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CONTRACTS FOR OUTSOURCING


UTILITY MAINTENANCE WORK

Working Group
B3.06

January 2015
CONTRACTS FOR OUTSOURCING
UTILITY MAINTENANCE WORK
WG B3.06

Members
Johan Smit, Convenor (NL), Nhora Barrera, Secretary (CH),
Norbert Kaiser (DE), Paul Leemans (BE), Paul Myrda (US),
Iliana Portugues (GB), Alan Wilson (GB)

Copyright © 2015

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ISBN: 978-2-85873-308-8
CONTRACTS FOR OUTSOURCING UTILITY MAINTENANCE WORK

CONTRACTS FOR OUTSOURCING


UTILITY MAINTENANCE WORK

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CONTRACTS FOR OUTSOURCING UTILITY MAINTENANCE WORK

Table of Contents
EXECUTIVE SUMMARY .........................................................................................................4
CHAPTER 1 INTRODUCTION ..............................................................................................5
CHAPTER 2 THE STRATEGIC REVIEW..................................................................................6
2.1 Competency Mapping ................................................................................................................. 6
2.2 Business Strategy Alignment ....................................................................................................... 7
2.3 Financial Assessment..................................................................................................................... 7
2.4 Legislation ...................................................................................................................................... 7
2.5 Risk Management ......................................................................................................................... 8
CHAPTER 3 WORK SPECIFICATION FOR CONTRACTOR SELECTION ................................9
3.1 Statement of Work....................................................................................................................... 9
3.2 Bid Response................................................................................................................................10
CHAPTER 4 SUPPLIERS QUALIFICATION SYSTEM AND EVALUATION ........................... 12
4.1 Requirements ...............................................................................................................................12
4.2 Qualified suppliers list (suppliers pool) ..................................................................................15
4.3 Supplier’s qualification ..............................................................................................................15
CHAPTER 5 TENDER ASSESSMENT .................................................................................. 17
CHAPTER 6 CONTRACT STRUCTURE ............................................................................... 18
Overview .................................................................................................................................................18
A. General Conditions ...........................................................................................................................18
B. Special conditions ..............................................................................................................................22
C. Cancellation of the contract ............................................................................................................22
D. Annexes:..............................................................................................................................................23
Summary ..................................................................................................................................................23
CHAPTER 7 MANAGEMENT OF PERFORMANCE AND CONTINUAL IMPROVEMENT ..... 25
7.1 Management Responsibility ......................................................................................................25
7.2 Resource Management ..............................................................................................................26
7.3 Measure, Analyse and Improve ...............................................................................................27
7.4 Benchmarking ..............................................................................................................................30
CONCLUSION .................................................................................................................... 31
BIBLIOGRAPHY/REFERENCES ............................................................................................ 32
ACKNOWLEDGEMENTS ..................................................................................................... 32
ANNEX 1: PAPER FROM 2012 DOBLE CLIENTS CONFERENCE, BOSTON ......................... 33
ANNEX 2: EXAMPLE OF A SERVICES CONTRACT............................................................. 49
ANNEX 3: SUPERVISING AND MONITORING ACTIVITIES ................................................ 65
ANNEX 4: OVERALL MAINTENANCE MONITORING WITH INDEX SYSTEMS .................... 66

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EXECUTIVE SUMMARY
BACKGROUND OF THE TECHNICAL BROCHURE

For some 15 years a working group B3.06 within the B3 CIGRE substations group has tracked changes in
management of maintenance activities. The first activity (then a joint SC 23/39 group) was a major international
survey. It was completed in 2000 and published as Technical Brochure 152, where several key trends in the
management of maintenance tasks were identified [1]. These were to seek “efficiencies” to manage asset care,
introducing tighter controls of budgets, and most importantly processes for managing business risk exposure.
Subsequently, WG B3-06 has looked at some of these changes in greater detail. Three topics were pursued in task
forces- TF 01 outsourcing of maintenance, TF 04 decision processes for asset replacement and thirdly TF-05
information strategy for asset management. Each involved further surveys, and for the outsourcing group further
brochures and papers at Paris sessions followed, particularly from Task Force 01- references [2], [3], and [4]. After
a break for some years further surveys reviewing the changes in outsourcing aspects of substation maintenance
were undertaken using Doble clients both in USA/ Canada and in Europe. The closing review was presented at the
2012 Doble Clients Conference in 2012- and published in this brochure as Annex 1. The other task forces have
also completed recent publications. The asset replacement work was published in 2012 as Technical Brochure 486
[5] and the Information Strategies work was published in 2014 as TB 576 [6].

With introduction of “asset management” came centralised decision making, lifetime cost management and
centralised data management systems. It became natural at that point to define prioritised work programmes
centrally, and for these to be undertaken by site located staff. At this point the topic of “outsourcing” of any, or all,
site work becomes a natural decision point. Managing effectiveness is the same- whether the team undertaking the
task is internal or external to the company – both are in effect contractors for the asset manager. One of the early
reorganisations commonly implemented was to move the maintenance department into a subsidiary entity, but
wholly owned by the utility. This had the attraction to facilitate business-like approaches to site work and allow the
group to bid for unregulated projects for other companies and, in doing so, demonstrated their cost effectiveness to
a regulator. Significant cost savings tended to occur only when a totally independent maintenance company is
involved. The use of external service suppliers is now a long established feature of life in Europe, Asia and
Australasia and a growing trend in North America. However, maintenance outsourcing is not a simple task,
particularly when involving core areas. In most instances it can be successful, provided goals are not unrealistic,
obstacles minimised and suitable management controls established. The surveys indicate significant concerns
remain within utility engineers relating to flexible working, loss of skills and knowledge.

These are the issues, along with compliance to contracting and bidding legislation that need to be identified and
managed within the outsourcing contract. This final brochure has been written to describing the contracting
framework- a more practical guide to the outsourcing process. The bidding should be open consistent with the
GATT/WTO and other procurement directives valid in the region of application. The contract structure itself has
followed two relevant European Normatives, but written to focus on power utility needs. These are EN 13269: 2006
“Maintenance- Guideline on preparation of maintenance contracts” and EN 13306:2010 “Maintenance-
Maintenance Terminology”.

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CHAPTER 1 INTRODUCTION

The liberalisation of global markets over the last two decades has led to structural upheavals within utilities, not
least of which has affected the role of asset care within transmission and distribution substations. For some 15
years a working group within the CIGRE substations group B3.06 has been tracking these changes through
surveys, and providing advice on best practice processes, these being published as CIGRE brochures. A closing
review of this activity on behalf of the group, and published in the proceedings of the 2012 Doble Conference, is re-
published here as Annex 1.

A key feature of the changes has been the re-focus of utilities from being purely service entities into commercial
businesses. This changed from having rates based on a cost plus basis to one achieving an acceptable level of
profit for an acceptable service level. Customer choice, aided in some cases by regulation, was there to ensure
minimised costs and an acceptable service. The business focus extended to identifying what was core business for
a utility and what could be outsourced. The changes have evolved and matured over the years. Perhaps the more
universal change which has been observed in the industry was the shift to having a centralised “asset
management” group to control the lifetime costing of all assets in the network. This group has also taken
responsibility for prioritising expenditure to areas they identified as having greatest business benefit and minimum
business risk exposure. With centralised decision making and centralised data management it became natural to
define work programmes then to be undertaken by site located staff.

Many companies set up an internal service supplier organisation for its entire site based staff. This allowed internal
trading with the centralised asset management group. It also allowed the maintenance team to earn unregulated
income from other utilities. Some of these units became independent companies but still owned by the utility. At
this point it became a natural decision point for asset managers to contract some or all technical asset activities not
just to the internal unit but to external suppliers. For some it led to a greater or lesser extent of contracting outside
the company; the level being determined by the decisions as to what should be core competencies, and where the
balance of acceptable risks lay.

The outsourcing activity is not new, outsourcing of commodity tasks- like tree pruning, tower painting have long
been undertaken by specialised service companies. However, the situation involving outsourcing of more general
substation maintenance had indeed changed from the earlier simple cost saving process followed when contracting
lower risk tasks.

This current document is intended as a more practical guide to the outsourcing process. It covers:

Section 2 The strategic review, including executive backing, identification of activities in terms of their core or
strategic value, risk analyses and mitigation strategies.
Section 3 Work specification for contractor selection, the documentation for the request for proposals (RFP),
statement of work (SOW) and selection of contractor.
Section 4 Contractor qualification system and performance evaluation
Section 5 Tender Assessment
Section 6 Contract preparation
Section 7 Monitoring performance during the contract
Section 8 Conclusions
Section 9 Annexes

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CHAPTER 2 THE STRATEGIC REVIEW

The maintenance department is often the largest within a utility; hence the allure within a business focussed
operation to reduce costs by reducing resource levels in this area. One approach is to outsource activities to an
outside company, which can be a detriment to both: the company and the staff. There are, however, some working
areas where the risk of transferring specific expertise outside the company can provide a benefit. Consequently
such a move needs full endorsement by the executive. The selected approach, if handled badly, can affect the
performance and the motivation throughout the whole company and negatively impact the company image. To a
larger degree, performance issues are very often a knock-on effect associated with the staff involved the loss of
their jobs and those who remain.

In some cases substation staff may transfer to the new supplier, but for many vendors the cost of assuming the
past pension provision has been too high to recover within the contract. This will deter some from bidding and may
become an issue that the utility needs to address through voluntary redundancy, early retirement packages and
other arrangements where the company retains the pension liability.

Where work is undertaken by in-house staff it is up to the management to identify and control the risks. This is a
more difficult situation when the work is done by contractors only indirectly under management control.
Responsibility for risks is a significant issue and this usually is retained by the utility. This means significant
attention is needed to decide what to outsource, how to select the contractor, and how to manage contractors
subsequently.

2.1 Competency Mapping


Decisions as to whether to outsource all or only some activities will depend on the degree of risk a company will
accept. Selection is made through competency mapping and this topic is emphasised in Annex 1. Some of the
activities undertaken by utilities are low risk. Spill-over competencies allow a utility to obtain profits through external
sales. Parasitic activities waste organizational resources. Tower painting would be an example. These are activities
that may be managed with cost–driven adversarial contracts- since cost and performance can be identified fairly
easily and consequently the risk of poor performance is less.

However, essential competencies are those needed for an organization to operate. This was discussed in detail in
reference [2]. In the case of a transmission utility this could include the competency of post-fault restoration of
demand. In essence, the operational skills included are those such as switching, maintaining safety from system
dangers, protection tripping analysis and emergency repairs. These may be outsourced provided the risk analysis
had been undertaken and that level of risk was acceptable to the company. Protective competencies can also
cause considerable risks for the success of the whole organization if they are not managed properly. An example in
the case of transmission utilities would be protection maintenance.

Adversarial relationships might well deliver the lowest price for any of these services. But apart from spill over
competency tasks, they are unlikely to deliver best value or indeed the lowest overall costs, after transactional and
other possible costs are accounted for. Very close collaboration and mutual trust is necessary if the relationships
are to generate the scale of benefits needed to justify a decision to outsource. This requires the use of long term
contracts usually described as partnership contracts. The lesson is clear- but many commercial departments
usually do not appreciate the differences or the need for different models for managing outsourcing of different
competencies, and this is a source for disappointment and a potential for failure of the whole process. Greater
involvement of in house asset managers is needed for these contracts to be effective.

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2.2 Business Strategy Alignment


Without doubt modern utilities are not altruistic: they are profit driven business entities. A key question for them is
whether needing to undertake activities which they have assessed can be undertaken by outside service suppliers.
Outsourcing services should lead to reduced costs, and allow the remaining staff to focus upon tasks which are
truly critical. It should also allow innovation from suppliers who work with a wider variety of clients, and this is more
likely to occur with collaborative contract management. .

2.3 Financial Assessment


For many the cost savings are seen as the major driver. However, within a rigorous outsourcing evaluation
exercise, it is important that costs be compared on a like for like basis, including overhead allocation. It is vital that
all costs associated with in-house provision are captured. In addition to direct costs e.g. labour costs, the
assessments should also include training and development of staff, acquisition and maintenance of tools and
equipment. The administrative costs associated with the work that would be outsourced must also be accounted for
in the analysis. This enables an accurate portrayal of overhead costs (buildings, HR, pensions etc.) when the
comparisons are made.

Some utilities will also include provision for innovation development, leading to a total reduced cost of the activity.
To complete the picture, one-off costs, e.g. market development costs, or switching costs associated with
transferring the activity to an external supplier must also be taken into account when appropriate.

2.4 Legislation
The main legal requirements to be followed when starting outsourcing relate to open and fair trading practices. The
General Agreement on Tariffs and Trade (GATT) was a multilateral agreement first signed in 1947. It regulated
international trade practices to achieve a "substantial reduction of tariffs and other trade barriers and the elimination
of preferences, on a reciprocal and mutually advantageous basis." It took effect in 1948 and lasted until 1994 when
it was replaced by creation of the World Trade Organisation (WTO). The agreement had been revised a number of
times between 1947 and 1994, and an important addition came in force in 1981 with “The Agreement on
Government Procurement (GPA). This is clearly relevant to utility procurement since many remain in public
ownership. This and GATT agreements came under the auspices of the WTO in 1996. Both agreements regulate
the procurement of goods and services by the based on the principles of openness, transparency and non-
discrimination.

In the European Union the Utilities Procurement Directive 2004/17/EC came into force. (The latest updated
implementation was in January 2006). Like GATT and GPA it was issued with the intention to create an open
market in the European Union (EU), to promote free movement of goods and services, and ensuring public bodies
get best value. But utilities, whether they are public or private, must also comply. Here they are required to
advertise all significant contracts for goods and services in an Official Journal of the EU thereby allowing suppliers
equal access. However, the process can be simplified from an open contract –meaning one open to all who want to
bid, and the utility having to accept the one with the lowest cost– to a restricted or negotiated procedure with
criteria based upon the most economically advantageous tender. This allows escape from lowest, but often
unsuitable, cost bids. This is the approach to be followed in the tender sections of this brochure.

Not only must an applicant for service contracts satisfy competence requirements there are also important
Standards to be met. These are ISO 18001, covering health and safety, ISO 14001 for environmental management
and ISO 9001 for quality processes. It is likely that there will be an increased demand that potential suppliers can
satisfy the 2014 issue of ISO 55000 which covers risk management. Elsewhere OSHA (Occupational Safety and
Health Administration) will apply. Any potential supplier must be able to demonstrate how they implement these
standards. Pre-certification and listing on an acceptable third party “utilities vendor database” can become a

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prequalification to a tender being made. Tendering can then be restricted at the outset to only suppliers able to
demonstrate just how an integrated approach to all the standards is being used, and the extent the way of working
is understood by staff at various levels. In some areas this precertification is referred to as SHEQ (Safety, Health,
Environment, Quality) certification.

Once the contract is placed, EU legislation such as the Acquired Rights directive and transfer of undertakings
protection of employment may affect any transfer of work. This legislation was approved in 2001 and protects
workers when a contract provider changes. It can also apply when work being undertaken by internal staff is
outsourced to an independent provider. This could lead to redundancies in the utility if staff affected cannot be
transferred internally or the contractor prefers to use his own workforce. Any such restrictions should be analysed
and cleared before starting the tendering process.

2.5 Risk Management


The common risks relate mostly to: business interruption through poor performance, safety to workers and public,
health exposure, and environmental damage. Most tasks will involve data entry using an access into the utility
servers. Some utilities will use a secondary firewall allowing contractors into only part of the company data base.
The supervisory staff need to be trained to monitor identified risks and mitigation. All workers will need adequate
and up-to-date training and certification for their tasks- and this can be quite an expensive process. The general
topic is covered within ISO 55000 and how it reflects at a practical level is the topic of a new CIGRE working group
B3-38

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CHAPTER 3 WORK SPECIFICATION FOR CONTRACTOR SELECTION

Two documents are needed in order to progress to the first stage. These are a statement of work (SOW) and a
request for proposals (RFP). The RFP is intended to be a short statement to be sent out, or published in a trade
journal, to alert possible suppliers to an opportunity – it is in effect an executive summary of what is outlined in the
SOW -. The latter would be sent to parties expressing interest, aiming to limit the responses to those on a company
approved list, and /or complying with norms for safety, health, environment and quality (SHEQ) requirements. The
latter may have been accredited by a third party to SHEQ requirements and then held on a widespread vendor
database.

It is a balance between encouraging an adequate number of bids without being overwhelmed with a multitude of
inappropriate ones. The SOW is a document to be sent to responding contractors. The original SOW will often be
revised many times through discussion with the bidders, evolving into what becomes the terms of the contract. It
could even be part of a “negotiated” procedure within the terms of the EU utilities directive (see para. 2.4 above.)

An issue to be resolved early is whether to use a single contractor for a selected work package, or to have multi-
sourcing. Single sourcing may be simplest but there is always a need to encourage a mature market, where
several contracting companies can bid for work and to behave in a competitive manner.

To divide the service territory into parts and let the contract to different suppliers is also a lower risk route. This will
allow benchmarking between them for cost and performance. It also allows termination of a contract with an
unsatisfactory supplier and transferring those tasks to one working in an adjacent area. The work then is
transferred to one who is already familiar with the company, with the tasks, and has pre-approved ways of working.
The other reason for using multi-sourcing arises when one single supplier cannot perform the whole range of
activities or is unable to perform the work for other reasons (e.g. financial problems etc.)

3.1 Statement of Work


The SOW must be as detailed as possible, describing the work to be done, where and in what time frames. Also to
be included would be the expected deliverables and criteria for measuring performance. It is a document that must
be detailed sufficiently for effective bids to be made. It will be reviewed and evolved with the selected vendor. It is
in essence the first version of the technical aspects that will appear in eventual contract.

A good contracting utility is one that has agreed and defined, in a strict way, what it wants to contract, the
outcomes expected and the means to assess who can offer the service with a guarantee. It is important, that the
tendering conditions are expressed to allow even treatment between various tenders. It should cover the following
aspects:

i) Clearly indicate the scope of the service, definition of the completion of works, and the conditions to provide the
service contracted. It should allow open and fair competitive bidding from any contractor who satisfies the
requirements.
ii) Allow clear interpretation of the work and how it is being carried out, together with the roles and responsibilities
of the utility and the contractor.
iii) Clearly describe the evaluation criteria and process to be used for assessment.
iv) Precise documentation of the complete tendering process, including how individual tenders are assessed
against the selected criteria, is needed, in case arbitration becomes necessary with a contractor who has lost.
Essentially a statement of work includes:

i. A list of the locations for the contracted work, together with the scope of works at each of these locations

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ii. Detailed inventory of equipment at these installations, including initial commissioning date and main
revision/maintenance history
iii. Network conditions relating to the current operational availability of installations and equipment
iv. Planned activities together with their planned outage time schedules.
v. Some indication as the range and frequency for (unplanned) responsive work, together with expectations of
response times.
vi. Any need for work to be stage–gate managed in order to restore the circuit rapidly prior to full completion of
the task and required in the event of sudden curtailment of the outages.
vii. Responsibility for post fault recovery work (if included in the schedule).
viii. Applicable Standards, Regulations, norms, recommendations, etc. under which the work is carried out
ix. Safety conditions and potential for environmental impact.
x. Required personnel training certificates for qualification to undertake particular functions.
xi. Technical and logistic support required for the contractor- for example an engineer qualified to undertake
switching, mobile access platforms, which party is responsible for providing consumable spare parts.
xii. Documentation relating to the assets- such as manuals, service records, test results and OEM service
advisories, and where this information is to be accessed.- and who is to provide these.
xiii. Expected outcomes in terms of reports describing work done, results of verification testing, if appropriate,
on the equipment after maintenance.
xiv. Activity report structure, including how data entry into the company server will be managed.
xv. Service level agreements used to judge the performance of the equipment after maintenance- failure rates-
outage statistics. Whether any benchmarking will be done.
xvi. Penalties and rewards for work done- and the criteria determining these.
xvii. Definition of the contractor and contractor party supplies, charges, limits, etc.
xviii. The use of subcontracting companies and where this is expected, as a resource constraint or to undertake
a specialised role (analyses in a laboratory for example).
xix. Expectations of the utility for the management of work programmes, Common management organization,
information flow, etc. expected between supplier and the utility.
xx. Clear definition of site services or temporary facilities provided by the Utility for work to be performed. For
instance whether items such as office/lunchroom/ toilet facilities will be provided by the bidder or the Utility
at the particular site. Will station service power be provided for equipment or will contractor need to provide
portable power units during the work.

