12 Common Procurement Mistakes

Procurement mistakes are as costly as engineering errors; wrong certificates, unclear Incoterms, and missing inspection hold points lead to delays, rejected materials, and contract disputes. These 12 errors cover the most frequent commercial pitfalls in piping material procurement.

Documentation Mistakes

1. Confusing MTC 3.1 and 3.2 Certificates

Error: Ordering with EN 10204 Type 3.1 certificates when the project specification requires Type 3.2. Risk: Type 3.1 is issued by the manufacturer only. Type 3.2 requires validation by an independent inspection body. If the project requires 3.2 and you accept 3.1, the materials may be rejected during quality audit. Fix: Verify the certificate type requirement in the project material specification and state it explicitly in the PO.

2. Accepting Material Substitutions Without Engineering Approval

Error: Allowing the vendor to supply an “equivalent” material (e.g., A350 LF6 instead of A350 LF2) without formal deviation review. Risk: Equivalents may differ in impact toughness, hardness limits, or corrosion resistance. A350 LF6 Class 2, for example, has a lower carbon range but different mechanical properties than LF2. Fix: Require a written material deviation request (MDR) with supporting data. Engineering must approve before shipment.

3. Missing Supplementary Requirements in the PO

Error: Not specifying ASTM supplementary requirements (e.g., S1 for product analysis, S5 for Charpy impact testing) when the piping class calls for them. Risk: The manufacturer produces to the base standard only. Critical tests (impact, hardness, product analysis) are skipped. Materials fail on-site testing. Fix: List all applicable supplementary requirements (S1-S20) in the PO line item description, not just in an attached specification. See project procurement documents for a full breakdown of the documentation that must accompany every purchase order.

Incoterms and Logistics Mistakes

4. Using FOB Without Understanding Risk Transfer

Error: Specifying FOB (Free on Board) without realizing that insurance and risk during ocean transit fall on the buyer. Risk: If materials are damaged or lost at sea, the buyer bears the full cost. Marine insurance must be arranged separately. Fix: Consider CIF (Cost, Insurance, Freight) or CIP (Carriage and Insurance Paid) to keep the seller responsible for transit insurance.

5. Not Specifying Packaging and Preservation Requirements

Error: Omitting packaging, end protection, and preservation requirements from the PO. Risk: Flanges ship without face protection and arrive corroded. Pipe ends without caps collect moisture and debris. Gaskets are crushed in transit. Fix: Include packaging requirements per the project specification: beveled end protectors for pipes, flange face covers, VCI wrapping for machined surfaces, and wooden crating for valves.

6. Ignoring Customs and Import Documentation

Error: Not specifying country-of-origin documentation, HS codes, and import certificates upfront. Risk: Materials sit in customs for weeks due to missing phytosanitary certificates (wooden packaging), certificates of origin, or incorrect tariff classification. Fix: Include import documentation requirements in the PO and verify with the logistics team before shipment.

Inspection and Quality Mistakes

7. Not Defining Third-Party Inspection (TPI) Scope

Error: Stating “TPI required” without specifying which hold/witness/review points apply. Risk: The inspection agency attends the wrong tests. Critical inspections (hydro test, PMI, dimensional check) are missed. Defective materials ship to site. Fix: Attach an Inspection and Test Plan (ITP) with clear H (hold), W (witness), and R (review) points for each manufacturing step.

8. Skipping Pre-Inspection Meeting (PIM)

Error: Starting production without a kick-off/pre-inspection meeting between buyer, vendor, and TPI agency. Risk: Misalignment on acceptance criteria, test methods, marking requirements, and documentation standards. Issues discovered only at final inspection. Fix: Conduct a PIM before production starts to align on all ITP requirements, especially for first-time vendors.

9. Not Requiring Positive Material Identification (PMI)

Error: Omitting PMI requirements for alloy and stainless steel materials. Risk: Mixed-up heats or incorrect alloy composition are not detected until failure in service. ASTM A106 Gr. B pipe supplied instead of A335 P11 looks identical visually. Fix: Require PMI (XRF or OES) on all alloy and stainless materials per the project specification, with results recorded on the MTC.

Payment and Contract Mistakes

10. Advance Payment Without Bank Guarantee

Error: Paying 30-50% advance to a vendor without requiring a bank guarantee or letter of credit. Risk: If the vendor defaults, goes bankrupt, or delivers non-conforming materials, recovering the advance payment is extremely difficult. Fix: Require an advance payment bank guarantee (APBG) for any advance exceeding 10-15% of the PO value.

11. Missing Liquidated Damages (LD) Clause

Error: Not including delivery delay penalties in the PO terms and conditions. Risk: The vendor delays delivery by weeks or months with no financial consequence. Project construction is delayed, with costs borne entirely by the buyer. Fix: Include LD clauses (typically 0.5-1% per week, capped at 5-10% of PO value) for delivery beyond the agreed schedule.

12. Not Specifying Warranty Terms

Error: Accepting the vendor’s standard warranty without reviewing its scope, duration, and exclusions. Risk: Standard warranties may exclude corrosion, improper storage at site, or third-party installation damage; covering almost nothing in practice. Fix: Negotiate warranty terms that cover material and manufacturing defects for 18-24 months from delivery or 12 months from commissioning, whichever is later.

Frequently Asked Questions

What is the difference between MTC 3.1 and 3.2?

EN 10204 Type 3.1 is a material test certificate issued by the manufacturer, confirming that the materials meet the order requirements based on their own testing. Type 3.2 additionally requires validation by an authorized independent inspection body. Sour service (NACE MR0175), critical piping classes, and most offshore projects require 3.2.

Can a supplier substitute an equivalent material without approval?

No. Any material substitution must be formally approved by the buyer’s engineering team through a material deviation request (MDR). Equivalent grades may have different impact toughness, hardness limits, weldability, or corrosion resistance that affect fitness for the specific service.

What is the risk of using FOB Incoterms?

With FOB (Free on Board), risk transfers to the buyer once the goods are loaded on the vessel. Any damage, loss, or delay during ocean transit is the buyer’s problem. The buyer must arrange and pay for marine cargo insurance separately. CIF or CIP terms are safer for the buyer.

Why is third-party inspection important for piping materials?

TPI verifies dimensional accuracy, material chemistry, mechanical properties, heat treatment records, surface finish, and marking at the manufacturer’s facility; before shipment. Catching a defective batch at the factory costs a fraction of discovering it at the construction site, where rework, schedule delays, and replacement costs multiply.

What happens if packaging requirements are not specified in the PO?

Vendors will use minimal packaging to save cost. Pipes ship without end caps, collecting moisture and dirt. Flange faces arrive corroded or scratched, requiring re-machining. Gaskets get crushed or deformed. Specifying packaging per the project standard prevents 80% of transit damage claims.