the new oge purchasing concept – optimisation and ...oge’s departments involved (purchasing,...

The New OGE Purchasing Concept –Optimisation and Monitoring of Construction Processes

IPLOCA – Regional Meeting, Berlin – Klaus Link – 02.05.2017

Agenda

Overview

1. Who are Open Grid Europe?

2. Purchasing

3. NEP as a Challenge

4. Experience / Outlook

The New OGE Purchasing Concept | IPLOCA – Regional Meeting Berlin | 02.05.2017

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Agenda1. Who are Open Grid Europe?

1.1 Key Figures

1.2 Shareholders

1.3 Associates

1.4 Pipeline Grid

2. Purchasing

2.1 Purchasing as Partner for Technical Unit and as a Service Provider Inside OGE

2.2 Key Purchasing Instruments at OGE


3.1 Grid Development Plan (NEP 2016)

3.2 Investment Projects on Schedule – Start Strategy

3.3 Challenges of NEP Projects


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3.4 Objectives

3.5 Measures

3.6 Special Contractual Measures for Health and Safety

3.7 New Standard Process for Bidder Lists / ContractAward Suggestions

3.8 New Standard Process for Claim Management

3.9 Introduction / Development of Project Control and Coordination Function

3.10 Restructuring of Expediting

4 . Experience / Outlook

4.1 Experience in Implementation of New OGE Purchasing Concept

4.2 Continuous Improvement Process (CIP)

1. Who are Open Grid Europe?


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1.1 Key Figures

Founded in 2004 as E.ON Gastransport; name changed to Open Grid Europe 01.09.2010

One of Germany’s leading natural gas transport companies

Sole responsibility for operation, control, expansion and marketing of the pipeline grid

Approx. 1,650 employees; head office: Kallenbergstraße 5, 45141 Essen, Germany

Clients: more than 450 national and international merchant gas companies, regional

companies, public utility companies, industrial clients and gas retailers


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1.2 Shareholders

ABU DHABI INVESTMENT AUTHORITY

MEAG MUNICH ERGO ASSET MANAGEMENT

BRITISH COLUMBIA INVESTMENT MANAGEMENT CORPORATION

MACQUARIEEUROPEAN INFRASTRUCTURE FUND 4


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1.3 Associates


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1.4 Pipeline Grid

Pipeline grid approx. 12,000 km

26 compressor stations with 88 units,

Total output of approx. 1000 MW

17 border interconnection points

Approx. 1,100 exit points

Annual offtake: approx. 703* billion kWh

Two types of gas carried in the grid

high calorific gas

low calorific gas

* As of 31.12.2015


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2. Purchasing


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2.1 Purchasing as Partner for Technics and as a Service Provider Inside OGE

OGE’s Central Purchasing Department is located in Essen

Purchasing units responsible for:

construction services, pipelines and piping components

mechanical equipment and gas processing facilities

electrical engineering and engineering services

operating requirements and facility management

IT

communication and fleet

Additional responsibilities within units:

insurance

project control / coordination at purchasing level and expediting

logistics

processes and systems


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2.2 Key Purchasing Instruments at OGE 1/3

Supplier management:

Commercial and technical pre-qualification

HSE pre-qualification

Supplier performance assessment


Time

Quality

Costs

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Purchasing:

Definition of contract award strategy

Assurance of capacities and prices by generating competition

Concentration of demand

Drafting and handling of contracts


Time

Quality

Costs

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Project control / Project coordination:

Project control / coordination functionas interface between Technical and Purchasing Units

Monitoring of delivery dates and quality

by expediting


Time

Quality

Costs

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Total number of NEP projects: 119Total number of NEP projects handled by OGE Group*: 75

3.1 Grid Development Plan (NEP 2016) A considerable share is being implemented by OGE.


OGE51%

GUD6%

Thyssengas9%

bayernets8%

Fluxys2%

terranets bw7%

GRTgazD6%

NEL Gt6%

Others5%

Total investment for NEP: € 4.3 bn

OGE share of NEP: 51% (€ 2.2 bn)

Source: http://www.nep-gas-datenbank.de *OGE and OGE associates

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Pipeline construction projects

Metering and regulating stations

Line valve stationsCompressor stations(extensions / new-build projects)

3.2. Investment Projects on Schedule – Start Strategy


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Forchheim – Finsing pipelineLength: 79 km (DN 1000)Commissioning date: 2018Investment: € 173 m

Roll-out, Werne CS*1 x 25 MW + 2 x 12 MWCommissioning date: 2018Investment: € 170 m

Herbstein CS(2+1) x 13 MW Commissioning date: 2018Investment: € 170 m

Epe – Legden PipelineLength: 15 km (DN 1100)Commissioning date: 2018Investment: € 41 m

Rothenstadt CS(2+1) x 15 MW Commissioning date: 2018Investment: € 145 m

Schwandorf – ForchheimpipelineLength: 62 km (DN 1000)Commissioning date: 2017Investment: € 124 m

Pipeline projects

Compressor projects

Underconstr.