3.2 Bid Response


Bid responses should include the structure for charges- fixed costs and how variables are to be determined. But
equally important is to respond to the conditions of the tasks identified in the SOW, including:

• Skill and experience level of the staff to be deployed, their certification of competence for the tasks.
• Their experience and performance undertaking the same tasks, and ideally on the same manufacture of
assets, together with references from other utilities.
• How they would respond to rapidly changing requirements- post fault recovery, unplanned maintenance,
cancelled outages, delayed outages.
• What extra resources they could call upon in the event of some emergency.

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• How they would bring added value, such as innovation into the work- from experience elsewhere, new
techniques, or a wider resource pool with experts to be called in when some unusual situation arises.

In addition to these specific responses to the SOW, a generic supplier qualification will need to be undertaken prior
to award of the contract, as described in the next section.

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CHAPTER 4 SUPPLIERS QUALIFICATION


QUALIFICATION SYSTEM AND EVALUATION
EVALU

Fundamental aspects to evaluate suppliers are shown in figure 1:

Figure 1 Evaluation of supplier

4.1 Requirements
Three main requirements are considered on the qualification system and performance evaluation:
evaluation

i) MANAGEMENT SKILLS

a) Organization:
• How is the company organised?
organi Is this a subsidiary of a larger organisation? A measure of the relative
sizes of the vendor and the utility may be important. If the vendor is very large it may not give the level
of priority to the needs of a small client. On the other hand if too small they
they may not have the flexibility
and be too dependent on availability of key personnel.
• How is project management practiced? Is there a clearly identified project leader? Is there a planning
tool in use to match resource to work time frames? Are those tools (software), compatible with the
Utility’s project management reporting requirements?
• How is the communication flow during project execution? Do they have key contacts-
contacts commercial and
engineering- to manage the work flow and interfacing with utility outage and maintenance planners, as
well as local engineering staff?
• How are the competencies of the project team and the line-management
line management defined? How is change
management implemented?

b) Finance:
• Is the supplier’s finance performance sound?
• Which accounting techniques
niques are used?
• Is the financial administration proposed transparent:
transparent time-sheet reporting, invoicing, cost specification?
• What is the process for reporting rate of spend throughout the contract?

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c) Capacity:
• How many employees are available? In what categories of skills?
• Has its productive capability been analysed?
• How is the workload managed during regular vacation periods?
• How is the workload managed during the weekends and public holiday periods?
• Can the supplier resource the absorption of unexpected increase in work load?

d) Strategic:
• Can the supplier accomplish diversification within an acceptable risk level?
• What is the way they might create uncertainty with secondary aims (an agenda not necessarily in the
best interest of the company, such as an OEM contractor who might be working towards an earlier
capital replacement)?
• How do they get into new markets?

e) Legal:
• Has the supplier analysed any legal restrictions that might impact their capability to do the work?
Working time directives and other such legislation may limit the capability to complete a task.
• How will the supplier afford the civil consequences or costs if faced with mishaps or claims? Are they
insured and to what level?

f) Labour or social matters:


• Will labour relationships and trade union agreements on terms and conditions affect the work?

g) Stocks reduction:
• When are the “Just-In-Time” (JIT) techniques or space reduction applied?
• Is it expected from the supplier to keep a spare parts warehouse?

h) Sustainability:
• Has the supplier been in this market for a long time?
• Is it an important player on this market?
• Has it been successful in earlier contracts? (A history of renewals would be a good indicator).
• Is there an after sales warranty, and how is it defined?
• What is the contractor’s level of staff turnover which may affect sustainability?
• How are training and retaining competencies and experience considered and implemented by the
supplier?

ii) QUALITY ASSURANCE SYSTEM:

a) Certifications
• Is the company certified by ISO 14 001 standards
• Is the company certified by OSHAS 18 000 standards
• Is the company certified by ISO 9 001 standards
• Is the company on a vendor data base as passing SHEQ requirements

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b) Quality Plan
The supplier should present a Quality Plan to the utility. In case of unavailability of this plan, he should
assume the one proposed by the contractor.

This Quality Plan must set the procedures that will be used to complete the task. The Quality Plan must
define its application field, identify the most important agents, and identify its distribution inside the
organization and the actualization during the service execution. It must also quote all the documentation
related to the execution of the service and the responsibility of all the agents in the process.

The Quality Plan must also include a detailed characterisation of the several phases of the service
execution and emphasize, for each phase the procedures, the Tests and Inspection Plans, the related
requirements and documents.

Still, it is very important to consider the way in which this information will or can be collected, and how it will be
used to identify the most suitable supplier. Before any evaluation is started, it should be clear to the utility what are
the most important criteria and why. Otherwise there can be a lot of information about the supplier, but with little
effect on the final evaluation.

During the tender evaluation suppliers will attempt to provide the best image and consequently the utility must be
very critical with the information provided for evaluation.

iii) PERFORMANCE AT WORK:

A continuous suppliers’ assessment process must be kept, which must allow in each supply or significant period of
time to evaluate the supplier performance based in previously defined measurement criteria. This evaluation must
be reported to the suppliers in order to allow them to improve its performance. This procedure, which must
guarantee the supplier’s evaluation feedback, will be approached further in this document. A set of questionnaires
can be used and completed by inspectors.

This questionnaire should cover a wide range of topics, grouped under the three main headings (see Figure 1):

a) Technical skills:
• Has the supplier competent personnel?
• Has the supplier the necessary know-how and tools to carry out the works?
• Has the supplier appropriate training programs and knowledge retention processes?

b) Safety ability/attitude and procedures


• Has the supplier got safety educated personnel, with on-going training and with personal protective
equipment as appropriate?
• Are the procedures adequate to the task?
• Does the supplier routinely carry out risk assessments and mitigation method identification for tasks to
be undertaken?

c) External aspects
• Do they have an adequate reference list of other companies using similar services?
• Does the supplier implement adequate environmental protection measures?

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4.2 Qualified suppliers list (suppliers pool)


Many utilities create and keep lists of qualified suppliers. These lists will initially
initially include both established service
suppliers and also with companies that are interested entering this service market.. Decision on the inclusion or
exclusion of current and new suppliers must follow clear regulations and the suppliers have to be informed
informe about
those regulations.

Figure 2 shows the most important parts of a pre-qualification process:

Figure 2: pre-qualification
pre process

As a rule, only suppliers included in the pool can be considered for tender. The admission of new suppliers must
include a process of qualification, which should be controlled by the utility. This process of qualification must be
supported by appliance documentation with questionnaires to be filled in by the applicants. The applications’
analysis must be supported by pre-defined
defined criteria with a high standard of objectivity.

If there are no clear conditions for qualifying new applicants it may be appropriate to allow a temporary contract for
the supplier to prove his worth. This may also be appropriate where it is not clear how to undertake the work, or to
assess outcomes. After this,, a definite decision on approval or denial for a longer term contract will be taken

4.3 Supplier’s qualification


The appropriate organizational unit of the utility should coordinate the other units in the qualification processes,
requirements definition, evaluation and follow-up
follow up of the suppliers, as well as in the contribution of the necessary
information (questionnaire definition of general and specific requirements, specific incidents that t affect the
evaluation) for the suppliers’ qualification.

The appropriate organizational unit will be responsible for the definition and classification of the goods and services
(critical, relevant, and non-relevant),
relevant), the procedures and the quality level
level of the services, as well as the other
aspects related with the realization of the works (technical and auxiliary means, safety at work, environmental
aspects, etc.).

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The requirements for the qualification of the suppliers vary according with the qualification level of the supply.

A questionnaire with general requirements and one questionnaire specific for the product or service are classified
as essential. It will be advisable that the suppliers integrated in this qualification will fit the following requirements:

• To be certificated in an accepted international qualification system such as the ISO 9001 for the service to
be qualified
• To have appropriate equipment, tools and processes to undertake the work
• To have certificates and/or documentation to support the legal and obligatory aspects related with security
and safety

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CHAPTER 5 TENDER ASSESSMENT

As a first step the interested bidders must satisfy the pre-qualification criteria, as mentioned earlier, relating to
safety, health, environmental and quality. Other qualification criteria can be additionally selected, according to the
specific needs of the contract.

In a second step pre-determined criteria are used to evaluate the competencies of the potential bidders. These
criteria can be divided into two broad categories: Technical and Commercial. Each tender is then evaluated in
accordance with the following criteria under each main heading:

Technical Commercial
• Methodology: • Price
o Planning
• Terms and Conditions
o Timing
• Legal
o Safety
o Insurance
o Network Reliability
o Guarantee
o Innovation
• Experience, references related to similar projects
• Staff Qualifications and Competencies
• Tools and Equipment
• Quality
• Organization
o Structure
o Management Competence
o Sustainability

The evaluation of potential bids should be based on the criteria defined above with weighting suggested as an
example in the Table below. The next step would be to introduce a scoring system for each topic, say 1-10 with the
utility assigning an acceptable “pass” score in each category, and then construct graph showing how the score
profile for each bidder varied across the categories- a simple way to see the evaluation.

Criteria Weighting Sub-criteria Weighting


• Methodology, Presentation 15%
• Experience and references 5%
• Staff Qualifications and Competencies 5%
Technical 60%
• Tools and Equipment 15%
• Quality 10%
• Organisation 10%
• Price 30%
Commercial 40% • Terms and Conditions 5%
• Legal 5%
Table 1: Categories for Tender Assessment

Weights should be chosen according to the relevance of the criteria to the utility. This process itself emphasises
that selection is not based solely on the lowest price bid; outsourcing is a process that is more than a task for a
commercial department to deal with.

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CHAPTER 6 CONTRACT STRUCTURE

Overview
The structure and the main items that the maintenance contract has to consider are listed below, indicating the
most important aspects. For these items we call special attention to two relevant European Normatives:

EN 13269: 2006 “Maintenance- Guideline on preparation of maintenance contracts” and

EN 13306:2010 “Maintenance- Maintenance Terminology”.

The methodologies in these have been used in preparation of this document. Since the range of work used by
contracting utilities is so varied it is no more possible here than in the normatives to provide any “generic” contract.
Only general principles that should be used can be given.

A. General conditions

a. Headline
b. Objective of the Contract
c. Useful definitions (Norm EN 13306 is useful)
d. Standards
e. Scope of technical activities
f. Additional technical considerations
g. Commercial considerations
h. Organizational considerations
i. Social and labour obligations of the contractor
j. Legal Considerations

B. Special conditions

C. Cancellation of the contract

D. Annexes:

a. Specifications
b. Tender (Bid)
c. Documents
d. Others

A. General Conditions
a. Headline
The headline includes all the necessary information to identify adequately the contract and each of its
parties:

• Identification of the contract


• Name of the parties
• Addresses

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• Trading registers
• Identity of the signatories and their position in the companies.

b. Objective
This should be a simple statement of the intention of the contracting parties by having such a contract.

c. Definitions
This section should include definitions of the terms, specially the technical, commercial and legal ones as
used in the contract.

d. Standards
This is a list of all relevant national and international norms and Standards relevant to the contract and
deliverables.

e. Scope of Technical Activities


The items (component, devices, subsystems, functional units, equipment and systems) should be
identified, to be considered individually in order to its maintenance, as well as its location and the place
where the maintenance task should take place.

It includes the adequate description of the task to be carried out by the contractor (including those excluded
of the contract scope, if necessary). This description should be strictly written and should include:

• Inventory of equipment and systems to be maintained.


• Actual condition of the equipment (age, status …) - this data can be available at company or supplier
database.
• Tasks to be undertaken
• Outcomes
• Measurable goals and acceptance margins
• Security requirements
• Data base access and entry rules, documentation.
• Personnel qualification and service conditions.
• Safety requirements
• Environmental requirements
• Tools
• Spare parts, perishable stocks and responsibility for provision
• Applicable methods and techniques to be used to undertake the maintenance
• Time frequency to carry out the tasks
• Conditions of the item to be maintained (out of service, in service, etc.)
• Period of time in which the maintenance task will take place.

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• Minimum/maximum period of answer of the contractor to the client demand, including emergency
response.
• Impediments that can arise in the maintenance task and its consequences. Detailed information is
needed about how adverse external circumstances can produce changes in the planned work. In this
case it should be necessary to indicate: the duties of the parties, how such occurrences will be
communicated,
• Agreement procedure to change the programme and how to appraise the costs/extra costs caused by
these changes and to identify its responsibilities.
• The actions to be carried out in case of work delays in relation with the fixed dates. The rights of the
other party must be carefully detailed (requirement of accomplishment in a reasonable period of time,
contract cancellation, compensation in case of failure or penalization to the other party).
• Proposals of improvement.

f. Additional Technical Conditions


In relation to:

• Detail of methods to be used for verification (checking) of the work (measurable conditions that the
contractor must accomplish to be accepted by the client or to achieve control ratios of the contract). It
should state what is to be measured and when and also how the verification is to be completed, and
by which party.
• Procedures to define the acceptable quality standard of these verification measures.
• Exchange of technical information- a check list of information that must be exchanged between the
two parties- and possibly to a sub-contractor.

g. Commercial Conditions
Financial compensation for accomplished works:

• Contractual prices.
• Rates and taxes.
• Insurance- what is covered and to what limits.
• Travel expenses (support, transport).
• Movement of equipment.
• Price of materials and spares.
• Other organisational allowable costs
• Clear change management processes

Currency and invoicing method:

• Penalties/Bonus.
• Retentions (stoppage of payment) and its reasons.
• Payment dates.
• To establish financial guarantees to protect the client or the contractor.

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h. Organisational Conditions
Including:

• Supervision and management of the contract- who the points of contact are, nominated contract
managers for commercial and technical aspects, work planning methods and their control.
Responsibilities for modifying work programmes and possibly the need for additional spend.
Organisation charts, use of third parties.
• Record keeping of principal activities undertaken, resources and consumables used, billing and
current year forecasting of expenditure to control the rate and totality of spend. Records of unplanned
and additional expenses.
• Conditions of task performance and responsibilities. This would include the process for initiating a
task, signing off satisfactory acceptance of completion and initiating a payment approval.
• Labour risks forecast (norms of safety and hygiene, safety clothing, medical certification, permissions)

i. Social and labour obligations of the contractor


It is necessary to include the obligatory nature for the contractor to follow in labour matters, social security
and safety and hygiene in the work. It will be convenient to specify the aspects related to the personnel to
take into account:

• Designation of safety technical personnel


• Scope of the established works
• Results required to establish satisfactory outcomes
• Control ratios and evaluation of results
• Representatives of the contractor and the company and flow and forms of communication between
them
• Forms to be used by the contractor and the contractor party
• Document revision and application
• Exception clauses to the previous aspects
• Environmental protection (preventive measures to avoid any kind of pollution)
• Property security (access control, confidential information, etc.)
• Measures to secure the quality (experience and qualification of the personnel, efficiency indicators,
materials control, calibration, fulfilment of client quality system). It could be compulsory to inform the
client if there are important changes in human resources of the supplier.
• Task supervision and information recording (including the personnel in charge of the performance
from the client part, the way in which this supervision will be carried out, the responsible from the
contractor part, the form and support of the recording and its definition).

j. Legal Conditions
• Definition of the governing law to be followed when undertaking the work, or when dealing with any
dispute.
• Confidential information use and limitations.
• Time of validity of the contract and period of renewal with its notification procedures.

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• Definition of the property to be used in the work, or arising from the work (documents, information,
recordings, etc.) and their ownership. Who has responsibility should any work be original and worthy
of patent protection.
• List of causes of “force majeure” that can impede the work continuity, the communication method and
the duties of both parts in these cases (how the works are resumed, additional costs, etc.).
• Responsibilities of both parties due to damage to equipment in the work, or responsibilities of the
employees for the contract performance. To detail the compensations to: people, third parts, property,
etc.
• To establish who, where and how the arguments are solved and the possible procedures for the
arbitration and even the appropriate court in last instance.
• To define the reasons and procedures that can produce the cancellation of the contract.
• To include rights and duties of the parts with its priority ranking in the contract.
• To define who can carry out contract changes, and how.
• To take into account the possibility of subcontract any of the works included in the contract (the client
should know to whom it is subcontracted and what kind of tasks are going to be subcontracted).
• To define which legal system is applicable to the contract (international contracts) and which language
will be the official one.

B. Special conditions
• It should be a document defining the work to be contracted, how it will be evaluated, expected results
and conditions required to render the service.
• Its structure should be complete and accurate because it can be used as “arbiter” in case of difficulties
and it is part of the contract.
• It should allow to interpret clearly the kind of intervention desirable and the performance rules between
the contractor and the client.

C. Cancellation of the contract


• If there are infractions or problems that advise the end of the contract or the requested services, the
contract should end before the according data. It can occur as well if any of the parties’ wishes to do
so.
• It is very convenient to include under which situation the contract should/can be cancelled and what
kind of administrative steps are necessary, as well as the indemnification imports and required
payments and the circumstances of the personnel that are involved in the contracted services.
• Due to the specific nature of each individual contract it is not feasible to give special conditions:
generally situations not meeting the conditions of the contract can be a reason for disbanding the
contract. It is however important to preview the main reasons for termination such as:
- Expiration of time agreed upon:
• mutual written information
• Minimum period of contract
• Period time of given notice, date of expiration

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- Period of extension of contract if no notice is given


• Date of expiration
• Which works and payments have to be performed before date of expiration

- Mutual agreement
• Date of expiration
• Works to be performed before until an agreed date
• Due date of open payment

- Disrespect of regulations

- Bankruptcy of supplier

D. Annexes:
It is normal to include in the contract all relevant documentation

• Specifications
• Tender (Bid)
• Documents
• Others

Summary
In the previous chapters we indicate some aspects to be taken into account during the different phases in the
drawing-up of the Contract for the outsourcing activity.

For a correct drawing-up of the contract, it is necessary to pay attention to the following general criteria:

• Contracts should be neither very short nor very long. An excessively long Contract is a bad Contract
and demonstrates an inadequate earlier process. Conversely, a very short contract can be indicative
of inattention to critical areas.
• The Contract terminology has to be very carefully expressed.
• A good relationship today is not a reason to relax the Contract arrangements for both parties.
Tomorrow, relations can become problematic.
• Contracts have to be easy to control and they must allow the contractor introduce innovative initiatives
and demonstrate a continuous improvement.
• The annexes must be signed and be part of the Contract’s main body.
• Some are who sign by proxy and others are the managers responsible of the following-up and
execution.

As regards the drawing-up of the “Contract Specification”, it is necessary to take into account the following rules:

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• It must be a very careful document, indicating clearly what has to be contracted, how will be evaluated
the fulfilment of the results, and in which conditions the service has to be provided.
• Its structure has to be complete and rigorous, because it can be used as an “arbitrator” in case of
difficulties, and it uses to be contractual with the signed Contract.
• It must allow a clear interpretation of the type of the desired services and of the functioning rules
between the sub-contractor company and the client.
• No doubts must exist about it, and so, it will make possible the issue of homogeneous offers from the
different suppliers, allowing an easier and more objective comparison of them.

The general aspects of a good Contract would be:

• based on the sharing-out of the objectives.


• based on a complete clarity between Contractor and Client.
• facilitating effective management and control.
• based on the identification and use of performance measures allowing the external company to realise
continuous improvement.
• based on the principle that the more wins for the external company, the more wins for the utility.

An example contract -here one prepared for use in USA- is included as Annex 2 to the brochure.

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CHAPTER 7 MANAGEMENT OF PERFORMANCE


PERFORMANCE AND CONTINUAL
IMPROVEMENT

The utilities must establish the requirements to be observed during the monitoring of the process.

