Procedure For Change Order, Claim and Risk Management

Doc.
no : 4G79371-Q0004-Y021-D
Status : Final
EM TS 5 AE Issue : 12/2014
Procedure for Change Order, Claims & Risk Management
Issued By EM TS 5 AE QM
PM QM Process Sales SO
Process Area
Tendering Procurement D&E DM Civil
Supersedes guideline issued on : 4G79371-Q0004-Y021-D (pilot version)
Distribution List EM TS Project Management, Procurement, Contracts & Sales Team
Security Classification Restricted
Applicable Project Category A B C S
Mandatory Clause M1 M2 NA R
Prepared by Haris Jafri Process & Resource Sgd Haris Jafri 22- Dec-2014
Manager
Reviewed by Anil Aroskar Head of Contracts Sgd Anil Aroskar
Concurred by Sasi Kumar Head of Quality Sgd Sasi Kumar

(Process Manager)
Approved by Lars Globig Head of EM TS BA Sgd Lars Globig
Approved by Mahmoud Hanafy Head of EM TS P Sgd Mahmoud

AE Hanafy
U:\B_QA-QC\C_ Procedures\C.19- Change, Claim & Risk Management\C.19.2-Procedures & Reference\Procedure for
Change claim and Risk Management.docx
Note: Printed copies are uncontrolled copy Page: 1/13

Doc. no : 4G79371-Q0004-Y021-D
Status : Final
INDEX PAGE
1. PURPOSE.............................................................................................................................4
2. SCOPE.................................................................................................................................4
3. RESPONSIBILITIES ................................................................................................................4
4. TERMS & ABBREVIATIONS:...................................................................................................4
5. PROCEDURE ........................................................................................................................4
5.1 DEFINITIONS: .......................................................................................................... 5
5.2 GENERAL:................................................................................................................ 6
5.3 ESCALATION ........................................................................................................... 7
5.4 CHANGE (ADDITIONAL) ORDERS PROCESS ............................................................... 7
5.5 CLAIMS ................................................................................................................... 8
5.6 PROJECT RISK MANAGEMENT ................................................................................ 10
5.7 NON CONFORMANCE COST(NCC) ......................................................................... 12
5.8 COST REDUCTION.................................................................................................. 12
5.9 COST TRANSFERS .................................................................................................. 12
5.10 PERFORMANCE EVALUATION AND ANALYSIS ..................................................... 13
6. REFERENCE DOCUMENT & RECORDS .................................................................................13
7. REVISION AND RETENTION PERIOD OF RECORDS ...............................................................13
8. ATTACHEMENT .................................................................................................................13

Doc. no : 4G79371-Q0004-Y021-D
Status : Final
DIRECTORY OF ABBREVIATIONS
A M2Mandatory – This document with minor

modifications allowed, to make the requirement
Applicable Project Category: of Customer/Client/ Local Law.
A N/A - This document is not applicable for this

project category.
B
R - Use of this document is recommended.
C
P
D
PM – Project Management
D
Q
DM – Document Management
D&E- Design and Engineering QM – Quality Management
M S
Mandatory Clause: SO - Site Operations
M1Mandatory – This Document must be used.

Doc. no : 4G79371-Q0004-Y021-D
Status : Final
1. PURPOSE
The purpose of this procedure is to systematically manage the change (additional) orders, claims with
client / suppliers, risks and opportunities internal cost transfers and Non conformance costs.
2. SCOPE
This procedure applies to all the contracts executed by Siemens LLC EM TS and the organisations
governed by EM TS business in UAE.
3. RESPONSIBILITIES
Responsibility of implementing this procedure lies with
Head of Projects
Head of Projects (Finance)
Project Managers
Contract Administrators (for Projects Category B and above)
Commercial Project Managers.
4. TERMS & ABBREVIATIONS:

EM TS – Energy Management Transmission Solutions
NCC – Non Conformance Cost
5. PROCEDURE
Change management process consists of the following topics:-
Change (Additional) orders,
Claims with client / suppliers,
Risks and Opportunities,
Non conformance costs.
Cost reduction
Cost transfers.

