IT CAPEX REQUEST FORM

BUSINESS CASE
This form should be completed in consultation with IT Projects and Consulting Services.

PROPOSAL NUMBER: <IT Use Only>

PROJECT TITLE: iProcurement

Delivering a world class requisitioning system through

the implementation & roll-out of iProcurement – which in
turn delivers intelligence to the business

Estimated Total for Approval: $ 165,000

NAME SIGNATURE DATE

Business/Functional

Business Representative
The person who has the responsibility
for the business processes associated
Alastair Whittome 15/11/06
with the proposal.

Sponsor:
The person who will sponsor the
proposal and has ultimate
David Henchliffe 15/11/06
responsibility for the project.
IT Review

IT Services Manager:
Endorses the project from a technical Mark Rosser
perspective.
TRAC

Technical Systems Manager

Signoff after review and approval by Louis Rothenberg
TRAC

Notes
1. The purpose of this proposal is to request IT Capital funds and is to be used for all capital expenditure
requests, including software and hardware.
2. In the first instance, to determine the feasibility of the proposal, the Business Representative should contact
the IT Projects & Consulting Team, who will work with the Business Representative to prepare this document.

Endorsement and Release Notice

This is a managed document. All copies of this document preceding this release are obsolete. This document
has not been released for use until authorized.

Revision History
Rev Date By Description
1.0 15/11/06 A Whittome Final version for BAGG & TRAC submission / approval

Document References
Ref Document Description
<Business Request Document>

Page 1 of 12
Executive Summary
TODAY

In today’s environment, most users are using Core Applications rather than the web-based eBusiness suite of
products for key requisitioning, receipting and order tracking activities.

Data flows one way, with no access for suppliers to provide input.

Enforcing Policy compliance presents a major issue due to an inability to embed this within Core Applications
processes.

The inability to enforce compliance through system smarts results in the requirement for manual intervention on
many orders, the re-keying of information, and “un-clean” data being held within our systems that requires
cleansing in order to support strategic sourcing / supplier cost control activities.

POST-IMPLEMENTATION

iProcurement will act as an “intelligent shop front” for all requisitioning, receipting and order tracking across the
business.

Direct electronic procurement links between Santos and key suppliers will be enabled.

Through these systems, we can embed policy, methodology, and many beneficial “smarts” to add value for all
users, and significantly reduce the requirements for manual intervention in the procurement process and reduce
time consuming data cleansing activity required for strategic sourcing / supplier cost control activities.

Policy enforcement will greatly reduce risk exposure for Santos in the use of non-approved suppliers /
contractors and will enable Santos to extract maximum value from contracting arrangements already negotiated.

The project will expose Santos to the use of smart form technology within Oracle – the future “intelligence
builder” within Oracle eBusiness suite to match business processes.

The project will provide a potential basis for the re-engineering of contract development and management within
Santos – and will support a “cradle to grave” within one system philosophy for all procurement.

It also aligns with agreed IT strategy of web-delivered business applications, leveraging core systems to all of
Santos, and is an enabler to the department continuing to support Santos wide growth and acquisitions without
the need for organisational change or major expansion – positioning us well for the future.

The expected cost of the project is $165,000 which will be recovered within a 1 year period post go-live.

Value, Risk, Cost Ranking Criteria Summary

Value $245,000 per annum (low estimate)
Risk Low
Cost $165,000
NPV $936,675
PWPI 9.22

Page 2 of 12
1 PURPOSE AND BUSINESS OBJECTIVES

1.1 BUSINESS GOALS

The key Business Goals can be summarised as follows:

 To reduce risk in the procurement process through the use of iProcurement module for requisitioning within
Oracle.
 To increase on time delivery performance of materials to Santos
 To reduce cost from our procurement processes.
 To increase value from our Contracting Arrangements through Purchasing Policy Enforcement.
 To increase agility in our Business through the use of technology and the removal of non-value add activities
that slow Santos today.
 To provide total visibility into the procurement cycle to requisitioner’s.