Under constr.

PAP

PAP*

*Source: NEP 2016-Konsultation - www.nep-gas-datenbank.de *PAP: plan approval procedure; *CS: compressor station

Under constr.

Under constr.

3.3 Challenges of NEP Projects Largest purchasing volume since OGE

was set upSteel as example:

3 pipeline projects ►66,000 tonnes ►44,000 VW Golf

3 station projects ►16,000 tonnes

►11,000 VW Golf

Achievement of ambitious budgetobjectives

Demand structures not synchronised in terms of timescale and contents

Restricted supplier capacities

Limited internal resources for adherence to supply deadlines and quality assurance

Human factor as a challenge

Cross-project control of purchasingrequired


Objectives:

Measures:

Time

Quality

Costs

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3.4 Objectives


Budget compliance

Synchronisation of demand structures in terms of contents and timescale

Identification of suitable cross-project bidders

Cross-project control of purchasing

Close communication and cooperation between Technical and Purchasing Units

Set-up and optimisation of external expediting

Time

Quality

Costs

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3.5 Measures 1/2

Synchronised demand concentration and

simultaneous control of engineering contractors

Analysis / adjustment of existing bidder structures

Development of an NEP contract award / procurement strategy

Introduction of a standard process for bidder lists and contract award suggestions

Introduction of a standard claim management process

Intensification of project controlling


Time

Quality

Costs

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3.5 Measures 2/2

Regular cross-project status meetings

Introduction of central project functions “Procurement Manager”

Development of a new role concept for the project control and coordination

New expediting standards jointly developed by Technical and Purchasing Units

Set-up and conclusion of framework agreements with suitable qualified expediters


Time

Quality

Costs

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3.6 Special Contractual Measures 1/2for Health and Safety

Within OGE and particularly on OGE’s construction sites, safety is of key importance:

“For us, health, safety and environmental protection are the cornerstones of optimum corporate governance. Work-related illnesses, injuries, accidents and environmental damage are inacceptable.”

“No work is so urgent that it cannot be performed safely – if in doubt, safety first.”

(Excerpt from OGE’s Corporate Principles)

► Contractual Basis with OGE’s Service Provider


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3.6 Special Contractual Measures 2/2for Health and Safety

Contents of contracts with contractors to ensure health and safety on construction sites:

Old approach:contracting of work and services for example for pipelaying on the basis of a standard rate per meter with integrated safety-related aspects

New approach:specific consideration of special HSE requirements in separate work and services (no longer included in the standard pipelaying rate!), e.g. drainage site roads sheet piling preliminary construction work Security briefing

► Maximum attention + objective-driven contracting


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Contract award suggestion


3.7 New Standard Process for Bidder Lists / Contract Award Suggestions

Order

Bidder list

Inquiry

Department Techn. department + Purchasing Purchasing

Purchaserequsition

Release of purchase

requsiition.

Info on purchase

requsition

Form-controlled work flow: purchase requisition – bidder list – contract award suggestionB

id evaluation

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3.8 New Standard Process for Claim Management


Process step Document to be created

Who To whom / for forwarding

1. Registration OGE form Contractor Planning: engineering managerConstruction: construction manager

2. Technical release OGE form Planning: engineering managerConstruction: construction manager

Category purchaser, procurement manager, project controller

3. Description of additional work / services

Checkable supplementary bid

Contractor Category purchaser forwards to:procurement manager, project controller, Planning: engineering managerConstruction: construction manager

4. Claim evaluation OGE’s check of supplementary bid (checklist)

Category purchaser- commercial check: Purchasing (possibly legal expert)- technical check: construction manager (possibly technical department)

Procurement manager, project manager,engineering manager, construction manager, project controller

5. Determination of OGE’s strategy

Minutes / memorandum Category purchaser Procurement manager, project manager, engineering manager, construction manager,project controller, possibly legal expert,possibly technical department

6. Contract award negotiations / orderextension

Contract award negotiation minutes / order extension

Category purchaserContractor

Procurement manager, project manager, engineering manager, construction manager, project controller

