Securing contracts in Alaska's oil & gas industry: timely tips from industry insiders.

• Author: Anderson, Tasha
• Position: OIL & GAS

On May 25 AOGA (Alaska Oil and Gas Association) held its 50th Anniversary Celebration & Conference, celebrating both AOGA's history and the history of the oil and gas industry in Alaska. The conference featured several excellent panels, including "Tips for Success in this Low Price Environment: Procurement's View," moderated by AOGA President and CEO Kara Moriarty.

This panel was comprised of JP Connelly, Regional Director of Alaska Procurement, BP Alaska; Stan Golis, Operations Manager for Cook Inlet, Hilcorp; Dan Flodin, Supply Chain Management Director, Alyeska Pipeline Service Company; and Larry Burgess, HSE Manager, BlueCrest Energy. Below are excerpts from the panel.

Moriarty Share with us a "procurement horror story," i.e., what not to do when trying to secure a contract.

Connelly; Unfortunately there's a pretty wide array of options to talk about. What came to mind may seem obvious, but it's worth discussing, and the advice would be: "Don't try to buy the work." When I say that, it has multiple meanings. I was thinking specifically about a project I was working in West Africa where we were getting ready to construct a new warehouse and we were bidding out to market. I was out one evening with friends and I ran into a gentleman I recognized and I knew he was with one of the big contractors in town. He approached me and we had a conversation that he quickly steered to the tender we were going to be sending out. He said there's a way we can make this real easy for you and for me and save a lot of time and effort, and we could actually end up with an extra 20 percent for you. I knew what he was saying but I kind of didn't want to believe it. The short of it is he had this elaborate plan to kick back money to me and the company if we awarded this work to him. The next day I made sure this is a company we would never work with again and keep away from our doors.

The other part of that "don't buy the work advice" is companies, in a [low price] environment where people are desperate, they start to think in desperate terms and how can they win business [although] they don't have the capability, they don't have the know-how, but they would literally try to bid lower than anybody else and effectively buy the work. That's a very bad answer. It's a losing proposition for both the companies and the contractors, and it ultimately will end up costing everybody more money, ultimately end up costing everybody lost time as well. The contractors, in the effort to do the right thing and ultimately win more business, they kind of go down a path that's not good for anyone.

Golis: My example really deals with a multi-year contract. It involved an electrical component we were using. It's fairly expensive, probably the average cost was $250,000 per component. This was done at the more centralized level where we had our operations engineers involved in selecting qualified contractors. We were looking at the vendor base and we had one contractor that had demonstrated they could go out and they could install it and we had good run times and everything was working very well. Unfortunately, they had they had one technical expert that was key to their process, that contract. He did the QC [quality control], he was out there on every job that component was run, he made sure the...