Have you been tasked with scoping new process equipment for your industrial facility, such as a cooling tower or chemical storage unit?
The task itself may seem straightforward. Track down a few manufacturers online, contact the sales reps, share a few specs, and get an estimate. Choose the lowest cost or best value. Simple, right?
Wrong.
In reality, finding the best value between two units is a complex task. Often, the estimates provided by process equipment companies aren’t apples to apples comparisons. It can be easy for Project Engineers to miss key scope considerations, resulting in an initial quoted cost that’s far less than what’s required to install and flip the switch.
These misses can significantly impact the project’s profitability downstream. So, what are those all-too-common mistakes to avoid when reviewing quotes for purchasing capital equipment?
1. Failing to Consider the Operational Requirements
Getting a thorough spec sheet will go a long way in helping you choose the equipment manufacturer that’s right for your project. This includes the process operating rates in and out of the equipment, operating ranges, temperature, pressure, composition, percent solids, and more. But it doesn’t tell the whole story.
Before contacting vendors, the following questions need to be answered:
- Is the equipment going to be cleaned or sterilized?
- Is there a clean in place or steam in place system?
- What chemicals are going to be used for cleaning?
- Is there a polish requirement for sanitary or aseptic service?
- Does the equipment require passivation?
- How does cleaning and maintenance take place? On scheduled plant outages or reduced rate?
- Do you need a spare as a backup?
And those examples are just a few.
For large, heavy equipment, it’s important to include the seismic design constants for the site, as well as wind loads for outdoor installations. The equipment and support lugs need to have the ability to sustain these conditions without damage, catastrophic failure, or loss of life.
Apart from specs, you also need to know what is necessary on your end to make sure the process equipment can do its job. That includes power requirements, instrumentation included in the package, control panel interfaces, how much data will be pulled back to the DCS, and determining how it will be serviced routinely, and potentially, in an emergency.
That’s why it’s important to ask each vendor to provide a brief description of the equipment’s operation. It will help you better understand what interaction it will require from your operator or technician. This can help you determine the structural needs or considerations for the equipment, which can be a hidden cost driver.
2. Believing the Supplier’s Provided Scope is Complete
Another common pitfall in the procurement process is not understanding the manufacturer’s scope of supply. In short, what is included in the equipment price, and what is not?
The scope of supply includes only what is inside the supplier’s battery limits – or ISBL. A piece of equipment generally doesn’t work by itself. If it needs a pump, an agitator, or supply/discharge conveyor, for example, it’s important to know if that piece of equipment is included in the scope. A good proposal will have a detailed list of accessories, components, instruments, or control panels needed, as well as connected horsepower.
Some vendors will include these ancillary components in their proposals even if you haven’t specifically requested them, but it’s critical to ask and to know so you can make an accurate comparison.
Asking the following questions will help you determine the ISBL:
- What other services are included?
- Is the supplier going to passivate the equipment in the shop?
- Are they going to test the CIP system for shadowing?
- Are they going to perform a sterility test?
- Are they supplying an installation package?
- Are they supplying any structural components such as a support tower or access platforms?
In many instances, it’s easier for the vendor to include this with the equipment. For example, consider a support tower with a bucket elevator leg, or an access platform on a dust collector. You may also request a general arrangement drawing and equipment weights to get an idea of the structural framing and foundation requirements.
Finally, delivery time is also an important consideration for ISBL. Long lead equipment will drive the overall construction schedule. This helps you determine what equipment is on the critical path for overall project scheduling. Note, not all delivery dates are the same—there’s a difference between “upon receipt of purchase order” and “upon receipt of approved equipment drawings.” A good practice is to allow 1-2 weeks to receive equipment drawings, and another 1-2 weeks to get approved drawings back to the vendor.
3. Choosing a Cheaper Material for a Better Price
Not all equipment is created equal. You may notice that manufacturers may build similar equipment from different materials. It can be tempting to choose the cheaper material to get a better sticker price.