7. Work performance Quantity survey / work performance record

Contractor Planning: engineering managerConstruction: construction manager

8. Invoicing Quantity survey / work performance recordand invoice

Contractor Planning: engineering managerConstruction: construction manager

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3.9 Introduction / Development of Project Control and Coordination Function

Development project control and coordination Unit► Team SETUP

Internal tasks, e.g.:

Project interface between Purchasing and Technical Units Control and pooling of information ► central contact partner within Purchasing Unit Definition and control of the project-specific expediting process and interaction between

OGE’s departments involved (Purchasing, various technical contact partners)

External tasks, e.g.:

Contracting and control of the expediter Coordination / consultation, etc. between the expediter and contractors (materials suppliers, construction companies,

engineering contractor) and OGE’s departments (Purchasing, Technics etc.)


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3.10 Restructuring of Expediting 1/4

Initial situation:

No standard basic concept for expediting

No clear-cut definition of expediting processes/responsibilities

Limited internal resources for adherence to supply deadlines and quality assurance

► external qualified expediting

Objectives:

Development of an across-the-board expediting strategy

Deployment of external expediting companies for large-scale NEP projects

Determination of the expediting budget

Commitment to cross-project expediting standards for key materials

Conclusion of framework agreements with external expediting providers for key material components such as

pipes

piping materials and valves

gas processing components

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3.10 Restructuring of Expediting 2/4 27

PCC*

Management summary Brief overview

_____________________________

Expediting reportsCommunication with expediter

Expediting planInformation and planning instrument

Expediting strategyInternal basic instrument for deadline and quality control

PCC: project control / coordination PM: project managerSPM: subproject manager EC: engineering contractor* In cooperation with SPM; PM

Originator:

PCC

Expediter (ext./int.)PCC

PCC*

Recipients:

PM; planner; project controlling, Purchasing

Project teamand EC

Project team

EC, SPM, PM, project controlling, Purchasing, EC




Time

Quality

Costs

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4. Experience / Outlook


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4.1 Experience in Implementation of New OGE Purchasing Concept


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Time

Quality

Costs

Act

Plan

Do

Che

ck

Intended / actual worlds

Supply problems

Quality problemsControl / coor-

dination effortProcess safety

Request forstandard process

Linking / sepa-ration of ser-vice providers

Optimisation of contracts

Communicationproblems

Considerable gain in quality information

“Expediting does not ensure adhe-rence to supply deadlines but considerably reduces risks”

Cost control via budget objectives in debit

4.2 Continuous Improvement Process (CIP)


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Project success only through continuous, close, trust-based cooperation / consultation between Purchasing and Technology

Regular feedbackPurchasing /

TechnicalUnits

Experimentingwith new ap-

proaches

CommunicationDirect /Open

Project reviews /lessons learnt


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Thank you for your attention!

Backup


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Contract award suggestion


Standard Process for Bidder Lists and Contract Award Suggestions

Order

Bidder list

Inquiry

Department Techn. department + Purchasing Purchasing

Purch. req. Purch. req. release

Purchase orders ≥ € xxx:delegated authority in line with Signatory Authority Guideline P-01:1. signature by purchaser 2. signature by next-higher

superior or member of staff of same org. unit (depending on relevant value limit authority)

Release of purchase requisition value ≤ € xxx by PM1 (project manager)value > € xxx by PM2 (managing director) in line with Signatory Authority Guideline P-01

Release strategy including budget check stored in SAP

Purchase requisition released acc. to double-checking principle ⇒ order for Purchasing

Purch. req. info

Fo

rm 1

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Form attached to purchase req.: information for persons responsible for release with regard to project, performance and budget situation in form header

Form ensures:1. finalisation of bidder

list and contract award by department and Purchasing by signature

2. early determination of commercial and technical contract award criteria on bidder list

Form-controlled work flow: purchase requisition – bidder list – contract award suggestion

Bid

evaluation

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Expediting

Quality assurance and adherence to deadlines = > manufacturer/material supplier

Random sample checking under commercial / technical aspects for

progress control and quality inspection of materials

inspection of handling processes

e.g. using production flowcharts (comparison of required and actual values)

The inspections include

checking of documents, certificates and records

checking of primary materials (quantity and visual inspection of quality)

checking of production/components (dimensions, surface condition, stamps, welds, etc.)

checking of coating (where applicable by a specially trained coating inspector)

accompaniment of functional inspections or inspections by the German Technical Inspectorate (TÜV) or performance of factory acceptance tests or final inspections subject to agreement

inspection of packaging and shipping documents

► Expediting report by the expediter, Escalation by OGE


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