1. PROJECT MANAGEMENT 8 th May 2006

5. Project Management in Saipem

8. Saipem Documents System: Corporate role and Company role Operating Company Operating Company Operating Company Operating Company Operating Company Corporate SAIPEM GROUP coordinate steer overall vision & strategy define the common rules control

10. Mission Specific statement of the main purposes of an organisation and the main objectives to achieve Policies Statement of the procedures the organisation will use in order to achieve the objectives defined in its Missions. Guidelines Documents issued by the Corporate coherently with the relative missions and policies, which define and govern the process and relationships between the Corporate and group companies. Standards Documents issued by the Corporate relating to a given process which contain common rules, criteria and methods to all Group Companies for the application of the Guidelines. Corporate Procedures These are management or technical/operative documents which describe the ways of carrying out the Corporate activities, define the technical and operative details, specific duties and responsibilities These documents aim to establish common rules for the various Operating Companies in the Saipem group Saipem Documents System: Corporate Documents

11. Example of Procedure and Standards: Procurement Corporate Procedure Describe the overall Procurement Process to be followed by all the Saipem group companies , defining also Corporate activities Standards Describe the single segment of the main Procurement Process or a single transversal process, to be followed by all the Saipem group companies

12. General Procedure Document schematically describing a company process, indicating the activities, interfaces with other processes, respective responsibilities and reference documents Work Instruction Management or technical-operative document describing the procedures for conducting individual activities, which defines the technical and operative details, forms and specific competencies and responsibilities Specification Complete and referenced definition of technical requirements requested during the bidding stage from Vendors and Contractors depending on the product or service to provide. Criteria Full and referenced definition of the basic technical principles, in accordance with reference standards, in order to organise the correct development of the project’s technical documents Saipem Documents System: Company Documents

13. Example of Company General Procedure and Work Instruction Company General Procedure Describe the overall Procurement Process to be followed by all the functions within the Operating Company Work Instruction Describe the single segment of the main Procurement Process or a single transversal process, to be followed by all the functions within the Operating Company Both are to be consistent with the Corporate Documents

15. DOCUMENT CONTROLLER PROJECT CONTROL ENGINEER CONTRACT ADMINISTRATOR PROCUREMENT COORDINATOR CLIENT PLANNER ENGINEER COST ENGINEER WORK SITE ORGANISATION Typical Project Organisation PROJECT MANAGER PROJECT QUAL. ENGINEER PROJECT SE ENGINEER PROJECT ENGINEERING MANAGER INSTALLATION ENGINEERS DESIGN (DISCIPLINE) ENGINEERS MEDICAL COORDINATOR

16. SITE PROJECT CONTROL ENGINEER Typical Worksite Organisation SUPERINTENDENT COMMISSIONING MANAGER LOGISTIC SUPERVISOR QC SUPERVISOR SE SUPERVISOR DOCTOR CONSTRUCTION MANAGER SITE MATERIAL CONTROLLER PERSONNEL ADMINISTRATOR FIELD ENGINEER SITE MAINTENANCE ENGINEER SUPERVISOR TEAM SUBCONTRACTS

32. Project Procurement Management - PMI Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI

40. Contract Types and Risks Buyer Risk Seller Risk High Low Buyer Risk High Low Seller Risk CPPC CPFF CPIF FPI FFP Cost Plus Percentage of Cost Cost Plus Fixed Fee Cost Plus Incentive Fee Fixed Price Incentive Firm Fixed Price or Lump Sum

56. Subsidiary Management Plans

59. BUSINESS AIMS (Why?) PBS (Product Scope) & WBS (Project Scope) RAM RISKS CPM OBS GANTT & MILESTONES S-CURVE PROJECT OBJECTIVES PROJECT STRATEGY SCOPE & ACTIVITIES (What) PLANNING/ ESTIMATES (How) SCHEDULES (When) TOTAL PLAN RESOURCES RESPONSIBILITIES (Who does What) ORGANISATION (Who) RESOURCE/ COST ESTIMATES (How Much)