The fundamentals of the management of performance and continual improvement of the services suppliers must
be based on methodology of Quality Management. This idea is presented in the following picture:

Figure 3: Continual improvement

7.1 Management Responsibility


Supervision and monitoring will be conducted by adopting a series of specific unified guidelines which will be laid
down by a company management for this activity. These will be applied and will affect all contractors subject to
them in the same way.

It is necessary to monitor trends and ratios in order to adopt correcting and improvement measures, through the
term of the contract. Proposals can be made by the supplier or the utility but must be agreed by all parties. It is best
to do this in advance but, the contract should allow modifications based on experience to be included.

It is important for the utility not to lose control of maintenance programmes and activities as they must ensure
adequate risk assessment and management.

The contractor,
or, based in his competence and equipment knowledge - present condition and historical data, must
monitor performance, results and trends to ensure compliance with the contract.

The following indices are suggested for monitoring and control:

Cost:
• Monthlyy cost paid to the service supplier
• Cost of the stock (spare parts) consumed
• Cost of utility personnel dedicated to management and supervision

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Technical ratio results:


• Number of failures
• Rate of failures
• Mean time between failures (MTBF)
• Undelivered Energy due to Outages
• Unavailability
• Number of repeat failures on the same asset

Maintenance control ratios:


The main maintenance control ratios are:

• Availability
• Reliability
• Cost

The objectives can be developed as follows:

• Reduce the cost of unavailability caused by failure of installations, equipment and systems, or losses of
the service performance qualities.
• Limit the increase of failures associated with ageing of assets and the diminished reliability of equipment
and systems or the diminishing of quality of service.
• To create organizational improvements and the training, to implement the management systems, to
realize the methodology, the procedures and the norms.

The number of indicators and ratios must be the necessary, measurable, significant and useful in order to the take
of decisions for to correct measures and their improvement. The contract should include the indicators and ratios of
the technical and cost control that are really useful to judge but are also of easy interpretation and following.

It is convenient to take into consideration the ratios parameters in order to control the quality of the contracted
service. The contract, besides including clearly which are the equipment and systems to maintain, must incorporate
the ratios and results values to accomplish.

7.2 Resource Management


Deployment of Specific Staff with the Necessary Know-How
The monitoring and supervision function be provided with the necessary number of staff members so that it can be
carried out in an ideal manner. This will depend on the importance of the contracted work from the point of view of
its extension, application and type of work being contracted out.

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It is more than likely that the managers or team leaders can take on supervision and monitoring tasks in small firms
having only a small proportion of contracted maintenance work. This would essentially be done by means of
administrative systems and would be applied in the same way as it is applied to their own in-house staff members.
It is normal for middle management to carry out supervision tasks when a company decides to outsource its
maintenance work.

A large firm with a large number of contracted workers working for different contractors with different kinds of
specialities and contracts needs a different control and monitoring structure. This would be distributed among
various decision-making levels as well as staff members capable of monitoring the works being executed in the
different areas that have been contracted out. This organisation has to be provided with the necessary resources
and also generates high costs for the company, which have to be added on to the costs generated by contracting
out. The company doing the contracting out must incur these costs.

7.3 Measure, Analyse and Improve


Performance Indicators
Utilities must establish procedures and responsibilities for the analysis of information and generation of
performance indicators. The establishment and calculation of performance indicators allow the comprehension of
organizational processes and contribute to a culture of continuous improvement. For each indicator, an instruction
must be created which will establish the procedure for the determination of that indicator. This instruction must also
indicate the responsibilities related to the registry, how analysis of data will be performed, and validation.

• Economic and efficiency function monitoring


- Planning function - Cost function
- Workload function - Productivity function
It is important to know the situation of each function, establishing indices and relationships among them to
reach at interesting conclusions about the overall situation of the maintenance service. Annex 3 presents a
specific example applied to a transmission system.

• Service quality and assets performance monitoring


The quality of service can be measured and controlled by the key performance indicators (KPI) of the
elements that make up the system as well as from a global outlook.

• Electrical service quality indicators such as IEEE specified ratios such as SAIDI and CAIDI
- Availability indicators
- Service reliability Indicator

• Quality management indicator


- System Availability Indicator

How to measure?

a) Weighting
The weighting of the different areas considered should add up to 100. An example of such an assessment
could be similar to the example set out below. The monitoring systems corresponding to the functions of

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each area will be put together with similar criteria in such a way that they will add up to 100 for the whole
area. The following list provides an example of the possible functions to be included:

AREA 1: CONTRACTING METHODS AREA 2: ASSESSING CONTRACTORS


1.1 Defining the contracting policy 2.1 Availability
1.2 Contracting regulations 2.2 Technological know-how
1.3 Regulations 2.3 Professionalism and reliability
1.4 Administration 2.4 Prices compared to market prices
1.5 Safety 2.5 Training plans
1.6 Complying with obligatory inspections 2.6 Knowledge of maintenance management
AREA 3: ORGANISING/ PLANNING THE WORK AREA 4: QUALITY AND PRODUCTIVITY
3.1 Work order methods 4.1 Proactive contracting company - contractor
3.2 Work distribution methods system to improve service provision
3.3 Programming and planning 4.2 Selecting workers vs. works
3.4 Coordinating specialties 4.3 Delays in works
3.5 Task monitoring system 4.4 Assigning time
3.6 Meeting execution deadlines 4.5 Logistics and administration
3.7 Informing about work finalized 4.6 Taking advantage of time present
3.8 Coordinating with contracting company 4.7 Work performance
4.8 User satisfaction levels
AREA 5: SAFETY AREA 6: SUPERVISION OF CONTRACTORS
5.1 Own safety system 6.1 Meeting objectives
5.2 Knowledge about contractor's safety system 6.2 Monitoring execution deadlines
5.3 Availability and use of means of protection 6.3 Quality of execution
5.4 Training plans 6.4 Quality of spare parts provided
5.5 Complying with legal obligations 6.5 Accepting / monitoring works not included in the
5.6 Accident rates contract
6.6 Analysing and dealing with suggestions
6.7 Economic supervision of the contract
AREA 7: ESTIMATES AND COSTS AREA 8: CONTROL SYSTEMS
7.1 Offer documents 8.1 Monitoring and supervision methods
7.2 Putting together estimates 8.2 Functional condition of facilities being maintained
7.3 Cost reports 8.3 Aspect of the facilities being maintained
7.4 Economic background of interventions 8.4 Historical background and evolution of
7.5 Profitability analysis interventions, duration and out-of service periods
7.6 Computerising costs 8.5 Historical background and evolution of costs
7.7 User Satisfaction levels 8.6 Analysis of time/cost deviations
8.7 Monitoring objectives

Table 2: Areas for evaluation

b) Methods to be followed
The Assessment System presented consists of assessment, analysis and evaluation of the areas of activity
and their respective functions. These are essential characteristics to properly manage the contracting out of
works. The better these are applied, the better they will aid in reaching the objectives. The points given to
the different areas and each of their functions are weighted and summed up to know the situation of each
area as well as the work contracted out as a whole.

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The use of successive diagnoses enables us to know whether the measurements that are taken to correct the
functions thought to be unsatisfactory are achieving results along the required lines or need to be reconsidered.

A practical example of application of this methodology is presented in Annex 3.

When to measure

a) Before the services


The services suppliers must propose and supply Tests and Inspection Plans (TIP) that will control the
service. This plan must be a document in which the inspection and test actions to be done in the several
phases of the service execution cycle are listed, and where the reference rules, the acceptance and
rejection criteria, the records methodology and the responsibilities are listed.

Supply Tests and Inspection Plans are and must be received, analysed and approved in the supply
proposals evaluation phase, i.e., before the contract. TIP´s, after approval, have the same value as
contracts. It is recommended that the utility develops check-lists of TIP analysis in order to create the
uniformity of procedures, even when the analysis is made by different agents.

b) During the service


Supervision tasks should be reflected in documents and written reports. The former should be drafted in
accordance with standard models. The latter should be drafted when unsatisfactory matters arise in the
area contracted out. In other words they should be drafted only in exceptional cases.

Nevertheless, a general report should be drafted when an important work is finalised, or when a significant
phase of a wide-ranging programme is completed. Likewise, annual reports should be drafted when
contractors have entered into renewable integrated or sector contracts in order to have data available to
back the renewal or rescission of such contracts, as well as to proceed with their renewal but at the same
time putting forward proposals to correct any non-crucial mistakes that may have come about during the
previous contract period.

It is advisable to open a file on each contractor in order to gather information on it. In the long run, this file
will become an important assessment criterion on how each of the contactors has performed its tasks.

c) After the service


Utilities must develop procedures in order to ensure that the activities and services that do not satisfy the
requirements are controlled and registered. Each time there is an incorrect situation a corrective action
must be taken in order to eliminate its causes and to prevent its repetition.

These problems can be external – supplier’s fault – and it is its responsibility to register it, to identify the
cause and to execute the corrective action. On the other hand, problems can be internal – utility’s fault –
and in this case the company must repair it.

All the aforementioned information will be examined by the people responsible for the monitoring unit and then
summarised for higher levels of management so that the criteria are the same for all the parties interested in the
matter.

The managers of contractors should be informed of any conflicts, any delays or faults discovered in the works
contracted out, so that they are in a position to rectify them immediately. These managers should in turn inform the
contracting firm about any inconveniences they may discover that are the contracting firm's responsibility in order to
ensure their mission is accomplished correctly per the agreed to change management process.

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Utilities must impose processes of finding out the causes of problems in order to prevent its appearance. This
preventive action must create changes in instituted procedures, of technical specifications or operational
instructions. These preventive actions must be registered in order to emphasize achieved global improvements.

7.4 Benchmarking
Where a contract is let with multi-sourcing it can be helpful to compare performance between contractors through
outcomes in their work. Where the activity is significant- where a company has outsourced its maintenance to a
single contractor it is possible to benchmark against other utilities.

The usual procedure consists of the following basic steps:

questionnaire → data validation → interviews with best performers → evaluation report → evaluation conference

The outcome relates performance measures against cost. Surveys should be repeated every few years. Benefits of
international benchmarking collaboration include introducing utilities to the concepts of performance measures and
a comparison of how their costs differ from other utilities.

There may be various reasons why costs may differ, for example where equipment quality and age vary, or
operating in challenging climatic environments. But a major benefit is to learn of cost effective practices and their
value to performance. Introducing innovation will be a more useful way of reducing maintenance spend than simply
cutting the budget. Some companies undertake more local benchmarking with systems, equipment supply and
environment.

The problems associated with intercompany benchmarking have been described in CIGRE brochure 367. The
views expressed there are that performance indices are best applied only within a company and used to monitor
improving trends. Comparisons with other entities may be used but with care and to seek general pointers for
improvement, and are not for simple numerical comparisons.

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CONCLUSION
This guide attempts to assist companies whose objective is to decrease their costs and improve their results and
the quality of their activities through outsourcing of maintenance activities in substations.

To get an optimum and efficient Contract and to reach the expected objectives, the following “Golden Rules” have
to be taken into account:

• Don’t outsource a process that is not well understood.


• Identify the benefits not only in terms of cost, but also to have identified risk exposure and have a means
to assess impact on performance.
• Retain access to available data and new information.
• The contract should share objectives, risk and benefits or losses, and is clear and fair.
• The contractor should have their own infrastructure, contract managers, equipment, work and production
means, computer systems and everything that is necessary for it to be able to undertake and develop the
activity.
• Avoid routines that in medium or long term can lead to negligence, mistakes, lack of motivation and poor
functioning.
• The contract has to allow a continuous improvement and an optimisation of reliability-availability-costs
indicators. It should make possible initiative and innovative solutions and encourage a partnering
relationship with the supplier.

A comprehensive analysis of the service suppliers market, clear and detailed drawing-up of the contract, forgetting
neither important aspect nor the monitoring of the services provided by the contractor and their results, make
easier to reach the optimization of the contracted services and allow a continuous improvement of them.

After a good management of the contracts, and taking into account the results of the survey mentioned in Annex 1,
outsourcing presents these new opportunities and remaining threats:

Opportunities
• Allow managers to concentrate on core competencies, and to be enhancing the business benefits of site
work rather than resourcing the technical content.
• Have access to supplementary and flexible capacity, and in some cases to be able to select specialist
providers and so receive the “best practice” for services and innovative solutions.
• Eliminate restrictions between trade unions and the utility.
• Clear tender processes and transparent selection process of suppliers.
• Diminish the risk of service supplier non-fulfilments and allow sharing the risks between the parties.
• Assure to retain the know-how and the quality and up-dating of data.
• Reduction in head count and thereby achieving a reduction in internal and external costs.
• Reduce time required to manage the “same type of contracts” for all service suppliers.

Remaining threats
• Volatility of staff changes at the supplier’s side.
• Decline of in–house technical skills and dependency of third party, influencing contingency planning and
emergency response capability.
• Additional internal resources (and technical ability of those resources) required to supervise, manage and
audit the contract, as well to manage the processes continuous improvement and the contractor’s
motivation.
• Loss of the direct authority on the contracted personnel

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BIBLIOGRAPHY/REFERENCES

[1] "International Survey of Maintenance Policies and Trends ", CIGRE JWG 23/39 technical brochure N°1 52,
February 2000

[2] “Outsourcing of maintenance in view of market liberalization” T. Eyles, P. Wester, G. Brennan and A. Wilson.
CIGRE Session paper, 2002, 23-39-10

[3] “Maintenance Outsourcing Guidelines”, CIGRE JWG 23/39 technical brochure N°201, 2002

[4] “Outsourcing of maintenance –a review of world experience” A. Wilson, K. Doernemann, E. Olid-G, J. Lica, P.
Renaud, I. Kinnis, J. Corbett, CIGRE Session paper 2004, B3-106

[5] “Integral Decision Process for Substation Equipment Replacement” CIGRE technical brochure N°486, F ebruary
2012.

[6] “IT Strategies for Asset Management of Substations – General Principles” CIGRE technical brochure N°576,
April 2014.

ACKNOWLEDGEMENTS

The present TB included early contribution from the initial working group:

Joe Corbett (IE), Klaus Doernemann (DE), Terry Eylles (GB), Iain Kinnis (GB), Jorge Lica (PT), Eugenio Olid Gonzales (ES),
Philippe Renaud (FR), Philip Wester (NL)

Their involvement has been greatly appreciated by the current working group.

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ANNEX 1: PAPER FROM 2012 DOBLE CLIENTS CONFERENCE, BOSTON


REPRINT OF CONFERENCE PAPER FROM 2012 DOBLE CLIENTS
CONFERENCE, BOSTON. (COPYRIGHT DOBLE)

INTERNATIONAL TRENDS AND STRUCTURAL CHANGES IN


SUBSTATION MANAGEMENT

Nhora Barrera, Axpo AG, Switzerland;


Prof. Johan Smit, Delft University of Technology, Netherlands;
Alan Wilson, Doble Engineering Co, USA.

With discussion presentations from Paul Leemans, Elia, Belgium, and


Daniel Kuosa, Fingrid, Finland

ABSTRACT

The liberalization of global markets over the last two decades led not only to privatization but also to deregulation influenced
by identification of what was core business for a utility. This has led to structural upheavals within utilities, not least affecting
the role of asset care within transmission and distribution substations. For some 15 years a working group within the CIGRE
substations group B3.06 has been tracking these changes through surveys, and providing advice on best practice processes and
published as brochures. This current paper is intended as a closing review of this activity on behalf of the group, and published
here in the proceedings of the 2012 Doble Conference.

The first of three international surveys undertaken by the group was completed in 2000 and it identified several key trends.
Important drivers for respondents were to seek “efficiencies” to manage asset care, introducing tighter controls of budgets, and
most importantly managing business risk exposure. For many addressing these drivers has led to changes in the nature of their
utility, evolving from being a service provider into new organisations- a network manager, an asset manager or an asset owner.
At very least it set in train processes to define the various tasks that were being undertaken as part of maintenance. For some
this led to a greater or lesser extent of outsourcing; the level being determined by the decisions as to what should be core
competencies, and where the balance of allowable risks lay.

More recent surveys have identified gains and problems going down this route. Some find it difficult to find sustainable and
competitive independent providers. After some years it is clear that there is a balance to be managed. On the one hand utilities
can benefit from structural cost reductions, innovations and the use of suppliers with a more diverse knowledge base. On the
other hand a concern is that, since such a utility is not undertaking these tasks any longer they lose their legacy knowledge to
provide an effective management. Perhaps the most important conclusion is that a utility must manage and be seen to be
managing company risks. An outsourced provider cannot take this latter responsibility, and yet if the contract is properly
managed, within a collaborative rather than a traditional contractual relationship, that responsibility can be co-owned.

INTRODUCTION

The last 25 years, in particular, have witnessed significant changes in utility operation. The creation of energy markets and
privatization began in the 1980s when some South American countries were encouraged by the World Bank to address
structural issues. It was through the 1990s that these concepts were expanded internationally, and into the secure power
networks in Europe, Canada, and Australasia. This change led an increasing focus on commercial and business aspects of
utility operation, with several moving out of the public sector and un-bundling of generation from transmission and
distribution. The industry then saw the introduction of a market economy with continental power flows, energy trading,
unbundling of generation, regulation of transmission and distribution, and reduction in the extent of state subsidies for
nationalised industry.

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Over the period 1998-2000 the CIGRE B3-06 substation group undertook a significant international survey to determine how
these market trends were influencing substation activities [1]. Important drivers for respondents had by then shifted
significantly beyond simply providing power to all who wanted it. They were now seeking “efficiencies” to introduce tighter
controls of budgets, and to manage risk exposure. For many these were leading to alterations to the nature of asset care in a
utility. Traditionally the site-based teams were providers of a service, keeping the lights on. They were responsible for
maintenance for all assets in their own local area and undertook as much as possible within an operational budget. A move to
what is now described as a “network manager” allowed some degree of contractor use to undertake low risk routine tasks in
order to achieve some cost saving. The more radical types of organisation changes came as companies attempted to control
costs and network performance by introducing centralised decision making- the essence of an asset management organisation.
This latter group assumed control of lifetime costing of all assets in the network, and they prioritised expenditure to areas of
greatest business benefit and minimum business risk exposure. With centralised decision making and centralised data
management it became natural to define work programmes then to be undertaken by site located staff. Some companies set up
an internal service provider organisation for its entire site based staff. This allowed internal trading with the centralised asset
management group. It also allowed them to earn unregulated income from other utilities. Some of these units became
independent companies but still owned by the utility. At this point ideas to contract some or all technical asset activities not
just to the internal unit but to an external provider became a natural decision point. For some it led to a greater or lesser extent
of contracting outside the company; the level being determined by the decisions as to what should be core competencies, and
where the balance of acceptable risks lay. The situation had indeed changed from the earlier simple cost saving approach
achieved by contracting low level tasks.

In the early years of re-organisation of the wide range of de-regulated utilities a number of significant mistakes were made. A
role taken by SC 23/39- now re-named B3-06 was to follow the survey with a range of tutorial brochures, indicating pitfalls
and what should be best practice, [2-4]. This present paper attempts to summarise the key points of these four CIGRE public

1 THE INTERNATIONAL SURVEY OF MAINTENANCE POLICIES AND TRENDS

The 1998 survey was published in 2000 by CIGRE study committee 39 related to maintenance trends and these span the
changes described above [1]. Traditionally, “maintenance” has been considered a free-standing activity and undertaken locally
by site staff allocated an annual budget for work. The extent of work activity to be undertaken would be time based and guided
by the original equipment manufacturers (OEMs), and applied similarly to all assets within the same category throughout the
utility. The survey showed these guidelines have been followed to a similar or greater extent by all except North American
respondents who reported doing less than OEM recommendations. This was mainly through time based maintenance, but with
triggers from off-line diagnostics becoming important. By 1998 nearly all utilities (95%) indicated that they had begun to use
key performance indicators to manage their maintenance policy and set annual budgets. In order of importance, these were:
reliability, financial measures, availability, public and employee safety, and environmental safety. An average of 2% of the
replacement asset value was being spent by respondents on annual maintenance, of which around 75% was a labour cost.
Natural means to control costs is to seek to either reduce the activity level or to replace the internal workforce with lower cost
contractors. This has led to increasing use of condition based triggers, and increasing levels of outsourcing.

