Offshore category management

The aim of this case is to outline categories and to explore what these categories mean for the contractors and their suppliers. The example used is based around a tier 2 sub-sea contractor looking to control risk within their supply chain.

Contracting and procurement categories are used to ensure the appropriate sourcing process is implemented to satisfy the company's requirements. By allocating an appropriate category, the different risk profiles can be managed and mitigated to protect the contractor's interests as effectively as possible.

The following are examples of the categories used by an oil and gas company to manage their sub-contractors.

Provision of major services:

• Where a requirement consists of a complex scope of work, involving third-party personnel plus equipment it is classed as 'major services.' In this case the Procurement team will liaise directly with the Contracts team to determine the correct course of action. Services in this category are bespoke and a subcontract will be negotiated with the proposed vendor(s)using the relevant template, or an existing frame agreement.

Provision of minor services:

• If a scope of work includes the provision of third-party personnel plus equipment and or materials, but the specific requirement is relatively low risk, it can be classed as 'minor services.' But, where services do not involve the vendor's personnel travelling offshore, the Purchasing Officer may contract the work under a standard purchase order, using standard terms and conditions. This will be explained in the Contract Management Guidelines.

Repeated purchases and standing orders:

• A risk assessment can be reused for repeated purchases where the supplier has previously demonstrated compliance to specifications. If the use of the item differs and impacts health and safety, the risk assessment should be reviewed and modified. Where a standing order has been raised with a supplier, the supplier must indicate that all products being supplied to the company will conform to applicable legislation, codes of practice or specifications.

Purchase of goods / equipment:

• When there is a requirement to purchase goods/equipment from a vendor (for example, consumables, spare parts, pumps, rigging), the Purchasing Officer will contract the purchase under a standard Unit4 Business World (U4BW) generated purchase order, which references the appropriate standard terms and conditions applicable to the nature of those goods (e.g. equipment conditions).

Hire of Agency Personnel:

• If there is a requirement to source third-party personnel from an agency the Purchasing Officer may contact the work under an agency agreement call-off order. For a call-off, a valid Personnel Agency Services Agreement (PASA) must be in place. The Purchasing Officer will liaise directly with a Contracts Specialist for assistance with negotiation of terms and conditions where there is a deviation from the standard PASA contract.

1. Based on the categories typically outlined by a sub-sea oil and gas company, consider and explain the implications of misallocating minor and major services for the main contractor. (10 points)