Risk Analysis Guide - EN 09.2019

Risk Analysis
Guide
V1 – 09/2019
RISK ANALYSIS GUIDE
TABLE OF CONTENTS
Chapter Page
0 Guide for using the risk synthesis matrix..................................... 2
1 Commercial analysis......................................................................... 4
2 Geopolitical environment / Laws & standards............................. 6
3 Partners (bidding consortium, twinning, subcontractors, suppliers)........... 7
4 Technical analysis and site conditions.......................................... 11
5 Sustainable development................................................................. 17
6 Project management (Schedule)..................................................... 18
7 Contractual Analysis.......................................................................... 23
8 Financial Analysis.............................................................................. 28
9 Export issues (including Finance)................................................... 34
10 Maintenance...................................................................................... 40
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RISK ANALYSIS GUIDE
CHAPTER 0
GUIDE FOR USING THE RISK SYNTHESIS MATRIX
Bidder:
When it is a consortium or a JV, indicate its organisation, the participation percentage of each of its members and underline the
leader.
Name of the project/client: If need be, clarify direct client/ultimate client.
Type of contract: Information to be provided for several items:

- Public / private contract,
- Design & build for PPP (or concession) / design & build / construction only / maintenance,
- Price escalation formula (or none),
- Lump sum / BOQ / cost + fee / target cost
- Other…This may include turnkey projects
Solution: Base or alternative (cross as appropriate).
Country: If need be, also specify area or state (for a federal country).
Date of presentation: (of the Risk File)
Date of submission: (of the offer)
Offer amount (Consortium) excl. Tax: total amount (excluding tax) of the offer presented by the bidding unit
Including own share: amount (excluding tax) of the offer for the VINCI Energies’ entity presenting the project
“Risks sharing” columns:

Tick (X) who bears the risk (a multiple answer is possible, for example VINCI Energies bidding company and other JV members).
Those columns may be ignored if there is elsewhere a risk sharing matrix (to be attached to the Risk File documentation).
Columns “Consequences for the VINCI entities”, (level of risk or opportunity):

By default, the table is filled in in blank (i.e. no risk). Identified risks or opportunities are assessed according to the following table:
Risk level Colour code

Opportunity 0 green
No risk 1 blank (by default)
Low risk 2 yellow
Medium risk 3 amber
High risk 4 red
Comments: if needed, add a succinct explanation and the kind of risk treatment
- Blank: Risk is accepted without mitigation measures
- Q: Qualification
- P: Provision (amount in €, £, $ or %) to cover the risk
- R: Risk reduction by implementation of specific measures.
When appropriate, show the amount of the provision to cover the risk and/or the % computed on the entity’s own share.
This percentage is positive for a risk, negative for an opportunity.
After filling in the amount and percentage for each line, indicate at the bottom in the «summary» line the overall weighted
contingency amount and percentage taken into account.
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RISK ANALYSIS GUIDE
CHAPTER 0
GUIDE FOR USING THE RISK SYNTHESIS MATRIX
Lines: List of the risks / opportunities identified at offer stage

The potential risks identified at offer stage are classified in 10 chapters.
The Risk Analysis Guide is a tool to analyze these risks and determine their criticality by proposing - in each chapter - a questionnaire
and related best practices.
The criticality will be reported in the Risks Synthesis matrix on the lines corresponding to the level 1 risks.
If necessary, level 2 risks (details of level 1 risks) will be explained to provide a better understanding of the project’s issues.
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RISK ANALYSIS GUIDE
CHAPTER 1
COMMERCIAL ANALYSIS
Knowledge of the Customer / Engineer / Consultants

- Do we know the final customer?
- What is the Return of Experience with the direct customer? Orders completed, scope of works, net result, contractual attitude
(variation orders, penalties applied, …) approval of design, of suppliers, coordination competence,…
- What is the Return of Experience with the Engineer / Consultant? Orders completed, scope of works, net result, contractual
attitude (variation orders, penalties applied, …) approval of design, of suppliers, coordination competence,…
- How does the customer rate the BU’s competences (process knowledge, expertise)?
- Are we familiar with the customer’s decision matrix?
Provide the customer’s decision matrix with the Risk File
Customer’s competence commercial and ethical behaviour

- What is the customer’s commercial behaviour ?
- Is the customer experienced on this kind of project / contract?
- Has the customer on his own the adequate technical competence (Adviser, Architect, Engineer)? Can he sort out technical
disputes?
- Is the customer much involved during the project’s execution (prompt answer to questions, alternative solutions proposed to
solve difficulties,…)?
- Regarding the customer’s ethical behaviour and preventing the risk of corruption: has an analysis of the risk of corruption
linked to the customer and its representatives been conducted according to the procedure defined by VINCI Energies, the
Division, the Country or the Pole? Has this analysis revealed illegal past practice? If so, what measures have been taken to
manage the risk of corruption? (Awareness/training of the project team personnel etc…. see VINCI Anti-corruption Code of
Conduct)
Customer’s solvency
- Has the customer’s credit rating been checked (credit limit from COFACE or credit rating from another rating company, past
payments on time,…)?
- Are the funds necessary for the project available? Does the BU have to present a financial scheme?
- Is the customer’s budget or the project funds available sufficient to cover variation orders?
- What payment guarantee is requested by the BU (direct payment, bank guarantee, letter of credit, parent company guarantee, …)?
-R
eminder: Extending the benefit of the VINCI Energies insurance programme to third parties is prohibited unless a specific
authorisation is obtained from the legal department of the Division concerned
Offer’s positioning / competition

- Have we been able to estimate the customer’s budget?
- Is the customer confident to win its own order?
- Likely competitors: ...
- Tendering and award procedure: ...
- Are the customer’s decision criteria – and their respective weight - known (technical content, imposed vendors, timetable,
references, …)?
- Own evaluation of our financial offer compared to competition:
- Own evaluation of our technical offer compared to competition:
- What are the alternative offers presented to meet the customer’s criteria and budget?
Note: if an alternative offer is significant, a technical analysis of such alternative must be presented (refer to Chap 4. Technical
analysis)
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RISK ANALYSIS GUIDE
CHAPTER 1
COMMERCIAL ANALYSIS
Recommendations and best practices:
Ethical behavior of the customer and/or of its representatives

Prior to [our offer / signature of the contract], an evaluation of the customer and/or its representatives with regard
to corruption risks must be conducted according to the procedure defined by VINCI Energies, the Division, the
country or the Pole
Customer’s solvency:
Before the contract is signed, ask the finance department to check the customer’s credit risk: contact specialist
organisations and/or other VINCI Group companies already dealing with the customer. If applicable, check the
customer’s current outstanding balances with the Group and payment terms normally agreed with it
Offer’s positioning / competition

Alternative offers
Alternative offers should be presented as much and as often as possible to increase VINCI Energies’ differentiation and
competitive advantage. They can address:
- Maintenance contracts: to create activity for VINCI Energies once the contract is finished (rather than a simple
warranty period)
- Complete turnkey packages
- Options to be decided by the customer at a later stage – for instance when it has an opportunity to increase its
budget
- VINCI Energies’ international network of subsidiaries and /or the proximity of our locations
- Following the customer in its relocation ventures
- Customized financing schemes: PFI, buyer’s credit, ...
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RISK ANALYSIS GUIDE
CHAPTER 2
GEOPOLITICAL ENVIRONMENT / LAWS & STANDARDS
For export contracts, refer to chap. 9
Social or political instability, lack of security, terrorism, vandalism, corruption, …:

- Does the recent history or the country survey identify political instability (elections to come, unrest, rebels or terrorists groups)
now or during the execution period?
- Have we assessed social factors such as influence of trade unions or religious events?
- Have we estimated the risk of vandalism or theft?
- Have health issues (epidemic, pandemic, radiations) been considered?
- Corruption: what is the rating of the country where the project is to be performed according to the international corruption
perception index? (This rating is available in the VINCI Energies a corruption risk map template 1°. low risk to 4°. high risk)
- The country where we will be present is not a country excluded by our insurers with regards to international sanctions for the
envisioned operation?
Opposition to the project / legal action against the project:

- Are legal actions against the project possible? Should protestors’ demonstrations that can stop the works be considered?
- Are we liable for the consequences (delays, …)?
Local environment (employment, minorities…):

- Does the contract specify criteria to be met in terms of local employment (minorities, clause for integration), respect for human
rights, sustainable development, environmental constraints, …?
- Have potential negative impacts on the social and economic environment, as well as possible disturbance to local residents,
been identified and taken into account (see Annex to the Guide on Human Rights, chap. 5)?
- If the project requires expropriation and/or relocation of occupants, are the company’s responsibilities clearly defined?
- Is any vendor imposed by the customer?
Legal and regulatory framework / Change in Law:

