Adrienn Nagy dr. Leader

Corporate Services Business Supervision and Process Management

Budapest 14/11/2007

Procurement Audits

AGENDA

• What is Audit about?• Procurement Lifecycle

Audit • Audits in 2006-2007• Recommendations• Audit Effects• Process Transparency• Ethical Behavior

Audits 2006-2007

Audit Outcomes affect:

Procurement processes

Practices

Ca. 30 Procurement Audits Prepared

LogisticsRoad transport; Rail / BargeChemical Road;Bitumen Road + Follow-up

ITIT Procurement General

Notebook Tender 2007

Retail Tebodin project management regional Contract execution

BT PipelineTechnical specification

Tank cleaning Bid evaluation

Procurement Policy elaboration (Moscow) / update / supervision

Contract testing: compliance, archiving

Audit Initiated by CS DirectorGCFO

Inter-business

Procurement Leader

Procurement Process

Subsidiary AuditsMOL Romania+ Follow-up

Branch AuditsPakistan/Kazakhstan

Moscow + Follow-up

Audit performed by:

CS Business Supervision

•Set-up in Q3 2005• Monitor Procurement Practices•Introduce and unify best practices•Yearly Audit Plan and single initiations to investigate• Audit Report with Recommendations•Audit Follow-up•Regulations update, Process improvement

-Contact for Suppliers complaints, networking

-Advises on Transparency, Ethical and Procurement Process issues

-Cartel Risks; follow-up, risk mitigation

-Breach of Contract supervision

Suppliers Relations

Procurement Lifecycle Audit

AUDIT Investigates the complex Procurement Process

6. Post-evaluation of Supplier Performance

GRADING

1. Supplier pre-qualification

2. Bidding Procedure

3. Bidding Evaluation

Negotiation and communication with

Suppliers

4. Contracting

5. Contract Performance

Fair & Reliable

Guarantee issues, Eventuel Breach of Contract

Basis for Invitation to Bid (ITB) AU

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Impact of Audit Recommendations

• Process compliance with laws and Group regulations

• Process rationality and efficiency

• Input for decision making • Opens discussion on future

procedure, introduces new best practices

• New control point elaboration• AUDIT FOLLOW-UP!

PROCESS MONITORING AND FEEDBACK TO

PROCUREMENT

AUDIT RECOMMENDATIONS

PROVIDE

Positive Effects of Audit Recommendation

• How to communicate suppliers in a bidding process – fair procedure & international standards

• Enforce open gates principle – always invite newcomers from the relevant market

• New Group level Ethical Code

• Draft Procurement Ethical Code

Initiates Procurement Process Changes & Practices

Affects Change in Regulatory Environment

Process Transparency & Ethical Behavior

TRANSPARENCY and Procurement

Why to enhance TRANSPARENCY?

What is to be TRANSPARENT?

Common Business Value

Duly Keeping Processes & Deadlines

Open Gates Principle

TRANSPARENT Communication with Suppliers

Process Transparency - We expect the same Approach!

MOL ensures that Suppliers are familiar with the Procurement Processes, deadlines.

OPEN GATES PRINCIPLE:market surveys and invitation of new Suppliers

NO Cartels / effective detection / MOL surveys Supplier activity and has the possibility to submit Cartel suspicion to National Competition Authorities or even to the EU Commission

MOL expects fair and complete documentation, correct pricing from Suppliers in a Bidding

Keep deadlines, do not wait for the last seconds when submitting your documents in a Bidding

NO Cartels / individual pricing / ensure individual strategic behaviour in the bidding

Correct Contract Performance / warranty issues / influences evaluation and the fact that you get on the invited list for the next Bidding!

MOL OFFERS YOU ARE REQUESTED TO

ETHICS and Procurement

Corporate Ethics

Group level OBLIGATIONS & EXPECTATIONS

MAIN Source: MOL Group Ethical Code

International Standards & Best Practice

Ethical Code is to be attached to all contracts for signature

NEW

Ethical Behavior We expect the same Approach!

• All information with regard to relations between MOL Group and its suppliers is considered confidential.

• We will not misuse our position in the marketplace, • Creating equal conditions for all our business partners. • We expect our Bidding and contracted partners to act in the same manner.

• Avoid personal financial interests and do not misuse occupied position.

• Honesty and Integrity • We condemn any form of bribery or the acceptance of unlawful business advantage• We discourage the offering of gifts, and we forbid our employees to accept them.

Mutual Trust and Respect

Conflict of Interest

Prohibition of Unlawful Advantage

Ethical Code is attached to all Procurement Contracts but have to stick to it throughout the Bidding Process!

Contact & Thank You for your attention!

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PROCUREMENT AUDIT helps MOL Group Procurement to be EXCELLENT in the CEE Region.