(Solution) CIPS ADNOC Onshore Developing Contracts in Procurement and Supply (PDC)
Executive Summary
For this second assessment in CIPS practitioner qualification, it evaluate role of contract terms and conditions. By using ADNOC Onshore organisation as the organisation of focus, the role of terms and conditions to enhance management of risks of quality, time extension, costs overruns and unethical issues which affect stakeholders. As part of this assessment, the performance measures and management in ADNOC Onshore practices have equally been put into consideration. For ADNOC Onshore which operates in United Arab Emirates onshore and offshore operations, the terms and conditions are identified as appropriate for enhancing the organisation competitiveness in this sector. This is since the terms and conditions influence on the risk level and power held to implement contracts.
In regard to the findings, they indicate that the terms and conditions are appropriate for ensuring that the organisation is well positioned to engage most qualified suppliers. The relevance of using the terms and conditions are essential for ensuring success in solving the different issues faced. Further, from the different findings, they evidence the terms and conditions as force majeure, performance, quality requirements, cost management, indemnity, insurance cover and risks. Also, the findings note that for ADNOC Onshore different departments working in synch, the terms and conditions are identified as essential to link them with all their departments. This is for ADNOC Onshore ensuring dominance of their oil and gas sector maintaining competitiveness in their practice.
Finally, battle of forms have been used with their importance guiding establishment of mutual agreement on best practice to implement contracts. The outcome of this is different terms and conditions existing with a mutual agreement attained.
At the end, from the different gaps and challenges identified in this report, the suggested recommendations are;
- Improve the awareness level amongst the PS&M teams for aligning their terms and conditions in different contracts
- Establishing various terms and conditions for their different spend categories
- Mutually agree on the different terms and conditions for solving battle of the forms issue
- To initiate technology and innovativeness for the overall PS&M operations
- Be able to implement various KPIs and SLAs on contract adoption
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Description
Solution
Table of Contents
1.1 ADNOC Onshore Organisation Background. 4
1.2 Selected Terms and Conditions. 4
2.0 ADNOC Onshore Terms and Conditions. 7
2.1 The Risk of Poor Quality. 7
2.2 Risk of extension of Time. 10
2.3 Risks of increased costs. 12
2.4 Risk of Unethical Practice. 12
3.0 Performance Measures Monitoring and Management 13
5.0 Conclusion and Recommendations. 16
Appendix 1: Contract Terms and conditions. 21
Figure 1:Summary of Mendelow Matrix Analysis. 5
Figure 2:Contract Management Cycle. 6
Figure 3:Illustration of Vulnerability and Risk; Relative Value & Impact 7
Figure 4: Comparison of Warranties and Conditions 8
Figure 5:Phases of contract implementation. 11
Figure 6:Areas of performance monitoring and management by PS&M… 14
Table 1:Risk Register summary. 9
1.0 Introduction
1.1 ADNOC Onshore Organisation Background
Abu Dhabi National Oil Company (ADNOC) Onshore is an organisation which has been in active operations in United Arab Emirates (UAE) since 1971 (ADNOC, 2023). The organisation is involved as a leading onshore within ADNOC Group. The organisation concession area is approximately 12,000KM squared and is found operating more than 11 oil and gas fields in their 4 assets. These assets include Bab, North East Bab (NEB), Bu Hasa and South East (SE). Further, the organisation operates two different export terminals in Jebel Dhanna and Fujairah and vast pipeline network where the oils is transported form the oil fields.
The size of ADNOC spend is approximately $150 billion in next 5 years as a strategy for advancing their 5 million barrels daily in oil and gas production targeting to 2027 on back of improved market fundamentals (Upstream, 2022). Further, MEED (2022) note that their categories of spend cumulatively includer $5.3 billion in 2022. Their main categories of spend are pipeline equipment and installation, furniture and fixtures, motor vehicles, plant-based machinery, research and technologies, IT services, admin services and logistics. As evidenced in ADNOC iSourcing platform, they adopts multiple suppliers including Vallourec, Tenaris, Sumitomo, Tianjin Pipe, Hengyang, TMK, JFE and Voestalpine (Reach UAE, 2023).
1.2 Selected Terms and Conditions
In terms and conditions summary provided in Appendices, they are standard or bracket despite of risks and spend amount associated with it. For ADNOC onshore to facilitate their operations in exploration of oil and gas, they engages different suppliers of products and services. The process entail risks distribution and also the power accrued by ADNOC Onshore and the suppliers or their vendors being involved.
For identifying the importance of selected terms and conditions to vendors/suppliers and buyer, Mendelow Matrix Tool is applicable (CIPS, 2022);
Figure 1:Summary of Mendelow Matrix Analysis
Source: Summarised from ADNOC Onshore internal documents
Minimal effort- For the shareholders, identified tendering supply teams and competitors have low influence and high interest. Their role is no direct influence on the terms and conditions in place. Besides, quality level of the offered products and services with an influence on ADNOC Onshore service provision.
Keep satisfied– For regulatory teams, suppliers of different spend categories and UAE government have a major impact in guaranteeing success in adopting the terms and conditions. The relationship with the entire stakeholders is nevertheless an area of their concern in the terms and conditions.
Key players- The different partners and employees are enablers in the implementation of the terms and conditions. This is while ensuring their interests are prioritised in these contracts. They work with collaboration with PS&M teams for their successful operations.
Keep informed– With low power and low interest, the competitors, tendering department and shareholders influence how the contract terms and conditions are implemented. With ADNOC Onshore involved in directing UAE laws, this influence the best practice in implementation of the different terms and conditions.
Also, for identified ADNOC Onshore contracts, in order to ensure terms and conditions manage different categories of risks, referencing on contract management cycle CIPS (2023) is relevant to guide implementation of their terms and conditions. The cycle is essential in guiding different supply teams and buyers to distribute risks through adhering on contract demands. This is with best negotiation and important change set as a priority. The contract cycle identify phases in which the terms and conditions are applicable with PS&M involved in managing the internal risks and external operations (CIPS, 2023a);
Figure 2:Contract Management Cycle
Source: (CIPS, 2023a)
2.0 ADNOC Onshore Terms and Conditions
From the introduction of this assessment, ADNOC Onshore terms and conditions have been…………
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