- Is an evolution of this framework possible (especially working conditions, taxes)?
- Are we liable for the consequences?
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RISK ANALYSIS GUIDE
CHAPTER 3
PARTNERS (BIDDING CONSORTIUM, TWINNING, SUBCONTRACTORS, SUPPLIERS)
Bidding Consortium:
Description of the consortium / JV:
- Consortium members and share of each member:
• What is the current financial situation of the partners?
• What are the most recent references of the partners for the same scope of works and project size?
• Regarding ethics and the prevention of the risk of corruption: an analysis of the risk of corruption relating to the
consortium partners has been performed according to the procedure defined by VINCI Energies, the Division, the
Country or the Pole? Has this analysis disclosed any illegal past practice? If so, what measures have been taken to
manage the risk of corruption: (Awareness/ training of the project team personnel, etc. … see VINCI Anti-Corruption
Code of Conduct)
• Our partners have not been subject to international sanction or restrictive controls?
• Could we replace them in case of default?
- Leader:
• Are the role and responsibilities of the leader crystal clear?
• Amount (or %) of the leadership fees?
• Decisions for common expenses under leader’s responsibility only?
- Is the consortium joint and several?
- Is the leader joint and several?
- Have the consortium members / project team already worked together ?
- Are the scope limits and interfaces with the partners clearly defined?
- Do you have an in depth knowledge of the partners’ works ?
- Do the partners assume 100% responsibility for their scope of works?
Consortium agreement:
- Is the consortium agreement signed?
- Is it applicable to the tender only or to the tender and execution as well?
- Has it been checked by the legal department? What are the risk identified by the legal department?
- What clauses are different from the model provided by the Group?
- Is the allocation of risks and responsibilities crystal clear?
• Towards the customer?
• Between the members towards the other members
• Is there a risk allocation matrix?
- How are the delay penalties shared?
- How are the performance penalties shared?
- Is there a procedure to describe funding from the partners (for example to pay common expenses) and rules established to
split the customer’s payments?
- Is there a dispute resolution clause?
- Are the conditions to replace the defaulting leader by another member specified?
Internal organisation – Twinning:

- What type of twinning has been agreed?
- Who are the participating VINCI Energies’ entities?
See the memorandum «Twinning at VINCI Energies » of 04/2018 describing different types of twinning and the related best
practices. This memorandum is available on the application Internal Control/Internal Control Manuals/Annexes
Type 0°: Bed & Breakfast Type 4°: Consortium will allocated work packages
Type 1°: Non-Profit loan of staff Type 5°: Consortium with integrated team
Type 2°: Subcontract Type 6°: Joint Venture
Type 3°: Internal co-contracting Option°: Contract administration by local BU
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RISK ANALYSIS GUIDE
CHAPTER 3
BIDDING CONSORTIUM:
(Also refer to the Internal Control and Risk Management Manual: Process P 2.8)
Entities can work together in several ways to perform a project. Legal assistance should be sought to determine the
most appropriate form depending on the specific features of the project and country of performance.
Joint and several consortium: each member is responsible towards the customer for the performance of the whole value of
the contract.
Not joint consortium (several consortium): each member is responsible towards the customer only for its own
share of the contract.
Whether or not we are joint and several, a badly performing partner will endanger the smooth execution of the
contract. This may have consequences for the BU in terms of timetable, additional costs and customer relationship.
Therefore selected partners should have a strong performance record both technically and financially and the
consortium agreement should clearly state the respective roles and responsibilities as well as the interfaces.
Recommendations:
- Select the appropriate organisation based on the common objective (execution of distinct work packages or pooling
of resources), the maximum risks that the BU is willing to assume (joint and/or several liability) and the technical and
financial strength of the partners.
- Before committing to any form of consortium, joint venture or alliance, measure the real benefits and risks for the BU
compared with those that would exist in a subcontractor’s situation.
- Joint and several liability consortiums should be avoided.
- The responsibilities of the leader (or the head of the consortium) during the offer period include in particular the management
of the project, the relationship with the customer, and in some instances, the consistency control of the technical solutions and
timetables proposed by the partners. The leader is also in charge of the optimisation of the total consortium offer to meet the
target price. It is necessary to check that an insurance policy covers the liability of the leader of the Consortium.
- If VINCI Energies is the leader, then the leadership fees must be included in the « Engineering and project
management » rubric of the price breakdown.
- Restrict the expenses / decisions which could be committed by the sole leader (if it is not the VINCI Energies’ BU)
on behalf of the consortium.
- The consortium agreement must be signed before tender submission. Every time we are party to a complex
consortial operation, an organisation chart must be presented where the contractual links and liabilities of each
partner will be specified.
- The most usual rules for the allocation of the penalties between partners are the following:
A/ When one party only is identified as faulty, it may be either:

1. The faulty party pays 100% of the penalties charged to the consortium, or
2. The faulty party pays up to the contractual % cap applied to its share, then the balance is split between
the partners (including the faulty party) in proportion to their respective share
B/ If no single partner is identified as faulty, then the penalties are split in proportion to the share of each partner
- When the VINCI Energies BU’s share in the overall consortium is small, it is safer for the BU to mutualise the
penalties (option A2 above) to avoid the risk of having to pay the penalties computed on the total value of the
contract, should the BU be the only faulty party.
- If a BU that joins a consortium, Joint Venture or other arrangement gives commitments on behalf of companies
outside the Group, ensure that these commitments are passed on to these companies (on the same terms and in
the same amounts) and ask for them to be covered by a credit worthy counter-guarantee (e.g. bank guarantee, parent
company guarantee indemnity bond for example).
Reminder: the extension of VINCI Energies’ insurance programmes to Goup’s external partners, in particular in the context of
consortiums or joint ventures, is prohibited except express authorization from the legal department of the Division.
The fight against corruption: An analysis of the other partners in the consortium relating to the risk of corruption is
to be performed according to the procedure established by VINCI Energies, the Division, the Country or the Pole.
Human rights: Have the members of the consortium made commitments to respect human rights in accordance with VINCI’s
Guide on Human Rights?
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RISK ANALYSIS GUIDE
CHAPTER 3
Subcontractors and suppliers:

- What are the main works subcontracted?
- Are suppliers or subcontractors subject to the customer’s agreement or are they to be designated by the customer
(e.g. “vendors list”)?
- Do the subcontractors’ payment conditions have to be approved by the customer (projects executed in France)?
- Are the suppliers and subcontractors financially robust?
- Have we checked their technical competence and the availability of their resources so that they perform their works on time?
- Have we concluded exclusive agreements?
- Have they been involved in the costing of the bid?
- Are we in a position to replace a failing subcontractor or supplier?
- Do the contractual conditions applicable to the suppliers and subcontractors protect the bidding BU?
- Regarding ethics and the prevention of the risk of corruption, has an analysis of the risk of corruption relating to suppliers,
distributors, subcontractors, service providers, been conducted according to the procedure defined by VINCI Energies,
the Division, the Country or the Pole? Has this analysis disclosed any illegal past practice? If so, what actions have been
implemented to manage the risk of corruption (Awareness/Training of project team personnel, etc. … see the VINCI
Anti-corruption Code of Conduct)?
- Have subcontractors been reviewed with regard to the safeguard of human rights (health, safety, hours of labour …)?
(see Annexe to the VINCI’s Guide on Human Rights – Practice relating to human rights in the value chain)
- Is there a system in place to monitor and control the practices of subcontractors during the implementation of the project?
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RISK ANALYSIS GUIDE
CHAPTER 3
SUBCONTRACTORS AND SUPPLIERS:

Also refer to: 8 . Financial Analysis and to the Internal Control and Risk Management Manual: process P 4.1
An industrial risk may arise with certain subcontracted or co-contracted items of equipment or concerning local
suppliers imposed by the Customer, or with untested technology transfers. Specific care should be taken with regards
to supplies which are critical in terms of delivery deadline or performance of the overall systems.
It is recommended to request guarantees to cover these risks.
Note: this risk coverage should not be mistaken with the error margin taken into account for the quantity estimates
(cables / number of I/O) or to cover nearly unavoidable expenses which can only be estimated as a % based on volume.
- Check the provider’s financial and technical soundness, as well as its ability to perform within the deadline
- In order to increase the BU’s overall competitiveness, special attention should be given to:
• Make or buy alternatives
• Procurement from low cost countries: ready to use equipment and supplies, manufacturing according
to the BU’s specifications, detailed design subcontracting, …
• Compliance with VINCI Energies’ procurement policy, in particular with regards to frame contracts,
payment terms and conditions.
- Involve the subcontractor during the bid period: appraise its proposals regarding alternative solutions, options
(which could be presented to the customer as alternatives), optimisation of the overall project cost, …
- Ensure that the subcontractor has properly understood the project constraints, particularly those relating to
technical issues and deadlines; insofar as possible, arrange for a worksite visit by the subcontractor.
- The following should be agreed with the suppliers and subcontractors:

• Binding offers, to secure the project budgeted costs
• « back to back » conditions, to mitigate BU’s technical and timetable risks (in particular, with regards to
the warranty period, delay and performance penalties, performance bonds, …) after having checked that
they can actually assume them
• « if & when » payment conditions, so that they share the financial risk on the final customer
- Draw up a comparative table of bids with quantifiable criteria to assess the proposals in a relevant and objective
fashion.
- Verify the subcontractor’s compliance with labour and tax requirements (e.g. in France, vigilance certifications …)
The fight against corruption:

- An analysis of suppliers, distributors, service providers and subcontractors regarding the risk of corruption is to
be performed according to the procedure established by VINCI Energies, the Division, the Country or the Pole.
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RISK ANALYSIS GUIDE
CHAPTER 4
TECHNICAL ANALYSIS AND SITE CONDITIONS
Activity (typical or new for the entity)

- What are the technical competences needed for the project’s execution? (Separate those needed for basic design from those for
installation, maintenance and services)
- Are these competences available in the BU?
- Which other BU(s) from the group could reinforce the team?
- Which similar projects have already been performed by the bidding BU? By the Management Pôle or by the Division?
Initial expected profit

Past projects Business Unit in charge Selling price Updated profit
(Budget)
Project definition / Design / Quantities

Technical understanding of requirements / Analysis of BU’s technical responsibility / Reliability of
customer’s data
Is the BU (or the consortium which the BU is a member of) in charge of the basic design?
If the BU is in charge of the basic design:
- Does the contract describe the customer’s approval process – phase after phase - of the BU’s basic design?
- Does the Customer’s basic design approval release the BU’s responsibility?
- What is the amount of the provisions included in the cost estimates for re-design (additional engineering, cost of equipment
modifications, supplies, …)?
If the customer (or a third party designated by the customer) is in charge of the basic design:
- Is the customer’s responsibility clearly stated in the contract?