Typically, the level of outsourcing throughout the world reported was between 30 and 35% by 1998. This represents an
increase from the 26% reported in a preliminary 1991 survey. The exceptions were again from North and South Americas,
where the survey reported outsourcing to be only 5%. But averages can mislead. Some 50% of the respondents outsourced
more than 50%, and of these some 15% outsourced more than 90% of their work. In terms of regions, Asia and Middle East
had the highest proportions, at 57%, followed by Europe and Australasia at 30-36%. The traditional kind of activities being
outsourced were the lower skilled areas, commonly outside of the substation, such as tree pruning, tower painting, grass
cutting, etc. But there was also seen a major change towards outsourcing of some specialist activities. Utilities were
increasingly focusing their activities on core business, and that meant that for some small and mid-size utilities they would no
longer be able to justify supporting a complete technical infrastructure. Some of this could be outsourced to service teams in
OEMs or to niche companies. In some small central European utilities the work is contracted to a neighbouring utility- who
with the increased volume is then able to resource a more comprehensive maintenance team. Equally, suppliers of apparatus
will be moving into this area providing total power system solutions, taking the responsibility for construction and operation of
the substation installation.

2 DECISION PROCESSES AND ORGANISATION OF MAINTENANCE

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2.1 The effects of legislative drivers and Organisation of Maintenance within Modern Utilities

The 2000 survey indicated structural changes within utility organisations, and these were described in detail in a CIGRE
session paper in 2000 [2]. Utilities had produced several models in order to describe a framework to enable consistent
decisions in this area. It associated tasks into the various organizational structures, Figure 1.

A service provider is a description of a traditional maintenance department where all tasks are undertaken internally. A second
category- a network manager would seek to outsource low risk “Parasitic” activities where there is often an ample supply of
competent external contractors and the risk exposure to the utility is low. Tower painting and housekeeping are examples.
These are of course tasks that some have outsourced for many decades. They refer in the main to the traditional time based
maintenance tasks, although with impact of budget cutting, some have linked the selection of which tasks to be undertaken to
impact on SAIDI KPIs [5].

It is at the next two categories that the greatest impact of global changes has occurred. Within the asset manager category work
programmes will be defined for the whole company based on risk based prioritisation. The company can then decide whether
to undertake these internally or seek an external provider. The decision would be determined by acceptance of varying levels
of risk exposure, the extent of available external expertise etc. Most of the content of this review will focus on the decision
processes of this category. It may be that the asset manager will decide to keep all tasks in this category in house- and the only
change is to manage the work centrally. In some cases the companies took steps to set up an internal service company so
allowing un-regulated work outside the company in addition to the internal maintenance tasks. The fourth category is an asset
owner category, who has handed over operational management, often to a major international service provider such as an
OEM.

Service Activities
Housekeeping Services
Non-core Maintenance- vegetation, tower Outsource
painting etc.
Peak-lopping Maintenance
Routine Checks
Predictive Maintenance- primary & secondary Defined Work Plans for
Preventive Maintenance- primary & External or Internal Service
secondary equipment providers
Emergency Response = outsource opportunities
Maintenance Policies
Maintenance Planning
Resource Scheduling In-house
Safety Management
Spares Support
Grantor Relationships
Contract Management
Model Asset Owner Asset Network Service
Manager Manager Provider

FIGURE 1: MAINTENANCE ACTIVITIES AND BUSINESS MODELS

2.2 Mapping of Strategic Competencies

The first step when considering the structure of a maintenance unit, including outsourcing, is to identify strategic issues against
the four transmission business models for a particular company. This approach enables a broad understanding of the most
important capabilities, or distinctive competencies, of a particular organisation to be developed.

Once an appropriate model is identified it can be applied at the Services level to enable more refined outsourcing decisions by
helping maintenance activities to be further categorised using the competency classifications as discussed.

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The aspects identified above represent the distinctive competencies for each type of organisation. There are several others. An
essential competence is one needed for an organization to operate. In the case of a transmission utility this could be the
competency of post fault restoration of demand. In essence, the operational skills included are those such as switching,
maintaining safety from system dangers and emergency repairs. Such essential competences differ from distinctive in that they
could be outsourced provided the risk analysis had been undertaken and that level of risk was acceptable to the company.
Protective competencies are also close to distinctive competencies but related to activities that cause considerable risks for the
success of the whole organization if they are not managed properly. An example in the case of transmission utilities would be
protection maintenance. When outsourcing protective or distinctive competencies the risk exposures for the company are high.
Tasks must be very closely defined and monitored; a full risk analysis is needed and mitigation methods identified. Whilst
adversarial relationships might deliver the lowest price for a service, they are unlikely to deliver best value or indeed the lowest
overall costs, when transactional and other possible costs are accounted for. Very close collaboration is necessary if the
relationships are to generate the scale of benefits needed to justify a decision to outsource. This requires the use of long term
contracts. A collaborative approach to outsourcing of essential or protective competencies is the only realistic option for
transmission utilities. The lesson is clear- but many commercial departments usually do not appreciate the differences and the
need for different models for outsourcing different competencies, and this is a source for disappointment.

Other types such as spill over and parasitic competencies are further from strategic competencies. Spill over competencies
allow a utility to obtain profits in a related activity through its distinctive competencies. In a transmission utility which uses
helicopters for line patrols this could include hiring out the helicopter for other purposes, for example transport, hence
increasing revenue through external sales. Parasitic activities that are done in house that waste organizational resources. Tower
painting would be an example. Some activities relating to parasitic competencies may be managed in and adversarial manner-
since cost and performance can be identified and the risk of poor performance is less.

Changing market environments can cause activities to shift from one category to another over time. As an example, air blast
circuit breaker maintenance may be considered to be a distinctive competency, since appropriate skills may only reside within
the utility, whereas in the case of SF6 circuit breakers, skills may be available through manufacturers, enabling circuit breaker
maintenance to be considered even as a parasitic competency. The pit-falls, include too little control from the utility, all
knowledge of the tasks lost, lack of a wider view of the utility operations, emergency response, outage curtailment preventing
completion of tasks, the need to bundle tasks by circuit and circuit ends, contractors committing the utility to unforeseen
liabilities and obligations, etc. All will require attention- and will impact the apparent cost savings achievable through
outsourcing. Successful management of risks is critical to success. The use of external service providers does enable risk to be
shared. However, it is unreasonable to expect a contractor to carry large risk on behalf of the Utility if the work to be
undertaken is low cost with low margins. Contractors need to pay their insurance premiums but this has to be limited to a
reasonable level and in the end the utility must bear most of the business risk.

2.3 Identifying Risk Exposure

No assessment of an outsourcing opportunity should proceed without an appropriate risk exposure analysis. Here the three
overriding issues of importance to outsourcing decisions are:
• risk (R)
• cost ( C)
• quality/effectiveness (Q)

These factors have been combined into an "RCQ" model that is activity specific in its application and enables objective and
quantifiable assessments of outsourcing opportunities to be made. The components are compatible with the overall concept of
best value. The model is shown schematically in Figure 2 below:

The extent of outsourcing with which a particular utility feels comfortable will, to a large extent, be dependent on the business
conditions prevailing within its sphere of operation, its strategic objectives and particular business drivers (e.g., mode of
regulation). Within this context attitudes to risk are important- and in some situations and work packages will over-ride simple
cost of services calculations.

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Outsourcing Opportunity

RISK
Assessment

Risks
COST Safety COST
In House Service Outsource
Business

QUALITY/EFFECTIVENESS
of Current Suppliers

Recommendation
In-House or outsource

FIGURE 2: OUTLINE "RCQ" MODEL STRUCTURE

Risks can always be managed, but at a cost i.e. risk translates into cost. Risk is calculated by multiplying the frequency with
which an event occurs over a given time period (obtained from historical records) by a severity weighting factor based on an
assessment of the impact of the events. It is this approach that will lead to the overall concept of best value as to whether a
service is outsourced or supplied by in-house resources. The methods for calculation of the “value at risk” involves estimating
the impact on system outages if an activity is undertaken incorrectly- and this can achieve a measure of a monetary value [4].
But risks also derive from incorrect work undertaken by in-house work teams also. The following matrix is one means to score
performance of the two types of work teams (and also for benchmarking the various bidders for any contract).

FIGURE 3 QUALITY AND EFFECTIVENESS ASSESSMENT

2.4 Cost Comparisons

In-house Costs: For rigorous outsourcing evaluation it is important that costs should be compared on a like for like
basis, including overhead allocation. It is vital that all costs associated with in-house provision are captured. In
addition to direct costs e.g. labour costs, the assessments should also include training and development, tools and
equipment and all management costs. It needs also the cost of increased overhead cost (buildings, HR, pensions etc.)

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Outsourced Costs: It is essential that outsource cost components should include both on-going direct and transaction
costs. This should also include training, certification of workers. Some will also include provision for innovation
development to lead to a total reduced cost of the activity. To complete the picture, one-off costs, e.g. market
development costs, or switching costs associated with transferring the activity to an external supplier must also be
taken into account when appropriate.

2.5 The Regulator’s Perspective

It is necessary to follow up any high level analysis of potential outsourcing with a rigorous assessment of the situation. The
following paragraphs outline a methodology which can be used to provide a systematic evaluation of outsourcing opportunities
against defined criteria. It can be used to support a utility's outsourcing strategy in a regulated environment, particularly when
Regulators require utilities to demonstrate that they are incurring costs efficiently, i.e. are they procuring services for the least
cost?

Any methodology for outsourcing evaluation must allow for any Regulator's perspective of the market to be taken into
account. He must be convinced that services are being procured by the utility for the least cost. This process is represented in
Figure 5 below. It should be recognised that whilst the strategic importance of an activity to a utility is crucial to it, but is of
less interest to a Regulator.

It follows, therefore, that in a Regulated environment, in the first instance any evaluation of whether a particular activity
should be outsourced must be objective, quantifiable and independent of a utility's own strategic intent. Whether an
outsourcing decision is followed through however, will be heavily influenced by the utility’s regulatory strategy.

FIGURE 4: REGULATORY PERSPECTIVE

2.6 Comparison of Internal and External Service Providers

At the outset of outsourcing considerations it is important to recognise the different business drivers that influence the manner
in which internal and external service providers behave. These behaviours heavily influence the strategies that have to be

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adopted by Utilities to overcome barriers to the successful implementation of outsourcing policies. Some of the business
drivers are listed below. The list should be considered to be neither complete, nor static, since it will be heavily affected by the
prevailing commercial environment.

Internal Service Providers External Service Providers

• Driven by security of supply • Driven by cost and profit considerations


• Driven by work programs etc. • Driven by programme and cost damages
• Driven by long term issues e.g. reliability and • Driven by reliability during warranty periods
ability to maintain • Knowledge is limited to product or service
• Generally have greater specialised system being provided
knowledge and understanding of the impact of • Generally not able to perform better than
changes contract will allow
• Driven by budgets, but have the ability to • Minimum controls and reporting
influence budgetary provision • Mixed attitudes towards long term. Often have
• Often strong political influence and high little regard for long term operational or
levels of reporting maintenance issues
• Feel a high level of ownership of the assets

2.7 Barriers to Success

It follows from the above that difficulties that have to be overcome in moving to an outsourcing strategy are not insignificant.
Utilities will inevitably face a number of hurdles in seeking to implement outsourcing. The major barriers to success, in order
of importance, are:

• internal resistance
• unclear performance/benchmarking metrics for the contract
• loss of control over the process or activity
• lack of prior outsourcing experience
• inadequate planning of the contract
• lack of suitable contractors in the local market
• inadequate documentation of existing maintenance standards, processes and asset records (too much is still in the
heads of your key in-house service providers)

In addition to barriers to overcome there are a number of common mistakes made by businesses in the course of outsourcing
decisions that should be avoided to ensure a successful implementation of the strategy. These include:

• no link to business strategy and competencies


• lack of clarity and honesty around description of core competence
• strong tendency to start with the name of a service provider and then try to justify the relationship
• no objective selection criteria
• lack of clarity around the type of relationship required
• lack of management experience and vision
• lack of basic management processes, KPIs and organisation structure
• inadequate senior management involvement
• expectations of both parties misaligned
• misunderstanding of all the cost components in the process chain

Other issues that should be considered before embarking on outsourcing are:


• cost of developing adequate documentation of standards and processes e.g. transmittal of drawings
• bringing Asset registers/maintenance management systems up to date
• site access control systems
• access to spares by contractors
• increased risk of sabotage by disgruntled in-house workers

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2.8 Barriers to Entry of External Suppliers.

In addition to the above there are a number of entry barriers that suppliers will have to overcome to provide best value services
to transmission utilities. Some barriers are common e.g. where site access is concerned there are safety management issues.
Others may be cumulative e.g. network wide coverage may be required to establish a critical mass for the market.

Typical barriers to entry are:


• Site access and safety rule authorisation requirements.
• The infrastructure necessary for nation-wide coverage.
• Market size. There may be lack of critical mass for some equipment e.g. power electronics.
• Understanding of network operation and systems issues. Could be critically important in some areas, e.g. protection
testing.
• Breadth of technology employed.
• Supplier skills and knowledge. ( expertise in the maintenance of older technologies may now only reside within
utilities particularly if there is no history of outsourcing)
• Emergency response requirements ( Immediate response 365days/year, 24 hours/day)
• Flexibility requirements and payment for cancellations (e.g. short term cancellation of work due to over-riding system
operator requirements)
• Establishing contractor competence
• Union attitudes
• Complexity of contracts. (particularly for smaller suppliers)
• High set up costs e.g. infrastructure, spares, insurance etc.
• Purchasing power
• Level of liquidated damages
• Inadequate asset information systems

Some or all of these issues would need to be addressed in most instances to enable external suppliers to enter the market.

2.9 Pros and cons of competitively let versus partnering style contracts.

Collaborative style contracts are often referred to as partnering contracts. Partnering contracts can be defined as high
performing, genuinely mutual relationships, producing significant added benefits to both parties.

The term partnering describes the quality and not the legal form of the relationship, since a range of contractual arrangements
can be used.

Transmission utilities that have outsourced services are moving to longer-term arrangements and building appropriate business
relationships. This is because the nature and consequences of the work requires a high level of mutual trust and confidence.
The utility will get the best out of a contractor if innovation and value adding activities are encouraged and appropriately
rewarded.

Very close collaboration is necessary if a relationship is to generate the scale of benefits needed to justify a decision to
outsource. This requires a foundation of long term or even life time contracts.

Partnering relationships are highly demanding of time, management attention, know-how, and resources, particularly financial
and technical. Consequently, it is unlikely that companies will be able to build more than one such relationship at a time in
similar areas of activity. It is therefore extremely important that companies are selective in the try to build.

Traditional outsourcing contracts are competitively let, short term, priced based, discrete transactions. Such a model does not
sit well with the requirements for long term and close relationships with suppliers as the following analysis demonstrates.

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Adversarial Collaborative
Behaviour individual gain seeking mutual respect
transitory committed
defensive open and sharing
aggressive trusting
Attitudes retain expertise focus on group gains
centralised authority people involvement
power over contractor and active buyer knows devolved authority
best approach power covert, inactive mutual
homogeneous suppliers differentiating suppliers
passively responsive proactive innovation
problem driven preventative driven
Measures uni-directional e.g. delivery measures mutli-dimensional
uni-dimensional relationship positioning
inspection outcomes limited measure process
infrequent feedback extensive evaluation and feedback
success individually biased success shared self-regulation
Processes buyer specifications shared design
hands off open information exchange hands on, close
few boundary spanning roles many boundary spanning contracts
static systems learning organisation
team based
supplier investment in people and processes
Time limited life extended, guaranteed life
frequent resourcing single sourcing
low switching costs high switching costs
discrete transactions infrequent resourcing
less information transfer transaction history-context

In the light of the above it is evident that whilst adversarial relationships might deliver the lowest price for a service, they may
not necessarily deliver best value nor indeed the lowest overall cost when transactional and other possible add-on costs are
taken into account.

It is concluded that a collaborative, i.e. partnering, approach to outsourcing of services offers the best option for transmission
utilities.

However, in order to comply with some legislation, such as EU Directive 90/531/EEC, utilities must advertise any intention to
award an outsourcing contract in the OJEC and comply with the provisions of the Directive. This can create difficulty in
relation to long term partnering style arrangements since a utility may not wish to enter into a competitive tendering situation
but rather award a contract to its existing supplier because of the strategic value of the relationship.

2.10 Pros and Cons of Long Term Relationships versus Short Term Contracts.

The tenure of maintenance contracts in the context of transmission assets tends to be longer term, typically five years or
greater. The reasons for this include:

• The contracts usually cover a number of assets and equipment in an asset class. It can therefore be expected for a
contractor to take some time to become fully acquainted those assets. (Unless the resources that have historically
carried out the maintenance are employed by the Contractor).
• If the utility requires “added value” from the maintenance contractor, for example assisting with failure mode analysis
to develop maintenance strategy, the contractor needs to understand and gain experience of the asset over a period of
time.
• to gain trust and confidence between the parties there needs to be adequate time allowed for sound and enduring
business relationships to be built.

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The contractor should be around long enough to “reap what is sown”, that is depending on the style of the contract and the
latitude given, the contractor may short-change the utility on the level of service which may not materialise as problems for a
number of years.

Finally, the Contractor should be given adequate time to evolve in the required direction (as must the Asset Manager!)

2.11 Outsourcing Good Practice

Some good practice points in relation to establishing sound outsourcing contracts are:

• clearly stated objectives


• good understanding of both parties objectives
• both parties stand to gain
• contracts should clearly state the required service and costs levels, how they are to be measured and the penalties that
would apply.
• spend time and effort on getting the right structure for the outsourcing contract
• significant leverage over service providers can be obtained when they are encouraged to compete against each other
on a regular basis.
• use of more than one service provider may be advantageous in areas of rapid change (e.g. Information Technology).
• build benchmarking milestones into long contracts to check performance standards
• partners should be open with one another
• breaks and exit routes should be planned
• make sure that asset information is adequate and up to date first
• make sure that standards and process documentation and drawing systems are adequate and up to date first.

2.12 Outage Planning/ Flexibility of Response.

The dynamic nature of transmission systems requires flexibility in outage planning. Although typically 70% of work scheduled
at the year ahead takes place during the planned outage window, a significant amount of work has to be moved, accelerated or
cancelled.

In liberalised markets an increasing important factor in outage planning is emergency return to service times required by
customers as a consequence of the targets for system availability and reliability set on them by Regulating Authorities.

Traditionally the costs associated with these changes have been absorbed internally by utilities. Outsourcing of outage related
work will have associated flexibility costs and management of them will increase the complexity of the outage planning
process and may lead to higher contract management costs.

3. CHANGING ATTITUDES TO MAINTENANCE MANAGEMENT AND OUTSOURCING

3.1 The 2000 Survey

Typically, the level of outsourcing throughout the world reported in the 1998-2000 survey was between 30 and 35% by 1998.
This represented an increase from the 26% reported in a 1991 survey. The exceptions were North and South Americas, where
the survey reported outsourcing to be only 5%. The traditional kind of activities being outsourced there were the lower skilled
areas such as tree pruning, tower painting, grass cutting, etc. But elsewhere there was also a major change towards outsourcing
of specialist activities as utilities are increasingly focused their activities on core business.

3.2 The 2002 CIGRE/ Doble survey


This particular survey was completed by members of the B3 CIGRE group and some attendees at the September Doble Clients
meeting in USA.

