The Path Forward Climate of Concern - JOC.com...... The Path Forward..... Climate of Concern . P E G...
Transcript of The Path Forward Climate of Concern - JOC.com...... The Path Forward..... Climate of Concern . P E G...
John F Mika
Senior Vice President of Procurement
CH2M HILL
............ Climate of Concern ............The Path Forward
PEG
Procurement Executives Group
Discussion Topics
• Procurement Executives Group (PEG)
• Global Economic Environment
• Supply Market Landscape
• EPC Industry Landscape
• Concerns and Threats
• Questions and answers
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PEG
Procurement Executives Group
Procurement Executives Group
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AMEC, Peter Jessup
Bechtel, David Hammerle
Black & Veatch, Mike Gammill
Burns & McDonnell, Matt
Nordhus
Burns & Roe, Michael Clark
CB&I, Dan Kinsey
CH2MHill, John Mika
Fluor, Jim Scotti, Ed Ruane
Foster Wheeler USA, John
Crockett
McDermott, Ryan Siebenkittel
Jacobs, Harry Breijaert
KBR, John Townsend
Kiewitt, Christopher Gonzalez Kvaerner Americas Inc., Jeanean
Slamen
Mustang, Ted Kelly
S & B, Kent Malone
Shaw, Gary Dellesky, Jim Malone
Technip USA, Art Wardlaw
The Industrial Co., Michael
Chambers
URS, Joe Christopher, Larry
Dinger
Worley Parsons, Tom Brock
Zachry, Glenn Kloos
2011 Membership Profile ENR Rankings
•Top Contractors
6 of top 10 are PEG
10 of top 25 are PEG
12 of top 50 are PEG
•Top Design Firms 7 of top 10 are PEG
13 of top 25 are PEG
15 of top 50 are PEG
•Top International Contractors
15 of top 225 are PEG
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PEG
Procurement Executives Group
The Procurement Executives Group
(PEG) serves as a forum for the
executive leadership of procurement
and supply management in the
engineering and construction
industry. We seek to represent,
promote, and improve the
contributions of our profession to the
industry we serve. In fulfilling this
mission, PEG and our member
company representatives are
committed to a set of Core Values….
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• Ethics and Integrity
• Safety
• Quality
• Diversity
• Sustainability
• Collaboration
• Leadership in
Procurement
Excellence
Charter Core Values
For more information, visit http://peg-eci.org/
PEG
Procurement Executives Group
Headlines • Concern around a double dip recession
• US and European expansion anemic – Consumer and business confidence
– Sovereign worries
– Fiscal tightening
– Gridlocked US government
• Emerging markets fairing better – Best growth
– Best pricing potential, selling or buying
• Projects – “Giga Projects” is the new landscape
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PEG
Procurement Executives Group
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Global Recovery: Diminished Expectations
2009 2010 2011 2012 2013
United States -2.6 2.9 1.5 1.8 2.3
Eurozone -4.1 1.7 1.8 1.2 1.6
United
Kingdom -4.9 1.4 1.1 1.9 2.3
Japan -6.3 4.0 -0.2 3.9 1.8
China 9.2 10.3 9.2 8.3 8.9
India 9.1 8.8 7.5 8.1 8.6
Brazil -0.6 7.5 4.2 4.6 5.2
World -1.9 4.1 3.0 3.6 4.0
Real GDP Growth
Source: IHS Global Insight
PEG
Procurement Executives Group
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U.S. Economic Growth by Sector
2010 2011 2012 2013
Real GDP 3.0 1.5 1.8 2.3
Unemployment Rate 9.6 9.1 9.2 8.9
Consumption 2.0 2.1 1.9 1.8
Light Vehicle Sales (Millions) 11.6 12.5 13.5 15.0
Industrial Production (growth) 5.3 3.7 2.0 2.9
Housing Starts (Millions) 0.58 0.60 0.67 0.94
Business Fixed Investment 4.4 7.8 4.3 5.7
Fed Government 4.5 -2.3 -2.9 -3.6
CPI 1.6 3.2 1.6 1.8
10 yr Treasury Yield 3.2 2.8 2.7 2.9
Oil Prices (WTI, $/bbl) 79 94 98 106
(Percent change unless otherwise noted)
Source: Global Insight
PEG
Procurement Executives Group
30
35
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45
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55
60
65
2006 2007 2008 2009 2010 2011
United States Eurozone China
PMI Manufacturing Indexes values over 50 indicate expansion
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Purchasing Managers‟ Indexes: Manufacturing Slowing Down
Source: Global Insight
PEG
Procurement Executives Group
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-6
-4
-2
0
2
4
6
830
35
40
45
50
55
60
65
2005 2006 2007 2008 2009 2010 2011 2012
6 Month Lag, PMI Component Index - Delivery Times (Left Scale)
Year over year change, PPI, Intermediate and Capital Goods (Right Scale)
Pressures in Supply Chains are Beginning to Abate
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-10
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0
5
10
15
40
45
50
55
60
65
70
2005 2006 2007 2008 2009 2010 2011 2012
6 Month Lag, PMI Component Index - Supplier Deliveries (Left Scale)
Year over year change, PPI, Core Intermediate Materials (Right Scale)