- Does the BU have to check, then endorse, the basic design provided by the customer?
- Does the BU have to check, then endorse, the quantities specified by the customer?
- Are the modifications to be made on customer’s design identified in BU’s offer (or in consortium’s offer)?
- Are the entry data needed by the BU - consistent with the basic design delivered by a third party - listed in the contract
documentation (nature, format, timetable, …)?
- Is the current progress of the basic design satisfactory?
- Does the contract specify the procedure to account for the discrepancies between the entry data provided by the customer
and those actually found?
When the detailed design is provided by the customer:
- Does the BU have the obligation to check the drawings, the quantities in the BOQ (Bill of quantities)?
- Have discrepancies been identified between the drawings and the BOQ?
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RISK ANALYSIS GUIDE
CHAPTER 4
Technical understanding of requirements:

Does the contract state specific performances to be achieved by the BU?
If it does :
- What are the main performances stated in the contract?
- What are the significant pieces of equipment contributing to the achievement of the contractual performance?
- Is the BU responsible for the technical specification of the main pieces of equipment?
- Are the procedures for the acceptance and the methods for measuring the contractual performance (conditions, tests,
duration, …) described in the contract? If not, are they described in our offer?
Other identified technical difficulties:

- Have technical issues, other than those listed above been identified? For example: size of the equipment to fit into the available
space, resistance to weather conditions (heat, earthquakes, …), co-activity, ...
- Which equipment, if any, bears a significant technical risk or delay risk?
- What are the main technical risks that could prevent / delay the provisional acceptance :
Is a preliminary design phase (Ingéniérie Simultanée) planned? If not, has it been proposed to the customer?
Documentation :
- Any particular requirements with regards to documentation, administrative agreements or unusual technical norms?
Possible technical alternatives :

- Description of the proposed alternatives, with their effect on timetable, perfomance, costs :
- Could the acceptance of an alternative by the customer or the authorities be a risk?
- Who takes responsibility for the potential consequences (equipment, maintenance)?
Note: if the alternatives have a significant impact, a technical analysis has to be presented for each alternative.
Costing / Reliability of pricing :

(See also: 8. Financial analysis: Costs estimates and evolution)
- Is the scope of works (equipment and services) clearly defined in our offer? Quantities, main equipment specifications, civil
works, erection, supervision of erection, commissioning, warranty…
- Are there differences (related to the scope of works) compared to the customer’s expectations?
- Is the scope of works under the customer’s responsibility clearly stated?
- Are there technical interfaces which have not been verified?
- Has a site visit taken place?
- Has this site visit allowed full knowledge of the environment? Was it sufficient?
- Have the expected number of hours been checked by the departments in charge of execution (design office, site manager, …)?
- Are contingencies or provisions included in the project costs to cover identified risks or uncertainties in the contract
documentation?
- Is the total project’s budgeted cost consistent with that of the similar projects performed recently?
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RISK ANALYSIS GUIDE
CHAPTER 4
Methods / Innovation :
- Does the project include innovative components or new execution methods?
- Are non-conventional processes covered by a technical agreement from a recognised organisation?
- The legal safeguard of innovative components is envisioned?
Consideration for unforeseen conditions (bad weather)

- Do the provided or available reports identify such phenomena (storms, floods, earthquakes, …)?
- Does the contract consider natural events (extension of time, force majeure, suspension, )?
Site conditions
- Any particular constraints related to security and safety?
- Any particular site or environmental issues or constraints?
• residential / industrial area
• underground networks
• access to site
• access or rights of way,
• risks related to works close to occupied or being currently built buildings
• are issues related to traffic conditions and / or access to site foreseeable?

• has a traffic management drawing (or sketch) been issued and do specific risks appear?
• ...
- Are special accreditations or qualifications needed (for the BU or individually) to access the worksite (restricted areas: nuclear,
defense, …)?
- Human rights: Have the necessary resources (for implementation and monitoring) been provided to ensure compliance with
human rights commitments (see VINCI’s Guide on Human Rights and its annex)
Ground risk (insufficient knowledge)

- Any potential risks relating to soil and sub-soil?
- If yes, who bears the risk? What consequences? Preventive measures considered by BU?
- Are archaeological searches foreseeable?
- May the ground be contaminated?
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RISK ANALYSIS GUIDE
CHAPTER 4

Project definition / Design / Quantities
Scope of works:
The scope of works is really the main risk area as VE has to commit on a scope, a price and a timetable based on
information from the customer that he will not confirm to be 100% accurate and complete . Therefore, in its offer, VE
should explain in detail the assumptions used to quote:
- What is included: main equipment specifications, quantities, civil works, services estimated for erection or for the
supervision of erection only, …
- What is not included: for example co-ordination with other contractors, site facilities to store equipment.
A “ lump-sum” contract should not be understood as an “all inclusive” contract. The stated price and timetable in our
offer must make reference to a precise list of supplies and services.
If the references mentioned above cannot be written in our offer, they should be kept in the contract file for future
reference when discussions for variation orders and claims will take place .
Erection, Commissioning
These services can be performed either entirely by VE (or by VE’s sub-contractors), or entirely by the customer (VE
having no responsibility whatsoever) or by the customer under VE’s supervision.
It is therefore important that each party’s responsibilities are precisely described and that the costs of these services
account for the risks borne by VE.
When VE supervises the services performed by the customer, or if VE has to provide assistance, then it is
recommended to write in the contract the assumptions used for pricing these services: daily rate (or hourly rate),
monthly lump-sum amount for a given number of people assigned, who bears the travel and accommodation costs, …
Preliminary engineering phase (FEED, PRO, …)

During this phase the BU, together with the customer, will perform a detailed pre-study and more accurately determine
the works and services to be provided. This pre-study is paid by the customer and is generally more detailed than a
mere quotation.
It is recommended to include this proposal in our offer.
Documentation
Ensure that the exhaustive list of the documentation to be provided to the customer is actually included in the contract
documents. This list should be completed with a timetable, in particular for the documents which have to be approved
by the customer before execution (approval of FEED, PRO, procedure for performance measurement, …)
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RISK ANALYSIS GUIDE
CHAPTER 4

Costing / Reliability of pricing
The full cost must be calculated in compliance with Quartz rules, and in particular with a conservative approach,
and include all the costs items as shown in the Quotation Sheet (cf: Internal Control and Risk Management Manual:
Process P2.2)
Assess the costs arising from the project environment: project execution conditions, joint activity, lost time, logistics,
staff health and safety, insurance, environmental protection, waste collection and traceability, etc.
Include a contingency amount consistent with:

- difficulties, risks and expected opportunities (technical risks, deadlines, purchasing, subcontracting, inflation, etc.)
- the precision of the customer’s specifications documents used to prepare the offer and the accuracy of the price
study carried out
Once the cost of the various services has been calculated, the offer’s total cost should be optimized by seeking
synergies between the various cost components (do not just add them together).
Finally, the estimated total cost should be compared with that of similar projects (won or lost)
During negotiations:
- Recalculate costs, including contingencies, to take into account changes in the offer following clarifications received
- Anticipate customer’s expectations not stated in the contract and that cannot be invoiced additionally
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RISK ANALYSIS GUIDE
CHAPTER 4
Contract based on Unit prices / quantities provided by customer

- Is the basic design provided by the customer?
- Does the BU have to take the responsibility for the detailed design?
- Do the items of the BOQ and the unit prices correctly cover the whole scope of works? (consistency with the list of items used
for the cost calculation)?
- Are the quantities in the bid documents consistent with the design?
- Maximum % of variation up or down without any increase in price?
- Can fixed costs (studies, site works) be charged in addition to unit prices if quantities vary or if the timetable is extended?
- Will the assumptions used for the Unit prices be attached to the BU’s offer?
- Are the measurements and invoicing methods and tools described in the bid documents?
- Progress will be approved by the customer weekly/monthly?
- Is a quantity surveyor included in the project team?
- Orders to sub-contractors will include similar unit prices and payment only if and when measurements are approved by the
final customer?

