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Ferrovial

Ferrovial - Integrated annual report 2013 / Construction

Approximately 56% of all Ferrovial’s suppliers are in the construction industry. The Purchases Department in this division is responsible for managing relations with major suppliers so that clients can be offered higher quality and better services, as well as forging long-term relationships wherever possible to provide the maximum benefit for both sides. This department also works to improve communication between suppliers and project managers, in order to help solve any problems that may arise.

Construction is the Ferrovial business that deals with the largest number of suppliers: it works with a total of 33,986, of which approximately 45% are Spanish. In the breakdown by countries the number of local suppliers is over 95% of the total, given that the nature of the construction business tends to encourage the use of local suppliers.

The Purchases Department is part of the Construction Division’s Corporate Resources Department, which also includes Quality, Prevention and the Environment to enhance coordination between them. It has a representative on the Global Procurement Committee (Director). In addition, it coordinates purchasing policy at a global level and manages purchases in which global negotiation (through economies of scale) and/or international market knowledge contribute value.

Ferrovial’s established purchasing principles, policies and processes aim to comply with customers’ requirements by optimizing prices and meeting deadlines and the quality, prevention and environmental requirements specified, while at the same time maintaining the greatest possible profitability.

Purchasing policy and procedures

Purchasing policy is based on common basic operating standards and principles worldwide (organizational procedure), adapted to the particular features of each country and company by means of operational procedures that regulate the entire purchasing process, with the aim of optimizing it by:

  • Taking advantage of economies of scale and centralized purchases when they add value.
  • Coordinating purchasing between different countries.
  • An international/global vision of the supplier market.
  • Transparency in the purchasing process.
  • Using company IT systems to manage purchasing knowledge and help control the purchasing process in itself.

Purchasing classification

Coordinated management at international level

  • A list based on the Organizational Purchasing Procedure.
  • They must be managed jointly by the site, the Purchases Department of the country in question and Ferrovial Agroman’s Purchases Department.

Centrally managed (at company/country level)

  • These are for products or services that are uniform across different projects, with a reduced number of suppliers in the market and a high purchase volume.
  • They are managed centrally in each country to obtain the best conditions by negotiating large volumes.

They are managed jointly between the country’s Purchases Department and the sites

  • Those that correspond to non-uniform products or services (different at each site) with a reduced number of suppliers in the market and a high purchasing volume: here the best conditions can be obtained by coordinated negotiation with the projects.

Decentralized management

  • The rest of the purchases are managed directly with the project sites, with the support of the Purchases Department of the country in question, at the request of the project managers.

The purchasing procedures form part of the Quality and Environment System, which is certified under ISO 9001 and ISO 14001 standards. They also comply with the requirements of the OHSAS 18001 Occupational Health and Safety standards, under which Ferrovial Agroman is also certified.

A new internationally applicable Operational Procedure for purchasing was implemented in 2012, and the procedures of different countries were adapted to include the changes introduced by this document. A new category of coordinated purchase management at international level was established. It is managed jointly between the purchasing and project managers of each country and the Purchases Department of Ferrovial Agroman. Changes were also made to the criteria for scoring evaluation factors in the Supplier Quality Monitoring File. The idea is to establish more clearly the differences between the different scores and thus simplify the evaluation by the project manager.

Actions carried out in 2013 include:

  • Creation of an Operating Procedure for International Trade, which regulates in detail the process to be carried out in these operations, and the responsibilities given to each one of the positions and departments that take part, as these operations can be complex.
  • Implementation of Phase 1 of the “InSite Compras” application worldwide. It is global application that can be used in any country. This first phase includes the entire purchasing process, from planning to selection, and the corresponding approval processes. In 2014 the Supplier Quality Evaluation and Monitoring module should be implemented globally. This will provide one worldwide IT system to carry out these functions and promote monitoring of supplier compliance.
  • Creation of an International Subcontracting Framework Model, which will be the basis for developing specific models for new countries in which the company begins to operate. It will help to structure the models for new countries in a similar way and to include basic legal and commercial clauses, such as specific Corporate Responsibility clauses (Global Compact, Health and Safety, Environment, Personal Data Protection, etc.).
  • Work has been carried out in collaboration with the Environment Service to conduct carbon footprint studies of relevant products and to monitor and take measures to cut fuel consumption.

