Centralized Procurement Agent Practices in Large Chinese Enterprise Groups. Mr. Zhang Zhifeng Vice President State Grid Materials Co.

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1 Centralized Procurement Agent Practices in Large Chinese Enterprise Groups Mr. Zhang Zhifeng Vice President State Grid Materials Co., Ltd

2 Contents General introduction Centralized tendering procurement agent practices Advantages of doing centralized procurement through a tendering agent

3 30+ provincial transmission networks 300+ transmission and substation projects

4 Optical communication DC power supply Computer monitoring device Substation protection device Switchgear Isolation switch Breaker GIS Arc suppression coil Reactor Capacitors Lightning arrester Instrument transformer Transformer Fittings Fiber optic cable Insulator Tower Grounded line Power cable computer Bulk office supplies Electricity acquisition device Smart meter Project Supervision Substation construction Power transmission design

5 A Professional Centralized Procurement Agent established in July 1998 the first professional tendering company in the electric power industry of China has provided agent services to dozens of international thermal, hydro, wind power and transmission projects using the World Bank, ADB and foreign government loans has accomplished thousands of electric power projects the most professional tendering agent in electric power industry of China

6 Tendering Projects Shanghai Waigaoqiao Power Plant 2 900MW Phase I project Yixing Pump Storage Power Station project Funding World Bank World Bank Zhanghewan Pump Storage Power Station project ADB Henan Yuzhou 2 300MW Power Plant project Shanxi Shentou No MW Power Plant Phase II project Shanxi Yangcheng 6 350MW Power Plant project ADB Foreign goverment Foreign goverment

7 Tendering Projects Jindongnan-Nanyang-Jingmen 1000kV UHV AC pilot project Huainan-Shanghai 1000kV UHV AC demonstration project Xiangjiaba Shanghai ±800kV UHV DC transmission demonstration project Jinping Sunan ±800kV UHV DC transmission project Three Gorges Guangdong ±500kV HV DC transmission project Three Gorges Changzhou ±500kV HV DC transmission project Qinghai-Tibet ±400kV DC interconnection project Funding Own fund Own fund Own fund Own fund Own fund Own fund Own fund

8 Practices: Centralized Procurement Scope Enlarging 1000kV UHV 330kV~750kV EHV 35kV~220kV HV 220V~10kV

9 Practices: Centralized Procurement Amount Growing 203 billion 14.2 billion

10 Practices: Regulated Centralized Procurement Procedure instilled with quality-emphasized and technique-advanced theories offered open, transparent, and equal platform for all bidders cultivated a fair-competing market environment within the transmission and transformation industry procured high-quality equipment for safe and stable operation of power grid significantly prevented corruption

11 Centralized Procurement Agent Practices: Based on former experience, SGM develops a operation procedure covering all steps, and the procedure has been incorporated into the E-commerce platform. Thanks to this platform, a standardized and transparent centralized procurement operation procedure has been established to provide free, equal and unlimited access to bidding for all potential bidders.

12 Decision Making Decision Making Planning Procurement Contract Management Execution Business Control and Execution Warehousing Management Distribution Management Waste Material Management Supplier Management and Coordination Quality Management Procurement Standards Specialist Management Business Data Management Master Data Management ERP ECP Decision Making Master Data

13 Peak number of biding per day: 32;Registered Users: 38,412; Peak bandwidth of internet per day: 60Mbps On-line User per day and Max (units: person/day) Time of decrypting on open of bidding(units: min) On-line Users per day Max On-line Users Decrypting time of Bidding Sys. Decrypting time of ECP Pricing files 份 8100 份 9900 份 份 3820 份 4100 份 Jan Feb Mar Apr May