The unit prices are an average price based on reference quantities. This reference has to be stated in the offer (or in
the bid documents) and variations of actual quantities compared to the reference must trigger a variation of the unit
prices.
The maximum variation of quantities (especially when it is a decrease) without unit price changes should be limited
(recommended: 10% maximum). If the threshold triggering the change in unit prices is higher than a given value (for
example 10%), then the unit prices should include a commensurate contingency.
The reference for VE’s unit prices also assumes specific work conditions and labour efficiency: clear instructions
(diagrams) from the customer to prevent re-work, unrestricted access to working areas, and a precise timetable to
execute the works.
This reference should also be stated in our offer together with the price list for deviations from this reference: monthly
site costs for extended timetable (project management, site management, rent of facilities, equipment, …) and hourly
rates of engineering, studies, … due to re-work at customer’s request or for completing specifications that should have
been provided by the customer.
Nota: although these recommendations aim at protecting VE’s interests, they should also be presented to the
customer as protecting its interests: indeed, if VE is not sure it will recover its costs if quantities increase or decrease,
or if the works last longer than anticipated, then we will include contingencies in our selling price, which in the end
may be more costly to the customer than a fair remuneration of the actual work done.
If the references mentioned above cannot be written in our offer, they should be kept in the contract file for future
reference when discussions for variation orders and claims will take place
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CHAPTER 5
SUSTAINABLE DEVELOPMENT
Environment, pollution (water, air, noise …)

- Are local regulations known?
- Does the contract include clauses related to sustainable development?
- Are there specific constraints pertaining to environment (noise, vibrations, …)?
- Are the works and equipment subject to special security rules (hazardous environment such as: nuclear risk, explosion risk
ATEX, seism, …)?
- Is there a risk of existing contamination (oil & gas, heavy metals, asbestos, …)?
- Can the works themselves generate contamination (existing water tank, noise, vibrations, air, …)?
Customer’s safety procedures :

- Have customer’s specific requirements regarding safety – if any - been taken into account?
Quality assurance
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CHAPTER 6
PROJECT MANAGEMENT (SCHEDULE)
Organisation / interfaces
- Are interfaces « customer/BU » or « bidding consortium/other contractors » defined without ambiguity?
- Is a crystal-clear organisation planned, stating the interfaces with third parties as well as the internal operating mode
(roles and responsibilities) with the co-contractors, the Engineer, the General Contractor,…
- Is the design carried out by one Engineering firm or several ones? In the latter case, is there a design coordination cell?
- For comprehensive projects including all building activities (Tous Corps d’Etat - TCE) is there an integration cell with adequate
resources?
Project schedule (Sequencing, Management, Coordination)

- Is the timetable reasonable?
• Engineering - Design
• Manufacturing - Supply
• Civil works
• Erection
• Commissioning
• Warranty
- For multi-discipline project, is there a comprehensive programme of works?
- Is the time allowed for preparation, design, method statements sufficient?
- Can we meet the intermediate milestones?
- Is the time period for customer’s controls or approval specified in the contract?
- In case of silence of the customer, are the documents deemed approved after a specified period?
- Is there a sufficient period of time dedicated to the tests prior to commissioning and take-over?
- What are the key issues to meet the contractual dates?
- Do adverse weather conditions grant an extension of time?
- Warranty period:
• What is the starting point of the warranty period?
• Duration in months of the warranty period?
• What is the latest warranty date?
• Any specific arrangements for maintenance during the warranty period?
Control / Approval of design / Acceptance of alternatives:

- Does the contract documentation define the technical coordination process with the customer (reviews, technical meetings,
frequency, reports, tools, …)? If not, do we propose a process in our offer?
- Does the contract documentation define the change management process (scope of works, timetable, price, maximum period
to come to an agreement, consequences of a non-agreement)? If not, do we propose a process in our offer?
- Take-over conditions :
• Are the take-over procedures (FAT, tests, acceptance, …) described in the contract (duration, resources, authorisations, …)?
• Do we have control over the acceptance process?
• Are partial acceptances possible?
• Can the customer use the installation prior to acceptance?
• Have we allowed enough resources to clear the punch list items within a reasonable period of time?
• Is the training of customer’s staff a condition precedent to obtaining the take-over certificate?
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CHAPTER 6
Administrative agreements
- Are the permits and administrative authorisations under our responsibility exhaustively listed in the contract?
- Are the procedures to be granted permits and authorisations familiar?
- Are the difficulties for third parties to obtain permits and authorisations identified?
- Are recourses possible?
- Are the procedures for obtaining visas and work permits well known?
Resources (availability)
- Does the project fit into BU’s expected workload?
Project management / Supervisory staff

- Is the project manager or the project director identified?
- What is the past experience of the project manager / project team for the same scope of works and project’s size?
- Are Business Experts (Experts métier) available?
- Are experienced site managers available?
Site labor :
- Is there a group entity which can provide assistance locally?
- Are we familiar with local external subcontractors?
Claim management ressources :

- Has the customer assigned adequate resources for contract management?
- Are claim management resources included in our project team?
Fixed assets / equipment necessary

- Any specific capital expenditures needed for the project?
- Are specific software tools included to monitor the project?

Supplies, materials, site vehicules :
Productivity / mastering of technical knowhow:

- Could we have progress rates (productivity ratios) lower than those considered in the costs estimates?
- Could a lack in the mastery of technique have significant consequences (insufficient quality, repair works, delays, …)?
Transportation / Incoterm :
- Any particular issues related to procurement or transportation?
- Which is the contractual INCOTERM?
- Does the timetable show the period allocated to transportation?
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CHAPTER 6

Organisation / interfaces
During the offer period, plan a coordination meeting with all the project’s stakeholders to clarify interfaces, modes of
operation … and organise a kick-off meeting as soon as the order is awarded.
Project schedule (Sequencing, Management, Coordination)

Most often, VE’s progress is conditional on other contractors’ progress (civil works in particular) or on customer’s
approvals (approval of execution drawings, FAT tests, SAT tests, agreement on proposed suppliers or subcontractors, …).
Therefore, VE’s offer must include a timetable highlighting the milestones to be met by the other parties – including
the customer – so that it can meet its own deadlines.
Our offer must indicate the maximum period for customer’s approval of the drawings or of the changes proposed,
and the consequences of exceeding this period; for example: the documents (or the proposed change) are deemed
approved and VE is contractually allowed to execute them, or an extension of time is granted (with associated costs)
until the complete performance of the milestone by the customer.
Customer’s approval of technical specifications:

Make sure this period is limited contractually, to be able to meet the contract’s global timetable.
The documents must be “deemed approved” when the customer has not answered within a reasonable period.
Organise an accurate follow-up of the customer’s late answers (backed up by documentation) to justify our potential
future claims on this matter.
Examples of critical milestones to be met by the customer:

- Approval of the basic design: “freeze the basic design”. VE should not start the detailed drawings until there is a
prior formal acceptance of the basic design by the customer.
- Approval of the detailed design at the end of the studies for execution
- Agreement on factory tests
- Free access to site
- Customs clearance performed
- Agreement on site tests
- Provisional Acceptance – start of warranty period
Control/ Approval of design / Acceptance of alternatives

Changes requested by the customer: when the customer has sent back its mark-ups on VE’s proposed drawings,
it should not be allowed to make new modifications on the same drawings unless the contractual change procedure
applies (with related price and timetable impact). Otherwise, the customer could request endless changes and VE
would not be able to make progress according to its timetable. VE would also incur additional costs that would be
difficult to charge back to the customer.
Change management procedure :

Clarify the terms pertaining to additional works and changes to prevent non-payment.
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CHAPTER 6

Take-over conditions / punch lists
The take-over of BU’s works should not be subject to other contractors’ take-over or to a particular event beyond BU’s
control.
Clarify the procedures for the tests proving conformity and aiming at provisional acceptance.
Try to obtain partial acceptances upon intermediate milestones, or per sub-system, per geographical area, etc...
If the acceptance clause is not clearly written by the customer, propose our own terms (request for acceptance,
procedures, …). Specify that, in any case, final acceptance is deemed granted at the latest N months after it was
requested.
If there is a risk that the equipment’s installation and commissioning are unduly delayed, or even never done (because
of the customer, in particular), include a clause stating that acceptance is automatically granted X months after
equipment delivery.
In all circumstances, acceptance must be granted if the customer uses the installation (partly or globally) for
commercial purposes (express or deemed acceptance).
Provide for sufficient resources to clear punch lists items within a reasonable period
Refuse reserves which do not pertain to VE’s contractual scope of works
As the case may be, make sure customer’s staff training obligations prior to acceptance are duly completed
Warranty:
Insure that the BU can actually assume the warranty commitments undertaken, in particular with regards to equipment
life duration and availability of spare parts.
Request from suppliers warranty commitments (nature of risks and duration) matching VE’s contractual warranty. If
need be, include a provision in the project’s costs and / or estimate the cost of a technician remaining on site during
the whole warranty period.
Significant risks during the warranty period are those likely to result in the return to the factory of major items
of equipment constructed specifically for the project (transformers, turbines, etc.). It is very important to draft
maintenance and operating manuals and deliver them to the customer as early as the provisional acceptance stage,
given that such manuals discharge us from any liability in the event of operator’s default (unless specified otherwise in
the contract).
Resources (availability)
Management / Supervisory staff
It is of utmost importance to identify the project manager / project director as soon as bid stage.
It is recommended to select a project manager or a project team with a proven record of achievement in terms
of planning, works organization and coordination for projects of a similar size in identical environments (industry,
infrastructure, maintenance, export, …).
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CHAPTER 6

In addition to the above, ensure that:
- The project team is large enough – maybe even oversized – at the start of the project, particularly during the
design and engineering phase. This initial “investment” significantly increases control over the project in the
subsequent performance phases.
- The design and engineering teams have enough resources for the coordination and production of the execution
drawings
- Design resources are retained at the end of the project so that the “as built” dossier can be produced quickly
- Resources are planned to clear punch list items quickly
- A kick-off meeting is planned with all the departments managers: engineering, procurement, site, commissioning,
legal, …
Contract management resources

