Streamlining processes and increasing value for the oil and gas supply chain 1
What is the Supply Chain Code of Practice? The Supply Chain Code of Practice outlines a set of best practice guidelines and is an aspirational code of conduct to help the UK oil and gas industry: improve performance eliminate unnecessary costs add value and boost competitiveness Signatories include major purchasers (operators and principal contractors) and suppliers (companies providing goods or services). By signing up, you are embracing a co-operative attitude towards developing and maintaining an efficient supply chain and achieving the highest attainable standards of business ethics and health, safety and environmental operations. This will allow the UK supply chain to improve commercial relationships and boost the UK Continental Shelf s (UKCS) competitiveness in line with the industry s strategy to maximise economic recovery (MER UK). The Code tackles behaviour at three key stages in the commercial process under the headlines of Plan, Contract and Perform & Pay. The tiered compliance system measures this behaviour and an annual award scheme gives public recognition to those purchasers with high levels of compliance. All signatories must be registered on FPAL (First Point Assessment Limited) the oil and gas supply chain database that allows oil and gas purchasers to identify, select and manage current and potential suppliers. It is acknowledged that full compliance with the Code will not be achievable by all signatories. However, companies should aim to comply as fully as possible. Oil & Gas UK and the Oil and Gas Authority are both committed to the principles of the Code, which was initially launched in 2002 under the PILOT progressing partnership scheme. Oil & Gas UK manages the Code and all signatory information. More information can be found at www.oilandgasuk.co.uk/sccop. 2
Plan Transparent planning of contracting activity by major purchasers to improve supply chain capability Contract Streamline pre-qualification, tendering and negotiation processes to reduce bidding costs, eliminate waste, add value and increase competitiveness Perform & Pay Increase feedback dialogue to improve performance and shorten payment cycles Commitment to Industry Behaviours Charter Tender Efficiency Framework FPAL Company Profile FPAL Key Performance Indicators (KPI) and Performance Feedback Oil and Gas Authority Supply Chain Strategy Plan Contract 30-Day Payments Oil & Gas UK Share Fair Industry Mutual Hold Harmless (IMHH) Forward Work Plan Perform & Pay FPAL Listings and Capability Profiles Standard Invitations to Tender (ITT) Debriefs Standard Contracts See p7-9 to find out more about these industry initiatives 3
What are the benefits for industry? Applying industry best practice will drive positive behaviours throughout the whole supply chain Improving efficiency through use of industry Standard Contracts (LOGIC or company-specific) and ITT as well as embracing the principles of the Tender Efficiency Framework Easier access to supplier/purchaser information and contacts and reduced duplication Reduced pre-qualification leads to a more efficient tendering process and reduces tender costs associated with repeatedly providing and reviewing the same information Use of formal KPIs and issuing/receiving meaningful feedback ensures all companies improve service and gain repeat business Sharing forward work plans on the FPAL website supports an organised approach to tendering and a greater choice of suppliers Payment of invoices within 30 days, prompt payment of the undisputed part of a disputed invoice and feedback on the quality of invoices all ensure better business performance and working relationships Encouraging two-way feedback on performance for the duration of contracts will drive closer relationships between purchasers and suppliers and help support industry improvement The annual Share Fair allows purchasers to present their current and future plans on the UKCS. This enables suppliers to plan for future business opportunities Small and Medium-sized Enterprises (SMEs) It is recognised that the development and support of SMEs is critical to the future success of the UK oil and gas industry. Therefore, the Code fully promotes engaging with supplier SMEs where possible. 4