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Outsourcing as a Respondent numbers by location


Percentage of Total US/Can Latin Europe Far East Australia/
O&M budget America NZ
<10% 14 12 2
10-25% 6 1 4 1
25-50% 4 1 2 1
50-75% 1 1
>75% 3 2 1
Table 1: 2002 Survey of per cent maintenance budget

The US/Canada respondents included two industrial companies, one with <10% and the other 25-50% outsourcing. All other
26 respondents were utilities. This small survey confirms that outsourcing is less in North and South America, but all other
respondents were spending more than 10% of their budget external to the utility. Three companies listing more than 75%
outsourcing claimed 10, 15 and 30 years satisfactory experience of outsourcing the category of work listed above. One
company had multiple suppliers and did not use an incentive based payment, instead had the incentive of an extension to the
contract. For 15 years this company had used a 3-year contract with a 3year extension. They were about to increase the
duration to a 5+5 year contract. The other two had mixtures of single and multiple service providers, a mixture of 1, 3 and 5-
year contracts, all with incentive payments.

3.3 2011 CIGRE/ Doble survey

The main respondents here were utilities attending two Doble events in 2011. The first was in San Diego in September where
the 58 responders were mainly from USA and Canada. The second was at the EuroDoble Colloquium in Stockholm in October
where 18 European utilities contributed. Later that month there was a B3-06 meeting and 5 extra European utility members
contributed.

Meeting attendees rarely have budget percentages at their finger-tips, and so this questionnaire attempted to seek OPINIONS
rather than extent of outsourcing. The first set of questions was intended to identify to what extent management of asset care
was being centralised and the extent to which it had led to outsourcing of work. Here the two categories were (i) low risk site
facilities- such as vegetation control and tower painting and (ii) skilled care of assets.

Outsourcing Extent USA/ Canada Europe


Having an asset management group CENTRALLY deciding what/ when work 57% 78%
should be done
(i) Utilities outsourcing site facilities 96 83
• Expecting to see more outsourcing of these tasks 72 48
• Believing that the number of service providers will grow to create a 63 48
sustained competitive environment for this type of work
• Believing that Service providers achieve a better level of performance 33 43
than in-house staff
• Believing that performance can be measured – using KPIs for example 73 74
(ii) Outsourcing maintenance of primary and secondary assets 51 65
• Expecting to see more outsourcing of these tasks 48
• Believing that the number of service providers grow to create a sustained 43 22
competitive environment for this type of work?
• Believing contractors can retain the knowledge and grow a skilled 38 36
workforce for the next generation?
• Believing that performance can be measured – using KPIs for example 83
Table 2: Opinion about Extent of Outsourcing

These replies show that in both continents centralisation of work management had taken place. With 57% in USA this
represents a very significant change over last decade. In Europe the changes started 20 years ago and so the extent of
outsourcing is more mature, with smaller changes indicated for the future. But in both the concerns remain that quality is less

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than delivered by internal teams and fears for long term continuity exist. As long as contract departments insist on lowest cost
tendering for even the higher skilled category then on-going recruitment and innovation will suffer. The poorer results are also
indicative of poor growth of collaborative contracting.

The enquiry attempted to identify what are the most important features to be sought when outsourcing. There are no clear
conclusions. Clearly the company will seek cost savings but these are only secondary. Surprising is the low response in the last
question about the utility receiving a better practice from a wider experience in the contracting team. These two aspects are the
basis for increasing external contracting and these findings indicate more development is needed.

OPINION OPINION
THE POSITIVE REASONS US/ Canada Europe
For selecting outsourcing VERY NOT VERY important NOT
important important important important important
Cost reductions can be achieved 43% 45% 11% 13% 74% 13%
More flexibility allowing the internal 34 52 14 35 56 9
team to concentrate on core business.
Eliminate restrictions between trade 31 31 38 18 32 50
union and utility
Smaller utility staff means lower 24 57 19 13 61 26
infrastructure costs (office buildings,
transportation, lap tops, measurement
devices)
Utility receives “best practice” services, 24 38 38 27 50 23
due to wider experience of contractors
Table 2a: Positive Features about Outsourcing

OPINION OPINION
THE NEGATIVE FEATURES US/ Canada Europe
From outsourcing VERY NOT VERY important NOT
important important important important important
Utility loses specific know-how for tasks 89% 7% 4% 68 32
- including how to manage effectively.
Loss of asset specific knowledge.
It means a higher dependency on third 87 13 83 17
party for emergency response,
conflicting priority with other clients,
lack of ownership in workforce.
Risks (i) of losing historical asset 67 22 10 61 22 17
oriented
(ii) from third party access to 43 26 31
confidential information
(iii) becoming hostage to a 73 24 2 50 37 13
single service provider
particularly for more highly
specialised work.
(iv) bad contractual conditions 61 33 6 43 35 22
and risky practices
Risk must be assumed by utility for poor 80 18 2 31 65 4
performance of the service provider,
lower cost= lower skill perception,
consequence to operators liability.
Higher Contractual costs -to supervise, 40 50 10 44 52 4
monitor work and administer contract-
particularly if change providers

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Table 2b: Negative Aspects about Outsourcing

The groups were much clearer about what they didn’t like about outsourcing. There is significant concern about the loss of
technical skills from the company- and then being hostage to providers who retain the skills. Emergency restoration is a key
requirement in any utility and flexibility will be lost using a third party. This can be addressed using a small in-house team who
retain all necessary skills and can be used for this purpose. Both groups accept the need for the utility to assume the risks- and
the consequences in term of management of contractors.

The content of section 2 described the fairly straightforward process when contracting out spill over and parasitic competencies
where a good case to contract out can be made, the risks are less, tight contracts can be drawn up and managed on cost driven
basis. The processes need to be quite different if essential and protective competencies are to be contracted out. The focus must
not be on cost reduction but quality and reliability of the service. It is likely that many have not developed these collaborative
style contracts as they will allay many of the concerns raised in the survey. One utility example identifying the differences was
presented in 2003 [7]. Here the company had placed contracts to outsource three activities. Routine oil testing was placed on a
simple cost basis, unlike that for analysing the results within the context of asset health analysis where the basis was trust and
quality. The third contract was also collaborative and covered the consequential on-site HV testing to investigate unusual oil
analysis.

CONCLUSIONS

Centralisation of decision making within an asset management model is clearly the widespread response to business drivers
introduced into utilities. This has led to increased contracting of work to external groups. The use of external service providers
is a long established feature of life in Asia and Australasia and a growing trend in Europe and North America. However,
maintenance outsourcing is not a simple task, particularly in core areas. In most instances it can be successful provided goals
are not unrealistic, obstacles minimised and suitable management controls established. The surveys indicate significant
concerns remain within utility engineers relating to flexible working, loss of skills and knowledge.

ACKNOWLEDGEMENTS

The content of this paper has been extracted from previous publications from CIGRE and permission from the B3 committee
of CIGRE to publish is acknowledged. Also acknowledged is the earlier assistance of earlier team members- Jorge Lica,
Eugenio Olid Gonzales, Klaus Doernemann, Philippe Renaud, Philip Wester and Joe Corbett.

REFERENCES

[1] "International Survey of Maintenance Policies and Trends ", CIGRE JWG 23/39 brochure N°152, February 2000

[2] “Outsourcing of maintenance in view of market liberalization” T. Eyles, P. Wester, G. Brennan and A. Wilson. CIGRE
Session paper, 2002, 23-39-10

[3] “Maintenance Outsourcing Guidelines”, CIGRE JWG 23/39 brochure N°201, 2002

[4] “Outsourcing of maintenance –a review of world experience” A. Wilson, K. Doernnemann, E. Olid-G, J. Lica, P. Renaud,
I. Kinnis, J. Corbett, CIGRE Session paper 2004, B3-106

[5] “Distribution Performance Metrics used to Optimize Maintenance Expenditures and Prioritize Engineering Analysis
Labour.” V J. Forte, Jr, M Lopez-Sánchez, C A. Warren, M J. Lastella, National Grid USA, EuroDoble Conference 2005.

[6] “Transmission Asset Risk Management” CIGRE Brochure No 422, 2010

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CONTRACTS FOR OUTSOURCING UTILITY MAINTENANCE WORK

[7] “Developing partnerships for transformer asset management -An outsourcing experience” 2003, Z. Richardson, A. Rowe
and A. Wilson.

BIOGRAPHY

Nhora Barrera, Axpo AG, Switzerland;


Nhora Barrera has worked in different areas of Project Management in high-voltage substations for over fifteen years,
including five years at ABB GIS Manufacturer, four years at the IFC - World Bank Group in project financing, two years on
site and most recently, at Axpo AG managing large high-voltage substations projects. Education includes an Electrical
Engineering degree with major in Power Systems, post-graduate studies in Business Economics and a MSc in Project
Management. Member of the PMI since 2004.

Johan J. Smit, Delft University, Netherlands:


Johan Smit received his Ph.D. at the State University of Leiden in 1979, after which he was employed in research/management
functions during two decades at KEMA’s testing, consultancy and engineering company, Arnhem NL. He became supervisory
board member of the power transmission company of South Holland. Since 1996 he is fulltime professor at the Delft
University of Technology (NL), chairing the section of High Voltage Technology and Management. He is heading the
executive board of the foundation for Knowledge Sharing and Research on Asset Management of Electrical Infrastructures.
Furthermore he is convener of the IEC-TC112 working group on Electrical Insulation Systems Evaluation, CIGRE TC-
honorary member, past study committee D1 chairman on Materials & Emerging Technologies, convener of CIGRE advisory
bodies and of B3.34 on Impact of Future Grid Concept on Substation Management.

Alan Wilson, Doble Engineering Co, USA.


Alan Wilson worked in the research department of Central Electricity Generating Board for 25 years investigating failure
modes in HV equipment, and specializing in diagnostics. After privatization he joined National Grid, UK as a technology
manager responsible for cable ant transformer technologies. He joined Doble in 1999 and has worked in USA and UK. He is
currently director of Global Strategy. He has a BSc, PhD; is a chartered engineer and fellow of IET.

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APPENDIX- CASE STUDIES

1 SUBSTATION OUTSOURCING IN ELIA, BELGIUM, Paul Leemans

Elia is the independent Belgian system operator for the majority of the 30 kV – 380 kV transmission system
network. Elia was founded out of the former transmission system department of the fully integrated electrical utility,
Electrabel.

Prior to deregulation important parts of the substation work was already outsourced to other external contractors:

• Project studies, planning & execution


• Electrical, mechanical and civil substation construction works
• Painting
• Transformer repair work & LTC maintenance
• Building & site maintenance
• On site diagnostics (thermography, oil analysis…)
• Emergency substation repair work

Elia was appointed in 2001 as both TSO (380 - 150kV) and DSO (70-30 kV). As a consequence, and atypical to
other TSO’s only dealing with >= 220 kV level, the former maintenance department was fully integrated within Elia.
The outsourcing of the core HV and LV maintenance to an external partner was not considered due to the absence
of HV maintenance crews in Belgium (from manufacturers or local DSO’s) able to deal with the work load, even
partially, of over 600 substations.

Since deregulation was introduced in Belgium in the beginning of this millennium the outsourcing model has been
evaluated on several occasions.

From the start of deregulation in 2000 a business model was implemented with an infrastructure manager (asset
owner) and an internal service provider (asset maintainer). The roles and responsibilities of all the stakeholders
were clearly defined but a lot of effort was lost in dealing with the “contracts”, SLA’s and KPI’s between the
business units. This led on several occasions to sub optimal decisions and an increasing distance between the
asset owner and the field with even issues on knowledge management. After several years the “Ivory tower” of the
asset owner popped up in several discussions.

Some pilot projects in “full turn-key” with only functional specifications were initiated by the asset owner but this
model was abandoned. One of the reasons were asset management issues for the service provider (spare parts,
training …) due to the increasing diversity of standards and assets.

During this period the service provider re-evaluated the outsourcing of his tasks. The major drive was to maintain
the core competences inside the company in order to be able to deal with the long and mid-term issues. Some
minor tasks were outsourced (overhaul of hydraulic CB parts, compressors, transport between sites...). However,
LTC maintenance and SF6 breaker re-gasketing was insourced. Important aspect in these decisions were the
availability of the activity on the local market, enough volume to manage the activity internally and the evaluation of
the impact on company risk in case of loss of the outsourcing partner. Other new tasks were developed within the
maintenance department (diagnostic methods, transformer remaining life assessments …) to support asset
management decisions.

In 2004 Elia insourced the project studies, planning & execution by acquiring Bel Engineering as part of the Elia
group. The expertise for the new equipment (material specs & building standards) was integrated within an

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expertise department of the engineering company. The time consuming power transformers FAT witnessing was
outsourced to an external partner.

In 2006 the initial business model was abandoned. The expertise of the asset owner and asset maintainer was
merged in order to develop a more integrated asset management for the existing assets in order to face the
challenges of the aging network.

Further improvement of the efficiency led to the merger of the expertise for new assets and existing assets into one
department by the end of 2008. Only one asset manager deals now with the total life cycle of the asset. At this time
the factory audits during equipment qualification process and GIS FAT witnessing was outsourced additionally.

To conclude we are convinced that we have found a good balance between in and outsourcing of tasks with the
major drive to manage the company risk by maintaining the core knowledge within the company.

The in- and outsourcing policy is of course only one aspect of asset management were an optimal asset
performance and an optimal technical life usage of the assets are amongst other two of our important goals.

On the other hand it is clear that the company model, the regulation context and the local market situation (e.g.
availability of external partners) are so different from one to the other that no ideal or best practice outsourcing
model can be defined.

2 SUBSTATION OUTSOURCING IN FINGRID, FINLAND, Daniel Kuosa


Fingrid is the transmission system operator for Finland working with Sweden, Norway and Denmark as part of a single
electricity market. The Finnish system has 14,400 km of mainly overhead line and 113 air insulated substations, at voltages of
400, 220 and 110 kV. Its turnover was 438M€ in 2011. It now manages all maintenance, operations and telecommunications
through outsourcing and an internal staff of only 248.

But the transition from all work being undertaken internally was not a revolution but an evolution. Prior to 1995 the power
companies were vertically integrated. The Electricity Market Act came into force in 1995 and it was then that Fingrid was
formed as TSO. But contracting for maintenance work began in 1989, but limited to internal activities. Bidding and including
external providers began in 1992 and it was then that cost savings were achieved. In 2001 Operations and Telecommunications
activities were outsourced, and by that time a more established bidding and contracting process was in place. This left the
internal staff to focus their expertise on planning, work definition, procurement, supervision, analysis and development. Their
relationships with contractors have so far been through open and fair relationships- a partnering. Success is achieved through
effective tools for data management, operated by Fingrid and contractors through an extranet. Quality is managed through
benchmarking, and the use of key performance indicators. Good or bad performance is identified and rewarded or penalised.

Fingrid has worked hard to ensure that the market has several service providers and contractors; the company has been very
open with future investment plans, maintenance needs (volumes) etc. and communicated these well in advance so potential
contractors have had enough time to react. Attention has been given to look at the market from the service providers’
perspective, not suddenly introducing large reductions in activity level. A certain base level volume has to be guaranteed in
order to ensure continuity. On the substation maintenance side there is a broad collection of qualified service providers and
thus a good competitive environment and sustainability. For the lines there are two potential domestic candidates and for relay
maintenance only one viable candidate (relay manufacturers could do their own products but not those of other suppliers).

This business model has served us very well granting rather could results in the ITOMS (international transmission operation
and maintenance study benchmark) both cost and quality wise. However, in the future we will be seeing certain challenges e.g.

- Long-time partnerships may end because of new aggressive market entrants.


- The older staff are retiring slowly – and in highly competitive environment recruiting and training has not met the
necessary levels
- Within Fingrid experience of hands-on work will also be lost as field experienced people retire.

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ANNEX 2: EXAMPLE OF A SERVICES CONTRACT


The following services agreement is an example of a US contract with representative terms of agreement and
conditions. These are for example only and should not be considered as prudent for other situations.

SERVICES AGREEMENT

THIS SERVICES AGREEMENT (this “Agreement”) is dated as of [______], 20[_] (the “Effective Date”), between
(“Owner”), and (“Contractor”). For all purposes of this Agreement, unless the context otherwise requires, (a) except as
otherwise defined herein, all capitalized terms used in this Agreement (including the Recitals) shall have the meanings set forth
in Exhibit A and Part I of Exhibit A-2 attached hereto and (b) the rules of construction and interpretation for this Agreement
shall be as set forth in Part II of Exhibit A-2 hereto.

WHEREAS, Owner purchased the Transmission System as of the Effective Date, and Contractor and Owner
recognize that it is necessary and desirable for Owner to receive certain field services and control center support services
relating to the Transmission System;

WHEREAS, Contractor and Owner further recognize that it is necessary and desirable for Owner to receive specific
services relating to the Transmission System for a transitional period, following Owner’s purchase of the Transmission
System; and

WHEREAS, Contractor is willing to provide such control center support, field services and other transitional services
to Owner.

NOW, THEREFORE, in consideration of the premises and the covenants and mutual agreements contained herein,
the Parties agree as follows:

1. Scope of Services and Work

(a) Contractor shall perform for Owner (i) Transition Services, (ii) Operating, Maintenance and Inspection Work, (iii) Demand
Work, (iv) Major Maintenance Work, (v) Capital Work, (vi) Control Center Support Services, and (vii) Spare Parts Inventory
Management, all in accordance with this Agreement, including Exhibit A. Operating, Maintenance and Inspection Work;
Demand Work; Major Maintenance Work; Capital Work; and Spare Parts Inventory Management shall be referred to herein
collectively as “Field Services.” Transition Services, Field Services and Control Center Support Services shall be referred to
herein collectively as “Operational Services.”
(b) Subject to Section 14, all work and services to be provided hereunder shall be under the direction and control of, and at the
discretion of, Owner, unless otherwise indicated in this Agreement. All Operational Services will be performed on, or with
regard to, the Transmission System in compliance with Applicable Law.
(c) Contractor will arrange and assign personnel to accomplish the Operational Services under this Agreement consistent with
(i) Contractor's applicable labor contracts, (ii) current and ongoing operational procedures and (iii) availability of personnel
with adequate technical knowledge and expertise.

2. Term of Agreement

(a) The initial term of this Agreement shall commence on the Effective Date and expire on the fifth (5th) anniversary of the
Effective Date (the “Agreement Expiration Date”); provided that this Agreement shall renew automatically for successive three
(3) year terms following the Agreement Expiration Date unless written notice of intent to terminate is given by either Party (a)
with respect to Control Center Support Services, at least one (1) year prior to the Agreement Expiration Date or the expiration

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of any renewal term, as the case may be, and (b) with respect to Field Services, at least one-hundred and eighty (180) days
prior to the Agreement Expiration Date or the expiration of any renewal term, as the case may be.

(b) Contractor shall perform, and Owner shall accept and pay Contractor for, the Field Services until the earlier of (i) the
termination of this Agreement and (ii) any Agreement Expiration Date or date on which a renewal term shall expire, prior to
which notice of intent to terminate such Field Services has been given pursuant to Section 2(a).

(c) Contractor shall perform, and Owner shall accept and pay Contractor for, the Control Center Support Services until the
earlier of (i) the termination of this Agreement and (ii) any Agreement Expiration Date or date on which a renewal term shall
expire, prior to which notice of intent to terminate such Control Center Support Services has been given pursuant to Section
2(a).

(d) Unless extended by mutual agreement, Contractor shall perform the Transition Services until the date which is one-hundred
and eighty (180) days after the Effective Date (“Transition Services Expiration Date”). Notwithstanding any provision
contained herein to the contrary, neither the initial term of this Agreement nor any renewal term hereof shall extend
Contractor’s obligation to perform the Transition Services beyond the Transition Services Expiration Date.

3. Price

Payment terms for various work elements should be established such as the following:

(a) For the Transition Services, Owner shall pay Contractor each month, the amount calculated in accordance with Section 9.x
of Exhibit XX for the Transition Services performed during such month.

(b) For the Field Services, Owner shall pay Contractor each month, the amounts calculated in accordance with Sections 9.x
through 9.y (inclusive) of Exhibit XX for the Field Services performed during such month.

(c) For each month (or part thereof, on a pro-rata basis) that Contractor provides Control Center Support Services, Owner shall
pay Contractor the amount specified in Section 9.z of Exhibit XX.