1.2 STAKEHOLDERS
Key Users Affected:

 All staff raising requisitions within Santos.

 All Santos sites (within Australia).
 Procurement & Logistics Dept – as the primary driver and user of information.
 All material planners within Santos [Maintenance, Drilling & PE, Production, Process].

Key Deliverables:

 Provide seamless delivery of order information through the requisition to pay cycle.
 Provide a single point for requisitioning through Oracle iProcurement that is so easy to use you would never
choose to go elsewhere [NB: Requisitioning via Maximo and its interface will continue as normal]
 Provide Procurement Policy Enforcement capability whilst providing flexibility to support varied business
requirements.
 Provide transparent on-line visibility to the requisition to pay process.
 Template the requisitioning process to support Commodity and Spend Analysis tools
 Utilise smart form technology as a tool to manage information collation, embed templates and workflow
requests to the correct buyer 1st time

In Scope:

Key items within scope of the Project are:

 Roll-out of Oracle iProcurement to Santos – utilising smart form capability, and multi-stores functionality
 Evaluation of correct electronic interface to be used between Santos & its suppliers (punch-out / EDI / Oracle
exchange) and its implementation with two strategic suppliers

A listing of functional capability to be considered is attached in Appendix B.

Page 3 of 12
2 SUCCESS CRITERIA
The success of this Project will be measured by the following key Criteria.

Business Benefit Quantifiable Measure

 Increased use of automation within procurement process
Efficiency
 Seamless exchange of data between Santos & suppliers
 Use of supplier catalogues and punch out capability from Oracle (or
alternate electronic trading system)
 Transitioning users out of Core Apps into a user friendly web-based
Effectiveness
environment
 Increased compliance with on-contract spend
 Reduction in direct charge purchasing
 Increased quality compliance with material specifications
 Increased quality of information provided to users
Quality
 Increased quality of data entered in Oracle and not required to be
cleansed
 Reduced total cost of ownership for goods & services
 Decreased down-time of plant & equipment
Value  Increased on time delivery of all requirements
 Decreased risk exposure due to reduction of use of non-approved
suppliers / on-site contractors

3 CURRENT FACILITIES AND REASON FOR CHANGE

Santos currently has iProcurement in use but not used to its full potential. This project will now ensure that
Santos fully utilises the Oracle suite of products that it has available to it, leveraging from the work completed in
the 2006 Oracle upgrade project to deliver significant business benefits.

This project will be the first use of smart forms functionality within the Oracle eBusiness suite at Santos. This is
a key functionality that is being used by Oracle to deliver flexibility and therefore value to businesses. Future
releases of Oracle will further enhance this capability without undoing any work already completed. This project
is therefore positioning Santos well for future enhancement and development of our Oracle systems.

Current gaps / risks in our systems which can be addressed through the implementation of iProcurement are
detailed in the following table:

Risk / Gap Issue Addressed By

This results in multiple tools being

iProcurement is a web-based
used for the same purpose resulting
Currently all users can only shopping environment that will
in inconsistent use of the tools, a
requisition inventory items via Core allow all requisition types to be
lack of policy enforcement, and
Apps transacted through the same
most users utilising a difficult to use
business process
interface

Non-compliance with Santos spec
product purchasing / too many
items requisitions fall into Buyer
pool that are catalogued and on
contract
Users cannot find the correct item
to requisition
Shopping categories can be used to
enable users to navigate easily to
the item they require, also ensuring
that specific specifications and
standards are adhered to

Increased costs in both process and
unit cost through the lack of correct
data available without cleansing.
Provision of correct information
causes delays in the procurement
process, increased costs in the
process and potentially in their unit
cost. This also has the flow on
effect of mass data cleansing being
required to support Strategic
Sourcing decisions.
Use of templates will ensure that
users are forced to supply important
information to support both policy,
and reporting requirements without
data cleansing activities

Page 4 of 12
 Risk / Gap Issue Addressed By

There are many situations where an
integrated catalogue search would
be beneficial to Santos, especially
for low value low risk items but also
for items where specifications
change rapidly eg electrical items.
To purchase low value low risk
goods, Santos has to catalogue
these internally which adds cost,
time delays, and off-contract spend
is a consequence.
Ability to punch out to supplier
catalogues, enabling on line
purchasing through suppliers
systems without leaving Santos’s
systems.

