1
Distribution Contractors Day with Saudi Electricity Company
October 28 th , 2015

2
The contracting phase consists of two main elements: tendering process and contracting process
Prequalification Contracting Operation
1.1 Ceiling distribution & coverage assurance
1.2 Bidding mechanism
2.1 General terms & conditions
2.2 Performance management
1.3 Pricing mechanism 2.3 Others

A number of key recommendations are implemented in Phase 1
3
1 Prequalification 2 Tendering 3 Contracting
1. Prequalification model: new prequalification process and criteria to assess contractors
2. Coverage model:
Kingdom model will be used on office level to help match supply to demand in all offices across the
3. Tendering strategy: will include the number of required contractors in each electricity department and how their ceilings will be defined
1. Pricing mechanism: reference prices along with an improved pricing mechanism are expected to yield more accurate prices
1. Guarantees: Bid bonds are required from contractors. These are refundable unless contractor confirms intent to sign contract.
Bank guarantees are 5% of contract ceiling.
2. Contract ceiling: contract ceiling is distributed based on contractors’ work capacities, prequalification scores and bids
2. Contract duration: new UR contract term is reduced to 2 years with 1 optional year
3. Awarding strategy: will determine who gets awarded a contract, and what their ceiling will be. If contractor refuses to sign, his ceiling is given to the next in line contractor (cascading)
3. Payment terms: 50% payment upon completion of work is incorporated to allow better liquidity
4. KPIs: KPIs are integrated in the contract to objectively measure contractor's performance, and linked to SEC’s evaluation sheet
5. Incentives & penalties system: the building blocks for a future incentive & penalty system are put in place

4
12+ operational tools are developed to facilitate the operationalization of the new process
PREQUALIFICATION TOOLS CONTRACTING & TENDERING TOOLS
CONTRACTING
GUIDE
UPDATED
CONTRACT
CLAUSES
KPI
EVALUATION
WORK ORDER
ALLOCATION
TOOL
COVERAGE
ANALYSIS
MODEL
PRICE
UNIFORMIZATION
VALUE
ALLOCATION &
COMMITMENT
INSTRUCTIONS
FOR BIDDERS

Initiation includes developing historic reference prices to gauge contractor bids
Prequal Tendering Contracting
Bids from last tendering process are entered into model
Model applies appropriate inflation factor
New price uniformization methodology is applied to bids
Final historic reference prices are generated
5
Historic bids entered to be compared against new contract bids
An inflation factor based on a detailed contractor cost model is applied to historical bids
New contract bids are uniformized on a line item level using a standard deviation methodology
Bids are compared to historic reference prices and final prices are calculated

Contractors ’ bids and prequal scores will be used in determining the contract ceilings
SEC WILL DETERMINE TOTAL COVERAGE
REQUIRED IN EVERY OFFICE
Prequal Tendering Contracting
…AND DISTRIBUTE IT ACCORDINGLY
TO CONTRACTORS x
150%
Demand
6
Note: This data pertains to the Madinah office only
Source: SEC data
~ x
40%
Supply
EXAMPLE OF MADINAH OFFICE

7
5 star safety system is now a mandatory system that all contactors must abide by
Prequal Tendering Contracting
CONTRACT SAFETY REQUIREMENTS ARE
UPDATED TO INTEGRATE 5-STAR SYSTEM
CONTRACT SAFETY REQUIREMENTS ARE
UPDATED TO INTEGRATE 5-STAR SYSTEM
•
Safety KPIs are incorporate in contractor performance measurement:
-
Number of Type 1 (First Aid) Incidents per 1 M work
-
Number of Type 2,3,4 (Injury, Handicap, Death) Incidents per 1
M work
-
Percentage of times that work site complied with SEC safety standards
•
12% of the points in the prequalification scoring pertains to safety record & HSE systems
•
Safety performance averaged over the last three months will be reflected in work allocation through KPIs
•
Contract addendum enforces the 5-star safety system in performance
•
Safety systems will be checked in post-signing stage.
Contract is subject to termination if standards are not met
•
Non-compliance on safety requirements for trenches subject contractors to a penalty of 200 SAR

~10 KPIs were developed based on current situation & best practices
Prequal Tendering Contracting
8
CATEGORY
Timely Work
Performance
Safety
Performance
Collaboration &
Responsiveness
KPI DESCRIPTION
1. Percentage of WOs completed within time (count)
2. Percentage of WOs completed within time (value)
5. Average delay on delayed
WOs (count)
7. Density of contractor work
Total work orders completed on time compared to total number of WOs completed
Value of all work orders completed on time compared to all work value performed under URC
The average number of delayed days for all work orders that have delays
Average work value for a given contractor's work orders
Number of type 1 incidents that happen with a given contractor compared to his value of work
9. Number of Type 1 (First Aid)
Incidents per 1M SAR work
10. Number of Type 2,3,4 (Injury,
Handicap, Death) Incidents per
1M SAR work
12. Percentage of times that work site complied with SEC safety standards
18. Average number of days to accept work order
20. Number of emergency and maintenance rejected WOs*
21. Number of construction rejected WOs
Number of type 2, 3, 4 incidents that happen with a given contractor compared to his value of work
Number of contractor site visits that complied with SEC safety standards compared to total number of site visits
Response time of contractor when a work order is issued
Number of emergency and maintenance rejected work orders in a given month
Number of construction rejected work orders in a given month

9
We have developed a new dashboard for KPIs linked to the
Prequal Tendering standard evaluation form
KPI DASHBOARD TO BE GENERATED
MONTHLY …
… AND AUTOMATICALLY LINKED TO
EVALUATION USING WEIGHTS
Contracting
New evaluation system will the building block for a future incentive & penalty scheme