(d) Owner shall pay on or prior to the last day of each month during the term of this Agreement, ($X,X00,000), divided by
twelve (12), for the general and administrative cost of providing the Operational Services provided during such month.

4. Terms of Payment

(a) Contractor shall submit invoices monthly to Owner, and Owner shall pay Contractor not later than the twentieth (20th) day
following the receipt of such invoice. The rate of interest on any amount not paid when due shall be equal to the Interest Rate
in effect at the time such amount became due, except for any unpaid amounts that are properly placed in escrow subject to the
terms of Section 4(b) below. Interest on delinquent amounts shall be calculated from the due date until the date of payment.
When payments are made by mail, invoices shall be considered as having been paid on the date of receipt by the other Party.

(b) In the event a portion of any invoice is in dispute, the undisputed amount shall be paid when due, and the disputed portion
of the invoice shall be deposited with a financial institution to be agreed upon by the Parties (which financial institution shall
be reasonably acceptable to both Parties) pursuant to the terms of an escrow agreement to be agreed upon by the Parties (which
escrow agreement shall be reasonably acceptable to both Parties and the financial institution) within thirty (30) days after the
original due date of a payment. The escrow agreement shall specify the fee payable to the financial institution to serve as
escrow agent and other costs payable to the escrow agent, and shall contain investment instructions to the escrow agent, to
invest the escrowed funds. The Party placing such funds into escrow (the “Withholding Party”) shall pay all of the out-of-
pocket costs related to such escrow arrangement. Notwithstanding the foregoing, if it is determined that the Withholding Party
owes the other Party less than the full disputed amount, the other Party shall pay to the Withholding Party an amount equal to
the out-of-pocket costs related to such escrow account multiplied by a fraction, the numerator of which is the amount of the
disputed portion of such invoice deposited into escrow minus the amount ultimately determined to be owed in connection with
such dispute, and the denominator of which is the amount of the disputed portion of such invoice (the “Allocation Fraction”).
Any such disputed amounts shall be released from escrow and paid promptly after the Parties have determined the correct
amount, either by mutual agreement, final order of a court or by such other dispute resolution procedure agreed to by the
Parties. When any such disputed amounts are released from escrow, the Withholding Party shall be entitled to receive the
amount of interest accrued on the disputed portion of such invoice, if any (as such interest or other return may be earned, based
on the approved investments made by the escrow agent), multiplied by the Allocation Fraction, and the other Party shall be

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entitled to receive the amount of interest accrued on the disputed portion of such invoice, if any, multiplied by the difference
between one (1) and the Allocation Fraction. To the extent that the Parties cannot mutually agree on a financial institution, the
form of the escrow agreement or any other material provision of the escrow arrangement within thirty (30) days after the
original due date of a payment, then the Withholding Party may continue withholding the disputed portion of the payment, in
lieu of the escrow arrangement and pending the resolution of the payment dispute; provided in such event, interest shall accrue
on any disputed portion of a payment held by the Withholding Party that is determined to be due, from the original due date
until paid, at the Interest Rate, as provided in Section 4(a). Notwithstanding any provision contained herein to the contrary, this
Section 4 shall not limit a non-Withholding Party’s remedies under Sections 19 and 20 of this Agreement in the event a
Withholding Party withholds funds other than for reasons of good faith.

(c) If, at any time, the rating in effect by S&P or Moody’s for the long term senior unsecured non-credit enhanced debt of
Owner is both BB+ or lower and Ba1 or lower, respectively, then Contractor may provide Owner with written notice
requesting collateral (the “Performance Assurance”) from the Owner, which collateral may be in the form of (i) cash collateral,
(ii) letter(s) of credit for a period of at least three hundred and sixty four (364) days, on terms reasonably acceptable to
Contractor or (iii) such other security reasonably acceptable to Contractor, in an amount determined by Contractor in a
commercially reasonable manner; provided that in no event shall the amount of the Performance Assurance exceed the sum of
Owner’s payments due hereunder for (x) Control Center Support Services for the preceding six (6) months and (y) Operational
Services, other than Control Center Support Services, for the preceding three (3) months, unless otherwise agreed upon by the
Parties. Upon receipt of such notice, Owner shall have ten (10) Business Days to provide such Performance Assurance to
Contractor. In the event that Owner fails to provide such Performance Assurance within ten (10) Business Days of receipt of
such notice, a Breach under Section 19 will be deemed to have occurred, and Contractor will be entitled to the remedies set
forth in Section 19 and 20 of this Agreement. If at any time Performance Assurance is provided under this Section 4(c), the
rating in effect by S&P and Moody’s for the long term senior unsecured non-credit enhanced debt of Owner is higher than both
BB+ and Ba1 , respectively, then Owner will provide Contractor with written notice requesting that the Performance
Assurance be returned to Owner or terminated, as applicable. Upon receipt of such notice Contractor shall have five (5)
Business Days to return to Owner or terminate, as applicable, such Performance Assurance. To the extent Owner’s credit rating
remains below the specified levels for more than twelve (12) months, Owner shall, upon written request of Contractor, renew
and extend any letter(s) of credit for an additional twelve (12) months not less than thirty (30) days prior to the expiration of
such letter(s) of credit. In the event that Owner fails to provide such renewal and extension of Performance Assurance within
ten (10) Business Days of receipt of notice or thirty (30) days prior to the expiration of such letter(s) of credit (whichever date
is later), a Breach under Section 19 will be deemed to have occurred, and Contractor will be entitled to the remedies set forth in
Section 19 and 20 of this Agreement.

5. Warranty and Disclaimer

(a) Contractor warrants that any Operational Services will be performed by properly skilled personnel (i) in a good and
workmanlike manner, (ii) in accordance with any written specifications provided by Owner pursuant to this Agreement, and
(iii) in accordance with this Agreement, Applicable Laws, NERC, RRC and Controlling RTO requirements, as applicable,
Standards of Conduct, as applicable, and Good Utility Practice. The preceding warranties are intended to cover workmanship
only, and Contractor shall not warrant and shall have no liability for defective products, equipment or materials, unless
Contractor fails to use and install any such products, equipment or materials supplied or specified by Owner, in breach of this
Agreement; provided that the exclusive remedy for any breach of the foregoing shall be limited to (i) Contractor repairing or
replacing, at no additional cost to Owner, any such products, equipment or materials with conforming products, equipment and
materials, and re-performing, at no additional cost to Owner, any such services on the same conditions as the original services
and (ii) Owner’s rights to indemnification to the extent described in Section 6. EXCEPT AS EXPRESSLY STATED
HEREIN, THERE ARE NO OTHER WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, INCLUDING
THE WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE, AND ALL OTHER
WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. WITHOUT LIMITING THE FOREGOING, IN NO
EVENT SHALL THE CONTRACTOR WARRANT OR GUARANTY, ANY SPECIFIC LEVEL OF RELIABILITY
OR AVAILABILITY OF THE TRANSMISSION SYSTEM.
(b) Contractor shall take all commercially reasonable actions to maintain in force, and shall enforce on behalf of Owner or
assign to Owner, as applicable, all warranties, if any, supplied to it by suppliers or vendors.
(c) Except as provided in Section 6 below with respect to negligence and willful misconduct, in no event shall Contractor be
liable for any loss or damage whatsoever, by reason of its failure to discover, report or modify latent defects inherent in the
subject matter of the services. The warranties described in this Section 5 are subject to the following conditions:
(i) Contractor shall not be responsible for repairs, replacements, calibrations or corrections made by Owner or any
Person not under Contractor’s direct or indirect control or for any product, material or equipment not supplied by
Contractor;

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(ii) Contractor shall have no obligations for breach of warranty arising from Operational Services performed with
respect to a specific item of equipment if Owner fails to transport, store, install, operate or maintain such item in
accordance with (a) Applicable Laws and Good Utility Practice, (b) the provisions set forth in this Agreement, or (c)
the provisions of any storage, installation, operating or maintenance policies and instructions issued by the equipment
manufacturer, or in the absence thereof, by Owner;
(iii) Owner shall notify Contractor in writing of any claim for breach of warranty with respect to the Operational
Services performed by Contractor within thirty (30) days after the discovery by Owner of the defect or other
circumstance giving rise to such claim; and
(iv) This Section 5 shall not apply in the case of Capital Work that is bid out to third-parties by Owner, it being
understood that any such work awarded to Contractor will be governed by a separate agreement.

6. Indemnification

(a) Each Party shall indemnify and hold the other Party and the other Party’s Indemnified Persons harmless from and against
any and all claims, losses, liability and damage, of or arising from any third party, including personal injury or death, and the
imposition of any monetary penalty or fine by a Controlling RTO or Governmental Authority, together with reasonable
attorneys’ fees (collectively, “Claims”), relating to or arising out of (a) a breach by the indemnifying Party under this
Agreement, (b) the negligence or willful misconduct by the indemnifying Party in connection with the performance of its
obligations under this Agreement, or (c) the violation of, or failure to conform with, any Applicable Law by such indemnifying
Party or its Responsible Persons; provided that such indemnification shall not be required where such Claims are caused by a
breach of the Party seeking to be indemnified under this Agreement or the negligence or willful misconduct of the Party
seeking to be indemnified or its Responsible Persons. The indemnifying Party shall have the right to undertake the defense of
any Claim for which the other Party is seeking indemnification hereunder.
(b) The indemnified Party, when it becomes aware of a Claim, shall give prompt written notice thereof to the indemnifying
Party. Such notice shall set forth, in reasonable detail, the nature of the Claim.
(c) The foregoing indemnities shall survive the expiration or termination of this Agreement and shall apply to the Parties and to
their respective successors and permitted assigns. Notwithstanding the foregoing, this Section 6(c) shall in no way toll or waive
any statute of limitation under Applicable Law.

7. Limitation of Liability

(a) The total liability of Contractor, its agents, employees, vendors, contractors and subcontractors with respect to any and all
claims by Owner arising out of this Agreement including the performance of obligations in connection with the Operational
Services, whether based on contract, warranty, tort (including negligence), strict liability or otherwise, shall not exceed Four
Million Dollars ($4,000,000), excluding amounts covered by insurance required to be carried by Contractor under Section
11(b); provided however the foregoing shall not prohibit Contractor from self-insuring under the terms of Section 11(c), and in
such event, Contractor’s liability shall be limited to the respective amounts of insurance described in Section 11(b), as
applicable. To the extent of any coverage provided by the insurance required to be carried by Contractor under the terms of this
Agreement, Contractor’s liability with respect to amounts excluded from the total liability set forth in the immediately
preceding sentence shall be limited to the proceeds of such insurance, if any, provided however, should Contractor fail to
procure and maintain any such insurance, then Contractor’s liability with respect to amounts excluded from the total liability
set forth in the immediately preceding sentence shall not exceed the policy limits of such insurance that should have been
maintained by Contractor, as provided in this Agreement. Notwithstanding any provision contained in this Section 7 to the
contrary, the limitation on liability described in the first sentence in this paragraph shall not apply with respect to amounts
payable by Contractor for (i) third-party Claims to the extent that such Claims are not the result of a breach of Owner or the
negligence or willful misconduct of Owner or its Responsible Persons and (ii) amounts in excess of One Million Dollars
($1,000,000.00) payable by Contractor for Deductibles under the insurance described in Section 11(b).

(b) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER FOR INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT
LIMITATION LOST PROFITS OR REVENUES FROM FOREGONE TRANSACTIONS), WHETHER SUCH LOSS IS
BASED ON CONTRACT, WARRANTY, NEGLIGENCE OR OTHERWISE.

(c) This Section 7 shall prevail over any conflicting or inconsistent provisions contained herein and shall be given effect even
if the remedy or remedies set forth herein fail in their essential purpose.

(d) Notwithstanding the foregoing, this Section 7 shall not apply in the case of Capital Work that is bid out by Owner to third-
parties, it being understood that any such work awarded to Contractor will be governed by a separate agreement.

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8. Force Majeure

(a) If either Party is rendered unable, wholly or in part, by a Force Majeure Event, to carry out its obligations under this
Agreement, then, during the continuance of such inability, the obligations of such Party shall be suspended to the extent such
Party is rendered unable to carry out its obligations hereunder (the “Suspended Obligations”), and the other Party shall not be
required to make any payments hereunder with respect to unperformed Suspended Obligations. The Party relying on a Force
Majeure Event shall give written notice of such Force Majeure Event to the other Party as soon as practicable after such event
occurs. Upon the conclusion of such Force Majeure Event, the Party heretofore relying on such Force Majeure Event shall,
with all reasonable dispatch, take all necessary steps to resume the obligation previously suspended.
(b) Any Party’s obligation to make payments already owing shall not be suspended by a Force Majeure Event.

9. Taxes

Any amounts payable to Contractor by Owner for the Operational Services are exclusive of federal, state, county,
municipal, or local property, license, sales, use, excise or similar tax with respect to the items covered hereby, and any future
gross receipts tax with respect to the foregoing. If Contractor is required by Applicable Laws to pay or collect any tax or if any
such taxes are assessed against Contractor, no matter when such assessment is made, then such amount of tax or taxes shall be
paid by Owner to Contractor in addition to the prices provided for herein; provided that Owner shall have the right to contest
such taxes and Contractor shall provide reasonable cooperation to Owner in connection with any such contest. Notwithstanding
the foregoing, the amounts payable by Owner to Contractor shall not be grossed-up for any state or federal income taxes
payable by Contractor.

10. Owner’s Obligations

In addition to Owner’s obligation to pay the contract price and all other sums when due under the terms of this
Agreement, Owner shall be obligated to perform the following in a reasonable manner, as to not materially hinder or delay
Contractor in the performance of the Operational Services:

(a) Coordinate with Contractor in the drafting of specifications for the Operational Services, as appropriate, including
specifications for products, material and equipment. Such specifications shall be consistent with the general scope of the
Operational Services as provided in Exhibit A, and shall be drafted in accordance with Good Utility Practices. To the extent
that Contractor believes that any of such specifications by Owner are either inconsistent with the scope of this Agreement or
Good Utility Practices, Contractor shall notify Owner and the Parties will cooperate to mutually agree on such specifications.

(b) To the extent that a work site is owned or controlled by Owner, provide a safe and proper work site for Contractor and its
personnel, agents or subcontractors. The conditions at said work site shall at all times comply in all material respects with all
Applicable Laws.

(c) Provide to Contractor and to its personnel, agents or subcontractors access to the Transmission System, to the extent
necessary to perform the Operational Services in accordance with the Standards of Conduct.

(d) Coordinate its operations of the Transmission System with Contractor in order to schedule the Operational Services to be
provided by Contractor. Such coordination of operations may include, but not be limited to, scheduling outages and taking
facilities off line in accordance with Good Utility Practice.

(e) Provide to Contractor and its personnel, agents or subcontractors, all operational spare parts and any special equipment or
special tools necessary to perform the Operational Services.

None of the foregoing obligations of Owner shall restrict Owner’s operational control of the Transmission System, and subject
to the limitations of Good Utility Practice, Owner shall have the right to delay or defer the performance of the Operational
Services, if, in the exercise of Owner’s reasonable discretion, Owner believes that the Operational Services will interfere with
its operation of the Transmission System. Further, the Parties have agreed upon certain demand prioritization in the
performance of the Operational Services, as more particularly described in Section 4.9 of Exhibit A. Notwithstanding the
foregoing, to the extent that Contractor is hindered or delayed in the performance of the Operational Services by Owner’s

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failure or delay to perform any of its obligations under this Agreement, Contractor may, subject to Section 19(c), immediately
suspend the Operational Services thereby affected for the period such Operational Services are affected by such failure or
delay or, subject to notice and opportunity to cure under Section 19(b), terminate this Agreement. In no event shall Contractor
be liable for any delay or non-performance, or the consequences of any delay or non-performance, arising out of any breach by
Owner of its obligations under this Agreement, and, to the extent such costs and expenses are not payable under any other
provision of this Agreement, Owner shall be responsible for Contractor’s costs and expenses related to any such breach to the
extent such costs and expenses would not have otherwise been incurred by the Contractor but for such breach, including, as
applicable, any additional mobilization or re-mobilization costs on a cost-plus basis as provided in Section 9.2 of Exhibit A,
cancellation fees, rescheduling costs and other similar costs.

11. Insurance

Each Party agrees to procure and maintain insurance coverage with reputable insurers with an A.M. Best rating of A-
VII or better in the kinds and amounts as set forth below:

(a) Owner agrees to maintain, at its own cost and expense, the following insurance coverage for the life of this Agreement in
the manner and amounts, at a minimum, as set forth below:
(i) Workers’ compensation insurance in accordance with all applicable state law;
(ii) Employer’s liability insurance in the amount of One Million Dollars ($1,000,000) per accident;
(iii) Commercial general liability and/or excess liability insurance in the amount of Twenty Five Million Dollars ($25,000,000)
per occurrence, such coverage to include products/completed operations liability, explosion, collapse and underground liability
(x,c,u), contractual liability covering the obligations assumed herein, and sudden and accidental pollution liability;
(iv) Business Automobile liability insurance for all owned, non-owned and hired vehicles in the amount of Five Million
Dollars ($5,000,000) each accident; and

(v) If applicable, Aircraft Liability Insurance covering all owned, non-owned, or hired aircraft used in connection with the
performance of this Agreement, including Guest Voluntary Settlement, with limits of not less than Five Million Dollars
($5,000,000) per occurrence.
(b) Contractor agrees to maintain, at its own cost and expense, and except with respect to the insurance described in Section
11(iii), to require each of its subcontractors performing any work or services under this Agreement to maintain, the following
insurance coverage for the life of this Agreement in the manner and amounts, at a minimum, as set forth below:
(i) Workers’ compensation insurance in accordance with all applicable state law;

(ii) Employer’s liability insurance in the amount of One Million Dollars ($1,000,000) per accident;
(iii) Commercial general liability and/or excess liability insurance in the amount of Twenty Five Million Dollars ($25,000,000)
per occurrence, such coverage to include products/completed operations liability, explosion, collapse and underground liability
(x,c,u), contractual liability covering the obligations assumed herein (whether performed by Contractor or any of its
subcontractors), and sudden and accidental pollution liability;
(iv) Business Automobile liability insurance for all owned, non-owned and hired vehicles in the amount of Five Million
Dollars ($5,000,000) each accident; and

(v) If applicable, Aircraft Liability Insurance covering all owned, non-owned, or hired aircraft used in connection with the
performance of this Agreement, including Guest Voluntary Settlement, with limits of not less than Five Million Dollars
($5,000,000) per occurrence.
(c) Each Party may, at its option, be a self-insurer for all insurance to be provided; provided that (i) the rating in effect by S&P
or Moody’s for the long term senior unsecured non-credit enhanced debt of such Party is higher than both BB+ and Ba1,
respectively and (ii) the approval of the State may be required for the insurances required of Owner in Sections 11(a)(i) and
11(a)(iv), and of Contractor in Sections 11(b)(i) and 11(b)(iv). Each Party will maintain such Deductibles and/or retentions
under the insurance described in Sections 11(a) and 11(b), as applicable, as are maintained by other similarly situated
companies engaged in a similar business. The Parties agree that all amounts of self-insurance, retentions and/or Deductibles are
the responsibility of, and shall be borne by, the Party maintaining such insurance.

(d) Except with respect to the insurance to be procured and maintained under Sections 11(a)(i), 11(a)(ii), 11(b)(b)(i) and
11(b)(ii), each Party shall name the other Party as an additional insured on the insurance procured pursuant to this Section 11.
To the extent that either Party shall maintain permanent property insurance on its property, the Parties agree that such
insurance shall be primary (over any insurance carried by the other Party and covering the same loss), to the extent of any such
loss to a Party’s property.

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(e) To the extent permitted by applicable law, each Party hereby waives subrogation rights by the insurers in favor of the other
Party and each of its assignees, affiliates, agents, officers, directors, employees, contractors, subcontractors, insurers or policy
issuers, whether by endorsement or otherwise, in respect of any type of liability of any of the persons insured under any and all
such policies listed above, including any permanent property insurance carried by a Party.