Requisitions are processed Some users will be raising Ability for users to save re-usable
incorrectly, leading to failures in requisitions on a regular basis, lists and view all of their
system processes and / or non- some wont – the use of templates transactions in one place
contract purchases being effected and re-usable lists is desired

Unable to search supplier & Santos Slow process, duplicated efforts, Ability to search both Santos and
catalogue’s simultaneously misaligned data, increased costs. supplier catalogues at same time

Due to the un-friendly nature of Core requisitioning systems and Automated step-through requisition
Core Apps, this encourages non- processes are not complied with. process
compliant purchasing, leading to
vast in-efficiencies in the procure to
pay cycle (= cost) and non-contract
spend which could result in
increased risk through poor
quality / non-controlled supply

To quantify the effects of the project and its change the following details are noted for information:

Detail / Item Size

Key processes directly affected - both upstream and Requisitioning, Purchase Order Tracking,
downstream Cataloguing Integration

Number of staff affected in a major way 100-200

Number of departments affected in a major way 1
Number of sites affected in a major way Parts of All
Number of staff affected in a minor way Potentially all (all staff have requisitioner access)
1600+
Number of departments affected in a minor way All
Number of sites affected in a minor way All
Number of IT systems affected Oracle directly, Maximo indirectly

Page 5 of 12
4 BUSINESS PROCESS CHANGE
This project will be a driver for significant business process change. The key process change can be
summarised into 3 key segments:

 User change
 Procurement & Logistics Change
 Key supplier integration Change

A key deliverable of the project is to make this requisitioning environment the only way anyone would want to
requisition goods or services within Santos through its ease of use.

The user change’s will therefore be primarily driven through mass communication during roll-out, supported by
appropriate documentation and / or presentations / training sessions for specific user groups.

It should be noted that although all employee’s are able to requisition goods and services, in reality a smaller
pool of staff actually process these and these will be targeted with specific training as opposed to mass
communications.

Changes within Procurement & Logistics will be major - especially with regard to data set up, use of smart form
technology, data integrity / cleansing and the mapping of systems to process, these changes will be handled via
workshops and dedicated support within the department.

Key supplier integration change will consider the use of on line catalogues, sharing data electronically and
exploring the full potential of eBusiness solutions.

5 OPTIONS CONSIDERED

5.1 OPTION 1 – PROPOSED SOLUTION

To implement iProcurement in its entirety, utilising selected product functionality as determined during the initial
functionality specifications phase.

5.2 OPTION 2 – ALTERNATIVE 1

Utilise a 3rd party e-commerce facility, eg Quadrem, Ariba. This is discounted on the basis that Santos has
already invested substantial time & resources into the Oracle e-Business Suite of products, and this project is to
fully implement two modules that Santos already has and will provide incremental benefits and value to Santos’s
investment.

5.3 OPTION 3 – MAINTAIN STATUS QUO

As defined in the benefits section of this document, there are many beneficial factors for Santos to implement
these modules fully – maintaining Status Quo would be to remain static in our progress, ultimately resulting in
increased risk to the Business and increased costs / value add’s that are must be avoided for commercial
reasons.

Page 6 of 12
 6 VALUE ANALYSIS

6.1 RISK ASSESSMENT

The following table highlights the key risks identified with this project and some proposed mitigation strategies.