14 From go-live on Jun/2011 to Aug/2012: E-Commerce Platform of SGCC Procuremen t Standards Procurement Planning Bidding Signed Contract Supplier Management Experts Database 150,000 records of Material Master Data 792 templates of Structured Procurement Standards 619 Designing 536,000 records of Procurement Request Max records in one procurement batch Completing 234 batches, more than 1100 procurement projects About 2,538,000 bidding files Deploy 46 templates of Contract 470,000 Signed contract More than registered suppliers More than 7000 suppliers bidding More than experts of evaluation of bid 5 levels of experts major, totally 210 majors Institutes

15 Suppliers Management Model: First-level Management of headquarters Suppliers Registration on the E-commerce Platform(ECP) Audit and approve Participate in all bidding at E- commerce Platform(ECP) Registration of suppliers Verification of qualification & performance Supplies Management System Evaluation of performance of suppliers Treatment of bad behavior of suppliers Applied to the bid evaluation business Establish a centralized supplier management system, unify external service window, and enhance the quality of service. Coordinate supplier s performance evaluation with bidding evaluation organically, to supporting the bid evaluation.

16 Strengthening material intensive management by the means of information. Coordination room, as the coordination institutions of the e-commerce platform(ecp) in application, through the coordination of scheduling, business monitoring and statistical information aggregation functions, to globally co-ordinate, monitor and reasonable coordinate the deployment of various businesses.

17 Based on the Two-Level and Three-Line operation and maintenance(o&m) system, abide by the rule of Unified operation, Unified customer service entrance, Unified operation and maintenance work orders & problem, Hierarchical management, establish a e-commerce features unified operation and maintenance framework. Users of E-commercial Platform(ECP)(Include internal & external Users ) Headquarters Customer Service Platform(Call Center ) Business application s support State Grid Material Co., Ltd/Province & State company Business M&O State Grid Informatio n Communica tion Co., Ltd. System M&O State Grid Informatio n Communic ation Co., Ltd. Consulting service providers Support Software provider support State Grid IT support service center Computer hardware / network vendor support Server hardware / network / channel vendor support

18 ERP system E-commerce platform (ECP) Other parts supplier management expert mana geme nt procur ement standa rd Quality assess ment Performa nce appraisal Quality manag ement Waste material Main process progra m manag ement rocurem ent manage ment contract manage ment Storage & distributi on managem ent Main data

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20 Advantages of doing centralized procurement through a tendering agent: provide a more comprehensive and accurate suggestion to the tenderee for his centralized Rich Experience procurement decision-making, and help the tenderee avoid making big mistakes in his management of quality, schedule and price level setting.

21 Advantages of doing centralized procurement through a tendering agent: provide comprehensive and accurate understanding of relevant laws and regulations; Professional Personnel know how to play with international rules and how to execute regulations of the lending institutions; good at executing all the regulations and requirements; can use modern analysis model to analyze all the bidding data.

22 Advantages of doing centralized procurement through a tendering agent: The system provides access to all tendering Advanced E-commerce Platform information, so the procurement is more efficient, fair and transparent. It stores and manages a large amount of electronic documents and thus improves the efficiency of the procurement activities.

23 Advantages of doing centralized procurement through a tendering agent: Standardized Procurement Procedure adhere to the principles of receiving orderly, opening transparently and efficiently, evaluating rigorously and carefully ", develops a standardized centralized procedure to ensure that the procurement is open, fair and just.

24 Advantages of doing centralized procurement through a tendering agent: based on the professional classification criteria developed by evaluation experts in China, SGM Comprehensive Pool of Experts establishes a database of experts with five categories, involving 210 majors. The pool now has 20,000 experts from around the country, and it can basically meet the demand of various types of procurement.

25 Conclusion As a professional procurement agent, SGM, for the past 7 years, has been a successful agent for SGCC s large scale centralized procurement. Practice has proved that the use of professional tendering agent service can make the centralized procurement of a big enterprise group fair, transparent, standardized and efficient, establish a tendering platform for standardized and fair competition, and can bring win-win result to all relevant parties.

26 Thank You