Purchase-to-Pay (P2P) in US Pipelines & Logistics Contractor Safety Forum 2007 (Southern Region) P2P Update

1. Purchase-to-Pay (P2P) in US Pipelines & LogisticsContractor Safety Forum 2007 (Southern Region) P2P Update August 2007

2. Agenda • What is P2P? • Why P2P? (Benefits to BP and Contractors) • P2P Process Overview • Current Status • Major Changes • Lessons Learned • Q&A

3. Ordering/ Purchasing (PO) Receiving Materials or Services Identify Need Requisitioning (& Approval) Receiving & Approving Invoice What is P2P? What is P2P? Process, activities, systems, and information flow associated with purchasing materials and contractor services from suppliers. Starts when need is identified, continues through requisitioning, ordering and receiving, and ends when supplier’s invoice is paid.

4. Why P2P?

5. New P2P Process in US Pipelines & Logistics • Procurement P2P Team Lead / Change Agent [Larry Barnett] • Lead Management of Change (MOC) for new P2P process • Procurement Coordinators (9 hired; 1 posted; 2 additional for USL) • Single Procurement points-of-contact for Operations & Maintenance Teams, Engineering & Maintenance, Procurement Specialists and Suppliers • Manage/execute procurement transactional activities (e.g., PO’s) • Drive compliance to P2P process, including using preferred Suppliers • Click CSM • Fully web-enabled P2P-compliant system for procurement of contractor services and materials • Requires no hardware or software for contractor or BP user • Provides PO’s, electronic receipting and automatic payment (from SAP) • System pre-loaded with contract data, rate sheets, etc. to drive contractor and price compliance • One location for contractor HSSE qualification information, rate data, hours worked, sub-contractors used, etc.

6. P2P will implement common, global processes and data across R&M providing only two routes to market (FasTrack and Gated) enabled by common, fully integrated systems infrastructure FasTrack: Streamlined process for accessing goods and services from defined set of pre-negotiated “leveraged” agreements approved by PLBU or other BP Procurement team Goal: 70% of spend Current: “Release” against existing MSA’s with preferred suppliers Gated: Highly controlled, competitive process for high value, infrequent purchase of materials or services where no pre-sourced agreements exist and/or or testing marketplace or comparing suppliers Goal: 10% of transactions Current: One-time agreement; “three bids and a buy” P2P Process Vision

7. Contractor Classifications

8. Contractor Procurement Approver Procurement Associate PLBU Approver Procurement Coordinator Project Controls Click CSM System Functionality BP Field Representative District Engineer O&M Team Lead Project Manager Maintenance Planner P2P Using Click CSM for FasTrack Services (“MSA Release” Replacement) 9. Print & File Documentation External Systems/Manual Processes 12. Pay Supplier from SAP A/P 5.2.Countersign & Return Work Release 6.1-6.2. Perform Work & Submit Timesheets & BOL’s for Approval 6.3. Review & Approve Tmesheets & BOL’s 2. Inform Procurement Coordinator & Submit Requisition 1. Identify Need 9. Print & File Documentation Click CSM 4.4. Obtain PLBU Requisitioning DOA Approval 4.5. Obtain Procurement DOA Approval (if >$500 k) 11. Existing Interface from Click CSM to SAP * 3.1-3.5. Verify Supplier Details (HSSE Certification; if in Click CSM & SAP) 7.2. Accept & Approve Receipts 5.1. Send Active/ Awarded Order (PO) to Supplier 4.3. Enter BP Accounting Data & Submit Order for Approval 4.1. Create & Submit Draft Order Collaboration 10. Auto Approve Invoice 7.2. Accept & Approve Receipts Collaboration 4.2. Accept Draft Order (Submit Estimate) & Print, Sign & Return “Work Release” 7.1. Submit Click CSM “Receipts” w/Attached Documentation 8. “Create” Electronic Invoice (w/Sales Tax) Collaboration July 2007

9. P2P Process Overview for Services from “FasTrack - Touch” Contractor • PC sends Draft Order via Click CSM to contractor (linked to MSA for appropriate legal entity) specifying work scope and timing • Contractor submits line item detailed Draft Order (“estimate”) including contingency and estimated sales tax • Estimate includes MSA rate sheet items in effect at time Draft Order created, third part expenditures (sub-contractors, equipment rental, material purchased, etc.), estimated sales tax, mark-up and contingency • Names of sub-contractor compan(ies) and suppliers of materials >$5,000 must be specified • “Order Owner” (BP employee whose budget is impacted or his/her manager with appropriate invoice approval financial authority) approves Draft Order prior to committing funds to market • BP Procurement approval required for orders >$500,000 • [“Purchase”] Order generated automatically from Click CSM after contractor and BP agree to scope, cost and timing • Work Release embedded in PO • Signed by contractor and BP Procurement staff prior to beginning work