60. What is the Overall Definition Process? Plan / implement What will we deliver How will we deliver it Why are we doing it? Problem definition Solution definition Deliverables Performance Priority Time Cost Project Strategy Output Project Charter Scope Statement

66. Introduction to IBIS

67. IBIS and Project Management Tools

72. Information sharing and visibility across processes and companies Accounting, Finance & Controlling Revenue cycle Logistics & Operating management Project management Company Integration Engineering On site construction Human Resources

73. Information sharing and visibility consolidating data from different companies Management Cosolidation Group/Project Integration and consolidation Accounting, Finance & Controlling Company B Project Cosolidation Accounting, Finance & Controlling Company C Accounting, Finance & Controlling Company A

74. IBIS Processes and Systems (Rules) (Tools) Enterprise Mgmt Time/Costs Mgmt Design & Engineering Procurement Construction Mgmt Asset Mgmt HR Mgmt Business Consolidation Financial Risk Mgmt Financial Accounting Management Accounting Resources planning and staffing HR transaction Mgmt Time & Attendance Warehouse Mgmt Asset planning & allocation Maintenance Mgmt WBS definition and project budgeting Project cost mangt. Catalogue Mgmt. & Material requirements Design integration Document Mgmt Vendor Mgmt RFQ & Awarding PO & Contract issue Expediting & Transportation Fabrication / Operation Mgmt Site Material Mgmt Reporting & Analysis Good receipt & Invoicing Project Time mangt . Technical deliverables Mgmt Project Management SAP Peoplesoft Marian DMS Primavera BW Data Analysis

75. IBIS specific coverage on Project Management activities PHASES Procurement Fabrication / Installation / Construction Project Management ✓ Scheduling and Time Management Integrated Passive Cycle for Goods and Services. From Request to delivery at final destination WBS - Scope Management ✓ ✓ Engineering Data Analysis ✓ Project Cost Management (budget, control, forecasting) Timesheet management ✓ ✓ ✓ ✓ Document Management integration Document management Automated workflow ✓ IBIS coverage ✓ MTO management Project material master record Progress calculation Purchase requisition ✓ ✓ ✓ Service acceptance ✓ Goods receipt ✓ Specific Engineering appls. (Design, etc.) ✓ Site material management & tracking (constructability,etc) Bidding

78. IBIS in numbers Managed Companies WAN connected locations Managed Vessels Engineering catalogue items Procurement Departments Purchase order per year Managed Employees Connected countries Major equipment maintained World-wide users Managed Vendors/Strategic eProcurement catalogue items 28 IBIS full /120 custom 85 12 550.000 16 120.000 15.500 25 350 (int./ext.) 7.500 1.200 600.000

79. BUDGET PBCC SPS-PC SIPS Custom Systems Quickly Solution The Packages SAP BW SAP SEM BCS GHRS AMOS SIPS Magazz SIPS GELE R/3 SD FI CO AM TR PS CFM MM PM CPC Payroll Services E-Proc S I E C O Document Management Integrated Solution