REVISED LIKELIHOOD
LIKELIHOOD

REVISED IMPACT
IMPACT

STRATEGY
RISK MITIGATION

Commitment to training provided by Engage key stakeholders in process,

unit managers
Inadequate on-going training relating
to new users, enhancements
Lack of support from Suppliers
Continued use of alternate
procurement systems
Technical complications result a “one-
stop-shop” being unattainable
Lack of resources – technically within
IT
Lack of resources – allocated within
Proc & Log
Lack of resources – allocated by key
suppliers
Lack of support from Oracle
Competing projects result in delays
due to dependencies
Data integrity not good enough to
allow full roll out
Post go-live focus is removed to other
areas
Too many new features are attempted
to be brought on in one go
M M Treat clearly explain benefits, provide varied M L
training options
Creation of Workready training packs, and
M M Treat roadshows at all locations to targeted L L
audiences
Drive through Strategic Sourcing initiatives
L M Treat L L
& supplier selection
Engage key stakeholders, ensure solutions
H H Treat are best in class to enable policy M L
enforcement
Ensure scope is clear, and key deliverables
M M Treat M M
are obtained through appropriate solutions
Strong project management, project
M H Treat L L
definition and involvement of IT
Treat Addressed through work load planning
M H L L
within department
Treat Address through contract meetings and key
M H L L
management teams in place (eg JMT’s)
Treat Contact and consult to ensure focus is high
H H from Oracle – utilising recent relationships L L
developed at Oracle Openworld
Treat Monitor and manage – being driven by
H H M M
same teams.
Treat Monitor and manage – recent Data Integrity
M H Programs run during 2006 have mitigated L M
this risk dramatically
Treat Commitment of Procurement & Logistics,
led by Business Systems Team to
L H L L
continually maintain, develop and enhance
the solution
Avoid Strong project management, and clear
M H scope definition prior to moving to L M
development

6.2 BUSINESS VALUE

Business value will be derived in many areas from this project. In terms of this Business Case submittal only
some very clear tangible results have been included to substantiate the project financially, and the estimated
financial benefits listed are very conservative in size. That said the payback on the project would still be
between 6 months - 1 year maximum.

Tangible:

 Increased up-time on plant due to on-time delivery of parts to Operations

 More effective planning / workload outputs within Operations through visibility into delivery dates
 Increased contract compliance through embedding Policy into the systems
 Increased negotiating power for Santos through greater on-contract spend, and consequently greater data
integrity
 Increased transport utilisation rates / performance through delivery visibility

Page 7 of 12
 Deferred headcount additions in purchasing & business systems to support order placement / strategic
sourcing spend analysis work (2006 has seen a 26% increase in procurement volume).
 Reduced costs in relation to managing the Santos catalogue for suppliers we integrate with.

A conservative high end benefit is $ 565,000 pa.

A conservative low end benefit is $ 245,000 pa.

Intangible (for the benefits calculations):

 Reduced risk of plant failure / downtime due to non-compliant products being ordered through Policy
enforcement & on-contract spend control
 Reduced time for requisitioning across the business
 Reduced processing time for order placement and follow up through seamless connectivity with suppliers
 Capability for Santos to manage supplier lists on-line
 Provision of a very simple requisitioning tool with in-built “smarts” for all requisitioner’s within Santos
 Enabling the use of web-based Oracle modules rather than Core Apps
 Enabling the use of supplier catalogues rather than all catalogued by Santos – adding value through agility,
and reduced transactional costs & workloads internally
 Exposure and use of smart form technology within Oracle – the future “intelligence builder” within Oracle
eBusiness suite to match business processes.
 Provides a potential basis for the re-engineering of contract development and management within Santos –
and will support a “cradle to grave” within one system philosophy for all procurement.
 Aligns with agreed IT strategy of web-delivered business applications, leveraging core systems to all of
Santos
 An enabler to the department continuing to support Santos wide growth & acquisitions without the need for
organisational change or major expansion – positioning us well for the future

6.3 COST
Low end estimate: $ 136,230
High end estimate: $ 172,080

Requested funds: $ 150,000

Contingency $ 15,000

Total submission: $ 165,000

Page 8 of 12
7 IMPLEMENTATION TIMING
It is anticipated that the project will commence in earnest in February 2007, some pre-work will be completed
prior to year end however no capital costs will be incurred in 2006.

