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Contract management

Hera S.p.A.'s Purchases and Contracts Department handles purchases for Hera S.p.A., in close collaboration with the area purchasing departments, and those for the Group companies for which a purchasing service exists (Herambiente, Hera Comm, Fea, Uniflotte, Famula on Line and Hera Luce).
In 2010, Procurement Protocol 231 was approved by Hera S.p.A.'s Board of Directors; it defines roles, responsibilities, behavioural principles and operating procedures which Group personnel involved in procurement activities must follow.
The procurement guidelines, in line with the Group's Code of Ethics, the organisational model as per Legislative Decree no. 231/2001 and the related Protocol, is the corporate reference for supplier selection activities, determining the principles inspiring the Group's procurement for the acquisition of goods, services and work, aimed both at activities carried out under free market conditions and subject to public works contracts. In February 2011, the review of the procurement guidelines was approved with the aim of unequivocally identifying the reference legislation for the awarding of supplies, services and work for Group companies. It is stated in this document that the Hera Group operates within the sphere of an organisational and management model adopted in pursuance of Legislative Decree no. 231/2001, for the purpose of ensuring the application of specific rules in the management of procurement in line with the Hera Group Code of Ethics and with the objectives of the Procurement Protocol (approved by Hera S.p.A.'s Board of Directors on 23 June 2010). It is confirmed in the guidelines that the Hera Group favours the economically most advantageous bid method as the approach for assessing bids, using sustainability criteria consistent with the principles established by the Group's Code of Ethics.
Furthermore, in accordance with the provisions contained in the AEEG 11/2007 resolution, as amended by the AEEG 57/2010 resolution concerning functional separation (so-called unbundling), it was also emphasised that the Hera Group handles the activities for the procurement of goods, services and work ensuring the application of efficiency, inexpensiveness, neutrality ad non-discrimination criteria. In dealings with suppliers, it guarantees the adoption in the contractual documentation of clauses aimed at observing the confidentiality of the commercially sensitive information relating to the activities functionally separated.
In December 2011, the review of 5 of the procedures containing the procurement methods of the Hera Group was approved, on a consistent basis with the principles contained in the "Group Procurement" guidelines, which define the Group procurement process for goods, services and work.
The procurement guidelines approved have been applied to all subsidiaries. At the end of 2011, 9 Group companies adopted the Procurement protocol envisaged in the organisational model pursuant to Legislative Decree no. 231/2001 (there were 5 in 2010).

The monitoring of work accidents at suppliers

In order to further improve the impact of outsourced activities in terms of accidents, in 2009 Hera began monitoring work accidents at major suppliers. This commitment is part of the implementation of the Safety Management System, which also resulted in the definition of the procedure for "injury, near-accident and accident management" and the introduction of the "Annual Summary of Injuries or Accidents Occurring at Contracting Companies in Performing Work for Hera" form into technical specifications and in tender contracts. During 2011, the request to compile the form was extended to all the suppliers of work, services and consulting activities.
The improvement in the monitoring of the suppliers in connection with health and safety in the workplace was subject to specific analysis within the "Un anno per la sicurezza nel Gruppo Hera" (A year for safety in the Hera Group) project, during which a training initiative has been envisaged addressing company contact individuals (around 700) who handle contractual relationships with suppliers.

Suppliers' workplace injuries
Value of total supplies (in millions of €)577.6589.3
Value ordered from suppliers under monitoring (in millions of €)321.5417.9
Value ordered from suppliers under monitoring (%)56%71%

During 2011, monitoring concerned Hera suppliers with regard to the commodity classes relating to the purchase of services and work (with the exclusion of goods and organisational consulting). The value of orders to suppliers under monitoring in 2011 was Euro 417.9 million, i.e. 71% of total orders.
At the date of drafting of this report, data was collected from 717 suppliers (101 in 2010), equal to an amount of Euro 243 million ordered in 2011, or 41% of the total amount of the Hera Group's orders in the year.
Calculations based on the collected data identified a frequency index of 27.2 with a severity index of 2.5. This last figure is affected by a lethal injury; without this event, the severity index drops to 1.5.

The E-procurement system
Volumes handled via the e-procurement platform12%39%70%
Suppliers with access to the platform56%89%93%

2011 saw further consolidation of the e-procurement platform which led to the achievement of 70% of the volumes negotiated on this platform (39% and 12% respectively in 2010 and 2009) and over 93% of qualified suppliers with coded access to the electronic platform.
The system was streamlined even further, improving stability and use. The bases were laid making it possible to introduce other functions at the start of 2012 which make accrediting by the suppliers direct and access to the system even more transparent, via the new Vendor management system. New instruments such as certified e-mail and the digital signature (for the sending and signing of contracts and orders) could permit a further improvement in the purchasing process at the same time reducing recourse to paper.
In conclusion, during 2011 use of the platform was extended also to public tenders, in fact establishing the conditions for considering it for all purposes to be the sole negotiation instrument adopted by the Purchases and Contracts Departments of the Hera Group.

Tender contract management manual

During 2011, a review of the Tender Contract Management Manual was approved; this document contains confirmation of its purpose as an essential instrument supporting activities of parties tasked with the control of the contracting and subcontracting companies with particular attention paid to protection of the staff used in outsourced activities.
In the first instance, the regulatory references were updated as a result of the entry into force, in particular, of Law no. 136/2010 containing norms concerning the traceability of cash flows. The obligation, to the charge of company contacts/works directors, to request - on the C.I.P.E. (Comitato Interministeriale della Programmazione Economica. Interministerial Economic Planning Committee) portal - the CUP code if public investment is involved, was first and foremost introduced. Again following the enforcement of this law, legislative updates were also included regarding identification cards for contractor staff (which must show the date of employment and, in the case of sub-contracting, the related authorisation) and regarding the use by the contractor of the customer's machinery (Article 72 of Legislative Decree no. 81/2008).
Furthermore, monthly monitoring of the sub-contracts authorised by Hera Group companies has been included, as an attachment to the Manual, a document which must be compiled each month and up-dated by the company contacts/works directors.

The use of sub-contracts

The Hera Group makes the works directors and the company contacts - parties tasked with checking outside companies - responsible for the preliminary activities necessary for prior authorisation of the sub-contracts, as well as all the subsequent fulfilments necessary for monitoring the activities of sub-contractors on site.
The company document which contains the fulfilments of both works directors and company contacts, and those of the contracting and sub-contracting firms regarding tenders, is the tender contract management manual, which specifies the matters envisaged by legislation on the topic of public work and service tenders.
The Hera Group works directors and company contacts send reports each month on the sub-contracts authorised within the sphere of all the tender contracts, using a pre-drafted procedure form. The Purchases and Contracts Department reports quarterly regarding the related checks.
28.6 million was sub-contracted out in 2011, equal to 6.4% of the amount of work and services outsourced by the Group.

Times of payment as per contract

Consistent with the financial stability objectives of the Hera Group as well as Group guidelines, the times of payment as per contract are set at least to 120 days, month-end invoice date. Certain types of supplies may depart from said limit, according to the matters envisaged by specific Group guidelines and procedures.