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Status : Final
5.1 DEFINITIONS:
5.1.1 Change (Additional) Order:

A Change (additional) order is an agreed contractual amendment to the scope of delivery and
performance, prices, deadlines or, any other contractually agreed conditions.
5.1.2 Claims:
Claims (relating to financial, scheduling and/or supply/ services issues) are asserted by a
contracting party if
Other contracting party fails to fulfil its contractual obligations
Changes to the framework contract conditions has occurred or perceived misinterpretation of
contract conditions by the other party.
Claims asserted by us against customers, project partners or suppliers are referred to as outgoing
claims or own claims.
Claims asserted by customers, project partners or suppliers against us are referred to as incoming
claims or third party claims.
5.1.3 Claims Management:

Claims management refers to the totality of all action taken to systematically implemented own
claims or to counter illegitimate claims asserted by project partners.
5.1.4 Project Risks:

Risks refer to the extent to which the achievement of project objectives may deviate from planned
as a result of events or actions / omissions inside and outside the control of the company.
5.1.5 Project Risk Management:

The task of risk management is to identify and financially evaluate risks, to define appropriate risk
influencing actions and to make provision for any residual risks.
5.1.6 Opportunities
An opportunity refers to the possibility of taking action to improve the project result at any time
during the overall project lifecycle.
5.1.7 Non Conformance Costs:

Non conformance costs (NCC) in project business are costs which exceed those specified in the
Order Entry Calculation and which are neither asserted as claims against project partners nor
covered by a change order.

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5.1.8 Cost reduction:

Cost reductions refer to a reduction in the costs planned in the OEC arising from exploitable
opportunities, such as purchasing successes or the implementation of equivalent, but more
economic, alternative solutions.
5.1.9 Cost Transfers

Costs must be transferred if planned project costs need to be allocated to other WBS elements due
to shift in scope or reallocation of scope. A cost transfer must not alter total planned project costs.
An increase in costs at one juncture must be balanced by a commensurate reduction in costs
elsewhere.
5.2 GENERAL:
A synopsis of the customer contract shall be prepared consequent to contract award phase.
The entire project team shall be familiarized with the relevant contract conditions, e.g. by means
of the contract synopsis.
Key members of Project Management Team shall be made aware of importance of

Change, Claim and Risk Management at the very early stage of the project - e.g. PACT workshop.
Awareness sessions and/or individual dialogues shall be conducted during construction phase of
the Project as and when deemed necessary by the Project Manager - esp. for Site Management
staff.
A Change management issues are to be documented, continuously updated and kept on the
project server. All projects shall use PMTC+ for Claims, Risk, Opportunity, NCC and Change orders.
The change management topics shall be reviewed during the monthly internal progress review
meetings.

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Status : Final
Change Management Elements
5.3 ESCALATION
Escalations related to change management shall be in line with the “Procedure for Project Specific
Escalation path – Doc No – 4G79371-Q0004-Y006”
5.4 CHANGE (ADDITIONAL) ORDERS PROCESS
Upon receipt of the additional order quote request on the existing contract from the customer, Project
Manager shall update the variation order form.
Quote shall be prepared considering the price, timeline and other contractual requirements. For the
quote value above AED 1,000,000 Power calc tool shall be used for calculation purpose, for valuation
of Change Orders of aggregate value up to MAED 1.00; Offer/Order Calculation Sheet [Doc. No.
4G79371-Q0010-Y137] shall be adopted.

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Cross verification of the prices shall be done with sales department to ensure all the elements are
considered with correct price.
Both the calculation and the quotation shall be signed in accordance with the signature mandate.
5.5 CLAIMS
A claim triangle consists of the three core elements of successful claims management: the facts, the
basis of the claim and enforcement.
Claims can only be successfully enforced if the facts have been adequately clarified and the verifiably
documented.
Claims are more likely to be successful if the basis of the claim has been agreed by contract or is
defined in law.
Even well prepared and well founded claims – for which an appropriate basis exists – must be
successfully enforced.
A distinction must be drawn between
Preventive claims management
Influence the terms and conditions of the contract and observation of the project environment
during the fulfilment of the contract with the aim of securing an advantageous position in the
event of possible future claims
Operative claims management

All actions during the project execution phase relating to the management of specific claim cases.
Irrespective of the type and nature, all the claims shall be recorded in PMTC+ / CLAMATO Tool.
5.5.1 Claim Strategy of the Organisation

Upon occurrence of a claim relevant event or a claim opportunity an official claim notification has
to be submitted within the stipulated time and the claim List has to be updated.
Subsequently the actual claim has to be prepared by using the summary Sheet. To maintain a
consistent approach towards the client throughout the projects and unless rates are mentioned in
the contract, the standard rates given in the Claim List shall be used. If applicable, a register has to
be drawn up under which citied or supporting documents such as reports, comment sheets, time
schedules and such like shall be attached.
In general, the claim amount shall be as much as possible/reasonably justifiable and may include
indirect costs. The official claim has to be signed as per the signatory mandate policy. In complex
cases Power Calc shall be used.