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-5
0
5
10
15
2040
45
50
55
2005 2006 2007 2008 2009 2010 2011 2012
6 Month Lag, PMI Component Index - Delivery Times (Left Scale)
Year over year change, PPI, Total Industrial Products (Right Scale)
-10
-5
0
5
10
15
2040
45
50
55
2005 2006 2007 2008 2009 2010 2011 2012
6 Month Lag, PMI Component Index - Supplier Deliveries (Left Scale)
Year over year change, PPI, Industrial Products (Right Scale)
United States China
Eurozone Brazil
Source: Global Insight
PEG
Procurement Executives Group
Supply Base Risks and Influences
• Supplier performance
• Shop capacity restraints
• Global dispersion of supply chain,
continues
• Regulation changes and compliance
• Financial condition and access
• Commodity volatility
• Energy cost and availability
• Counterfeit, fraud, and suspect items 11
PEG
Procurement Executives Group
Market Capital Expenditures (Capex)
• Power
• Oil, Gas, and Chemical (OG&C)
• Civil
• Mining
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Procurement Executives Group
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Global Energy Demand
0
50
100
150
200
250
300
350
400
1965 1975 1985 1995 2005 2015 2025 2035
Source: U.S. Department of Energy, International Energy Outlook & BP Statistical Review.
Fossil fuels projected to meet 80% of energy demand in 2035
Forecast
50% Growth
MM
BO
ED
Liquids
Natural Gas
Coal
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Procurement Executives Group
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Power Global Capex Oil, Gas & Chemicals Global Capex
Civil Global Capex Mining Global Capex
Source: IHS Global Insight
0
200
400
600
800
1000
1200
1400
1600
2010 2011 2012 2013 2014 2015 2016
No
min
al $
US
Bn
2010 2011
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200
400
600
800
1000
1200
2010 2011 2012 2013 2014 2015 2016
No
min
al $
US
Bn
2010 2011
0
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2010 2011 2012 2013 2014 2015 2016
No
min
al $
US
Bn
2010 2011
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200
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500
600
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800
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2010 2011 2012 2013 2014 2015 2016
No
min
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US
Bn
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Procurement Executives Group
Total Global Capex (Power, Oil, Gas & Chemical, Civil, Mining
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Source: IHS Global Insight
0
500
1000
1500
2000
2500
3000
3500
4000
2010 2011 2012 2013 2014 2015
No
min
al $
US
Bn
September 2010 Forecast
October 2011 Forecast
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Procurement Executives Group
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1,000
2,000
3,000
06 07 08 09 10 11 12 13 14 15
No
min
al $
US
Bn
Africa North America Western EuropeAsia-Pacific Middle East Latin AmericaEastern Europe
Regional Global Capex
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Procurement Executives Group
EPC Industry Landscape
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• Strong capital expenditures 2012 – 2015
• Significant growth in EPC Spend ahead, some bow wave happening
• Global project challenges – Attracting and retaining staff – Local labor shortages – Lack of infrastructure – Remote and challenging locations – Complex scope and size
• Global sourcing – Opportunities and challenges
PEG
Procurement Executives Group
EPC „Crystal Ball‟ - Spend Forecast
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Spend Forecast - Revisited
0
400
800
1200
1600
11 12 13 14 15
No
min
al $U
S B
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Civil Mining
OG&C Power
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Procurement Executives Group
‘Crystal Ball‟ – Part II
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0
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1.6
1.8
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40
60
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2011 2012 2013 2014 2015
Fre
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t To
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Billi
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Fre
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t S
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d in
$U
S B
illi
on
s Total Freight Spend
Total Freight Tons
- Revisited
PEG
Procurement Executives Group
…….Climate of Concern
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Logistics is even more critical to
EPC success!
• 40% chance for double dip
• Can Washington work again in collaboration
• Can the European debt crisis stabilize
• From Arab Spring to Arab Fall
• Can we continue to be ready for impending expansion