Very few projects are finally executed as was expected and contract evolution is the normal course of business.
Considering that competition is fierce and our prices stretched accordingly, VINCI Energies cannot absorb variations
not included in our price.
Therefore, the availability of contract management resources should be anticipated and their cost included in the
project’s costs.
Contract management should be performed throughout the contract term: it starts with the offer, then during
negotiation and continues notably during performance through to the term of any guarantee.
Note: Meetings with the customer for the negotiation of the contract documentation prior to order award give VE
the opportunity to:
- Clarify what is included in our scope of works and what is not
- Pintpoint what is still unclear or not agreed with the customer
and thus identify, as early as offer stage, potential additional works.
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CHAPTER 7
CONTRACTUAL ANALYSIS
Knowledge of Customer’s contractual conditions

When the customer imposes its own contract conditions
- Have all the documents which form part of the contract been made available : general conditions, particular conditions,
technical conditions, drawings, annexes, …)?
- Is the bidding unit already familiar with them?
- Are there particular risks with these imposed condtions (to be analysed with the following questionnaire)?
Contractual requirements (responsability penalties, …)

- What are the conditions of coming into force of the contract?
- Liquidated damages or penalties for delay:
• Rate / milestones:
• On delayed part, sub-unit or total contract value?
• To a maximum % of contract price:
• In full satisfaction of damages for delay?
- Liquidated damages or penalties for poor performance:
• Criteria:
• Rates:
• On part, sub-unit or total contract value?
• To a maximum % of contract price:
• In full satisfaction of damages for poor performance?
- Overall cap for liquidated damages or penalties? (in % of contract price)
- Cap on overall liability? (in % of contract price or through crossed waivers of recourse)
- Exclusion of consequential / indirect damages?
- Force majeure / excepted risks:

• Is the definition exhaustive?
• Is a compensation paid or an extension of time granted to the BU in case of Force Majeure?
- Customer’s suspension right for convenience without BU’s default:
• Is the maximum duration defined?
• Is a compensation paid to the BU?
- Can the customer issue orders with an execution obligation?
- BU’s rights and benefits:

• Hardship Clause: right to renegotiate the contract (raw materials price increase, change in legislation, in taxes, …)?
• Suspension / termination rights for delayed or non-payment by the customer?
- Have you identified discrepancies between the contractual documents?

- Is the order of precedence of the contractual documents clear?
- Is BU’s offer a contractual document?
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CHAPTER 7
Dispute / Arbitration – Applicable law

- What is the law governing the contract?
- What is the contractual language of the contract?
- What are the clauses covering the settlement of disputes?
- Is there a clause about applicable jurisdiction?
- Is an arbitration procedure described? Comments :
Insurance (availability of PI, CAR, TPL, 10YL, excesses)

- Do the available insurance programs cover all the project’s risks (design, construction, transport, maintenance and warranty)?
- Are specific insurance policies needed with regard to TPL, CAR, extended warranty?
- Are the deductible amounts adequate? Do they require specific provisions?
- Have all the recommendations from the insurance broker and related costs been taken into account?
PI: Professional Indemnity

CAR: Construction All Risks
EAR: Erection All Risks
TPL: Third Party Liability
10YL: decennial liability (only in France)
Project’s bonds and guarantees: see Chapter 8
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CHAPTER 7

(refer to the Internal Control and Risk Management Manual ; in particular Processes P 2.3 and P 6.3)
Generally speaking, it is strongly recommended to liaise as early as possible with the Pôle’s Legal Department to
analyse the terms & conditions and eventually prepare the negotiations
General recommendations :
- If the draft order/contract is imposed by the customer, ensure that all unusual or unbalanced clauses are fully
analysed and understood and, if necessary, negotiate adjustments or additional clauses
- Submit our General Terms and Conditions of Sale, for Services (see the models made available by the group
according to the nature of the works or services to be performed), possibly to be completed by specific terms and
conditions
- In the absence of any other solution, propose a model already validated by an in-house legal counsel or a
standard contract recognised in the industry (FFB/FNTP, FIDIC*, NEC **, ….) and adjust it to the project’s specific
features
- Letter of intent relating to an order/contract (or memorandum of understanding or any other document of the
same type): check the extent of commitments made and the BU’s real ability to further negotiate the contract
clauses that have not yet been finalised
- Framework agreement: in the case of an order made under a framework agreement, detail the specific terms
applicable to the order
- Multi-year contract: state the consequences of non-renewal or early termination of the contract, including the
transfer or redeployment of staff
- Draw up a complete list – by order of precedence – of the contractual documents and appendices and make
sure that all documents referred to in the contract are sent to you (e.g. drawings, particular technical
specifications, model bank guarantees, main contractor’s contract, etc.). Ensure consistency between indexes used
in the bid documents and the contract
- Before signing the final order, ensure that all the terms and conditions are fully understood by all parties and are
consistent with the outcome of negotiations
(*)FIDIC: International Federation of Consulting Engineers. (FIDIC best practices are available in the annexes of the Internal
Control and Risk Management Manual)
(**)NEC°: “New Engineering Contract”
Conditions precedent to the coming into force of the contract

- Conditions precedent to the coming into force of the contract (which are under the customer’s responsibility) or
optional works: state a deadline for meeting these conditions and the consequences of not meeting them or of
failing to exercise the option
- As a precaution, try to add a clause stating the consequences for VE should the advance payment not be
paid or the letter of credit not be opened before the agreed time limit: compensation for loss of opportunity,
reimbursement of the expenses already committed, …
Delay penalties
Firstly, try to obtain automatic extensions of the contractual deadlines in our favour, along with compensation in the event
of a delay that is not attributable to the BU (customer’s delay – in particular during the period for approving drawings or
for access to site -, delay due to another contractor, administrative delays, etc.).
Seek to obtain a bonus if the works/services are completed before the contractual date
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As far as possible, try to obtain from the customer that penalties / liquidated damages are:
- Payable only if it is proved that the BU is the only party responsible for the delay
- Computed per day of delay, with a grace period (and a daily rate commensurate with the total duration
of the contract)
- Capped at a reasonable percentage of the contract’s price (10% maximum)
- Computed on the delayed part only
- Payable only if the customer actually paid penalties as a consequence of VE’s delay
- In full satisfaction of all damages for delay
Performance penalties
Same recommendations as for delay penalties. Special attention should be given to the criteria for measuring the
performance and to the performance level accepted in the past.
Indirect and consequential damages and losses, such as: economic losses, pure financial loss,
loss of profit or loss of production, loss of use, … should be clearly excluded. It should be stated that this list is not
exhaustive.
VE ‘s Overall liability
The cap on overall liability should be written in a specific clause so that it covers the whole contract. It is usually written
as “ notwithstanding anything to the contrary in the contract, VINCI Energies ‘ total aggregate liability to the customer
arising out of or in relation to the performance of the contract – all causes included - shall be limited to … “ .
Remember to limit your liability to damages or losses which the BU is fully responsible for (not “in the course of the
performance of the Works”).
The cap should not be higher than the contract price .
Note: if nothing is specified regarding the amount of our liability, our liability is therefore uncapped and potentially far
above the value of the contract.
Force majeure :
Specify the procedure applicable in case of Force Majeure and the contractual consequences: extension of time,
reimbursement of the mobilisation /demobilisation costs if any, duration of the suspension, termination of the contract.
Note: Force Majeure does not entitle the BU for all costs attached to the suspension. Force Majeure is normally solely
about time relief.
Hardship clause: right (for VE’s BU) to renegotiate the contract terms, for example: increase of raw materials
prices (copper, steel, …), change in applicable standards or codes, change in law (including tax laws), …
Insurance (availability of PI, CAR, TPL, 10YL, excesses)

(refer to the Internal Control and Risk Management Manual, Process P 6.3)
There needs to be an in-depth control that all the risks induced by the performance of the contract are actually covered
by the insurance policies taken out by the group for its subsidiaries.
The insurance broker must be involved at least in the following cases:

- Business Unit’s contract value > 15 M€ (2 M€ outside of France and Germany) and / or construction period
longer than 36 months
- Unusual contract works
- Special risks (nuclear, space, aircraft, terrorism, personnel security, PFI, …)
- When VE is the operator: ie. In case of transfer of the facility under the BU’s custody, …
If an identified risk is not covered, it is the responsibility of the Project Manager to inform the BU Manager. The BU
Manager will be able to draw on recommendations made by the in-house lawyer, insurance manager, insurance adviser
and/or brokers in order to decide whether or not it is appropriate to take out a specific insurance.
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Remarks:
1. BU’s liability is not limited to the amount stated on the insurance certificate
2. VE never communicates its insurance policies to third parties: to answer such a request from a customer, an
insurance certificate can be provided (ask VE’s insurance broker)
3. Neither the customer nor third parties can be additional insured on the group’s policies unless a specific
authorization is obtained from the legal department of the Division concerned
Subscription of a policy in addition to the VINCI Energies Group programme :

The most common risks for which insurance in addition to the Group programme is necessary are :
a) Risks specific to a project:

- Construction and Erection All Risks (CAR/EAR) and/or decennial liability (only in France) when the contract value
of the works or their period of performance exceeds the limits contained in VINCI Energies Group policy
- CAR/EAR in addition to the policy taken out by the customer for the project as a whole
Even if the contract may state that VE’s BU is co-insured by the policy taken out by the customer for the whole
project, it is recommended to ask VE’s brokers to check the conditions precisely, especially the deductibles.
b) For a non-French company, the “usual” risks of a BU: Certain policies have to be subscribed in the country where
the subsidiary is established or in the country where the services are performed (for example: employer’s liability,
vehicles and site equipment, damage to premises). Also, in some countries, the law provides the obligation to
subscribe all policies locally. This needs to be checked by the BU.
Project’s bonds and guarantees: see Chapter 8
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FINANCIAL ANALYSIS
Nature of price :
- Nature of price (lump sum, bill of quantities, cost + fee, target cost, other, …)
Is there an escalation formula?