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Types of Claim strategy:

Claim strategy Manifestation
elements Moderate Offensive Defensive
Claim Low claim potential High claim potential Very low claim potential
Potential
Claim Only in cases of serious All incidents susceptible Look for all possibility to
threshold infringements and if the to claims reject the claim
basis of the claim is
watertight
Claim type Postponement All legally feasible Postponement to the
claims, including extent possible
financial compensation
Amount of Equivalent to actual Maximum possible Minimum possible
own claim impact
Third party Accept all legitimate Challenge all claims Challenge all claims
claims claims
Form and Only in order to support Prompt and active Slow and inactive
timing of our position when pursuit, including legal
assertion countering third party action.
claims and negotiating
follow-up orders
Customer / Project specific claim strategy shall be defined in the Siemens Project Management
Plan (PMP).
As and when deemed appropriate, assistance of Legal Services shall be availed for appraisal of
specific / settlement Agreement(s) with Customer.
5.5.2 Claim Strategy with supplier

If the delay from the supplier does not impact project schedule and/or Siemens shall not incur any
form of acceleration/additional costs, Project Manager may decide to withhold exercise of claim
option. Penalties in this case should only act as a deterrent to the suppliers.
If the delay from the supplier impacts project schedules and/ or increase Siemens costs, Project
Manager shall exercise the claim option.

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Penalties shall be a deterrent and shall be used skillfully as a tool to promote supplier
performance. This is intended to avoid Supplier provisioning the claims as costs / risks in the future
projects.
In accordance to stipulated contract conditions, sufficient / reasonable notice shall be given to the
suppliers for improvement in performance- viz delivery of the equipment or services.
specific/settlement Agreement(s) with Supplier.
The penalty levels shall be increased for repeated offenders if the price offered for the project is
attractive. This claim strategy stands common for all the suppliers.
5.5.3 Claims from Customer

Claims received from the customer shall be evaluated by the Project Manager in consultation with
the relevant supporting functions. Response shall be sent to the customer on the status of the
claim.
All the claims from customer shall be escalated to General Management through the Head of
Projects.
If possible claim shall be rejected with valid reasons. Under unavoidable situation if it is likely that
we have to pay for the claim, meet the customer to negotiate and settle the claim on a Win a Win
basis.
specific/settlement Agreement(s) with Customer.
5.5.4 Claims from Supplier

Claims received from the supplier shall be evaluated by the Project Manager in consultation with
the relevant supporting functions. Response shall be sent to the supplier on the status of the
claim.
Claims from supplier shall be escalated to higher management in line with the procedure for
project specific escalation path.
If possible claim shall be rejected with valid reasons. Under unavoidable situation if it looks like we
have to pay for the claim, invite the supplier for negotiation and settle the claim on a Win a Win
basis.
specific/settlement Agreement(s) with Supplier.
5.6 PROJECT RISK MANAGEMENT

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Risk management is an ongoing process which consists of the elements: risk identification, risk
evaluation, risk influencing and risk controlling.
Outcome of the risk management process must be regularly updated during the project
implementation phase as follows:
Evaluation of continuing risks and opportunities of the effectiveness of planned measures.
Addition and treatment of newly identified risks.
Minimising the costs of new risks by means of suitable measures.
Updated risk contingencies have to be included in the OEC in the WBS elements provided for risk
contingencies.
Updating risk and opportunities shall be done in PMTC+ tool for all projects.
The result of “Risk evaluation before measure” is calculated through Risk Backup Calculation (Format.
No. 4G79371-Q0010-Y251).
At the project closure there are no more general project risks. The corresponding risk contingencies
must therefore be zero. The updated risk contingencies for warranty and contractual / default
penalties have to be transferred into planned cost items for corresponding provisions via risk change
notifications.
If the risk materializes, project planning is modified in the following steps:

Modification of the planned project costs of the WBS elements by means of a change notification.
Planned project costs are modified independently of the planned risk contingencies to match actual
costs. Accordingly the risk provision made for this item has to be released into planned costs.
Non conformance cost (NCC) as a result of risk management shall be reported in PMTC tool. Refer the
“Procedure for Non Conformance Management – Doc No. 4G79731-Q0004-Y022” for the details NCC
from risk management.
Risk Management Process

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Status : Final
5.7 NON CONFORMANCE COST(NCC)
Non conformance management is in detail explained in “Procedure for Non Conformance

Management – Doc No. 4G79731-Q0004-Y022”
5.8 COST REDUCTION
Planned cost reductions can only be integrated in project planning using a cost reduction change
notification if a specific and demonstrable implementation concept exists or, in the case of purchasing
success.
Cost reductions arising from procurements and occurring after the contract has been concluded with
the supplier (due contractual penalties, reductions owing to a failure to fulfil the contract in its
entirety) must be treated as claims even if they can be directly clarified. There may also be included
any cost increases incurred by us.
5.9 COST TRANSFERS
The planned project costs of the relevant WBS elements must be increased, reduced or reallocate
using individual notifications. The change in the planned costs in the collective notification must be
zero.
All changes shall be recorded in the format (4G79371-Q0010-Y189) and duly signed mandatory by
PM, CPM, Head of BA and General Manager on monthly basis and becomes a part of monthly project
review meeting. Signature of Head of Projects and Head of Projects Finance is optional.