Tiered compliance system The Code s tiered compliance system automatically applies to all new and existing purchaser signatories. It allows suppliers to rate their clients (operator and contractor purchasers) for compliance with various aspects of the Code. There are four levels of award that can be achieved Bronze, Silver, Gold and Excellence (see overleaf for award criteria). The Excellence award is achieved by purchasers who receive the Gold Award for three consecutive years. Purchasers are categorised into three levels according to their declared supply chain spend. Purchaser level Declared spend per annum 1 Less than 30 million 2 30 million to 100 million 3 Above 100 million Timeline Compliance questionnaire to be completed by all signatories JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER Survey issued Results analysed Report created Criteria deadline Supply Chain Code of Practice year-end. Also start point and criteria deadline for FPAL performance feedback data Awards presented at Oil & Gas UK s Share Fair 5
BRONZE SILVER GOLD Criteria for awards Minimum number of FPAL purchaser feedback reports received and average score for questions about the code (purchasers rated by their suppliers) Level 1 Purchaser Level 2 Purchaser Level 3 Purchaser Average score of 5 3 5 10 Average score of 6 4 10 20 Average score of 7 5 15 30 Minimum number of FPAL supplier feedback reports issued (suppliers rated by purchasers) Level 1 Purchaser 5 7 Level 2 Purchaser 10 20 Level 3 Purchaser 20 40 10 30 60 Completion of annual Supply Chain Code of Practice Compliance Survey All Levels Commitment to annual Share Fair event Level 1 Purchaser Level 2 Purchaser Level 3 Purchaser 1 to 1 meetings every two years Presentation every three years and 1 to 1 meetings every year Annual work plans logged on FPAL website Level 3 Purchaser Level 1 & 2 Purchaser Not mandatory but preferred 30-day payments Level 3 Purchaser Compliance with agreed contractual terms Commitment to Industry Behaviours Charter All 6 Compliance with agreed contractual terms 30-day payments in contracts
Guidance notes LOGIC LOGIC (Leading Oil and Gas Industry Competitiveness) governance for standard industry solu ons was created in 1999 by the UK Government s Oil and Gas Industry Task Force to improve competitiveness on the UKCS. LOGIC is a wholly-owned not-for-profit subsidiary of Oil & Gas UK and works towards identifying collaborative industry-wide solutions to the UKCS commercial challenges. LOGIC manages and administers a number of key industry projects including: Standard Contracts IMHH contracts Find out more at www.logic-oil.com Standard Contracts Standard Contracts have been developed by the Oil & Gas UK Standard Contracts Committee with assistance from LOGIC. They seek to standardise contract drafting; ensure a consistent approach to risk allocation within the industry; and reduce the time required to draft, review and negotiate contract terms for work on the UKCS. They are widely used by industry and LOGIC administers the suite of Standard Contracts for use between purchasers and suppliers on the UKCS. First Point Assessment Limited (FPAL) FPAL is the oil and gas supply chain database and is the key tool used by oil and gas purchasers on the UKCS to identify, select and manage current and potential suppliers when awarding contracts or purchase orders. To comply with the Code, both purchasers and suppliers must make use of the tools provided by FPAL at www.fpal.com. FPAL performance feedback reports FPAL performance feedback reports are a mechanism to provide two-way feedback between purchasers and suppliers. Feedback is essential for mutual improvement to learn from mistakes and develop best practices. Industry mutual hold harmless (IMHH) IMHH was developed to respond to the uncertainties of risk allocation for contractors working on an installation together, but who are not contractually linked. The IMHH scheme addresses the contractual gap by creating a mutual hold harmless arrangement between contractors should there be no other contract in place between them. The IMHH Deed, for which LOGIC manages the enquiries, allows all offshore oil and gas industry contractors to sign up the mutual hold harmless scheme. The principles of the IMHH Deed are aligned with the drafting included in the Standard Contracts. 7