Detail Est Time Est Finish

 Start Feb 1st 2007

 Completion of Project Definition – Project Charter approved 0.5 month Feb 2007
 Detailed review and selection of enhancements from Product offerings 0.5 month Feb 2007
 Technical specifications and development 2 months Mar 2007
 Testing 1 month Apr 2007
 Training (Business Process Mapping, Docs Developed, Delivered) 2 months Apr 2007
 Full Roll-Out 1 month May 2007
 Full Roll-Out Review 0.5 month Jun 2007
 Ongoing support structure in place on going Jun 2007

8 COSTS SECTION
8.1 INFRASTRUCTURE COSTS
 Training environment in place for ongoing training for suppliers will be required, IT believe current
infrastructure & applications can be utilised to support this without the need for investment.

8.2 APPLICATION COSTS

 Licence purchases required are nil
 External consultants:
o 1 week of consultants time to evaluate and recommend electronic trading options - $ 10,000
o 2 x 7 day implementations of an electronic integration - $ 28,000
 Internal IT Services costs have been budgeted as follows – (all have been costed as external resources
due to non-availability of internal resources)
o Project Manager - $16,800
o Business Analyst - $ 28,800
o IT testing / change implementation costs - $ 2,400
o Potential data migration / filtering tool - $ 6,000
 From Procurement & Logistics the following personnel have been planned and require no back-filling at
this stage – and therefore will not require funding:
o Ian Oates 70% time for project duration.
o Alastair Whittome 30% time for project duration.
o Business Analyst (Lisa Florence or Dylan Odgers) Support 30% time for project duration.

8.3 IMPLEMENTATION & MIGRATION

 Training costs can be split into 4 key areas:
a) Development of training tools
b) Delivery of training to SPL
c) Delivery of training to requisitioner’s
d) Delivery of training to suppliers
(WorkReady, Manuals, eSheets)
(Manuals, Training Sessions)
(as appropriate – but some sessions)
(as appropriate – but site visits with key suppliers)

Anticipated costs relate primarily to travel and expenses, these have been costed as follows:
Return flights (once per destination) to Moomba, Ballera, Jackson, Mereenie, Pt Bonython, Brisbane, Roma &
Perth – est @ $350 e/way for 3 people:

Total cost: $ 14,700

Return flights (once to two destinations) to Melbourne / Sydney / Brisbane (depends on suppliers) – est. flights @
$450 e/way + cabs for 3 people

Total cost: $ 2,700

Costs for the preparation of WorkReady training modules have also been included at a total cost of $14,000

Page 9 of 12
8.4 OPERATIONAL
Nil – in fact reduced post go-live.

9 OTHER PROJECT CONSIDERATIONS

9.1 DEPENDENCIES
Nil – all internally controlled within Procurement & Logistics

9.2 PROJECT ORGANIZATION/RESPONSIBILITIES

The initial Project Organisation is expected to be as follows:

Steering Committee: David Henchliffe, Mark Rosser, Alastair Whittome, Mahree Waldeck
Will meet monthly to discuss progress at standing Procurement / IT services
review meeting.

Key Project Team: IT Project Manager & Business Analyst - TBC

Business Project Mgr - Alastair Whittome
Business Process Leader – Ian Oates
Business Analysts - Dylan Odgers, Lisa Florence (30% each)
Nominated supplier contacts
External Oracle consultants as required

Ad Hoc Project Members: Targeted requistioner’s from the business – some high volume users, some low
volume

9.3 QUALITY TARGETS

A quality plan will be delivered as part of the Project Charter.
9.4 SCOPE CHANGE
The final scope of the project will be as per the Project Charter. Any changes to this scope will require review,
approval and endorsement by the Project Steering Committee at a minimum.
9.5 COMMUNICATION
All communications with respect to the Project will be driven by the Project team, and will be performed in line
with the Communications Plan that will be developed and agreed during the Project Charter stage.