Doc. no : 4G79371-Q0004-Y021-D
Status : Final
5.10PERFORMANCE EVALUATION AND ANALYSIS
At the end of project, claims list, variation order and Risk & opportunity list shall be evaluated to find
the success rate. Means the percentage of claims accepted / rejected, Percentage of variation orders
w.r.t. the initial sales order, percentage of risks mitigated / materialised.
Summary shall be prepared by Commercial Project Manager with the details of measures taken for
success and reasons failure of claims, variations, risk and opportunity. This summary shall be part of
lessons learned and communicated to other projects in the organisation.
6. REFERENCE DOCUMENT & RECORDS

QM Guideline 10-01 change, claim and risk management.
Division guideline E T QM – 01/ E D QM – 01.
CF opportunities and risk categories.
Signature Mandate.
LOA Guideline
PMTC Guideline
List of Potential Claims and Variation from PMTC+ Tool
List of Standard Rates
Claim Summary Sheet from PMTC+ Tool
Power Calc
Change Management REcord
7. REVISION AND RETENTION PERIOD OF RECORDS

This procedure will be revised three years from the date release, subject to the Process Manager/
process Owner decisions.
All the documents of the projects including the drawings and correspondence stored in the project
folder shall be retained for 10 years from the date of PAC. System / Process related records stored in the
relevant folders shall be retained for 5 years from the date of filing.
8. ATTACHEMENT
Change Management record (4G79371-Q0010-Y189)
Offer/Order Calculation Sheet (4G79371-Q0010-Y137)
Risk Backup calculation sheet (4G79371-Q0010-Y251)

Procedure For Change Order, Claim and Risk Management

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Doc.

Procedure for Change Order, Claims & Risk Management

Supersedes guideline issued on : 4G79371-Q0004-Y021-D (pilot version)

Distribution List EM TS Project Management, Procurement, Contracts & Sales Team

Security Classification Restricted

Applicable Project Category A B C S

Reviewed by Anil Aroskar Head of Contracts Sgd Anil Aroskar

Concurred by Sasi Kumar Head of Quality Sgd Sasi Kumar

Approved by Lars Globig Head of EM TS BA Sgd Lars Globig

Approved by Mahmoud Hanafy Head of EM TS P Sgd Mahmoud

Note: Printed copies are uncontrolled copy Page: 1/13

Procedure for Change Order, Claims & Risk Management

Note: Printed copies are uncontrolled copy Page: 2/13

Procedure for Change Order, Claims & Risk Management

A M2Mandatory – This document with minor

A N/A - This document is not applicable for this

Mandatory Clause: SO - Site Operations

M1Mandatory – This Document must be used.

Note: Printed copies are uncontrolled copy Page: 3/13

Procedure for Change Order, Claims & Risk Management

4. TERMS & ABBREVIATIONS:

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Procedure for Change Order, Claims & Risk Management

5.1.1 Change (Additional) Order:

5.1.3 Claims Management:

5.1.4 Project Risks:

5.1.5 Project Risk Management:

5.1.7 Non Conformance Costs:

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Procedure for Change Order, Claims & Risk Management

5.1.8 Cost reduction:

5.1.9 Cost Transfers

Key members of Project Management Team shall be made aware of importance of

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Procedure for Change Order, Claims & Risk Management

Change Management Elements

5.4 CHANGE (ADDITIONAL) ORDERS PROCESS

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Procedure for Change Order, Claims & Risk Management

Operative claims management

5.5.1 Claim Strategy of the Organisation

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Procedure for Change Order, Claims & Risk Management

Types of Claim strategy:

5.5.2 Claim Strategy with supplier

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Procedure for Change Order, Claims & Risk Management

5.5.3 Claims from Customer

5.5.4 Claims from Supplier

5.6 PROJECT RISK MANAGEMENT

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Procedure for Change Order, Claims & Risk Management

If the risk materializes, project planning is modified in the following steps:

Risk Management Process

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Procedure for Change Order, Claims & Risk Management

5.7 NON CONFORMANCE COST(NCC)

Non conformance management is in detail explained in “Procedure for Non Conformance

5.8 COST REDUCTION

5.9 COST TRANSFERS

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Procedure for Change Order, Claims & Risk Management