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Streamlining processes and increasing value for the oil and gas supply chain

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The Supply Chain Code of Practice outlines a set of bestpractice guidelines and is an aspirational code of conduct tohelp the UK oil and gas industry:

• improve performance• eliminate unnecessary costs• addvalueandboostcompetitiveness Signatories include major purchasers (operators and principalcontractors) and suppliers (companies providing goods orservices).

By signing up, you are embracing a co-operative attitudetowards developing and maintaining an efficient supply chainand achieving the highest attainable standards of businessethics and health, safety and environmental operations. This will allow the UK supply chain to improve commercialrelationships and boost the UK Continental Shelf’s (UKCS)competitiveness in line with the industry’s strategy tomaximise economic recovery (MER UK).

What is the Supply Chain Code of Practice?The Code tackles behaviour at three key stages in thecommercial process under the headlines of Plan, Contractand Perform & Pay. The tiered compliance system measuresthis behaviour and an annual award scheme gives publicrecognition to those purchasers with high levels ofcompliance.

All signatories must be registered on FPAL (First PointAssessment Limited) – the oil and gas supply chain databasethat allows oil and gas purchasers to identify, select andmanage current and potential suppliers. It is acknowledgedthat full compliance with the Code will not be achievable byall signatories. However, companies should aim to comply asfully as possible.

Oil & Gas UK and the Oil and Gas Authority are bothcommitted to the principles of the Code, which was initiallylaunched in 2002 under the PILOT ‘progressing partnership’scheme.

Oil & Gas UK manages the Code and all signatoryinformation. More information can be found atwww.oilandgasuk.co.uk/SCCoP.

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PlanTransparent planning of contracting activity by major purchasers to improve supply chain capability

ContractStreamline pre-qualification, tendering and negotiation processes to reduce bidding costs, eliminate waste, add value and increase competitiveness

Perform & PayIncrease feedback dialogue to improve performance and shorten payment cycles

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Commitment to Industry Behaviours Charter

FPAL Key Performance Indicators (KPI) and

Performance Feedback

30-Day Payments

Industry Mutual Hold Harmless (IMHH)

Tender Efficiency Framework

FPAL Company Profile

Oil and Gas Authority Supply Chain Strategy

Oil & Gas UK Share Fair

Forward Work Plan

Debriefs

Standard ContractsStandard Invitations to Tender (ITT)

FPAL Listings and Capability Profiles

Plan Contract

Perform & Pay

See p7-9 to find out more about these industry initiatives

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• 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

What are the benefits for industry?• 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.

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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.

Purchaser level Declared spend per annum

1 Less than £30 million

2 £30 million to £100 million

3 Above £100 million

Tiered compliance system

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Timeline

JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER

Compliance questionnaire to be completed by all signatories

Survey issued Results analysed

Report created Awards presented at

Oil & Gas UK’s Share Fair

Criteria deadline – Supply Chain Code of Practice year-end. Also start point and criteria deadline for FPAL performance feedback data

Purchasers are categorised into three levels according to their declared supply chain spend.

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BRONZE SILVER GOLD

MinimumnumberofFPALpurchaserfeedbackreportsreceivedandaveragescoreforquestionsaboutthecode (purchasers rated by their suppliers)

Average score of 5 Average score of 6 Average score of 7Level 1 Purchaser 3 4 5Level 2 Purchaser 5 10 15Level 3 Purchaser 10 20 30

Minimum number of FPAL supplier feedback reports issued (suppliers rated by purchasers)Level 1 Purchaser 5 7 10Level 2 Purchaser 10 20 30Level 3 Purchaser 20 40 60

Annual work plans logged on FPAL websiteLevel 3 Purchaser ✓ ✓ ✓

Level 1 & 2 Purchaser Not mandatory but preferred

30-day payments

Level 3 Purchaser Compliance with agreed contractual terms

Compliance with agreed contractual terms 30-day payments in contracts

Commitment to Industry Behaviours CharterAll ✓ ✓ ✓

Commitment to annual Share Fair eventLevel 1 Purchaser Attend Attend AttendLevel 2 Purchaser Attend Attend Attend

Level 3 Purchaser Attend 1 to 1 meetings every two years

Presentation every three years and 1 to 1 meetings

every year

CompletionofannualSupplyChainCodeofPracticeComplianceSurveyAll Levels ✓ ✓ ✓

Criteria for awards

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LOGICLOGIC (Leading Oil and Gas Industry Competi ti veness) was created in 1999 by the UK Government’s Oil and Gas Industry Task Force to improve competi ti veness on the UKCS. LOGIC is a wholly-owned not-for-profi t subsidiary of Oil & Gas UK and works towards identi fying collaborati ve industry-wide soluti ons 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 Committ ee with assistance from LOGIC. They seek to standardise contract draft ing; ensure a consistent approach to risk allocati on within the industry; and reduce the ti me required to draft , review and negoti ate 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.

Industry mutual hold harmless (IMHH) IMHH was developed to respond to the uncertainti es of risk allocati on for contractors working on an installati on together, but who are not contractually linked. The IMHH scheme addresses the contractual gap by creati ng 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 off shore oil and gas industry contractors to sign up the mutual hold harmless scheme. The principles of the IMHH Deed are aligned with the draft ing included in the Standard Contracts.

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 identi fy, select and manage current and potenti al 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 reportsFPAL performance feedback reports are a mechanism to provide two-way feedback between purchasers and suppliers. Feedback is essenti al for mutual improvement – to learn from mistakes and develop best practi ces.

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governance for standard industry solu�ons

Guidance notes

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Annual work plans published on FPALBy 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.

InvitinginterestfromFPAL registered suppliersPurchasers 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 CharterThe 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

Guidance notes continued30-day payments30-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.

TenderEfficiencyFrameworkThe 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 atwww.oilandgasuk.co.uk/efficiency

Oil and Gas Authority Supply Chain StrategyThe 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 UKCS2. To anchor the service sector in the UK3. 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.

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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 eventOil & 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.

SupplyChainCodeofPractice Compliance SurveyThe 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.

DebriefsOffering 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.

InnovationandtechnologyThe 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 servicesDelivery 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.

Purchaser level Declared Spend per annum

1 <£30 million

2 £30 million to £100 million

3 Above £100 million

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