(f) IT IS UNDERSTOOD AND AGREED THAT THE INSURANCE REQUIREMENTS SET FORTH IN THIS SECTION
SHALL IN NO WAY LIMIT EACH PARTY’S LIABILITY UNDER THIS AGREEMENT, NOR SHALL THEY BE
CONSTRUED TO BE THE ULTIMATE TYPES AND AMOUNTS OF INSURANCE EACH PARTY SHOULD
MAINTAIN TO ADEQUATELY COVER ITSELF FROM THE HAZARDS OF ITS OCCUPATION.

(g) It is expressly agreed by each Party that any and all premiums, insurance taxes thereon in the appropriate jurisdiction,
Deductibles and/or any other charges due with respect to such policies of insurance shall be assumed by, for the account of,
and at each Parties’ respective sole risk.

(h) Within fifteen (15) days of the Effective Date and thereafter when requested, in writing, but not more than once every
twelve (12) months, during the term of this Agreement (including any renewals) each Party shall provide to the other Party
properly executed and current certificates of insurance or evidence of approved self-insurance status with respect to all
insurance required to be maintained by such Party under this Agreement. Certificates of insurance shall provide the following
information:

(i) Name of insurance company, policy number and expiration date;

(ii) The coverage maintained and the limits on each, including the amount of Deductibles or retentions, which shall be for the
account of the Party maintaining such policy; and

(iii) The insurance company shall endeavor to provide thirty (30) days prior written notice of cancellation to the certificate
holder (ten (10) days for non-payment of premium).

12. Audit and Records

(a) Upon providing reasonable notice in writing to Contractor, Owner will have the right, during normal business hours, to
audit Contractor’s accounts and records relating to costs charged to the account of Owner for Operational Services (which
accounts shall be maintained in accordance with generally accepted accounting principles and Applicable Law) within the
twelve (12) month period following the date of invoice for such Operational Services. Owner will make reasonable efforts to
conduct audits in a manner which will result in a minimum of inconvenience to Contractor. Contractor will bear no portion of
such audit cost unless such audit reveals that the amount, if any, overcharged to the account of Owner for Operational Services
during the twelve (12) month period prior to the beginning date of such audit is more than Two Hundred and Fifty Thousand
Dollars ($250,000). In such case, Contractor shall reimburse Owner for all out-of-pocket costs related to such audit. In all
cases, Contractor shall, as applicable,
(i) submit an invoice to Owner for the amount undercharged, if any, which amount Owner shall pay to Contractor not later than
the twentieth (20th) day following the receipt of such invoice, or (ii) reimburse Owner for the amount overcharged, if any,
within twenty (20) days after demand by Owner. Without limiting any of Contractor’s obligations pursuant to the first sentence
of Section 12(b), Contractor will not dispose of or destroy any accounts and records relating to costs charged to the account of
Owner for Operational Services prior to the expiration of the twelve (12) month period following the date of invoice for such
Operational Services.
(b) All records and other files kept by Contractor with respect to the Operational Services performed by Contractor (including
the records and files kept by Contractor in accordance with Sections 2.1, 3.1, 3.7, 3.8, 8.1 of Exhibit A hereto) are the property
of the Owner and shall be kept on file by the Contractor for the lesser of six (6) years or the term of this Agreement. At any
time, upon request of the Owner, the Contractor shall submit any such records and files to the Owner; provided that Contractor
may keep copies of such records; and provided further that in no event shall Contractor be required to turnover permanently to
Owner any original financial records necessary for Contractor to calculate its income or tax liability.

13. Assignment

(a) This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the respective
Parties. This Agreement shall not be assigned, transferred or otherwise alienated by either Party without the other Party’s prior
written consent, which consent shall not unreasonably be withheld; provided that any assignee shall expressly assume the
assignor’s obligations hereunder and, unless expressly agreed to by the other Party, no assignment shall relieve the assignor of

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its obligations hereunder in the event its assignee fails to perform. Any attempted assignment, transfer or other alienation
without such consent shall be void and not merely voidable.
(b) Notwithstanding the above:
(i) Either Party may assign this Agreement to a bank or other financial institution as security for indebtedness and the non-
assigning Party will provide reasonable and customary cooperation with such assignment;

(ii) Either Party may assign this Agreement to any Affiliate of the assigning Party; provided that such Affiliate is of equal or
greater financial strength of the assigning Party and such Affiliate expressly assumes the as signor’s obligations hereunder;

(iii) Contractor may subcontract its obligations under this Agreement;

(iv) Owner may assign this Agreement to any Person who agrees to purchase all or substantially all of the Transmission
System; provided that such purchaser is of equal or greater financial strength of Owner and expressly assumes the assignor’s
obligations hereunder; or

(v) Contractor may assign this Agreement to any Person who agrees to purchase all or substantially all of the Distribution
System; provided that such purchaser is of equal or greater financial strength of Contractor and expressly assumes the
assignor’s obligations hereunder;

without the prior written consent of the other Party, and, with respect to Sections 13(b)(iv) and 13(b)(v), the assigning Party
shall be thereby released from all liability under this Agreement arising after the date of such assignment; provided that,
neither Party shall be required to release any performance security delivered by the other Party to such Party until the assignee
delivers replacement security.

14. Independent Contractor Relationship

In the performance of the Operational Services, Contractor shall be an independent contractor with the sole authority
to control and direct the performance of the details of the Operational Services, including the means, methods, techniques,
sequences and procedures, Owner being interested only in the results obtained, to the extent herein warranted.

15. Amendments; Waivers

The terms of this Agreement shall not be amended or modified, except in writing signed by both Parties. No provision
hereof may be waived except in writing by the Party against who m enforcement of such waiver is sought.

16. Headings

The section headings in this Agreement are included for reference only. They are not a part of this Agreement and
shall not affect the interpretation and construction of this Agreement.

17. Entire Agreement

With respect to the subject matter hereof, this Agreement supersedes all previous representations, understandings,
negotiations, and agreements, either written or oral, between the Parties or their representatives and constitutes the entire
contract between the Parties. No part of any purchase order, request for proposal or other document issued by one Party in
connection with the Operational Services shall be binding upon the other Party or affect such other Party’s rights or obligations
hereunder unless this Agreement is amended to incorporate and include any provision of any such purchase order, request for
proposal or other document issued by a Party in connection with the Operational Services which amends or modifies a Party’s
rights or obligations under this Agreement, and such amendment is signed by a duly authorized representative of each Party.

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18. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State, except for the
provisions of such laws dealing with conflicts of law. This Agreement is intended for the benefit of the Parties and does not gr
ant any rights to any third-parties unless otherwise specifically stated herein.

19. Breach, Default and Remedy

(a) A breach of this Agreement (“Breach”) shall include:


(i) The failure to pay any amount due hereunder;

(ii) The failure to comply with any material term or condition of this Agreement, including any material breach of a
representation, warranty or covenant made in this Agreement;
(iii) If a Party: (i) becomes insolvent; (ii) files a voluntary petition in bankruptcy under any provision of any federal or state
bankruptcy law or shall consent to the filing of any bankruptcy or reorganization petition against it under any similar law; (iii)
has an involuntary petition in bankruptcy filed against it under any such law and such petition has not been dismissed within
one hundred twenty (120) days; (iv) makes a general assignment for the benefit of its creditors; or (v) consents to the
appointment of a receiver, trustee or liquidator;
(iv) Assignment of this Agreement in a manner inconsistent with the terms of Section 13; and

(v) Failure of Owner to provide access rights, or Owner’s attempt to revoke or terminate such access rights, as provided under
this Agreement.
(b) A default of this Agreement (“Default”) shall occur upon the failure of a Party in Breach of this Agreement to cure such
Breach in accordance with this Section 19(b). Upon the occurrence of a Breach (other than a Breach described in Sections
19(a)(i) or 19(a)(iii) above), the non-Breaching Party, when it becomes aware of such Breach, shall give written notice thereof
to the Breaching Party and to any other person such Party identifies in writing to the non-Breaching Party in advance. Such
notice shall set forth, in reasonable detail, the nature of the Breach, and where known and applicable, the steps necessary to
cure such Breach. Upon receiving such notice hereunder, the Breaching Party shall have thirty (30) days to cure such Breach.
Except with respect to a Breach described in Section 19(a)(i) or 19(a)(iii) above, if a Breach is such that it cannot be cured
within thirty (30) days, the Breaching Party will commence in good faith within such thirty (30) day time period all steps as are
reasonable and appropriate to cure such Breach and thereafter diligently pursue such action to completion. Except with respect
to a Breach described in Section 19(a)(i) or 19(a)(iii) above, in the event the Breaching Party fails to cure the Breach, or to
commence reasonable and appropriate steps to cure the Breach, within thirty (30) days after receiving notice thereof, and
thereafter diligently pursue such action to completion, the non-Breaching Party may (i) commence an action to require the
Breaching Party to remedy such Breach and specifically perform its duties and obligations hereunder in accordance with the
terms and conditions hereof and/or (ii) exercise such other rights and remedies as it may have in equity or at law (including,
but not limited to, termination of this Agreement). Upon five (5) Business Days’ prior notice to a Breaching Party of the
occurrence of a Breach described in Section 19(a)(i) above and if such B reach is continuing, and immediately upon the
occurrence of a Breach described in Section 4(c) or Section 19(a)(iii), the non-Breaching Party may (x) commence an action to
require the Breaching Party to remedy such Breach and perform its duties and obligations hereunder in accordance with the
terms and conditions hereof and/or (y) exercise such other rights and remedies as it may have in equity or at law (including, but
not limited to, termination of this Agreement).
(c) In the event of any Default by either Party, pending any termination of this Agreement by the non-Defaulting Party, the
Parties shall continue to operate and maintain, as applicable, the Transmission System in a safe and reliable manner. Further,
upon a termination of this Agreement by Contractor, Contractor may continue to provide such minimal Operational Services
for the Transmission System as Contractor deems necessary to maintain the safe and reliable operation of the Distribution
System until such time as Owner (i) elects to self-provide such services or (i i) contracts for such services with a third party. In
such event, notwithstanding the termination of this Agreement, Owner shall be liable to pay all of Contractor’s costs and other
expenses in providing such minimal services in accordance with Exhibit A.

20. Dispute Resolution

(a) In the event a dispute arises between Owner and Contractor regarding the application or interpretation of, or in any way
relating to, this Agreement, the Parties agree to attempt to resolve all disputes arising hereunder promptly, equitably and in a
good faith manner. If the Parties shall have failed to resolve the dispute within the ten (10) days after any written notice of the
dispute has been sent to a Party, then either Party may elect to refer the dispute to the respective senior management of the
Parties by notice in writing to the other Party, and the respective senior management of the Parties shall meet within the five
(5) Business Days after the date of the notice, to resolve the dispute. If the dispute remains unresolved within three (3)

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Business Days after such a meeting has commenced (but in any event within ten (10) days after the date of the letter referring
the matter to senior management), then either Party may at any time thereafter resort to any court having jurisdiction, unless
the Parties mutually agree to use an expert to arbitrate the dispute under the provisions of Section 20(b) below. The arbitration
provisions of Section 20(b) are voluntary, and not mandatory. Notwithstanding the foregoing, should the Parties agree to
arbitrate, the decision of the arbitrator will be final and binding.
(b) If the Parties agree that any dispute hereunder involves technical issues, then they may mutually agree to submit such
dispute to arbitration by a single independent electrical engineer (“Third Party Engineer”) for resolution in an expedited
manner pursuant to the American Arbitration Association (“AAA”) procedures utilizing a single arbitrator. The Parties intend
that a Third Party Engineer accept appointment as such within ten (10) Business Days after an agreement has been reached
between the Parties to submit a dispute to arbitration as provided in this Section 20(b). Either Party may request the AAA to
prepare a list of five (5) unbiased, neutral individuals who are qualified to act as the Third Party Engineer for the technical
dispute in question, within five (5) Business Days after such request. If the Parties cannot agree on the Third Party Engineer or
if no Third Party Engineer accepts appointment as such within such period of ten (10) Business Days after an agreement to
arbitrate (even if such failure is due to delay by the AAA in providing a list of potential arbitrators), then either Party, upon
five (5) days notice to the other Party, may refer the matter to any court having jurisdiction, and any such unilateral initiation
of a court proceeding shall be deemed a valid, mutual withdrawal of the Parties prior agreement to arbitrate under this Section
20(b). All such proceedings shall be conducted in the appropriate jurisdiction or such other location as the Parties may agree.
The Parties intend that the Third Party Engineer shall render a written determination on the matter in dispute to each of the
Parties within thirty (30) days after the Third Party Engineer’s acceptance of the appointment. If the Third Party Engineer fails
to render a determination within such thirty (30) day period, then either Party, upon five (5) days notice to the other Party, may
refer the matter to any court having jurisdiction, and any such unilateral initiation of a court proceeding shall be deemed a
valid, mutual withdrawal of the Parties prior agreement to arbitrate under this Section 20(b). Contractor and Owner shall each
bear one-half (1/2) of the out-of-pocket costs and expenses of any technical dispute resolution under this Section.
(c) Notwithstanding the foregoing provisions of this Section, neither Party shall be precluded hereby from at any time seeking
from the courts of any jurisdiction, provisional or equitable remedies, including without limitation, temporary restraining
orders and preliminary or permanent injunctions, and none of the time periods in this Section shall be deemed an impediment
to immediately initiate an action seeking equitable remedies. Either Party may seek equitable relief, in its sole discretion, and
any petitions for equitable relief under this Agreement shall be deemed ripe for judicial intervention.

21. Notices

All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall
be deemed to have been duly given upon receipt by: hand delivery (which shall not include delivery by the U.S. Mail);
certified or registered U.S. Mail, return receipt requested; telecopy transmission with electronic confirmation of receipt or
delivery; or e-mail transmission with electronic confirmation of receipt or delivery:

(a) If to Contractor, to: xxxxx

(b) If to Owner, to: yyyyy

Such names and addresses may be changed by written notice as provided in this Section to each person listed above.

22. Confidentiality

(a) Each Party will hold in confidence any and all Confidential Information as provided in this Section 22 unless (i) subject to
Section 22(d), compelled to disclose such information by judicial or administrative process, Applicable Law or as otherwise
provided for in this Agreement, or (ii) to meet obligations imposed by the Commission or by a Governmental Authority or by
membership in NERC, RRC or a Controlling RTO. Information required to be disclosed under (a)(i) or (a)(ii) above, does not,
by itself, cause any information provided by a Party to the other Party to lose its confidentiality. To the extent it is necessary
for either Party to release or disclose Confidential Information to a third party in order to perform that Party’s obligations
herein, such Party shall advise said third party of the confidentiality provisions of this Agreement and use its best efforts to
require said third party to agree in writing to comply with such provisions. A Party may disclose Confidential Information to
its Affiliates, contractors and subcontractors performing any obligations under this Agreement on behalf of such Party,
provided that such Affiliates, contractors or subcontractors agree to be bound by the confidentiality provisions of this
Agreement.

(b) During the term of this Agreement, and for a period of three (3) years after the expiration or termination of this Agreement,

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except as otherwise provided in this Section 22, each Party shall hold in confidence and shall not disclose to any Person
Confidential Information.

(c) During the term of this Agreement, and for a period of three (3) years after the expiration or termination of this Agreement,
each Party shall use at least the same standard of care to protect Confidential Information it receives as that it uses to protect its
own Confidential Information from unauthorized disclosure, publication or dissemination.

(d) If a Governmental Authority with the right, power, and apparent authority to do so requests or requires either Party, by
subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose
Confidential Information, that Party shall provide the other Party with prompt notice of such request(s) or requirement(s) so
that the other Party may seek an appropriate protective order or waive compliance with the terms of this Agreement. The
notifying Party shall have no obligation to oppose or object to any attempt to obtain such production except to the extent
requested to do so by the notified Party and at the notified Party’s expense. If either Party desires to object or oppose such
production, it must do so at its own expense. The disclosing Party may request a protective order to prevent any Confidential
Information from being made public. Notwithstanding the absence of a protective order or waiver, the Party may disclose such
Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use
reasonable effort to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so
furnished.

(e) Each Party may utilize information or documentation furnished by the disclosing Party, subject to Section 22(a), in any
proceeding or in an administrative agency or court of competent jurisdiction addressing any dispute arising under this
Agreement, subject to a confidentiality agreement with all participants or a protective order.

(f) The Parties agree that monetary damages by themselves will be inadequate to compensate a Party for the other Party’s
breach of its obligations under this article. Each Party accordingly agrees that the other Party is entitled to equitable relief, by
way of injunction or otherwise, if it breaches or threatens to breach its obligations under this Section 22.

23. Execution in Counterparts

This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute for all purposes one agreement. Signatures hereon sent
by facsimile may be treated as original signatures.

24. Survival

Any obligations incurred by the Parties under this Agreement to make payments due or remit costs, as agreed to prior
to the termination hereof, shall survive the termination of this Agreement, together with any other provision expressly
providing for such survival. In addition, the applicable provisions of this Agreement shall continue in effect after expiration,
cancellation or termination hereof to the extent necessary to provide for (a) final billings and billing adjustments, including
audit rights and the obligation to retain sufficient records for such purpose, (b) the determination and enforcement of liability a
no indemnification obligations arising from acts or events that occurred while this Agreement was in effect, including warranty
obligations and dispute mechanisms, and (c) the obligations of the Parties to hold in confidence, not disclose and protect
Confidential Information.

EXHIBIT A TO SERVICES AGREEMENT

1.0 Definitions.

The rules of usage applicable to the definitions in Exhibit A-2 to this Exhibit A shall apply to all definitions in the
Agreement. Capitalized terms defined Exhibit A-2 shall have the respective meanings set forth in Exhibit A-2, however, the
Parties agree that in the event of a conflict in the definitions between the capitalized terms set forth below in this Exhibit A and
the capitalized terms in Exhibit A-2, then the definitions set forth below shall control for the purposes of the Agreement, and

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CONTRACTS FOR OUTSOURCING UTILITY MAINTENANCE WORK

shall have the respective meanings set forth below, unless a different meaning shall be expressly stated in the Agreement:

“AAA” has the meaning ascribed to such term in Section 20(b) of the Agreement.

“Agreement” means the Services Agreement to which this Exhibit A is attached, as more particularly defined in the
preamble to the Services Agreement.

“Agreement Expiration Date” has the meaning ascribed to such term in Section 2 of the Agreement.

“Allocation Fraction” has the meaning ascribed to such term in Section 4(b) of the Agreement.

“Breach” has the meaning ascribed to such term in Section 19(a) of the Agreement.

“Breaker Internal Inspection” means a Visual Inspection of all or a sample of all of the contacts in breakers, including,
as needed, gasket, seal ring and O-ring replacement; inspection and cleaning of all components (including flange
surfaces); measurement and adjustment of contact gaps and resistance; mechanism travel adjustment; and, for oil
circuit breakers, the draining of the oil from the tanks and the measurement of contact penetration.

“Breaker Mechanism Inspection” means an inspection of the of mechanism timing and main contact resistance in
breakers, including, as needed, changing the compressor oil; inspecting and replacing drive belts; and checking the
heater, seals, compressor and pump start pressure.

“Breaker Oil Analysis or BOA” means a non-intrusive means of analyzing the condition of in-service circuit breakers
through testing of the insulating oil conducted by the use of Breaker Oil Analysis.

“Capital Work” has the meaning ascribed to such term in Section 6.0 of this Exhibit A.

“Claims” has the meaning ascribed to such term in Section 6(a) of the Agreement.
“Contractor” has the meaning ascribed to such term in the preamble to the Agreement.
“Control Center Support Services” has the meaning ascribed to such term in Section 7.0 of this Exhibit A.

“Deductible” means, with respect to an insured loss with respect to insurance required to be provided under Section
11, the amount of the insured loss to be borne by the insured Party before reimbursement for the insured loss will be
provided by an insurance carrier, including, as applicable, any self-insured retention.

“Default” has the meaning ascribed to such term in Section 19(b) of the Agreement.