Purchasing management

The Construction Division has unified purchasing procedures and supplier quality monitoring at a global level. The common principles and working methods allow key aspects to be treated uniformly at company level, yet tailored to each country’s specific features. As a result, purchasing can be managed globally. Each country’s main purchases are known, and needs can be aggregated worldwide for the most important products and services. This ensures that all purchases are made in the best possible price conditions from suppliers that accept the technical, quality, social, environmental, etc. requirements, thus guaranteeing equal opportunities in the contracting process.

The procedures apply to all purchases (or leases) of products and services included in the Process Monitoring Plans/Quality Plans that call for specific environmental requirements, or those with a significant economic impact, in order to ensure:

  • Wide range of bidders.
  • Equal access to information and fair treatment of suppliers.
  • Justified concession process, with established approval levels based on competitiveness.
  • Strictly professional relationship with suppliers.
  • The procedure regulates the complete process, as indicated above.

The purchasing system guarantees that the purchases and services comply with requirements regarding quality, environmental performance, safety and prevention, and delivery times, in the best possible purchasing conditions

Selection and continuous evaluation of suppliers

The Construction Division controls and monitors the quality of suppliers through evaluations carried out by project managers when the supplies/projects are complete, or annually for long-term supplies or projects, or when incidents occur, as soon as they are detected.

The factors evaluated are:

  • Meeting targets
  • Product quality
  • Technical capability
  • Meeting price specifications
  • Compliance with occupational health and safety
  • Environmental performance

The evaluation is managed using Supplier Quality Monitoring Files prepared by project managers. An incident is defined as when the average score of the evaluation does not meet the requirements established by the parameters (equal to or under 2.5 out of 5), or when the score is 1 out of 5 for any of the evaluation factors.

The supplier is informed of the incident and ordered to take appropriate measures to prevent the problem from recurring. The supplier is also informed that if it happens again it may become a “rejected supplier”. All the project managers working with the supplier are also informed, so the appropriate measures can be taken to prevent the incident from happening again, and to ensure the Purchases Department is made aware of the situation. Suppliers with incidents become Conditional under Supervision. At the end of 2013, 103 suppliers were in this situation.

A “rejected supplier” is a supplier that has three incidents in a year, or one “very serious” incident, defined as such by the Purchasing Manager, backed up by an analysis by the corresponding service when it concerns areas relating to corporate responsibility (quality, health and safety, or the environment). 15 suppliers were rejected in 2013.

Suppliers are rejected at international level centrally by the Purchases Department. The Purchasing Manager is the only position in the company authorized to make this decision.

When a supplier is rejected it cannot be contracted again for at least three years. The computer systems that issue orders and contracts do not allow the issue of any purchasing documents to “rejected suppliers”. If a contract with a rejected supplier is required for exceptional reasons, authorization is required from the Purchasing Manager.

The Supplier Quality Monitoring Files and all the information on the supplier evaluation are recorded in the suppler quality monitoring computer application. This information is available to be checked in real time from any project site or center worldwide by authorized personnel.

Around 11% of all the suppliers and subcontractors working with the company in 2013 underwent an evaluation process. Of the total evaluated, 421 registered incidents and were therefore warned as indicated above.

2,667 suppliers were evaluated under sustainability criteria. Of all the incidents, 105 were connected with these criteria.

In accordance with the methodology for classifying high-risk suppliers, the only purchases that could potentially be high risk are those connected with work clothing and footwear from high-risk countries. In 2013, the countries where these products come from were analyzed with the suppliers. The result was that, with only a few unimportant exceptions, most of the products do not come from such countries. In any case, the supplier of these few exceptions has been required to certify that the products supplied are made in compliance with international Human Rights standards.

Training

A course on International Construction was created specifically for employees in this business, in order to learn about the characteristics of the international market in this sector. It has been held on three occasions, with a total of 65 participants and 1,300 hours of training.

In 2013, 2,772 employees in supplier/subcontractor companies received Health and Safety training. A total of 35 internal Health and Safety audits were carried out on site and in the company’s buildings. In addition, staff from supplier and subcontractor companies were given Health and Safety information manuals.