- Is there a ceiling or a threshold?
- Is there a risk of shortfall due to the formula?
Costs estimates and evolution

(also refer to: 4 . Technical analysis and site conditions)
Labour and supervisory staff (hourly rate) / inflation

- % inflation included in costs estimates for labour?
Equipment/raw materials (unit cost) cost evolution / inflation
- % inflation included in costs estimates for supplies, equipment and raw materials?
- Estimate of the raw materials price risk and cover proposed?
Subcontractors and suppliers
- Have we received binding offers from the main suppliers and subcontractors?
- Are their prices fixed prices?
- Do we have benchmarks for comparison?
- Is a financing scheme or a supplier’s credit requested?
Note: a summary of the purchases (supplies and subcontracting) and a staff mobilisation chart or project organisation chart may
be presented with the Risk File to describe the related costs
Are the costs estimates consistent with the benchmark ratios?
Cash:
Terms and schedule of payment
Conditions as per RFQ :
Milestones Payment conditions

% or amount
(date,events) (days from invoice date)
Down/Advance payment
Progress payments
Acceptance
Retention for warranty
Final payment
- Is the cash always positive with those payment conditions?

- If not, action plan for improvement?
- Financial profit / expenses for the project?
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FINANCIAL ANALYSIS
Conditions as per our offer :
Milestones Payment conditions

% or amount
(date,events) (days from invoice date)
Progress payments
Acceptance
Final payment
- Is the cash always positive with those payment conditions?

- If not, action plan for improvement?
- Financial profit / expenses for the project?
Note: a cash curve shall be presented with the Risk File
Bonds and guaranties given to the customer
Validity period Back-to-back

to suppliers/
% or amount (a latest calendar date Progressive reduction Subcontractors or
is mandatory) Consortium partners
Tender/Bid bond
Performance
- Who is the issuer of the bonds / guaranties?

- Are they “on demand“ bonds?
- Are they revolving?
- Anticipated difficulties for the bonds release?
- Is a parent company guaranty requested (in lieu of bank guarantees)?
- Is the validity period fixed?
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FINANCIAL ANALYSIS

Subcontractors and suppliers: (refer to 3: Partners (Consortium, subcontractors, suppliers))
Other costs to be included in the full cost: (refer to the Quotation sheet)
Contingencies and warranty:

Contingencies are in addition to usual warranty provisions. Contingencies mean the total amount of cost estimates that
will be saved if all goes according to plan, if our optimistic assumptions are right and if our pessimistic assumptions
are wrong.
Warranty provisions are expected to cover the costs incurred during the warranty period, net of warranty costs
assumed by the suppliers/sub-contractors.
Financial costs should reflect realistic payment conditions and should be consistent with the cash curves.
Lost quotation costs and group fees should be those of the annual budget of the tendering BU.
Cash
Terms and schedule of payment :
(refer to the Internal Control and Risk Management Manual: Process P 2.7)
For obvious reasons, cash has to be collected as soon as possible and the stream of cash flows should ensure a positive
net cash position at all times during project execution.
To limit the risk of delayed payments, or even no payment, and their consequences, it is recommended to:
- Negotiate a significant advance/down payment, as many progress payments as possible, a short payment period,
and so on …
- For service contracts, negotiate payments in advance rather than in arrears
- Clarify with the customer the documents and information to be provided with the payment requests
- Obtain from the customer an exemption from any warranty retention in return for a bank guarantee
- Include a clause in the contract whereby the BU may suspend / terminate the execution of the works in case of
delayed payments
- If there is an insolvency risk, ask the customer for a payment guarantee (if not, request a parent company
guarantee) or a letter of credit for the total amount of the contract less the down payment
- If possible, request a direct payment from the final customer
- When needed, take out a specific credit insurance
Cash curves
The cash curves picture the projected cash flows over the life of the project. They are calculated before financing and
before tax. Several cash curves may be necessary to reflect the impact of changes in assumptions or when several
currencies are used (either for the payments or for the expenses).
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Examples:
The stream of payments from the customer should be consistent with the payment terms:
2 alternatives should be analysed:

- As per the RFQ documents
- As per VINCI Energies’ offer
and past experience with regards to the customer’s punctuality should be taken into account.
The stream of costs should take into account:

- The same total cost as per the Quotation Sheet, including contingencies and provisions
- Terms of payment to suppliers and sub-contractors (including “if & when” conditions when applicable)
- The overheads, assuming that they are spread during the whole life of the project in proportion to the expenses
In some cases, for particularly risky projects, a cash flow based on the commitment of expenses (rather than cash
outflows) will be presented to better appreciate the risk of a contract interruption.
Net present value of the cash flows (NPV):

The net present value is the value of the project’s cash flows (before financing and before tax) discounted with the
appropriate discount rate. It measures the value created by the project.
In most cases, a discount rate of 0,6% per month (in 2019) before tax is adequate. However, in risky countries or with
a risky customer, a higher discount rate should be used. The Pôle’s finance department is available to estimate this
additional percentage to take into account.
Contract bonds and financial guarantees

(Refer to the Internal Control and Risk Management Manual: Process P 5.4)
Reminder: Definitions :
Bid Bonds are requested from companies that participate in tenders (usually public tenders)
The bank issuing a bid bond undertakes to pay to the beneficiary (the customer), in principle upon first demand, all
or part of the guaranteed amount (usually 1 to 3 % of the contract price) in the event the bidder (Business Unit),
after having been awarded the tender, were to refuse or were unable to sign the contract or to issue the guarantees
requested in the RFQ.
The customer sometimes pays part of the contract price in advance and wishes to obtain reimbursement of the
advance payment if the contractor (e.g. Business Unit) wholly or partially fails to perform its obligations. In view hereof,
the customer will request a guarantee, which is called an advance payment bond.
A performance bond protects the customer against damage caused by the non-performance or improper
performance of the main agreement by the contractor (e.g. Business Unit).
A warranty retention bond has the purpose to allow the performance of work covered by reserves made by the
customer at reception. The warranty retention bond is secured by fractions of the down-payment, partial definitive
payments and of the balance (e.g. in French public contracts, the retention is capped at 5%, possibly 3%).
In the event that the amounts due to the contractor are insufficient to allow the deduction of the warranty amount,
a first demand guarantee is to be made, alternatively a bond. In commercial contracts, the bond should have been
provided for in the contract for it to be applied (also capped in France at 5% for commercial contracts).
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FINANCIAL ANALYSIS

- Before the offer is submitted, check the text of project guarantees requested in order to adjust them during
negotiations if necessary
- Pay attention to the formal requirements of guarantee commitments and in particular ensure that guaranteed
obligations comply with the contractual commitments made to the beneficiary
- All financial commitments must mention the maximum amount of the commitment and where possible state its
purpose and its validity period.
- Systematically offer a comfort letter instead of a bank guarantee (subject to regulations applicable to public
contracts), the draft of which is to be reviewed by the legal department.
Note: Any parent company guarantee issued within VINCI Energies requires the prior formal agreement of senior
management (within the parent company reporting line; e.g. for a VINCI Energies SA guarantee, the Chairman and
Chief Executive Officer of VINCI Energies SA). This guarantee will be invoiced to the BU on the terms set out in the
memo issued by VINCI Energies’ Finance Department
- Systematically negotiate a bank guarantee instead of retention money or early payment (advance rent, for example)
- When the wording of the bond is not imposed by the Customer, it is the Unit’s responsibility to propose a Group
model, the “softest” possible to start with.
- For the expiry date, state a specific calendar date rather than an event over whose timing the BU does not have
full control (e.g. provisional acceptance) . This will protect the BU if the timetable slips for reasons that it is not
responsible for
- Try to negotiate an automatic reduction of the guarantee amount as the project progresses (in particular down
payment guarantee)
- Avoid unconditional or «first demand» guarantees by inserting within the text conditions for calling the guarantee.
This will help prove – if needed – the unfair nature of the calling of the bond. Always favour bonds, alternatively
simple letters of comfort
- Seek to limit the extent to which guarantees stand separately from the contract and ask for the criteria for calling
the guarantee to be made explicit
- Try to include an automatic release clause and state that the deed does not need to be returned to confirm the
termination of the commitment
- Strictly limit the provision of “performance bonds” due to the significant risks that they represent for the guarantor
- Avoid assignment clauses, which are often refused by banks. Where this is not possible, seek to limit their extent and
check the integrity and respectability of the clause’s beneficiary
- Check whether it is worth taking out an insurance against the “unfair calling of bonds”. Indeed, compensation terms
almost always require that there is no commercial dispute with the customer
32
RISK ANALYSIS GUIDE
CHAPTER 8
FINANCIAL ANALYSIS

