BP WHITING CCTS REPLACEMENT PROJECT
Posted on May 07, 2012
BP selected Track to be the enterprise-wide contractor cost management solution for each of its North American facilities. The first implementation, at BP Whiting, resulted in substantial savings in the following areas:
- Non-contractual markups of the cost of 3rd party equipment were occurring at the Whiting facility for multiple years. Track identified and remedied this process, resulting in ~$1.5M savings per year.
- Thousands of workers were not adhering to the contracted work schedules on a regular basis. BP was being billed for time that was not being worked.
- Daily billing rates were being charged for equipment and materials, rather than less-costly weekly or monthly rates that were contractually agreed to.
- Existing Contractor Cost Tracking System was insufficient and did not meet BP Whiting's business needs.
BP, the fourth largest corporation in the world, is a $300 billion oil and gas company. BP has 16 refineries worldwide, and its second largest is located in Whiting, Indiana. BP Whiting, the sixth biggest refinery in the United States, is over a century old and employs tens of thousands of employees and contractor craftsmen to operate its facility.
Billions of dollars have been invested into the BP Whiting asset as part of a multi-year modernization project – what BP Whiting’s CFO, Luis Sierra, has called “the largest construction project in the history of Indiana.” This is being undertaken so that BP can better process heavier crudes. It is intended to provide states in the Midwest with greater energy security as conventional supplies of lighter crude diminish.
BP Whiting first engaged Track Software in the fall of 2010 to make substantial improvements to the plant’s existing process and solution for controlling contractor spend and contractual compliance. For years, BP Whiting had been using two legacy systems to manage their contractor tracking. These systems would need to interface with BP’s new SAP system, and management was faced with the decision of either upgrading both systems or implementing a new solution.
Complicating this decision was the fact that BP Whiting has two separate business units operating within the plant: Whiting Business Unit (WBU) and Whiting Refining Modernization Project (WRMP). Each has their own distinct processes, purchasing systems, and reporting requirements. Therefore, whether they installed new software or upgraded the old system, it essentially would amount to two implementations simultaneously – amidst the historic reconstruction going on at the refinery itself.
Track Software was selected to be the enterprise-wide solution for contractor cost management. In addition to the complexity of implementing Track at WBU and WRMP with 35 contracting companies, much of Whiting’s business and technical resources were consumed by a concurrent SAP implementation.
Track Software’s consulting services team implemented the Labor, Equipment and Materials modules of Track for all 35 contracting companies. These modules gave BP control over each phase of the contractor cost management process, something Whiting was not getting from its legacy systems.
Savings were realized immediately and continue to grow. There are a number of reasons why Track paid dividends so quickly and abundantly. Through its contract compliance tool, Track was immediately able to shed light on the fact that the management of the entire contracting process was being abdicated to the contracting companies themselves. Even though equipment markups had been removed from the vendor agreements, it remained a common practice to mark up equipment that was purchased on behalf of the facility. This too was costing the refinery millions of extra dollars each year.
Additionally, Track was able to determine that many workers were not arriving before their shifts started as previously agreed, and yet they continued to leave 10-15 minutes early each day (a norm that had been created over the years). Considering that at any given time there are as many as 6,000 contractors working at the plant, especially during a shutdown or turnaround, those minutes added up to millions of dollars a year.
Similarly, Track's ability to automate contract T's & C's found that a number of contractors were out of compliance with their contract. Rather than billing BP at a monthly equipment rate, these companies typically billed at a weekly or even daily rate – which resulted in as much as a 30% price increase. Again, because of the high cost of these services at the refi nery, such a percentage translated into cost savings that ran into the millions.
The enhanced visibility, greater controls and adherence to the contract has provided BP Whiting's management a more efficient process and a noticeable impact to the business's bottom line. It is this systemic improvement to the financial health of the plant, as well as culture and process changes, that are some of the enduring benefits of Track and why more industries trust Track Software for their contractor management.