While a cheaper material may perform the same function, its overall maintenance and length of service may end up costing more in the long run. Equipment made from carbon steel, stainless steel, alloy, and plastic all may be capable of getting the job done. But they don’t have the same strength, weight, wear rate, and potential for corrosion.
It’s important to get the best value out of your equipment, not just the best price. That means ensuring the material makeup of the equipment is the right material for the job.
To make a meaningful comparison between vendors, be sure they specify the construction of each key piece of equipment. And when they do, be mindful of how that construction will impact the initial and long-term cost of your system. Total weight of the equipment can be a good indicator. Look for material thickness, particularly on components like drive shafts, tubes, hoods, and ducts.
4. Assuming Every Necessary Part Needed Is Included
In reality, you’re buying more than one single piece of equipment or a machine. That equipment will have a motor, gear reducer, coupling, base, drive chain/belts, mechanical seals, and more. This is where many vendors try to gain a competitive advantage on price.
If you want a TEFC premium efficiency motor or a double mechanical seal with a seal pot, it needs to be on the spec sheet or you’re probably not going to get it. When it comes to components, a common practice is to match the spares in the plant. This can add cost to the overall equipment price, however it will save money long term with parts replacement and downtime.
For the equipment to perform its job, lots of components are required. You may need piping, instrumentation, nozzles, flanges, sensors, limit switches, safety devices, and controllers. Are the necessary components included in the proposal you’re reviewing? It’s important to understand how the equipment will be controlled, so that necessary instrument connections are included. These questions will ensure you get something that works:
- Where do you need manways for entry or access to internal components?
- Where do you need sight glasses for visual checks?
- Who is supplying instruments and can they communicate with the plant DCS system?
5. Assuming the Shipping & Freight Cost is Included
Shipping and freight costs for large equipment can be complicated and expensive. These logistical costs could be dramatically different between suppliers, and surprisingly, many initial quotes don’t include them.
That’s because key factors like equipment dimensions, total shipping weight, number of shipments, mode of transport, distance, and other elements can make freight costs hard to estimate. To deliver a competitive bid, manufacturers may not provide accurate shipping information.
When looking at a quote from a supplier or manufacturer, ask that estimated shipping and freight costs be included in each. And don’t simply take the shipping costs at face value—ask questions to ensure the estimates are as complete and comparable as can be.
As if shipping wasn’t already complicated enough, delivering large diameter equipment to remote plant locations can be especially challenging. Truck drivers may need to travel an additional 200 - 300 miles or more to avoid low bridges or other obstacles. If the equipment is over 48,000 lbs., you will probably need a transportation expert to help with mode of transport, or consider field erection.
With so many components and options, it’s hard to know where to begin. But start by asking so you can fairly compare each proposal. If shipping and freight costs are included, make sure you understand what they’re made from and how that will impact their cost and long-term performance.
If they’re not included, be prepared to track down those costs and add them to the estimate.
6. Omitting the Associated Start-Up Costs
Securing, receiving, and installing your system are the most tedious part of this process, of course, but making sure it starts and runs well can be equally so. Several pieces of equipment such as boilers, burners, centrifuges, compressors, chillers, and the like will require a service technician for commissioning. These activities could range in duration from one day to several weeks.
To make certain this crucial aspect of the project is covered, ask your vendors to include any start-up assistance, user training, on-site engineering, or other assistance they may offer. That can include piping checkout, system sterility, mechanical completion audits, electrical and instrumentation calibration and check-out, and equipment troubleshooting. It’s important to think about the resources you have available and where service technicians can fill in the gaps.
With all you’re investing in your new system, start-up isn’t the moment to learn you don’t have everything you need to make it work.
Scoping Made Simple
Even if you don’t have a lot of experience scoping systems, getting the complete price for your new equipment doesn’t have to be intimidating. Just avoid these 6 big mistakes and you’ll get more than the best price—you’ll ensure the kind of return on investment upper management will notice.
When you have several quotes to compare, it can be tough to distinguish which vendor will provide the best product for the most fair pricing. Run a true technical comparison and evaluate each supplier and its variables using our free Bid Tab template today!