80. Commissioning WIN PC’s Interface Aggreg.by Job-C.Center-Wbs GHRS (home office) PEOPLE SOFT ENG. MTO’s (CADD MTO ) MARIAN Project Control Systems : Link with other Company’s Information Sys. Construction Progress & Dates Wbs / P.O.’s & Sub-Contracts + total SAL Administration & Finance Procurement Human Resources Recorded Cost(FI) Accruals(CO) & Revenues(SD) SPS -PC (remote sites) Wbs/ Budgets & Upd ated Forecast Engineering Designed Qty’s DPR Deliverables-Progress Windchill / Documentum Progress & Dates Site MAt.MNGT. (site workshop) MARIAN Site Estimating Bid estimate Details Excel SAL details Local P.O. Assets Managmt (sites) Excel Mhs by: WBS - Discipl. -Act.code Dates Mhs FLOW SYS.rev.08-2005.ppt Tiime sheets Material Satus Report MHR’s report Eng. external services Progress Certificate (SAL) Mat. Availab. Prefabricabilty mod. FI / CO / SD SAP FLEXY (remote sites) SIPS GePe FLEXY GePe ( MANSIS ) (remote sites) Mat. Manag. SAP Project Control Department Legend: Data transfer Automatic Manual Wbs P.O.’s & Qtys DWG’s Mhs Loc.P.O.’s ENG. CAD (DWG’s/ MTO ) Autocad / PDS Dates Mat. By Comm.Code Project As built Data Excel Job Card Project Sch. – PRS Interface (aggreg.by unit-WBS-matcod ) mod. PS SAP Cost Control Planning & Progress Control Dates Construction Monitoring Qty’sProgress/Mhs-Productivity (sites) Excel ALL IN ONE* (to be implemented) cost details Excel Subcontracts Administration (sites) Excel B.Explorer- B.Object DATA WAREHOUSE SEM consolidate Scheduling Main Network - Resource Load Progress - Forecast PRIMAVERA Progress & Dates Eng.Control Progress (Mhs & Productivity) ECS PSR Project Status Rep. Excel Custom Reports Progress & Dates ProgressMhs & Dates Accounted Qty Cost & Planning PWBS – WBS - CBS OBS – DOW Change Control Progress Payment FLEXY PS (r emote site) ProgressMhs & Dates HOLD Risk Mgnt . Pertmaster Hook-up Mgnt- HMS Installed QTY cost details Excel ProgressMhs & Dates FLEXY PS (r emote site)

81. SAP-PS Project System

82. SAP-PS PROJECT COST CONTROL

84. PROJECT ARCHITECTURE – WBS CODING JOB N°. CBS Job type: Lump sum Reimbursables Changes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Area: Jacket Deck Flare Piles .......... Site/home office (for Management) General cost (for other cost) Phase: Management Engineering Project Material & transport Fabrication Transportation to Site Construction/Installation Hook-up Commissioning Start-up Warranty period cost Other cost Contingences Discipline: Civil Electrical Mlechanic Insulation Structural ........... Other level CBS: WBS

85. WBS & SYSTEM INTEGRATION Engineering PROJECT Proj. Mngt. SASP Procurement Transport Fabrication Installation Others RdA OdA SAL Fatt SP ALTRI PROCESS CIVIL MECHAN. ELECT. ... PROCESS CIVIL MECHAN. ELECT. ... ... INLAND SEA AIR SEALINES PLATFORM SYST. PACK. MECHANICAL . MACH. STEEL STRUCTURE PIPING ... SEALINES MANPOWER CONSUMABLES SERVICES SUBCTR. ... PLATFORM ... ... ... TOPSIDES DECK JACKET SYST. PACK. MECHANICAL . MACH. STEEL STRUCTURE PIPING ... TRIPS & MISSION INSURANCE TRAINING ... CO PLATFORM RdA OdA EM Fatt RdA OdA SAL Fatt SEALINES ... ... 962XXX … ... 964000 BRANCH Time sheet – accrued ( work-in-progress ) - SD : Sales & distribution FI : Financial TR : Treasury AA : Asset Accountancy MM : Material Management PM : Program Management CO : Controlling PS : Project System PS FI MM SD FI TR AA PM MM CO PS

86. Materials Consumables Subcontract Services Other costs Labor Gross margin Revenues Costs COST CONTROL ANALYSIS

87. COST CONTROL ANALYSIS

88. Statutory exchange Converted at fixed exchange rate Controlling view Actual: converted at hedging rate or accounting rate. ETC: converted at hedging rate, remaining amounts at Eni rates COST CONTROL ANALYSIS

89. Single entries Invoice # 222 Eur. 1.000 Invoice # 33 Eur. 870 Orders N° 1 Servicies Eur. 1.000 N° 2 Materials Eur. 2.500 PROJ. WBE WBE COST CONTROL ANALYSIS : Drill-down reporting MM FI PS

90. COST CONTROL ANALYSIS AND COMPANY BUDGET

91. PROJECT CONSOLIDATION – SEM-BCS 400 Cons. BW WBS Report x WBS Flexy-JC Excel 260 Price Escalation 600 ETC 420 Residuo ordine 240 Change Orders 220 Internal Transfer 100 Original Budget hISTORICAL Agg. Forecast SEM Passaggio dati per progetto SAP-PS Data-Warehouse

