Centralized Procurement Agent Practices in Large Chinese Enterprise G roups

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

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

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

4. 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

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

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

9. Practices: Centralized Procurement Amount Growing 80.2 billion 14.2 billion 2005 2011

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

13. From go-live on Jun/2011 to Aug/2012: E-Commerce Platform of SGCC Experts Database Procurement Standards Procurement Planning Bidding Signed Contract Supplier Management • More than 28000experts of evaluation of bid • 5 levels of experts major, totally 210 majors • Deploy 46 templates of Contract • 470,000 Signed contract • More than 12500registered suppliers • More than 7000 suppliers bidding • Completing 234batches，more than 1100procurement projects • About 2,538,000 biddingfiles • 150,000 records of Material Master Data • 792 templates of Structured Procurement Standards • 619 Designing Institutes • 536,000 records of Procurement Request • Max 64148records in one procurement batch

14. Suppliers Management Model： First-level Management of headquarters Audit and approve Participate in all bidding at E-commerce Platform(ECP) Registration on the E-commerce Platform(ECP) Suppliers Supplies Management System Treatment of bad behavior of suppliers Verification of qualification & performance Evaluation of performance of suppliers Registration 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.

15. 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.

16. 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-86-10-63411000） State Grid Information Communication Co., Ltd. • State Grid Material Co., Ltd/Province & State company Business M&O State Grid Information Communication Co., Ltd. System M&O Business applications support State Grid IT support service center Consulting service providers Support Software provider support Computer hardware / network vendor support Server hardware / network / channel vendor support

17. ERPsystem E-commerce platform (ECP) expert management supplier management Waste material Quality assessment Performance appraisal Quality management procurement standard Storage & distribution management procurement management contract management Main process program management Main data

18. Well-organizied Bid Opening Ceremony

19. Checking bid price online after bid opening ceremony

20. Separated Evaluation Bases for Large Scale Procurement

21. Sealing Communication Tools Evaluating through E-Commerce Platform

22. Save social and natural resources to protect the environment

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

24. Advantages of doing centralized procurement through a tendering agent： provide comprehensive and accurate understanding of relevant laws and regulations; 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. Professional Personnel

25. Advantages of doing centralized procurement through a tendering agent： The system provides access to all tendering 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. Advanced E-commerce Platform

26. Advantages of doing centralized procurement through a tendering agent： 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. Standardized Procurement Procedure

27. Advantages of doing centralized procurement through a tendering agent： based on the professional classification criteria developed by evaluation experts in China, SGM 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. Comprehensive Pool of Experts

28. 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.

29. Thank You