In addition to the general recommendations set out above:
- In a consortium – even if VINCI Energies is the lead company – limit our commitment in proportion to our obligations
under the contract
- If the BU that joins a consortium, joint venture or other arrangement gives commitments on behalf of companies
outside the group, ensure that these commitments are passed on to those companies (on the same terms and in the
same amounts) and ask for them to be covered by a suitable counter-guarantee (e.g. bank guarantee)
- State in the terms of the contract – particularly for export contracts – that the bonds or guarantees will be provided
by a top-tier bank, preferably one of the group’s usual banks. Try to avoid the guarantee being re-issued by a local
bank
- As far as possible, replace bank guarantees or bonds to be provided to another VINCI Group company as part of a
contract, with a unilateral letter of commitment to honour obligations upon first demand (see the model for this kind
of commitment on the VINCI intranet)
33
RISK ANALYSIS GUIDE
CHAPTER 9
EXPORT ISSUES (INCLUDING FINANCE)
ENVIRONMENT AND TECHNICAL ASPECTS

Economic / social / political environment
- What country organisation for the project?
- What is the latest project executed by the BU in this country?
- What are the main characteristics of the social and political context?
- Have we assessed social factors such as influence of trade unions, religious events?
- Any particular security issue and protection measures taken?
- Have health issues (epidemic, pandemic, radiations,…) been considered?
- Is the site compound under the responsibility of the customer or of a third party?
- Can we demobilise our personnel if its safety is not sufficient?
- Have we checked import restrictions of certain types of equipment, or constraints regarding the origin of the goods?
Technical particularities
- What are the main standards and norms specified in the contract? Have we used them before?
- Are the procedures for mandatory external controls well known?
- Are we fluent in the language to be used for the local works, technical documentation, training?
- Does the contract specify the details of land availability?
- Is the land free of inhabitants?
- Is the customer in charge of providing supplies (for example equipment, concrete, …)
- Has the risk of vandalism been assessed?
Local staff and subcontractors resources

- Will the project management and supervision teams be sent to site?
- Is the project management staff available in the BU?
- Is there a local VINCI Energies entity or VINCI entity able to provide support?
- Do we have, or is there, local manpower resources with the necessary qualifications or which could be trained?
- Will we have to recruit manpower from a county other than the country of execution?
- Have culture differences been considered?
- Is recruitment subject to constraints (local labour environment, conditions related to salaries and wages, legislation, work
permits, competencies, …)
- Has a productivity ratio been considered in the costs estimates?
- Are the local subcontractors identified?
- Is assistance from an agent necessary?
Permits and administrative agreements: (also refer to 6. Project management)

- Are the permits and administrative authorisations under our responsibility exhaustively listed in the contract?
- Are we familiar with the procedures to be granted the permits and administrative authorisations under our responsibility?
- Have the difficulties encountered to obtain from third parties the permits and administrative authorisations been identified?
- Are recourses possible?
- Are we familiar with the procedures to obtain the visas and work permits?
Transportation and customs

- Have we identified particular difficulties with regards to transportation or procurement?
- What is the Incoterm specified in the contract?
- Who is responsible for the customs clearance?
- Does the timetable specify the period included for transportation and customs clearance?
Supplies, equipment, site equipment (availability)

- Have we verified that the equipment and material necessary for the project are available locally?
34
RISK ANALYSIS GUIDE
CHAPTER 9
EXPORT FINANCIAL ANALYSIS (in addition to the analysis of the domestic part) :
Local costs estimates and evolution

Labour and supervisory staff :
- Have the costs of local labour and supervisory staff been provided by a knowledgeable source?
- % annual inflation included in costs estimates for labour?
Supplies, materials and equipment :

- Have the costs of supplies, materials and equipment to be procured locally been provided by a knowledgeable source?
- % annual inflation included in costs estimates for supplies, materials and equipment?
Subcontractors and suppliers :

- Have we received binding offers from the main suppliers and subcontractors?
- Are their prices fixed prices?
- % annual inflation included in costs estimates for subcontractors?
Payment guarantee / Credit insurance

For risky customers or in risky countries, is the payment of the contract secured by an irrevocable letter of credit?
- Issued on a first class bank?
- Is confirmation necessary?
- Event or date of opening of the letter of credit?
- Part of the contract covered by the letter of credit?
If not, what are the means of payment?

- How is it secured?
- What documents must be presented to get paid?
- Are local banks imposed?

Bonds and guarantees given to the customer :
- Do they have to be issued by a local bank?
Credit insurance
For risky customers or in risky countries, is the contract insured against:
- Political risk?
- Commercial risk?
• Is the unfair calling of bonds covered?
• Is the breach of contract covered?
- What are the residual risks not insured?
Name of the ECA (Export Credit Agency) or insurance company:
Have we received the insurer’s agreement to cover the risks?
Cost of the insurance (as % of the contract amount) :
35
RISK ANALYSIS GUIDE
CHAPTER 9
Currency exchange rates :

- What are the currencies for the contract’s payments?
• Domestic portion :
• Local portion (country of destination) :
- Can the local currency be transferred?
- Are the purchases paid in a currency other than that of the contract price fully covered?
- Amounts exposed to exchange risks and cover necessary:
• From the submission date to the contract award date: K€
• During the execution of the contract: K€
- When will the exchange risk cover be taken out?
• During the offer period :
• During the execution of the contract :
- Is there a foreign exchange regulation :
• Limiting the transfer of funds?
• Which may delay or significantly complicate payments?
• Causing several banks to be involved, and the National Bank in particular?
Tax exposure :
- Have all the recommendations from the finance department been taken into account?
- Is there a signed tax agreement with the country of the company?
- Is a permanent establishment necessary?
- Are all the taxes and duties properly estimated and provided for (import taxes, export taxes, VAT, custom duties, company’s
income tax, personnel income taxes and salary taxes, overhead expenses deductible, withholding taxes,…)
- Is the tax clearance certificate necessary before the last payment can be received?
- Are tax controls foreseeable?
Other contractual conditions : cf Chap 7 (Contractual Analysis)

- What is the language of the contract?
- What is the applicable law?
- Do the location of the court, the process for settlement of disputes and the language present a risk?
Insurance
- Are transportation and the local portion of the contract covered by the Group’s policies?
- Are specific insurance policies needed to protect personnel, site works, local facilities?
Note: in the Risk File include diagrams showing :

- The financial streams
- The tax organisation (permanent establishment, …)
36
RISK ANALYSIS GUIDE
CHAPTER 9

These recommendations and best practices come in addition to those listed for domestic projects.
TECHNICAL ISSUES / LOCAL RESOURCES

Unless the Division – and more specifically the same project team – already performed at least one project in the same
environment and for an identical scope, it will be wise to increase contingencies significantly, particularly if there is no
local VE Business Unit able to perform the local scope .
The most often encountered difficulties which have turned out to be very costly indeed stem from :
- Underestimated complexity of the customer’s decision process: number of meetings, number and motivation
of people involved,
- Productivity of local labour: not only pace of execution but delays to get work permits, authorisations for
overtime work, safety issues, availability of skilled labour for specialised works, language barrier
- Applicable norms and standards, approval procedures by control authorities
- Availability of handling equipment, ad-hoc vehicles
- State of access roads and working sites
- Weather conditions
- Cost of providing security to our personnel
- Language of the contractual documents and technical documentation to be issued
- Different appreciation of time constraints, deadlines, commitments, …
If the involvement of an agent is necessary, please refer to the best practices listed in Process P2.10.2 “ Agents and
commercial intermediaries” of the Internal Control and Risk Management Manual.
Transportation and customs

- Specify the INCOTERM used (to fix the point of transfer to the buyer of costs of and the risk in the goods), and in
particular state which company is responsible for customs clearance
- Our offer should indicate the maximum lead time allowed for transport and custom clearance and decline all
liability should the delivery deadline be exceeded for reasons beyond our control (for example due to customer’s
delays, local events, lay days in ports beyond a certain number of days, force majeure ).
- Compensation of any direct or indirect expenses incurred as a consequence of transportation delays (site costs,
storage costs, interest expenses, etc.) should also be anticipated.
- For our purchases, favour CIF to the point of destination ) (CIF is not always accepted by certain countries or
these may require a local insurance policy), and detail the necessary customs documentation. Other Incoterms
may be applicable, on a case by case basis, notably where we ourselves are selling goods (in which case EXW is
to be favoured).
- Chose the forwarding agent or carrier with great care, and favour end-to-end transportation, including handling
of equipment. VINCI framework purchasing contracts, notably with forwarding agents, have been concluded to
be able to benefit from favourable tariffs.
- Ensure that our materials and equipment are constantly covered by our insurance policies and that the
forwarding agents terms do not include any waivers of liability or the right of recourse, which could have a
prejudicial effect on our insurance cover.
37
RISK ANALYSIS GUIDE
CHAPTER 9

FINANCIAL ISSUES
Payment guarantee
- The security of payment of the local share of the contract needs to be addressed: to be checked with the Export
Credit insurers.
- Check that the payment guarantees to be received from the customer (bank guarantees, letter of credit, etc.) and
the guarantees provided by the BU are issued by a top-tier financial institution. Check the text of commitments
given and received (Note: since a first demand guarantee is a stand-alone contract, look at this contract’s
applicable law)
Letter of credit
- The letter of credit’s confirmation is necessary only when the L/C is not issued on a first class bank. Check with
the Pôle’s finance department the credit worthiness of the issuing bank (Note: confirmation means additional
costs)
- Request the exhaustive list and an accurate description of the documents to be presented to be paid with the
L/C: have their suitability checked by a financial institution before signing the contract.
Currency exchange rates

