers to stay on track?
Project delays can be a thorn in the side, but strategic negotiations with suppliers can keep you on track. Here's how to approach them:
How do you handle negotiations when project timelines are at risk?
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Here are some strategies to consider: 1. Assess the Root Cause of Delays: -Identify the issues. -Gather data. 2. Maintain Open Communication: -Transparent discussions. -Frequent updates. 3. Negotiate Flexible Terms: -Revised timelines. -Staggered deliveries. -Price renegotiation. 4. Explore Alternative Suppliers or Solutions: -Diversify sources. -Technical adjustments. 5. Incentivize Performance: -Incentives for expedited delivery. -Collaborative planning. 6. Risk Sharing and Contract Amendments: -Force majeure and contingencies. -Penalty clauses. 7. Problem-Solving Mindset: -Joint solution-finding. -Escalation procedures.
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Project delays aren’t always about contract non-compliance or contractor behavior—they can result from Force Majeure events like geopolitical issues, pandemics, or natural disasters. The root cause will shape the best approach forward. For a negotiated approach, start by assessing worst-case impacts, prioritizing supplier relationships, and analyzing key project indicators. Then, work collaboratively to identify and implement win-win solutions with suppliers.
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When our drilling project faces delays due to late equipment deliveries, I will assess the impact and realize we are at risk of exceeding our budget. During negotiations with our supplier, I will communicate our challenges and emphasize the urgency of the situation. I will propose that if they can expedite the delivery by a week, we would consider increasing our order for future projects. This not only helps us stay on track but also strengthens our relationship with the supplier, creating a win-win situation for both sides. Although I am currently not a drilling engineer, if I face this condition, I will handle negotiations accordingly to keep the project on track.
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Delays are expected and are normal to happen during any phase of the project but delays should be within a reasonable and acceptable range that must and should be agreed upon prior to the execution of each phase or a milestone. Milestones must be appropriately time managed and thus is crucial to the continuity of progress till completing all phases. Negotiations are not acceptable after the start or the beginning of any execution and if it happens during the process this will lead to multiple effects that will eventually reflect on the whole process. Penalties must be set to enforce and commit suppliers to stick to the plan
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It is doubtful that the suppliers are happy about the delay. It's important to address this, at least at first, from a place of understanding and thoughtfulness. Work with the supplier to determine the cause of the delay, identify potential solutions or requirements that can be safely sacrificed weighing the risks vs. value in order to put the project back on track.
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Establish regular communication channels with key suppliers to foster trust and transparency and approach challenges as shared opportunities, working together to find solutions.
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Delays in project completion can happen due to various reasons – poor project planning, procrastination, scope change, last-minute changes from clients, poor communication, etc
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Is management on a least two levels above their operation insuring all the expected planning/work/invoicing/recaps being carried out and is the data you are receiving is correct? Service companies who are doing this and know their information is correct can often understand what other services are not working up to expectations. Some operator personnel take on recommendations for improvement better than others. Have saved several major drilling operators $100's of millions. Offshore platforms, Deepwater development, Jack-ups, HPHT horizontal. BACK TO THE BASICS.
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Always communicate openly with stake holders if your targets are not within schedule. One must communicate openly on both sides to ensure budgets are not constraint having a contingent plan in place with the stake holders in the case of deliverables from suppliers that are not on schedule. Have a back up plan in place for emergencies to gain momentum of the schedule ensuring very little or no loss time in production. Planning is critical.
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