Download The Purchasing at EDF - sigma

Union, principally financed by the EU
A joint initiative of the OECD and the European
The Purchasing Function within a
Large Electricity/Power Company
in the French Utility Sector
Key features in the
procurement process
Daniel LEVY
(EDF, France)
Regional Conference on “Public Procurement Reform in West Balkan"
Pristina, 16-17september 2008
© OECD
Union, principally financed by the EU
A joint initiative of the OECD and the European
The Purchasing Function within a large
Electricity/Power Company
in the French Utility Sector- Key features in the
procurement process
I – EDF a new type of Company – public owned with a
private status – and an International Group
II – Purchasing at EDF – A continuous evolution facing
changes in its environnement as well as new profitability
requirements
III – The present procurement organisation and its challenges
2
© OECD
Union, principally financed by the EU
A joint initiative of the OECD and the European
The Purchasing Function within a large
Electricity/Power Company
in the French Utility Sector- Key features in the
procurement process
I EDF - a new type of Company which is publicly owned
with a private status and an International Group
3
© OECD
REASONS FOR CHANGING THE EDF STATUTE (17
Union, principally financed by the EU
A joint initiative of the OECD and the European
november 2004)
•
Increased financial needs to support an international
strategy
• Competition laws in the electricity sector
• changing the principle of speciality, that is not only
production, transport and distribution but also
undertaking any type of activity in relation to those,
enabling the company to develop its activities
4
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Union, principally financed by the EU
A joint initiative of the OECD and the European
AN ORIGINAL STATUTE …

EDF remains a public undertaking
(more than 70 % of its capital belonging to
the state)

EDF becomes a company with a private
status

EDF keeps its public utility missions
5
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Union, principally financed by the EU
A joint initiative of the OECD and the European
… WITH MAIN CONSEQUENCES
Public undertaking
- governance (notably through the board and the crucial
influence on the Chaiman’s choice)
- legal prescriptions (regulation, fiscal aspects)
Private status
Public utility sector
- following the rules of a company which is listed on
the Paris Stock Exchange
- an International Group (which must adapt to local
laws)
- employee representation (but the personal status is
unchanged)
- tariff regulation including help of the poor clients,
- territorial solidarity and local obligations
- preservation of common goods (management of
water)
These missions have to be defined and contracted through written
agreements with the State
6
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Union, principally financed by the EU
A joint initiative of the OECD and the European
DIRECTIVE 2004/17/EC OF THE EUROPEAN PARLIAMENT AND
OF THE COUNCIL
0F 31 MARCH 2004




The Directive 2004/17 of 31st March 2004 Co-ordinating the
programme procedures of entities operating in the water, energy,
transport and postal services sectors remains totally applicable
after EDF’s status changed. The exemption clause depends upon
the level of competition in the electricity sector but not the status of
the companies themselves.
EDF has a long experience of this legal framework requiring a
systematic call for competition except for given cases, described in
the Directive considering elements, such as the specific technicality
of products or services, or additional phases of works very closely
linked to those of the previous contract.
EDF takes benefit from the new possibilities of the Directive (most
economic choices criteria)
New questions may be addressed with the evolution of the energy
sector (commercial and partnership matters)
7
© OECD
Union, principally financed by the EU
A joint initiative of the OECD and the European
The Purchasing Function within a large
Electricity/Power Company
in the French Utility Sector- Key features in the
procurement process
II Purchasing at EDF – A continuous evolution facing
changes in its environment as well as new
profitability requirements
8
© OECD
Union, principally financed by the EU
A joint initiative of the OECD and the European
PURCHASING AT EDF : A COMPLEX
ENVIRONNEMENT
Long cycle industrial
sector
• Increased role expected
historical often
oligopolistic suppliers
• Increased pressure for
Technical constraints
and habits
• Legal framework
Weight of nuclear safety
from the purchasing
activity
utilities entering
competition
• Specific missions for a
public utility
9
© OECD
and quality (1)
Union, principally financed by the EU
A joint initiative of the OECD and the European
Main steps of the EDF Procurement Division
construction to achieve performance objectives
A CONSTANT ADAPTATION AND EVOLUTION
2000 : foundation of the Procurement Division on the following basics :

a centralized and highly-qualified business line

No purchase without a purchaser above €20 000

performance achieved by teamwork between technicians (business units) and purchasers :
strategy is defined, segment by segment, by a lead buyer through a close relationship with
technicians and business representatives. For important issues, management is involved on
both sides.

Since 2002, new improvements consisting of :

enhancing and broadening framework agreements ;

organising strategic sourcing and optimising suppliers panel ;

helping business units in controlling their expenditures (volume and price effects) ;
10
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Union, principally financed by the EU
A joint initiative of the OECD and the European
Main steps of the EDF Procurement Division construction so
as to reach performance objectives and quality (2)

2005 – 2008 an increased ambition
Introduce new levers – not giving up former levers such
as strategic sourcing, massification of contracts, duration
of contracts optimisation - so as to increase performance :

achieve better estimation of costs, especially when the
level of competition is low, and use it during negotiations

simplify and redefine specifications with respect to
general standards

Enhance productivity and create win/win situations through
partnership relationships