10. P2P Process Overview for Services from “FasTrack - Touch” Contractor – cont’d. • Contractor performs works and must have timesheets and bills-of-lading/receipts for third party materials used on job validated by BP Field Specialist, District Engineer/Project Manger or Inspector • Contractor electronically submits “validated/stamped” time sheets and receipts/invoices for materials purchased or sub-contractors hired for approval by BP designated Receipt Approver (not Order Owner) • Contractor “creates invoice” for approved receipts, adding appropriate sales tax or indicating need to accrue • Invoice submitted electronically to SAP for automatic payment

11. Current Status • Pilot implementation for recurring expenses in Merrillville office of Mid-America Business District, and Engineering & Maintenance projects in Merrillville, Mokena, Manhattan began May 2006 and completed successfully • 8 contractors, 4 materials suppliers and 18 BP users • Change management issues with BP users and Suppliers identified and addressed • Confirmed invoice payment process operated properly (i.e., checks cut according to contract T&C’s and suppliers paid) • P2P went live in Oct 2006 in Mid-America and Mid-Continent (North area only) Districts and Tank Program • Total suppliers onboarded into Click CSM (10 August 2007) • Service Contractors: 200 • Materials Suppliers and Minor Services Contractors: 142 • Total BP users trained: 334 • Numerous lessons learned, particularly that need to focus more on BP staff change management issues and less on utilization of Click CSM • District implementation ongoing (see schedule on next slide)

12. Implementation Schedule & Procurement Coordinator Locations Updated July 07

13. Procurement Coverage Wendy Hess – Chicago OCC not supported at this time Procurement Associate – Chicago (TBH) John Juarez - Chicago Lisa Allen - Olympic Kathy Petyo - Merriville Laurie Dobransky - Cleveland Ken Templeton, John Birkelbach, Chuck Amster & Richard Yeater Chicago Logistics West PC West Coast (TBH) Central PC (TBH) Merrillville Logistics East PC East Coast (TBH) Procurement Specialist Logistics – West of Rockies Amanda Rehder -Tulsa Chris Clark – Cooper River Gary Roe & Dennis Wyrick Houston Headcount in Place Approved - TBH LA Basin (Pipelines & Tanks) not supported. Carson Refinery provides all WC Pipeline procurement at this time. Larry Barnett &, Debra Wyatt - Houston Wanda Blanchard - Houma Ken Duty - Texas City

14. No. Orders and Spend Approved per Month 9 8 6 4 3 2 * * Cumulative no. Procurement Coordinators

15. Major Changes with P2P Process • District and HQ Procurement Coordinators (PC) serve as liaisons among BP users, suppliers and Procurement and must create (Purchase) Orders for all contractor services and materials > pro-card limit • Orders ‘pre-approved” via Click CSM • Invoices automatically paid when receipts verified by authorized BP Receipt Approver, eliminating current process where invoices sent to SAP paykey and then escalated via DOA hierarchy if required • Sales tax • Contractor will add to each line item (or indicate accrual necessary) when invoicing BP • Feed from Click CSM to SAP will provide full granularity on sales tax paid by BP directly to contractor and by contractor to his suppliers • Invoices not sent to BP Requester's SAP paykey (Accenture) • All receipting and invoicing via Click CSM • Paykeys will be shut down by as Suppliers and BP users fully “engaged” • Ongoing projects will be transitioned to P2P process at logical point (target 4-6 weeks after training) • Contractors to invoice BP for work completed and submit invoices to current paykeys • PC to issue (Purchase) Order from Click CSM for balance of job • Materials requested by engineering contractors and paid by BP must be ordered and processed by PC

16. Lesson Learned • Change management is challenging • Contract “remediation” has been time-consuming (identification, location, review and rate approval proceeding) • Contractor not setting up contact information in Click CSM correctly • Subcontractor company names not specified in original estimate (Draft Order) • Incorrect receipts being submitted • Timesheets hours do not add up to hours receipted for given labor category • Receipts submitted against Contingency line items • Receipts not validated by designated BP Representative • Tax not handled correctly by contractor • Contacts • Debra.Wyatt@bp.com • Kenneth.Duty@bp.com • Wanda.Blanchard@bp.com • Larry.Fogel@bp.com • Lawrence.Barnett@bp.com