(Also refer to the Internal Control and Risk Management Manual: Process P5. 3 Financial transactions P2.10.3°: Foreign
currency risks in tenders/projects)
The group’s policy is to hedge all currency exchange risks, except in exceptional cases duly authorised by VINCI
Energies’ Finance Department.
The most commonly used exchange risks covers are the following :
1 . Contract payments in several currencies, so that the breakdown of the selling price matches the expenses to be
incurred in the same currency
If this is not possible or is imperfect:
2. Subscribe an exchange rate cover, after approval by the Pôle ‘s Finance Director
These protections will be implemented:

- At bid stage when it is believed that there is a good chance of winning the project and if the financial amounts
involved make hedging justified. (Note: ensure that the hedge can be cancelled if our offer is unsuccessful)
- Immediately after signature of the contract or step by step as cash flows become sufficiently certain (Note: in this
case, the currency exchange risk during the offer period is borne by the BU).
The cost of hedging will be included in the project costs.
Remark: If the offered price can only be presented in one currency – thus generating a currency exchange risk – it may
be possible (to be checked in the RFQ documents) to indicate a « reference currency exchange rate » for the exchange
rate. However, it is then essential to state that the final contract price will be updated at a later stage with the forward
currency exchange rate prevailing on the date of updating.
In this instance, no costs are incurred for hedging during the offer period as long as there is no certainty that we will be
awarded the order.
The Pôle’s Finance Director must be kept informed during the final negotiations (as well as during the execution period)
of all potential changes so that the currency exchange risk cover is adapted accordingly as soon as possible.
38
RISK ANALYSIS GUIDE
CHAPTER 9

Tax exposure :
Laws and regulations regarding taxes and duties applicable to a project may have costly consequences ; rules are
complex and change over time. It is therefore recommended to seek assistance by legal and tax experts in order to
optimise the contract’s structure (off-shore / on-shore portions, permanent establishment, local subsidiary, consortium,
joint venture, etc…) and limit financial costs (VAT, local taxes, customs duties, etc…).
VINCI Energies’ tax department or the Pôle’s Finance Director must be informed as soon as it is decided to bid for an
offer and before a decision is made on the terms of the offer and the contractual organisation. The tax issues must also
be analysed before any consortium agreement is signed.
(See also Process P2.10.1 Permanent Establishment in the Internal Control and Risk Management Manual)
Other contractual conditions : cf Chap 7 : Contractual Analysis

- Check that the jurisdiction, applicable law and dispute resolution method are known and are acceptable
- Ensure knowledge of the contract’s language. Ensure that the BU will be able to draft the documents required
under the contract (plans, notices, manuals, training materials) in the requested language
Insurance
(See also Process P6.3 Insurance in the Internal Control and Risk Management Manual)
- Have the Pôle’s Finance Director of the group’s insurance brokers analyse whether specific insurance policies
should be taken out.
39
RISK ANALYSIS GUIDE
CHAPTER 10
MAINTENANCE
Services and scope limits:

- Is this the renewal of an existing contract (who is the current contractor and for how long? ) or a new contract?
- Duration of the contract :
- Type of services?
- Scope of services :
• Energy management (which ones): P1, P2, P3?
• Maintenance level: P1, P2, P3, P4, P5?
• Preventive maintenance, corrective maintenance, global maintenance, investments, additional works?
- Supply of spare parts and purchase of existing inventory?
- CMMS (Computarized Maintenance Management System): Are reports lists, periodicity, contents and CMMS tools defined in
our offer?
- Single-site or multi-site?
- Sedentary or itinerant?
- Single-technique or multi-technique?
- Posted? Stand-by?
Take-over of the existing conditions:

- Is an overlap period with the preceding contractor planned?
- Is the maintenance history available?
- CMMS and other data to take over?
- Is there a probation period for validating data before the final commitment?
- Is an agreed inventory of fixtures planned with the customer?
Start-up period :
- Is the start-up period contractually defined?
- Are the commitments during the start-up period clearly defined?
- What will be the transition process between the project team and the execution team?
- What resources are mobilised for implementing the contract?
- Are the resources needed for the start-up available?
Operating period :
- What are the expected changes in the scope of works? increase, decrease, additional flow business?
- How are we protected against changes in economic conditions or regulations during the execution of the contract? is there a
clause allowing the BU to terminate the contract?
End of contract :
- What are the conditions at the end of the contract if it is not renewed?
• State as new or in good working conditions?
• Timetable for the transfer?
• Inventory of the premises expected? subject to customer’s agreement?
• Are the control tests specified?
• Personnel
• Resale of inventories
• what are the contractual guarantees to be given?
40
RISK ANALYSIS GUIDE
CHAPTER 10
MAINTENANCE
- Early termination of the contract :

• Can the customer terminate the contract before the contractual deadline? With how much notice?
• Is the compensation paid to the BU adequate, particularly if investments have been made?
• Is the rule for sharing the reserve fund at the end of the contract acceptable?
Performance commitments, Progress plan :

- Type of commitments: resources only or guaranteed performance contract?
- Performance commitments?
• Are the performance criteria defined in the bid documents and measurable?
- What are the availability criteria requested and the risks of not meeting them?
- Progress plan (or decreasing prices) and actions to be implemented to achieve it :
- Are the procedures to measure performance defined?
- Is there a contractual obligation to replace with original parts? what if technology changed and original or similar parts cannot
be found? is a compensation considered should the new part be more expensive?
- What are the consequences of not achieving the committed performance?
Spare parts :
- Are they free-issued by the customer, included in the lump-sum or paid on cost + fee?
- Create or buy existing inventory? for what amount?
- Is the customer obliged to buy back the inventory at the end of the contract?
- Provision for obsolescence included in our costs?
Personnel :
- Average number of employees for regular operations?
- What are the critical skills needed for execution?
- Is there an obligation to take over existing personnel?

If existing personnel must be taken over :
- Is the take-over imposed by law, by the customer or is it negotiable?
- Number of persons to take over, seniority, protected employees, …
- Do we have to assume pension rights for prior service?
- Protected personnel and collective agreements :
- Redundancies anticipated?
- Is the customer (or the following contractor) legally bound to take back the staff at the end of the contract?
If not, how will the BU assign the employees?
41
RISK ANALYSIS GUIDE
CHAPTER 10
MAINTENANCE

Operation/maintenance contracts:
- Arrange a detailed inventory report within x weeks of the contract coming into force and set out the
consequences of discrepancies with conditions described in the specifications supporting the BU’s offer
- Arrange to receive all documents required for operation and/or maintenance work and make a list of them:
equipment maintenance logs, facility specification sheets, as-built plans relating to structures, acceptance
certificate for equipment and structures, reports relating to regulatory controls, annual energy consumption
statements, documents used to prepare the previous provider’s contract, etc.
- Obtain information about equipment operation conditions (number of hours of operation, annual production, etc.)
and ask to be able to adjust the selling price during execution of the contract if these parameters change
- State that the systematic inventory report prepared when technical responsibility is taken could give rise to an
adjustment in the selling price if it shows changes in scope.
- Provide for the end of the contract and set out handover terms: taking on staff, final inventory report, transfer of
facilities, etc.
42

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Risk Analysis

2 Geopolitical environment / Laws & standards............................. 6

3 Partners (bidding consortium, twinning, subcontractors, suppliers)........... 7

4 Technical analysis and site conditions.......................................... 11

6 Project management (Schedule)..................................................... 18

9 Export issues (including Finance)................................................... 34

Name of the project/client: If need be, clarify direct client/ultimate client.

Type of contract: Information to be provided for several items:

Solution: Base or alternative (cross as appropriate).

Date of presentation: (of the Risk File)

Date of submission: (of the offer)

“Risks sharing” columns:

Columns “Consequences for the VINCI entities”, (level of risk or opportunity):

Risk level Colour code

Lines: List of the risks / opportunities identified at offer stage

Knowledge of the Customer / Engineer / Consultants

Provide the customer’s decision matrix with the Risk File

Customer’s competence commercial and ethical behaviour

Offer’s positioning / competition

Recommendations and best practices:

Ethical behavior of the customer and/or of its representatives

Offer’s positioning / competition

For export contracts, refer to chap. 9

Social or political instability, lack of security, terrorism, vandalism, corruption, …:

Opposition to the project / legal action against the project:

Local environment (employment, minorities…):

Legal and regulatory framework / Change in Law:

Internal organisation – Twinning:

A/ When one party only is identified as faulty, it may be either:

Subcontractors and suppliers:

SUBCONTRACTORS AND SUPPLIERS:

- The following should be agreed with the suppliers and subcontractors:

The fight against corruption:

Activity (typical or new for the entity)

Initial expected profit

Project definition / Design / Quantities

If the BU is in charge of the basic design:

- Is the customer’s responsibility clearly stated in the contract?

When the detailed design is provided by the customer:

Technical understanding of requirements:

Other identified technical difficulties:

Possible technical alternatives :

Costing / Reliability of pricing :

Consideration for unforeseen conditions (bad weather)

• are issues related to traffic conditions and / or access to site foreseeable?

Ground risk (insufficient knowledge)

Recommendations and best practices:

Preliminary engineering phase (FEED, PRO, …)

Recommendations and best practices:

Include a contingency amount consistent with:

Contract based on Unit prices / quantities provided by customer

Recommendations and best practices:

Environment, pollution (water, air, noise …)

Customer’s safety procedures :

Project schedule (Sequencing, Management, Coordination)

Control / Approval of design / Acceptance of alternatives:

Project management / Supervisory staff

Claim management ressources :

Fixed assets / equipment necessary

Productivity / mastering of technical knowhow:

Recommendations and best practices:

Project schedule (Sequencing, Management, Coordination)