Develop purchasing synergies within the Group, from
simple co-ordination to common tenders.
11
© OECD
Union, principally financed by the EU
A joint initiative of the OECD and the European
The Purchasing Function within a large
Electricity/Power Company
in the French Utility Sector- Key features in the
procurement process
III The present procurement organisation and
its challenges
12
© OECD
Organisation chart of the Procurement Division
Union, principally financed by the EU
A joint initiative of the OECD and the European
Director of Procurement
Bruno CRESCENT
Deputy Director
François-Régis DE LA PORTE
Secretary / Communication
Gilles BELOIS
Group Purchasing Control / internal audit
Gérard SAMSON
Support Departments
Procurement Departments
Human Resources
Catherine QUEVRAIN
Generation / Engineering
Jean-François DEMALDENT
Methods of Purchasing – Industrial
Relations and Group Synergies
Quality / Sustainable Developpement
Daniel LEVY
Performance / Information System
Didier DECELLE
Services
Pierre SCHICK
Information Technology / Telecom
Pierre GUY
Networks / Customers
Laurent CACHEUX
13
© OECD
Key figures of the Procurement Division in 2007
OPEX & CAPEX
Union, principally financed by the EU
A joint initiative of the OECD and the European
EDF France (except the TRANSMISSION SUBSIDIARY)
Four Procurement Domains
SERVICES
PURCHASING
€ 2,8 bn
INFORMATION
TECHNOLOGY /
TELECOM PURCHASING
€ 0,8 bn
Totalizing € 8,3 bn among which
GENERATION /
ENGINEERING
PURCHASING
NETWORKS /
CUSTOMERS
PURCHASING
€ 3,1 bn
€ 1,6 bn
OPEX : € 5,6 bn
CAPEX : € 2,7 bn
STAFF
850 People located on 15 Sites
14
© OECD
Union, principally financed by the EU
A joint initiative of the OECD and the European
LOCALISATION OF PURCHASING Teams
Agence Nat. Achats Informatique Télécoms
(Information Technology and Telecommunication)
Agence Nat. Achats Matériels Électriques
(Networks materials)
NP
I
Lille
D
Rouen
P
PRI
Agence Nat. Achats Prestations Intellectuelles
(Intellectual Services)
NP
P
Ts
TH
D
Nancy
TH
PRI
P
Noisy Le
Grand
Montrouge
To P
Nantes
P
Tours
H
Agence Achats Ingénierie
(Engineering)
Agence Régionale Achats Production
(Nuclear Generation/Regional)
Agence Tertiaire Sud
(Services)
Agence Tertiaire Sud
(Services)
NP
PRI
P
Agence Nationale Achats Production
(Nuclear Generation/National)
P
To
I
Agence Tertiaire Nord et
Paris (Services)
Agence Achats Thermique
(Thermal)
Agence Achats Hydraulique
(Hydraulic)
P
La Défense
Lyon
Ts P P
P To
Bordeaux
Le-Bourget-duLac
H
Donzère - Mondragon
P
Toulouse
H*
Ts
P To
Montpellier Marseille
15
© OECD
Generation:Engineering
Union, principally financed by the EU
A joint initiative of the OECD and the European
24 PURCHASING SEGMENTS ACCORDING TO THE
« SUPPLY MARKET »
Networks
• Nuclear process
• Rotating machines
Services
• Properties
• Connector, cables
and support
• Civil engineering
• Maintenance logistics
Information
Technology
Telecom
• Swichtgear
Equipment and
Boilerworks/pipeworks/taps Transformers)
•
• Intellectual Services
(Consultancy,
Communication,
Advertising, Legal,
Finance)
• Waste and dismantling
• Customer Interface
(meters)
Distribution Works
• Instrumentation and
control
• Fossil fired power plants
• Software
• Computer
services
Research & Development
• Training
• Electricity
• Hardware
• Telecoms
• Services
• Travels/Vehicles
• Corporate Purchasing
Mail/transportation
• Industrial Logistics
process
• Non destructive testing
16
© OECD
STRATEGIC STAGE
Union, principally financed by the EU
A joint initiative of the OECD and the European
THE PURCHASING PROCESS
MAIN STEPS
With strong involvement of business units and management
Management role
Evaluate needs
• Anticipate
• quantitative
• qualitative (including specification)
• make or buy decisions
• Manage risks
• Level of globalisation
• Allotment
• Management of interfaces
•Strategic and global sourcing
• Panel optimisation
•Qualification criteria
17
© OECD
OPERATIONAL STAGE
Union, principally financed by the EU
A joint initiative of the OECD and the European
THE PURCHASING PROCESS
MAIN STEPS
• Organize tenders
Post award evaluation
• Evaluate suppliers
• Publicity
• quality of products and
services
• Prequalification
• Qualification (emphasis on the
product itself)
• Technical assessment
(including final
qualification)
• ways of using contracts by
business units (respect
of allocation between
• negotiation
suppliers)
• Award of contracts
18
© OECD
The Purchasing at EDF : present and new challenges
Union, principally financed by the EU
A joint initiative of the OECD and the European
Enhance Performance and quality in all its dimensions

Performance :
-
-
Purchasing must work closely with its internal customers, at all
levels and stages (strategic, tactical and operational)
Purchasing must contribute to EDF’s ambitions to increase its
performance objectives of its « Operational Excellence » program by
introducing new levels of productivity, such as the redefinition of needs,
process and products, which requires the convincing of internal
customers (often technically orientated) and methodical support.
Purchasing must contribue to Group Synergies, notably by extending
the scope of common tenders
19
© OECD
Enhance Performance and quality in all its
dimensions
Union, principally financed by the EU
A joint initiative of the OECD and the European
The Purchasing at EDF : present and new
challenges
Quality, Sustainable development, and Social responsibility
- Human resources : maintain and develop skills in a changing
environment: notably international
- Process
*Maintain ISO 9001 and ISO 14001 certification
* lead audits and control activities within a constant
improvement philosophy, including
coaching and mentoring
* involve suppliers on environmental ambitions
(environmental chart)
- Socal responsibility and ethics : respect of commitment
qualification of suppliers
subcontractors treatment and consideration
20
© OECD