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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. NEP as a Challenge
3.1 Grid Development Plan (NEP 2016)
3.2 Investment Projects on Schedule – Start Strategy
3.3 Challenges of NEP Projects
The New OGE Purchasing Concept | IPLOCA – Regional Meeting Berlin | 02.05.2017
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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?
The New OGE Purchasing Concept | IPLOCA – Regional Meeting Berlin | 02.05.2017
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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
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Time
Quality
Costs
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2.2 Key Purchasing Instruments at OGE 2/3
Purchasing:
Definition of contract award strategy
Assurance of capacities and prices by generating competition
Concentration of demand
Drafting and handling of contracts
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Time
Quality
Costs
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2.2 Key Purchasing Instruments at OGE 3/3
Project control / Project coordination:
Project control / coordination functionas interface between Technical and Purchasing Units
Monitoring of delivery dates and quality
by expediting
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Quality
Costs
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3. NEP as a Challenge
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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.
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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
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Objectives:
Measures:
Time
Quality
Costs
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3.4 Objectives
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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
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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
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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
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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
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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
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3.10 Restructuring of Expediting 3/4
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Time
Quality
Costs
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3.10 Restructuring of Expediting 4/4
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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
The New OGE Purchasing Concept | IPLOCA – Regional Meeting Berlin | 02.05.2017
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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