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Marty Stetzer Kristi Malik Qittitut Consulting Houston

Positioning for Growth Evaluation of the Contracting Process Review Session – May 31, 2006 Willie Underwood Cy Zebot. Marty Stetzer Kristi Malik Qittitut Consulting Houston. Presentation Outline. Agenda: Vision of the future Project objectives

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Marty Stetzer Kristi Malik Qittitut Consulting Houston

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  1. Positioning for GrowthEvaluation of the Contracting ProcessReview Session – May 31, 2006Willie UnderwoodCy Zebot Marty Stetzer Kristi Malik Qittitut Consulting Houston

  2. Presentation Outline Agenda: • Vision of the future • Project objectives • Expectations of the Implementation phase • Result: Proposed Roles & Organization • Result: Quick Hits • Next Steps Appendix: The approach used and sample deliverables

  3. Vision of the Future State An organizational structure, processes, procedures and system where deals are captured, papered, billed and tracked in the most efficient way possible to meet the needs of our customers. Push the work up-front to avoid redundancy, review and rework Put in place accountability, responsibility and ownership This structure should take the organization through the next 3-5 years. Positioned for Growth - Carthage to Perryville - S/E Supply Header - West to East/North Expansion

  4. Project Objectives • Review the contracting process to see whether “all the right things are being done in the right order” to meet our current and future business objectives. • Find ways to free up the Marketers to spend more time with customers. • Examine the organization and work content of the Marketers and the Contract Administration Group to ensure current and future workload is balanced. • Review/define roles and responsibilities to support the vision.

  5. Expectations of the Implementation Phase • After work is done with the As-Is, 95% of Quick Hits are implemented • Know all the tasks/reports by individual inside & outside the deal flow 3. Understand and have the “functional design” that we feel will work for 3-5 years: a. People (Roles & Responsibilities) b. Process c. Tools d. Technology

  6. Expectations of the Implementation Phase, cont’d 4. Successful implementation of the DFT/Deal Capture System • Organizational structure in place to support the new system • Push for improved accuracy at the front end of the deal c. Post -Implementation benefits i. Better split of responsibilities between Marketing and Contract Administration ii. Streamlined Process—no bottle necks, no redundant reviews and no multiple points of data entry iii. Automate processes where possible

  7. Result: Proposed Roles & Organization Senior Vice President and Chief Operating Officer Vice President of Marketing Vice President of Business Development Director of Financial Analysis and Planning Director of Special Projects and Invoicing

  8. Result: Proposed Roles & Organization Vice President of Marketing Contract Administration System Control On-system Marketing Off-system Marketing

  9. Result: Proposed Roles & Organization, cont’d Contract Administration • Responsibilities include working with Marketing and Legal to provide contracts to customers and follow through to execution. • Maintain contractual data/rates in database. • Responsible for various FERC reporting requirements such as Discount and Transactional postings and Index of Customer report. • Work with other departments in providing information for invoicing, Sarbanes-Oxley audit, and contractual data. • Work with customers in assisting with interpreting CEGT’s and MRT’s policies and procedures. • Provide ongoing customer service.

  10. Result: Proposed Roles & Organization, cont’d System Control • Performs management direction of System Control including resource allocation, budgeting, strategic planning, execution plans, management and development of personnel, identification of training needs, prioritization of activities. • Monitors execution of all System Control activities • Ensures consistent delivery of the product, cost effectively, with efficient use of operational resources • Manages customer interactions of System Control personnel to provide timely, accurate and accommodating information. • Overall responsibility for scheduling, confirmations, system balancing, load forecasting, throughput reporting, OBA management, Interrupt • System Utilization and Operational Storage Management/Tracking, issuance of Operating Alerts, Operational Flow Orders and Force Majeure notifications. • Manage, direct and coordinate emergency situations/incidents for the pipeline system. Provide operations/emergency support coordination to other pipelines or end-users during emergency conditions at their facilities. • Continual interaction with CEFS, CEPS, ARKLA, ENTEX and other Pipeline’s management on varying gas flow issues as it relates to each of their businesses. • Maintain regulatory compliance and interact with the local, state, and federal agencies we are responsible to communicate with during pipeline incidents and other pipeline events (LEPC, SERC, DOT, OPS, NTSB, EPA, State Commissions) • Involvement and participation in pipeline growth initiatives to ensure we have facilities that allow the pipeline the most flexibility (within the capital available) to enhance our marketability of the system and its services. • Direct responsibility for preparation and management of the O&M budget. • Prepares performance reviews, salary/bonus recommendations and disciplinary recommendations to executive management. • Direct involvement in F.E.R.C. filings and audits. • Overall responsibility for SCADA system and telecommunications needed to support this function. • Interaction and coordination with Legal on various tariff and compliance issues. • Responsible for communicating to Executive Management any unusual operating condition that may cause problems or may create opportunities.

