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RE Case Study

Introduction

What was the Project Objective?


When did it all Start?
What was the Plan?
How did Negotiations take place?
What were the Benefits of this process?
Experience needed to get the job done?

RE Case Study

History

Determine Future Business Needs for an EMS:

Exec. Steering Committee and Project Team Set Up Jan. 1997.


Large Consultant Selected to Assist with this Effort.
Project Focus on Direction of Deregulation.

Business Requirement Study Completed May 1997.


Implementation Plan Completed October 1997.

RE Case Study

History

Team Findings and Recommendations to Project


Steering Committee:
The Current EMS can not satisfy Reliant Energy needs past
the year 2001.
The Full impact of deregulation could not be determined yet.
Several Legacy EMS Life Extension Initiatives were proposed.
Budgetary cost, schedule, scope, and cash flow estimates for
all initiatives were provided.

RE Case Study

History

Team Received Executive direction in July 1997:


Proceed with EMS Life Extension Initiatives to meet short-term
needs, including Y2K remediation.

Begin a multi-phase effort to acquire a new EMS meeting


anticipated Reliant Energy needs for year 2000 and beyond.

RE Case Study

Plan Features

Reliant Energy bidder selection and negotiation process differed from the
classical process in several ways:

Classical Contract Negotiation Steps


Bidder Pre-Qualification process -- 3 months
Bid Documents, including EMS Technical Specifications -- 6 months

Bidder response and bid clarification/alignment process -- 6 months


Negotiate a fixed price, sole source contract, including a detailed
Scope of Work -- 6 months
EMS Functional Specifications are approved -- 9 months

RE Case Study

Bidder Qualification

Reliant Energy Abbreviated the pre-qualification phase.

Bidders were pre-qualified based upon:


Newton-Evans report
Bidders track record on large EMS projects
Project team members experience with bidders
Commercial information provided by Purchasing
The number of large system EMS vendors to choose from was
small.
Some potential unselected bidders have since merged with
the selected EMS vendors.

Bidder Qualification

RE Case Study

Result:

Four bidders were pre-qualified by the project team.


Nov. 1997 - Distribute Bid Instructions and EMS
Requirements.
Jan. 1998 - Begin bidder evaluation, including site visits and
Q&A.

RE Case Study

Bidder Selection

Reliant Energy focused on the bidders standard systems

Each bidders boiler plate EMS proposal document was requested.

Only Reliant Energy unique system needs, sizing, and performance


data were provided to the bidders.

Detailed bidder evaluation criteria were established for the:


Bidders standard system
Product development and other business processes
Ability to provide long-term product support and upgrades

RE Case Study

Bidder Selection

Results:

Time and resources savings.


Only demonstrable systems, processes, and staff capability were
evaluated.
Rapid information exchange between bidder and project
personnel.
Mar. 1998 - Eliminate two EMS bidders. Send the remaining two
follow-up questions and arranged for EMS demos.
Jun. 1998 - Begin contract negotiations with intended vendor
including specification of EMS functional requirements.
Aug. 1999 - Went directly into finalizing the EMS Functional
Specifications.

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RE Case Study

Commercial Negotiations

The result was the contract covered only that part of the project where
the EMS vendor offered unique strengths.
Reliant Energy elected to furnish certain services and third-party
hardware and licenses in order to leverage RE strengths, reduce costs,
and increase project flexibility:
Oracle licensing through RE Corporate.
Direct IBM HW and SW acquisition through RE Corporate.

Leverage Reliant Energy expertise in computer networks.

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Technical Negotiations

RE Case Study

Results:

Commercial
Project savings.
Improved project control.

Risk sharing and risk management opportunities.


Technical
Both Reliant Energy and vendor better understand the system
requirements.
Dec. 1998 - Complete negotiations with vendor. Issue Contract for
the initial phase of the Reliant Energy EMS Project.
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RE Case Study

What Worked

The project plan was followed closely.

The predetermined bidder evaluation criteria and bidder site


visits were very valuable in identifying the two weakest EMS
bidders.
Cost and schedule estimates received from the bidders were in
line with gross estimates made during the EMS business
assessment in 1997.
Reliant Energy commissioned a Newton-Evans custom
survey, targeting the bidders customers for information and
opinions on how well projects were conducted.
Reliant Energy used in-house expertise to evaluate the bidders
EMS system offerings and management practices.

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RE Case Study

What Worked

No project time was lost resolving contract requirements and


approving design specifications once the contract was approved.

Reliant Energy began acquiring EMS hardware


and software for the project IMMEDIATELY.

The Vendor started on the system staging


and software development phases of their
work at the factory IMMEDIATELY.

Reliant Energy started EMS training classes,


test data collection, and display standards work
IMMEDIATELY.
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RE Case Study

Cost Savings

The Contract represents about 2/3s the total cost of the EMS. Reliant
Energy leveraged its strengths and expertise on the other 1/3 of the
project scope to participate in actual and potential savings of almost $1M.
13%
1.7

52%
1.5
23%
2.9

8.2
64%

3%
0.1

17%
0.5
28%
0.8

Siemens
Vendor
CS
RELabor
Labor
IBM HW&Lic.
Oracle Lic.
Travel & Train.
Taxes & Misc.

Notes: 1. Equipment to be purchased on just in time basis. A potential savings


of $500,000 exists due to continuing improvements in the cost-performance of
workstations.

2. Enterprise licensing was used to save $400,000 in license fees for EMS clients.
3. Training will be conducted to the maximum extent in Houston to save travel and
other employee expenses.

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RE Case Study

Personnel

Reliant Energy personnel and the EMS project team in particular


have extensive EMS applications and related systems experience.

EMS Proj. Exp.


Management Team (5)

EMS Technical Team (4)


Remainder of Reliant Energy
Personnel
Total

Total Project /
Systems Exp.

55

127 m/yrs.

38

58 m/yrs.

171

313 m/yrs.

_____
264

_______
498 m/yrs.

Project teams average EMS-specific experience level is 15 man/years.


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RE Case Study

Conclusions

Reliant Energy employed the following guidelines successfully:

Create a plan for bidder selection and negotiation process and stick
with it.
Take advantage of internal expertise.
Leverage corporate resources and services.
Establish a project contact point for communications.
Manage expectations.
The negotiating team must be on par with bidders team.
Must have reliable sources of bidder intelligence.
Have technical, project management, commercial, and legal
experts on the project team.

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RE Case Study

Conclusions

Reliant Energy employed the following guidelines successfully:


Establish bidder selection criteria at the beginning of the process.

Know business needs and base selection criteria upon them.


Consider bidders support and product development record.

Select a product architecture that is open and supports standards.

This creates negotiating leverage when establishing the scope of


work.
Allows adding on best of breed functions from multiple
vendors.

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RE Case Study

Lessons Learned

Reliant Energy would do these things differently:

Include Reliant Energys standard Ts&Cs in the initial Bidder Package


Define Training expectations, requirements, and budget with the same detail as
any other EMS Advanced Application

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