92. Saipem – Claims Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI

93. Definitions Any request for project variations not recognised by the Client Claim Any revision / variation to the contract accepted and approved by the Client Contract Change / Variation Any deviation from contract specifications or conditions Project Change / Variation

94. Project Control Department Change Control Project variation Change Alert H.O. Site Project Manager decision Change notice Client decision Prepare change estimate Change Order request Client approval Change Order release

95. Project Control Department Claim management Project variation Originator Change Alert H.O. Site Project Manager decision Change notice Client decision Change status identified stop cancelled notified stop cancelled No change (& exec.) rejected Claim Management Exec. Exec. (own risk) Deviation evaluation ( from budget) Hold exec.

96. Project Control Department Change Orders Client decision Prepare change estimate Change Order request Client approval Change Order release Under estimate requested stop cancelled approved revise Approved Budget change Contract schedul. change

97. Project Control Department Change Documentation Documents Home Office Site Change alert Change notice Change order Deviation Log Change Log Claim Log ( rejected) Extrawork order E.W.O. E.W.O. Log

100. Saipem – Cash Flow Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI

102. Cash Flow Definitions Estimate of costs (expenditures) trends. (Depreciation and contingencies are also included in costs). Cash out Estimate of revenues (takings) trends. Cash in Forecast of revenues (takings) and costs (expenditures) updated by Project Control after contract changes and/or internal transfers carried out during the Project lifecycle. Revised Cash Flow (Revised Control Budget) Cash Flow in which revenues (takings) and costs (expenditures) have been established in contract clauses or internal agreements but still might not be realized. Estimated Cash Flow Forecast of expenditures and takings issued by the Commercial function after Project acquisition on the basis of the works to be carried out. Initial Cash Flow (Initial Control Budget) Cash Flow of entire Project revenues (takings) and costs (expenditures) in contract currencies and in corporate reference currency. Cash Flow Estimate of cash balance trends (difference between Cash-in and Cash-out). Cash Balance

103. Responsibilities

114. Saipem – Introduction to Currency Exchange Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI

116. Currency Definitions Exchange rate communicated by Financial Manager for financial coverage. It is used for detailed items as a fixed rate for both budget issue and revision and for financial accounts and estimates to complete. The hedging will be managed by Financial department according to the information by Commercial function. During the project execution, hedging data will be checked and updated according to the Current Forecast information. Plafond Rate Exchange rate communicated quarterly by ENI, used for estimates to complete (except for the covered currency part) Forecast Rate Official daily exchange rate used by Accounting for final accounts (except for the covered currency part) Accounting Rate Rate used for the commercial budget and during the project execution in order to evaluate Euro equivalent without the effects of any rate variation. It is equal to the rate for the first plafond (if available) or to the acquisition rate Reference Rate Exchange-rate fixed at contract acquisition and communicated to PCON by the Commercial Manager. It is used for detailed items such as fixed rate for budget issue and revision Acquisition Rate

118. Saipem – Risk & Opportunity Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI

120. In the SAIPEM Group, the use of the term RISK corresponds to a negative effect on the project… … and a potential positive effect on a project objective is referred to as an OPPORTUNITY. A CONTINGENCY is an element of time, cost or deviation from specification that the project, or part of it, carries to potentially mitigate an unresolved uncertainty. Risk or Opportunity have a cause, and if they occur, a consequence RISK OPPORTUNITY CONTINGENCY Risks and Opportunities (R&O) are uncertain events or conditions that, if they occur, have an effect on a project or a function objective. Saipem Definitions

121. É Risk & Opportunity Management in Saipem R&O IDENTIFICATION R&O EVALUTATION R&O CONTROL R&O MONITORING AND REPORTING QUALITATIVE BASIC QUANTITATIVE ADVANCED QUANTITATIVE PROJECT R&O RATING Estimating Negotiation Project Close-Out EPIC/ Project Execution Bid/ No Bid KNOWLEDGE MANAGEMENT Closure Prospect selection R&O management process R&O Management is a continuous process along the project lifecycle Type and level of analysis are adapted to each phase PROSPECT PHASE COMMERCIAL PHASE EXECUTION PHASE