Guidance notes continued Annual work plans published on FPAL By publishing annual work plans on the FPAL website, purchasers can give suppliers useful information about forthcoming contract opportunities. This is mandatory for Level 3 purchasers and strongly encouraged for any purchasers that can participate. Inviting interest from FPAL registered suppliers Purchasers are encouraged to, where possible, only invite interest from FPAL-registered suppliers who have an up-to-date Advanced Registration Profile and/or Verify Report. This encourages suppliers to keep their profiles up-to-date, hence avoiding duplication and helping to streamline the tender process. For more information on FPAL see www.fpal.com. Industry Behaviours Charter The Industry Behaviours Charter is a document signed by members of Oil & Gas UK and fully endorsed by the Oil and Gas Authority (OGA). It is a commitment to work effectively, efficiently and co-operatively, all of which align with the objectives of the Code. The Charter encourages businesses to: Be early adopters of efficiency initiatives, which includes new technology and sharing lessons learnt Provide access to decision makers to prioritise relevant issues Strengthen industry co-operation through continuous improvement and support of industry codes of practice, forums and standards Contribute to performance improvement through transparent and time-bound, legal, commercial and contractual engagements Commit to continuous improvement through review of the Charter Find out more at www.oilandgasuk.co.uk/charter 30-day payments 30-day payments ensure businesses can perform better and help to form stronger working relationships between businesses. The principle encourages swift payment, stops possible disputes from arising and improves business performance. Tender Efficiency Framework The Tender Efficiency Framework was established by Oil & Gas UK s Efficiency Task Force in 2016. It seeks to make significant savings to the cost of industry tender responses. Purchaser and supplier relationships are key in achieving these savings through tender optimisation, minimising duplication, enhanced behaviours and improving tender rationale. More information can be found at www.oilandgasuk.co.uk/efficiency Oil and Gas Authority Supply Chain Strategy The Oil and Gas Authority s Supply Chain Strategy outlines its vision for the UKCS supply chain until 2035. The strategy aims to grow the service sector s share in the domestic and global markets. There are three overarching priorities: 1. To maximise the economic potential from the UKCS 2. To anchor the service sector in the UK 3. To double the accessible international market share by 2035 The Code fully endorses adherence to the OGA s Strategy. More information can be found at www.ogauthority.co.uk/supply-chain/strategy. 8
Key performance indicators (KPIs) The Code supports the use of KPIs in major contracts and strongly encourages using them throughout the contract s duration as an effective aid to the discussion of performance. Oil & Gas UK s Share Fair event Oil & Gas UK s annual Share Fair provides a platform for purchasers to share forward work plans and planned contracting activity as well as meet with prospective new suppliers. Likewise, suppliers can showcase their products and services to a variety of purchasers and plan for future business opportunities and network. The Code recognises that companies at different levels, outlined in the table below, will be able to participate in Share Fair to different extents. Purchaser level Declared Spend per annum 1 < 30 million 2 30 million to 100 million 3 Above 100 million Innovation and technology The Code encourages companies to actively engage with key stakeholders to promote innovation. The annual industry Share Fair is a platform that can help support this, by sharing efficiency challenges and raising awareness to allow suppliers to identify solutions. This also includes supporting the development of new technologies once areas and opportunities have been identified. Industry standard ITT These help to eliminate duplication and improve efficiency through the tendering process. The Code advocates that, where possible, industry standard ITT should be used. ITT templates can be found at www.fpal.com. Contracts and delivery of goods and services Delivery of goods and services should only occur when an appropriate contract or purchase order is in place. The Code asks suppliers to comply with all contractual delivery dates, specifications and quality requirements as stated in contracts. Supply Chain Code of Practice Compliance Survey The annual Supply Chain Code of Practice Compliance Survey monitors the level of compliance within the industry. Purchaser participation is a prerequisite to be considered for an industry award for compliance. Debriefs Offering a debrief to unsuccessful bidders is an important part of the tender process to help bidders understand why they have been unsuccessful. This helps bidders and purchasers to identify areas of improvement for the future. 9
oilandgasuk.co.uk sccop@oilandgasuk.co.uk @oilandgasuk Oil & Gas UK 01224 577 250 2017 The UK Oil and Gas Industry Association Limited trading as Oil & Gas UK 10