“Demand Work” has the meaning ascribed to such term in Section 4.0 of this Exhibit A.

“Demand Work Labor, Technology and Equipment Cost” means, with respect to Demand Work performed during an
applicable period, the aggregate cost for all Individual Service Hours, or fractions thereof, where the cost of each
Individual Service Hour or fraction thereof in which the same Direct Labor Rate is charged shall be the sum of (A)
one (1) (or a fraction thereof if the cost of less than one (1) Individual Service Hour shall be calculated, as applicable)
hour multiplied by (I) the Direct Labor Rate multiplied by (II) the sum of (y) one (1) plus (x) Labor Loading Rate #1
plus (y) Labor Loading Rate #2 plus (z) the Supervision Loading Rate plus (B) one (1) (or a fraction thereof if the cost
of less than one (1) Individual Service Hour shall be calculated, as applicable) multiplied by the sum of (a) Labor
Loading Rate #3 plus (b) the Technology and Equipment Cost Rate. Contractor shall provide Owner from time to time
with current labor rates and loading rates.

“Direct Labor Rate” means, with respect to an individual performing Operational Services hereunder, the actual labor

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rate that Contractor is obligated to pay, identified in dollars per hour ($/hour).

“Effective Date” has the meaning ascribed to such term in the preamble to the Agreement.

“External Breaker Inspections” means breaker inspection activities that include, as needed, oil dielectric testing;
validation of alarm and control pressure switch settings, assessment of heater and cabinet seal integrity; lubrication of
parts; maintenance and testing of air blast compressors.

“Field Services” has the meaning ascribed to such term in Section 1(a) of the Agreement.

“Incidental Maintenance” means repairs and adjustments that can be made in the course of normal inspections
conducted pursuant to this Agreement, provided that such repairs and adjustments will only require equipment
normally carried by employees of the Contractor for routine inspection work. Incidental Maintenance does not include
the provision of, or installation of equipment or parts.

“Individual Service Hour” means an hour of work completed by an individual performing Operational Services.

“Labor Loading Rate #1” means the loading rate, identified as a fraction, the denominator of which is one thousand
(1000), associated with paid absence, incentive compensation and garage supplies, which rate is currently
[327.6/1000]. [Such quoted rate is as of the signing date of the APA, and is for reference only (to be updated as
provided herein).]

“Labor Loading Rate #2” means the loading rate, identified as a fraction, the denominator of which is one thousand
(1000), associated with employee benefits and payroll taxes, which rate is currently [238.2/1000]. [Such quoted rate is
as of the signing date of the APA, and is for reference only (to be updated as provided herein).]

“Labor Loading Rate #3” means the loading rate, identified in dollars per hour ($/hr), associated with small tools,
training, idle time, and safety and health, which rate is currently $[0.00] per hour for maintenance, $[1.66] per hour
for engineering support using personnel who are union members, $[0.00] per hour for engineering support using
personnel who are not union members or $[0.00] per hour for technicians, as applicable. [Such quoted rates are as of
the signing date of the APA, and are for reference only (to be updated as provided herein).]

“Major Maintenance Work” has the meaning ascribed to such term in Section 5.0 of this Exhibit A.

“Major Maintenance Work Labor, Technology and Equipment Cost” means, with respect to Major Maintenance
Work performed during an applicable period, the aggregate cost for all Individual Service Hours, or fractions thereof,
where the cost of each Individual Service Hour or fraction thereof in which the same Direct Labor Rate is charged
shall be the sum of (A) one (1) hour (or a fraction thereof if the cost of less than one (1) Individual Service Hour shall
be calculated, as applicable) multiplied by (I) the Direct Labor Rate multiplied by (II) the sum of one (1) plus Labor
Loading Rate #1 plus Labor Loading Rate #2 plus the Supervision Loading Rate plus (B) one (1) hour (or a fraction
thereof if the cost of less than one (1) Individual Service Hour shall be calculated, as applicable) multiplied by the
sum of (a) the Labor Loading Rate #3 plus (b) the Technology and Equipment Cost Rate. Contractor shall provide
Owner from time to time with current labor rates and loading rates.

“Material Cost” means Contractor’s cost of materials in performing the Operational Service s. As used in this
definition, cost of materials shall mean Contractor’s direct and actual cost of materials acquired.

“Moody’s” means Moody’s Investor Service, Inc., or its successor.

“OM&I Labor, Technology and Equipment Cost” means, with respect to Operation Maintenance and Inspection

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Work performed during an applicable period, the aggregate cost for all Individual Service Hours, or fractions thereof,
where the cost of each Individual Service Hour or fraction thereof in which the same Direct Labor Rate is charged
shall be the sum of (A) one
(1) hour (or a fraction thereof if the cost of less than one (1) Individual Service Hour shall be calculated, as
applicable) multiplied by (I) the Direct Labor Rate multiplied by (II) the sum of
(w) one (1) plus (x) Labor Loading Rate #1 plus (y) Labor Loading Rate #2 plus (z) the Supervision Loading Rate
plus (B) one (1) hour (or a fraction thereof if the cost of less than one
(1) Individual Service Hour shall be calculated, as applicable) multiplied by the sum of (a) the Labor Loading Rate #3
plus (b) the Technology and Equipment Cost Rate. Contractor shall provide Owner from time to time with current
labor rates and loading rates.

“Operating, Maintenance and Inspection Work” has the meaning ascribed to such term in Section 3.0 of this Exhibit A.
“Owner Functions” has the meaning ascribed to such term in Section 7.6 of this Exhibit A.
“Owner’s Representatives” has the meaning ascribed to such term in Section 7.6 of this Exhibit A.

“Operational Services” has the meaning ascribed to such term in Section 1(a) of the Agreement.

“Owner” has the meaning ascribed to such term in the preamble of the Agreement.

“Performance Assurance” has the meaning ascribed to such term in Section 4(c) of the Agreement.

“S&P” means Standard & Poor’s Ratings Group (a division of McGraw Hill, Inc.), or its successor.

“Spare Parts Inventory Management” has the meaning ascribed to such term in Section 8.0 of this Exhibit A.

“Subcontractor Cost” means Contractor’s actual cost in subcontracting any of the Operational Services.

“Supervision Loading Rate” means the loading rate, identified as a fraction, the denominator of which is one thousand
(1000), associated with supervision, clerical, and building support expense s, which rate is currently [191.2/1000].
[Such quoted rate is as of the signing date of the APA, and is for reference only (to be updated as provided herein).]

“Support Services Equipment” has the meaning ascribed to such term in Section 7.5 of this Exhibit A.

“Suspended Obligations” has the meaning ascribed to such term in Section 8(a) of the Agreement.

“System and Equipment Loading Rate” means the loading rate, identified in dollars per hour ($ /hr), associated with
systems and equipment necessary to provide the Transition Services, which rate is currently $[38.85] per hour. [Such
quoted rate is as of the signing date of the APA, and is for reference only (to be updated as provided herein).]

“Technology and Equipment Cost Rate” means the loading rate, identified in dollars per hour ($/hr), associated with
the systems and equipment necessary to provide Operating, Maintenance, and Inspection Work, Demand Work, and
Major Maintenance Work, which rate is currently $[0.00] per hour for maintenance, $[0.00] per hour for engineering
support using personnel who are union members, $[0.00] per hour for engineering support using personnel who are
not union members or $[0.00] per hour for technicians, as applicable. [Such quoted rates are as of the signing date of
the APA, and are for reference only (to be updated as provided herein).]

“Third Party Engineer” has the meaning ascribed to such term in Section 20(b) of the Agreement.

“Transition Services Expiration Date” has the meaning ascribed to such term in Section 2(d) of the Agreement.

“Transition Services” has the meaning ascribed to such term in Section 2.0 of this Exhibit A.

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“Transition Services Labor Cost” means, with respect to Transition Services performed during an applicable period,
the aggregate cost for all Individual Service Hours, or fractions thereof, where the cost of an Individual Service Hour
or fraction thereof in which the same Direct Labor Rate is charged shall be the sum of (A) one (1) (or a fraction t
hereof if the cost of less than one (1) Individual Service Hour shall be calculated, as applicable) hour multiplied by
(I) the Direct Labor Rate multiplied by (II) the sum of (w) one (1) plus (x) Labor Loading Rate #1 plus (y) Labor
Loading Rate #2 plus (z) the Supervision Loading Rate plus (B) one (1) (or a fraction thereof if the cost of less than
one (1) Individual Service Hour shall be calculated, as applicable) hour multiplied by the System and Equipment
Loading Rate. Contractor shall provide Owner from time to time with current labor rates and loading rates.

“Visual Inspection” means an inspection of a substation or transmission lines to monitor the ongoing operational
condition of the substation or transmission lines. Visual Inspection includes checking insulators for cracking or
contamination, inspecting equipment for oil or other fluid leaks, testing operating equipment, recording equipment
conditions, monitoring the condition of buildings and protective fences and noting evidence of intrusion by animals.
Visual Inspections of substations normally occur as part of regular weekly rounds. Visual Inspections of transmission
lines are conducted semi-annually.

“Withholding Party” has the meaning ascribed to such term in Section 4(b) of the Agreement.

2.0 Description of Transition Services

2.1 Overview. Transition Services shall be provided for the purpose of enabling the continued commercial operation
of the Transmission System from the Effective Date through the Transition Services Expiration Date. Transition Services shall
be comprised of billing and system scheduling support services. The performance of Transition Services shall be the sole
responsibility of Contractor through the Transition Services Expiration Date. The performance of the Transition Services shall
be the sole responsibility of the Owner after the Transition Services Expiration date. From the Effective Date through the
Transition Services Expiration Date, Contractor shall work with Owner to transfer to Owner such information, records and
contracts associated with the Transmission System as may be required to enable Owner to perform the Transition Services
from and after the Transition Services Expiration Date.

2.2 Billing Support Services. Contractor shall provide billing support services to the extent necessary to conduct
billings related to the operation of the Transmission System for transmission service agreements (including ancillary services),
interconnection facilities agreements, generator interconnection agreements and facility use agreements (including all tasks
that Owner may be required to perform by the Controlling RTO). The following tasks are associated with the provision of
billing support services:

• Daily tie line checkout and adjustments;


• Meter and schedule discrepancy resolution;
• Real time schedule verification, correction, and bill development;
• Process customer meter read information;
• Billing associated with generator interconnection agreements;
• Billing associated with facility use agreement;
• Billing associated with network services; and
• Billing associated with Grandfathered Agreements.

2.3 System Scheduling Support Services. Contractor shall provide system scheduling support services to the extent
necessary to maintain Control Area operations and coordination with Controlling RTOs, RRCs and other transmission systems.
The following tasks are associated with the provision of system scheduling support services:

• Monitor system tie lines;


• Monitor system generation adequacy (inter day and day ahead);
• Implement schedules into or out of the Owner’s Control Area;

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To the extent requested by Owner or required by the Controlling RTO, implement NERC transmission loading relief
schedule changes and approve as necessary;
• Forecast Transmission System requirements, including ancillary services;
• Provide schedule to balancing suppliers;
• Initial interchange accounting input;
• Initial schedule checkout and verification;
• Review tags into or out of Owner’s Control Area associated with Control Area capabilities;
• Provide information to RRC and Controlling RTO associated with Control Area operations;
• Checkout and verify transmission tags; and
• Support real time schedules.

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ANNEX 3: SUPERVISING AND MONITORING ACTIVITIES

Rating Functions
As was mentioned previously, each of the functions is rated between a minimum of 0 and a maximum of 10. Its
rating will be established by the following relation:

FUNCTION ASSESSMENT = Weighting x Rating


10
The sum of the assessments of the different functions included in a given area will add up to 100 for an area.

The assessment for the area will be calculated with the following formula:

AREA ASSESSMENT = Weighting x Area Result


100

Overall Diagnosis of the Contract as a Whole


The overall diagnosis for the contract will be the result of summing up the assessments for each area in relation to
100 as the maximum.

Practical example
COMPANY P.L.C. CONTRACTING AUDIT Date Page

% RATING AREAS/FUNCTIONS RATING


WEIGHT AREAS / FUNCTIONS WEIGHT C (10 = PERFECT) RATING AREA/CONT.
AREAS AREAS

A B 0 1 2 3 4 5 6 7 8 9 10 D=B*C/10 F=A*D/100

100

GENERAL CONTRACTING
13
POLICY
CONTRACTOR TYPE AND
11
SELECTION

8 CONTRACTING METHODS

WORK PLANNING AND


12
ORGANISATION
QUALITY AND
10
PRODUCTIVITY OF WORK

8 LOGISTICS

8 SAFETY

CONTRACTOR
12
SUPERVISION
ESTIMATE AND COSTS OF
12
CONTRACTED MAINTEN.

6 MONITORING SYSTEMS

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ANNEX 4: OVERALL MAINTENANCE MONITORING WITH INDEX SYSTEMS

ANNEX 4.1: ECONOMICAL AND EFFICIENCY FUNCTIONS MONITORING

MAINTENANCE MONITORING

Functions to Monitor and Ratios to Use

Monitoring Ratios
The system consists of analysing the following four functions:

A. - Planning Function

This function allows us to know the capacity and efficiency with which the Service distributes work.

A1 = Performance index of the Man-hours: A2 = Overtime index

Hours _ used Hours _ of _ overtime


x 100 x 100
Hours _ assigned Hours _ worked

A3 = Planned hours index A4 = Urgent work hours index

Hours _ planned Hours _ of _ urgent _ unforeseen _ works


x 100 x 100
Hours _ of _ work _ hours _ establishe d Total _ hours _ worked

B. - Workload Function

This function allows us to know the intensity of the work carried out and the suitability of the work execution
methods employed.

B 1 = Index of non-conditioned pending works

The amount of pending work, whose execution does not depend on any department other than the
Maintenance Dept., is expressed in units of time. Weeks was chosen as the most representative unit.

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B2 = Unforeseen Maintenance Work Index

Hours_ employed_ in _ non − preventive_ works


x 100
Total _ hours

B3 = Pending Work Index

Includes non-conditioned pending works and pending works that have been foreseen and planned, but
whose execution depends on the intervention of other sections of the plant. Like B 1, it is also measured in
weeks.

B4 = Preventive Maintenance Index

Hours _ of _ regular _ and _ programmed _ Servicing


Total _ hours x 100

C. - Cost Function

This function allows us to know the unitary cost trends for Maintenance, its distribution and the influence of any
investments made.

C1 = Maintenance – Investment Index

Ma int enance _ Costs


Investment s _ made _( without _ land _ nor _ real _ estate ) x 100

C2 = Indirect Maintenance Index

Amount _ paid _ out _ for _ indirect _ ma int enance


x 100
Total _ amount _ paid _ out _ for _ ma int enance

(Indirect maintenance includes works to modify, improve, research, develop, substitute and enlarge)

C3 = Production Maintenance Index

Amount _ paid _ out _ for _ ma int enance


x 100
Sales _ figures

It is expressed as a percentage variation of the previous index.

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C4 = Direct and General Maintenance Index

Amount _ paid _ out _ for _ Direct _ and _ General _ Ma int enance


Total _ amount _ paid _ out _ for _ Ma int enance x 100

D. - Productivity Function

D1 = Stoppage Time Index

Time _ plant _ stopped _ for _ ma int enance


Total _ operation _ time _ on _ base _ time _ considered x 100

D2 = Forecast Efficiency Index

Hours _ worked
Total _ hours _ establishe d x 100

D3 = Production – Maintenance Index

Sales _ figures
x 100
Amounts _ paid _ out _ imputable _ to _ Ma int enance

(Is expressed as a percentage of the previous index)

D4 = Activity index at any one time

N º _ of _ people _ working _ at _ a _ given _ moment


Total _ n º _ of _ people _ assigned _ to _ the _ Section x 100

Relational Systems of the Indices and Functions

The system indicated allows us to know the situation of each of the functions through the indices measured or by
means of a combination of these. Nevertheless, we are very interested in knowing about the overall situation of the
Service, which is measured by a combination of the functions shown above and is represented in the last figure on
the following pages. To do so, we distribute the overall result of each of the functions methodically on the sides of a
square similar to the ones used to represent the functions with the changes mentioned previously.

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A mnemonic technique allows us to configure the graph: The "heaviest" function, WORKLOAD, is placed on the
lower side of the square and the others clockwise on the other sides in alphabetical order.

The general situation of each function is represented on each side, and the points on opposite sides are linked.
The point at which the two lines cross is projected over the SE-NW diagonal of the square and divided into 100
parts.

The projection point of the cross-over over the diagonal line gives us information on the overall situation of the
Maintenance Service at the moment the base indices were measured.

The Service's management efficiency is shown by the way the point slides above the diagonal line. This is more
important than the initial situation of the index at the start of conducting this kind of monitoring.

The graphs on the following pages show how the system is applied.

Dimensioning of the Monitoring Indices

The dimensioning should be determined by the Service after considering it in depth with whatever consultation it
may consider relevant. Once established, however, it should not be modified if one wishes to keep this system to
monitor the progression in the Service's ratings. Nevertheless, slight changes to make it fit in with the changing
nature of things can be made, if they are admissible, as these will have little effect on the overall result.

We are attaching an approximate dimensioning used by a group of American companies dedicated to refining
activities.

DEF (*) EXC

A. - Planning Function:

A1. - Manpower performance 120% 85%

A2. - Overtime 20% 2%

A3. - Hours Planned 20% 60%

A4. - Hours of Urgent Work 30% 10%

B. - Workload Function:

B1. - Pending Non-Conditioned Works (Weeks) 4 0.5

B2. - Non-Preventive Maintenance 90% 40%

B3. - Pending Works (Weeks) 8 1.5

B4. - Preventive Maintenance 20% 50%

C. - Cost Function:

C1. - Maintenance - Investments 9% 2%

C2. - Indirect Maintenance 30% 8%

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C3. - Maintenance - Production +10% -10%

C4. - Direct and General Maintenance 70% 90%

D. - Productivity Function:

D1. - Stoppage Time (Unavailability due to maintenance 20% 2%

D2. - Forecast Efficiency 80% 100%

D3. - Production - Maintenance -10% +10%

D4. - Activity index at any one time 80% 100%

(*) DEF: Deficient / EXC: Excellent

LOAD COSTS PRODUCTIIVITY


E G +N N -N D E G +N N -N D E G +N N -N D

0 1,5 3 0 15 24 3 6 9

60 60 96 4 100 100
E E E E E E
0,97 21,16
98,1
G G G G G G

+N +N +N +N +N +N
35 65 87 13 80 85

N N N N N N
27,81 72,18

-N -N
-N -N -N -N

1,03 D D
D D D D 60 12,7 70
30 80 78 7,85 22
34 22 10
0 2 4 2 5 8

E G +N N -N D
E G +N N -N D E G +N N -N D

PLANNING
PLANNING
E G +N N -N D
100 E G +N N -N D E: Excellent
95 85 75 P
15 2
E E R
E 91,13 70 E
O G: Good
G G D
G G C U
+N
20
+N
O +N +N C N: Normal
S T
6
T N 48 N
I
N N
25
S
-N -N
V D: Deficient
-N -N I
T
D D
D 38,7 D Y
30 33 10
60 40 20 E G +N N -N D

E G +N N -N D WORKLOAD

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CONTRACTS FOR OUTSOURCING UTILITY MAINTENANCE WORK

ANNEX 4.2: SERVICE QUALITY AND ASSETS PERFORMANCE


MONITORING

The quality of service of transmission is measured and controlled by the KPI of the elements that make up the
system as well as from a global outlook.

Therefore, it is necessary to establish different types of Indicators for measurement of the quality of maintenance in
the Transmission Grid. The follow up and analysis of processes and activities indicators also have to be
determined and established to allow the evaluation of the activities performed by the service providers.

Below we define some type of indicators:

• Electrical service quality indicator:


• Availability Indicators.

• Service Reliability Indicators.

• Quality management indicator:


• Transmission System Availability Indicators.

Definition of different types of indicators is described and their use reviewed in brochure 367- Asset Management
Performance Benchmarking, published February 2008.

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