Finance and Administration Division

Financial Resources Management

Contracting in Accordance to PEMEX’s Policies and Procedures

May 2013

www.pep.pemex.com

Contracting Process

2

Core activities

Annual assessment of contractual

requirement involving assets and services

company needs

No

No

Yes

Yes

Contracting of Supplies Monitor and Control

of Supplies

Evaluation and Improvements of the

Supply Process

Supply Forecasting and

Planning Program

Petróleos Mexicanos Law

Public Works and Related Services Law

Acquisitions Leasing and Services of the Public Sector Law

Public Works?

Exceptions to bidding process LOPSRM Art. 42

Exceptions to bidding process LAASSP Art. 41

www.pep.pemex.com

Requirement analysis identifying the type of law used in 2012

3

No. Law Type Req. No. Percent

1 LAASSP 697 20

2 LOPSRM 109 3

3 PEMEX 2,739 77

Totals 3,545 100

www.pep.pemex.com

Administrative Processes for Procurement

4

Contracting of supplies Monitor and Control

of Supplies

Evaluation and Improvements of

the Supply Process

Supply Forecasting and

Planning Program

200-72500-201 AL 214w warehouse

200-72000-PA-011 IOS purchases

200-72000-PA-010 IOS purchases

200-72000-PA-013 ITS purchases

200-72000-PA-012 Intercompany contracts

200-72000-PA-001 Contracting Program

200-72000-PA-002 Reception Solped

200-72000-PA-003 Bid

200-72000-PA-004 Restricted Invitation

200-72000-PA-005 Direct Biding

200-72000-PA-006 Agreement Subscrip.

200-72000-PA-009 Non-recoverable cost.

200-72000-PA-008 Cost Adjustment

200-72000-PA-007 Admin and assets receipt

LAA

SSP

1

3 P

roce

d.

of

PEP

800-18000-PAI-01 to

800-18000-PAI-05 Y 37

800-18000-PAI-06 to

800-18000-PAI-13

800-18000-PAI-14 to

800-18000-PAI-34

800-18000-PAI-35 to

800-18000-PAI-36

LOP

SRM

3

6 P

roce

d.

Inst

itu

tio

nal

o

f P

EMEX

PEMEX LAW Art. 4-10,77

LEY PEMEX LEY PEMEX PEMEX LAW

Art. 12-46,51-53,78,79 PEMEX LAW

Art. 54-76,80-83 PEMEX LAW

Art. 47-50, 85-88

LPEM

EX

DA

C’s

1

4 P

roce

d.

war

eho

use

s o

f P

EP

www.pep.pemex.com

TIPO DE CONTRATO

Administrative Disposition for Contracts

Conditions for Contract Approval following PEMEX Law

5

Area Manager / Administrator of the Project

General Director PEP

Board of Directors for PEP

CAAOS for PEMEX Board of Directors

for PEMEX

A Greater or Equal to

$200M USD

Opinion

B Greater or Equal to

$100 M USD but less than $200M

USD

C Greater or Equal to $50M but less than

$100M USD

D Less than $50M

USD

Approval - Executive document - Contract model - Economic model

Contract Type

Board of Director Limits (updates)

Approval - Executive document - Contract model - Economic model

Approval - Executive document - Contract model - Economic model

Approval - Executive document - Contract model - Economic model

Approval - Executive document -Contract model - Economic model

CAAOS for PEP

Opinion - Prior opinion from Subcaaos of PEP

Opinion - Prior opinion from Subcaaos of PEP

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Contracting Process Protected by PEMEX Law

6

Basic Process

Invitation to Bid

QA Meeting / clarifications

Due date Evaluation Tec - Eco

Decision Signing of Contract

Art. 28, d), DAC’s One or several acts

Art. 27 DAC’s

Tec. Eco.

Visit

www.pep.pemex.com

Contracting Process Protected by PEMEX Law

7

Basic Process

Invitation to Bid

QA Meeting / clarifications

Due date Evaluation Tec - Eco

Decision Signing of Contract

Art. 28, d), DAC’s One or several acts

Art. 27 DAC’s

Tec. Eco.

Visit

1

2

2

1st Clarifications

Meeting

2nd Clarifications Meeting

Last day sell guideline

Prequalification documentation

receipt Evaluation

Public meeting to inform results of pre-qualification

Clarifications to prequalification

Pre-qualification program is announced

1

Prequalification

Art. 21, fracc. IV;

DAC’s

Art. 21, fracc. I; DAC’s

Art. 21, fracc. V; DAC’s

Period to solicit clarifications

www.pep.pemex.com

Contracting Process Protected by PEMEX Law

8

Basic Process

Invitation to Bid

QA Meeting / clarifications

Due date Evaluation Tec - Eco

Decision Signing of Contract

Art. 28, d), DAC’s One or several acts

Art. 27 DAC’s

Tec. Eco.

Visit

Participants of involved areas and the final decision

correspond to the Project Manager

4

3

4

3

Negotiation

Social Witness

Negotiation process is announced

Negotiation I Negotiation result is

announced

Art. 32, 2° pg. DAC’s

1

2

All of

whomever PEP deems to be appropriate

Negotiation II

Negotiation III

Negotiation n

Reasonable period to present final proposals

Proposal are received after negotiation

Art. 32, Fracc. II DAC’s

Art. 32, Fracc. III y IV DAC’s Art. 32, Fracc. V, index b) DAC’s Art. 32, Fracc. V, index c) DAC’s

Concurrently or after evaluation

Art. 28 fracc. “E” DAC’s

www.pep.pemex.com

Contracting Process Protected by PEMEX Law

9

Basic Process

Invitation to Bid

QA Meeting / clarifications

Due date Evaluation Tec - Eco

Decision Signing of Contract

Art. 28, d), DAC’s One or several acts

Art. 27 DAC’s

Tec. Eco.