  11. Result: Proposed Roles & Organization, cont’d Marketing (On-system) • Develop and Implement new marketing strategy • Monitor trends in storage and gas markets and plan to meet changing markets and competitive conditions • Develop and maintain pricing strategies • Negotiate standard and non-standard transportation and storage contracts • Negotiate agreements and coordinate required construction projects, related financial analysis, and provide proposal to customer • Develop new market opportunities

  12. Result: Proposed Roles & Organization, cont’d Marketing (Off-system) • Develop and Implement new marketing strategy • Monitor trends in storage and gas markets and plan to meet changing markets and competitive conditions • Develop and maintain pricing strategies • Negotiate standard and non-standard transportation and storage contracts • Negotiate agreements and coordinate required construction projects, related financial analysis, and provide proposal to customer • Develop new market opportunities

  13. Result: Proposed Roles & Organization Vice President of Business Development • Responsible for development and recommendations of new strategic initiatives for the Company. • Devise strategy for exploring potential opportunities for the Company. • Represent external opportunities and recommend appropriate strategy to Senior Management Team. • Generate revenue and build value for the Company through sales, services, partnerships, and alliances. • Develop strategic assessments of business markets and potential partnership targets for existing pipeline business. • Lead negotiations for the Company, handling transaction mechanics ranging from simple to complex. • Participate in formulating and administering company policies and developing long-range organizational goals and objectives. • Work with Senior VP to ensure business development plan is consistent with overall organizational goal and that efforts are focused on the most beneficial areas for organizational growth • Direct and manage Business Development group comprised of director and manager level business development professionals. • Responsible for recruiting, training and developmental opportunities of business development professionals and high potential employees. • Company’s Ethics and Compliance Code of Conduct and other Company policies and procedures, and take all required training courses. • Must demonstrate respect for all individuals and adhere to te Company’s values and business practices.

  14. Result: Proposed Roles & Organization Director of Financial Analysis and Planning • Responsible for monitoring, directing and coordinating the activities of the financial analysts and planning engineers in support of Marketing Department facilities design and capacity determinations • Responsible for the Business Development, fundamental supply/demand/price analyses disposition of small assets; and CEGT’s and MRT’s Sec. 311 supply attachments. • Responsible for updating and maintaining the financial analysis model used by CNP interstate gas transmission • Project Support – negotiations, economics, fundamental analysis, Marketing Department, special analysis, and M&A. • Project economics – supports Marketing, BD and Strategic Planning • Fundamental Analysis • 2006 update (supply, demand & price), Planning conference, Special studies, and Miscellaneous support • Facilities planning (Well connects, Facilities design, Maps, Integration of BD Planner, etc.) • Financial Analysis Model – Maintenance • FERC Reporting (Form 567, Peak day capacity report, etc.)

  15. Result: Proposed Roles & Organization Director of Special Projects and Invoicing

  16. Result: Quick Hits · Credit Application – Credit exposure calculated by Contract Admin instead of Marketers · Marketers Sign-Off – no longer required on daily deals · Rate Security – Changed so that Houston Contract Reps are solely responsible for maintaining rates for deals in the system and will be the only group with security to do so (ownership) · Invoice Posting – all invoices will be posted by Client Services – Shreveport · New Agency Agreement Form for customers to use · Document the procedures pertaining to the Agency and Asset Manager Agreements · For Legal, no deal detail in attached email; this could eliminate the necessity for Legal to compare and reconcile when necessary.

  17. Next Steps • - Develop detailed “Go live” plan for new Deal Capture system • Define new organization structure and roles and job descriptions • Evaluate other identified improvements by Contract Admin team: • Improve quality of “Desk Level” procedures • Investigate electronic scanning of agreements & contracts • Customer Names Changes process check • Service Request - Tariff form review • Measuring Point Number - Process of adding points review • BA Changes - Policy/Procedure review • Look into real-time communication options (IM, etc.)

  18. Appendix Approach Used and Sample Deliverables • Structured Process • Interview List • Updated As- is from Daily Firm Project - with responsibilities • Detailed Activity & Task Lists • Value-added and non-value-added analysis • Report Analysis for Redundancies • Integrated Workplan and Timeline

  19. Approach 1: Structured Process to Date Level 2 Flow Charts Level 3/4 Activity Lists Staff No 1 Staff No 2 Staff No 14 Plan the Deal Deal Flow Related Deal Flow Related Deal Flow Related Make Execute Settle Daily Business Non- Deal Flow Related Non- Deal Flow Related Non- Deal Flow Related Develop the Deal Plan Contract Admin Marketers Make Value-added Non-value added Activities 14 items 18 items Execute Settle Long Term Business

  20. Approach 2: Interview List / Status

  21. Approach 3: Execute the Deal - Daily Business Process Timeline: 9:30-11:00 8:15-10:00 Gas Control From Make the Deal To Settle the Deal Complete Daily Trades “Business for” email sent with all daily deal details to CR-H & CSR-S Marketing Approve & Execute Contract Email E3 E13 E4 Marketing Email Posting Set up contract in GIS K# Number generated (status – unfinished) Transactional & Discount Postings Receive “New Contracts”Email with contracts for daily business Email deal detail to customer Prepare & review TSA File Contract and Send to customer TK Enters points, term volume & rates (PALS) in TK (status – approved) Review for changes E5 E19 E1 E7 E2 E10 E15 E14 Contract Rep - H Auto email sent communicating contract readiness to Nominate Reviews Deal & Enters Rates (FT & IT) in TK Assist with nominations as necessary Email TSA Email Email Client Services Rep - S E12 E11 E16 Nomination Confirm Email to Generate Service Request Sign and return TSA to CR-H Receive Approved TSA Make nomination E9 E8 E6 The Customer E17 GIS Email Update Contract Status Report Excel E18

  22. Approach 4: Detailed Activity & Task Lists

  23. Approach 5: Value-added and non-value-added analysis

  24. Approach 6: Report analysis for redundancies

  25. Approach 7: Integrated Workplan & Timetable Five separate tracks of work will need to be integrated as we go forward… “Go live” plan to implement DFT/Deal capture is the critical path

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