123. Example Risk Register

124. Example R&O Sheet

129. Risk and Knowledge Management Function Risk Management System Principles and Guidelines and Process Step

130. System’s Structure Prospect Phase Corporate Standard: Risk Management in Execution Phase Risk and Knowledge Management Process Corporate Procedure: Risk Management Corporate Policy: Risk Management Corporate Manual: Risk Management Methodology Corporate Standard: Risk Management in Support Function / Entities Describe the overall Saipem Risk & Knowledge Management Process and Documents’ System, providing Picture of the Overall Macro - process of the Risk Management, in terms of activity responsibilities and actors Describe the mission and the principles of the Risk & Knowledge Management Culture to be followed and implemented by the Saipem group Describe sequentially each sub-process of the macro Risk & Knowledge Management process in terms of activities, functions / positions involved, input and output, deliverables and tools Describe transversal sub-process of the macro Risk & Knowledge Management process in terms of activities, functions / positions involved, input and output, deliverables and tools Corporate Documents to be followed by all the Saipem group companies / entities Proposal Phase Corporate Standard: Risk Management in Commercial Phase

139. Risk & Opportunity Breakdown Structure

161. Reporting in Ersai Ersai Input

162. Project Control Department Structure of Cost Report

182. Company Project Status Report

183. Sub-Contractor Management Spec. no. WI-SPA-PCON-004-E-A

187. Saipem - Contingency Management

188. Contingency Allocation to WBE Contingencies/mitigation costs are allocated to specific WBE (only generic contingencies, e.g. penalties, allocated to “central” WBE)... RISK REGISTER WBS/ABS

189. Contingency Allocation to WBE/Milestones ...and to control milestone in order to monitor them during the project life-cycle CONTINGENCY PLANNING/ MILESTONE RISK REGISTER

192. Contingency Monitoring

193. Contingency Monitoring Report

194. Contingency Monitoring Graph Analysis of planned contingencies vs actual cost ILLUSTRATIVE

199. Definitions It is the monthly analysis performed by Controlling department regarding the economic situation of the project to date (till the last day of the month). The following data will be taken into consideration: 1) accounted revenues and accounted costs, including accruals 2) for revenues an accruals will be added equal to the difference between the calculated revenues (cost * K factor) and the accounted revenues as “work in progress”. This operation will be done in order to align every month the current balance of the project with the expected final balance. In case of project with negative balance, this loss has to be added in the year of identification and the accruals will be defined according to this rule. Accounting closure Project Profitability index as division of total project revenues and total project costs K Factor Control budget revised with contract changes and/or with internal transfer carried out during the project life. Revised Control Budget Revision of the Commercial Budget finalized by PM with the collaboration of the Project Control function. It includes the re-aggregation, for entire project lifecycle, of physical quantities, relevant costs and final commercial budget according to the cost breakdown structure items. In case of hedging instruments, every costs/revenues data has to be converted using the plafond rate. Original Control Budget

200. Definitions Best overall lifecycle estimate of physical quantities and relative Forecast costs expected to completion; it is given by the sum of the committed and estimate to complete Current Forecast Forecast and exploitation of quantity/costs still to be implemented; it can refer either to actual costs or costs to be committed Estimate to Complete Part of costs which cannot be altered, since these are actual or accrued costs, except for materials where the overall procurement order amount is considered (it can be considered as sum of actual + accruals + residual for material PO) Committed Costs for external services executed but not yet booked in Accounting. These data will be accounted according to the information provided by Cost Control Engineer. All accruals will be equalized to zero at the beginning the following month, so costs not yet booked in the following months have to be re-accounted as accruals. For the closure of December, these accruals have to be calculated according to the instructions from Accounting department. Accrued / Accruals Sum of booked costs (e.g. external invoices, internal man/hours, local payrolls, misc. charges, etc. detectable from administrative forms) and accruals Actual

221. Decision Analysis & Quantitative Risk Analysis