Visit

6

5

Subsequent discounted offers (standardized assets or services)

Round I

Round II

Round…n . . .

5

6

Art. 31, DAC’s

4

3 1

2

www.pep.pemex.com

Contracting Process Protected by PEMEX Law

10

Request for Quotation

Evaluation Tec - Eco

Acceptance of Proposal

Signing of Contract

Receive Proposal

Art. 50 Fracc. III RLPM Begins with the request for quotation and ends with the acceptance of the

proposal

Previous decision from acquisition, leasing and Works and Services Commitee

2 days 15 days 10 days 5 days 15 days

Direct Contracting

Art. 56 LPM y 46 DAC: • Respond • Financial • Technical • Operative

Art. 57 LPM It involves: I. Spills, toxic gases, population risk, environmental damages, damages to facilities. II. Public federal services, agents or representatives of judicial and administrative processes. III. Spare parts in stock to support original manufactures warranties. The exceptions to the bidding listed in LAASSP and LOPSRM.

www.pep.pemex.com

Execution Strategy

11

-PEP obtains contract historical Information. -Consults areas & PAR -Identify needs. -Integrated tools and Philosophies about Supply management (contract forms). -Segments needs by specialty or grouping (contract group)

1.Families Selection 2. Supplier

Engagement

3. Evaluation And selection of

suppliers

4. Definitions of the process / contact

scope

5. Contacting process

6. Contract approval and

maintenance / execution

7.Best Practices

-DCO Collaborates to Facilitate contract strategies. -Families and Contractual inform. Are added in Accordance to exper. -Analysis to identify works according to Department or contract

-End user conducts Market research. -They identify existing offerings. -They elaborate strategy proposal as well as contract proposal.

-Integrates information needed for projects: • Justification • Economic Model • Executive Doc. -Consults with end user areas and PAR to identify needs. -Presents cases in accordance to type of contract: •Transactional, •Integral •Performance

-Conducts processes for contracting. -Awards contracts. -Formalizes contracts.

-Manages the contract. -Elaborates agreement.

-Best Practices in contracting.

Benefits: - Better Polices and definitions of Contracting. - Simplify the administrative process of contracting in accordance to our strategies. - Obtain economic saving due to better practices in contracting. - Align efforts in contracting.

www.pep.pemex.com

Based on past experience, the following issues were resolved by senior

management

12

Improve our availability to perform sound

market research prior to the request for

requirements. Improve our information

to justify the specifications and

characteristics of our needs

Identify all requirements in accordance

to PEMEX Law when considering

contract amounts greater than (A and B)

and should be properly documented for

approval at it’s appropriate instance

Improve the process to obtain

multi-period approvals.

Requirements are correctly document

and included in the project portfolio with

the required detail

Improve requirement identification.

Included these requirements in the Annual Requirement Program.

Review all Project Files for all necessary critical information for projects.

Define all elements needed for programming.

Document all budget coding for projects in accordance with Corporate policies.

Create formats that would document minimum standards of market data research to identify

potencial sources/vendors.

Create formats that would improve market research based on historical information of

consumption, practical technology, brands, operational standards well adapted in our industry.

Adapt homogenous formats to sustain the requirements.

Reengineer the process to:

Eliminate unnecessary steps.

Institute electronic approval processes.

Standardize approval of funds destined for operational investment.

Publish Board of Director meeting calendar as well as the calendars of the various committees for

critical dates.

Promote and make available with the operational areas the documentation needed for

requirements.

Action Items

www.pep.pemex.com

Improvements to Contracting Process

13

Alignment with initiatives

Alignment with initiatives for the administration of supply chain activities, with contract strategies

as mandated by the PEMEX, adding to it the opinions of subject matter experts in contracting

strategies for the various business segments.

Development of a program to unify project administrator’s efforts on how to communicate project

updates throughout the organization.

Replicate the work flow utilized in Strategic Projects to streamline efforts used in budget and

finance administration needs for Project Management as a whole.

Improve the supply chain / procurement process for the current application of contract module

used in PEMEX.

Action Items

Project updates

Streamlining

Strengthening the supply chain

Automation

Catalogs

Host an e-Offers module in our system.

Integration of automated offerings that include discounts and electronic clearances from vendors.

Inclusion of vendor/contractor catalogs needed for prequalifications.

www.pep.pemex.com

Time needed for contracting

14

Public Invitation

QA Meeting / clarifications

Due Date Evaluation Tec - Eco

Decisions Signing of Contract

Visit

Basic Bid Process (diverse types)

5 days 25 days 20 days 25 days 20 days 15 days 20 days

Invitation to Bid

Visit and QA meeting / clarifications

Due date Evaluation Tec - Eco

Decisions Signing of Contract

Basic Process Restricted Invitation (Invitation is for three)

5 days 15 days 6 days 7 days 15 days 15 days

Request for quote Receipt of Proposal

Evaluation Tec - Eco

Acceptance of proposal

Signing of Contract

Basic Process Direct Contracting

2 days 15 days 10 days 5 days 15 days

www.pep.pemex.com

Annual Forecast of Requirements (estimated)

15

PROCESS TYPE

TYPE A TYPE B TYPE C TYPE D TOTAL

QUANT. REQ.

QUANT. REQ.

QUANT. REQ.

QUANT. REQ.

QUANT. REQ.

Direct contracting 1 1 12 852 866

Invitation to at least three vendors to participate

0 0 0 439 439

International public BID 6 1 11 223 241

International public BID with agreement

11 33 58 841 943

Domestic public BID 0 0 4 767 771

Agreement with other Inter-companies

0 1 3 281 285

Total 18 36 88 3,403 3545