Page 10 of 12
Appendix A Financial Working Sheet

High Mid Low

Costs: (Mid +20%) (Expected) (Mid -5%)
Hardware
Servers 0 0 0
Network 0 0 0
Personal Computers – PDA 0 0 0
Other 0 0 0

Software
Licence Costs 0 0 0
Software Development Costs 0 0 0
Other 0 0 0

Project Management (external resource) 20,160 16,800 15,960

Roll Out / Roadshows / Change Management 20,800 17,400 16,530
Internal IT Costs (note all costed as external) 68,640 57,200 54,340
Consultancy for evaluation of electronic tools 12,000 10,000 9,500
Implementation of 2 x suppliers onto electronic 28,000 26.600
Trading 33,600
Training (workready) 16,800 14,000 13,300
Total Costs 172,080 143,400 136,230

Benefits:
Increased profit (per annum) $840,000 $420,000 $140,000
Workings for increased profit :
Annual spend on materials $ 560,000,000
Annual spend on services $ 940,000,000

Have taken 50% of material only and applied

reduction factors as listed in each column. This will
be delivered via on-contract spend, greater 3% TCO 1.5% TCO 0.5% TCO
negotiating power, on-time delivery of products, reduction reduction reduction
increase in up-time on plant & equipment.

Note: 2004 & 2005 sourcing initiatives have

delivered on average 6% savings, delivering a per
annum saving of $27M from a targeted total spend of
$420M.
Decreased costs: $280,000 $145,000 $105,000
Workings for decreased costs:
Increased automation in procurement process is
expected to deliver efficiency gains within the
department that will enable further expansion of
activities without additional headcount, which $160,000 $80,000 $60,000
currently would equate to $80,000 pa for any (2 FTE)
additional. Allowed for one person.

Decrease in volume of catalogue management,

currently we spend $50,000 per year via an $40,000 $25,000 $15,000
outsourced provider to cope with volume, expected to
halve this.

Increase in level of “clean data” provided, reducing

hours spent cleaning data for strategic sourcing / $80,000 $40,000 $30,000
spend analysis. Allowed for 0.5FTE cost avoidance (1 FTE)
equating to $40,000

Total Benefits $1,200,000 $ 565,000 $ 245,000

Page 11 of 12
Appendix B Functional Opportunities Available:
Functionality
i-Procurement
Web-Shopping Interface
Next Generation Catalog Engine
Complete Catalog & Content Management
Easy to use Sign-On and Home Page
Integration
Streamlined Order Placement
Requisition & PO Change Management
Approval Management
Policy Enforcement
Benefit
Familiar interface leverages user expereince with consumer sites
Automated step-through requistion process
Online stores organize content
Powerful search engine
B
Information templates
Multiple catalog search
Parametric search
Advanced sorting and filtering
Categorization
Ranked list support for matching items and major catergories
Simultaneuous local and remote content search
Inline item images
Multiple item comparisons
Content access from Oracle Purchasing
Blanket purchase agreements
Quotations
Item master
Web-based supplier catalog loading
Punhcout to external web stores or content hubs
Transparent Punchout to remote web stores without leaving
iProcurement
Off-catalog buying
Pre-built Oracle exchange supplier content
User friendly Home page
Organization specific purchasing policies
User preferences and personalisation
Fully integrated with Oracle applications
Third-party purchasing system integration support
Shopping lists
Saved shopping carts
Dynamic pricing calculation
Copy prior requisitions
Internal and external requisitions for goods and services
Automatic document creation
Inventory replenishment requests
One-time delivery address
Multiple currency support
Kit support
PO placemnet via email, fax, EDI, or Oracle Supplier Network
Order and line cancellations
Change request for orders, quantity, need by date & price
Requester led tracking
Full life cycle visibility
Configurable approvers list
Notes for approvers, buyers, and suppliers
Support for attachments
Vacation periods and proxy approvers
On-line funds-checking prior to approval
Procurement cards to pay for requested items
Tax exempt purchases support
Pre-defined favourite charge accounts
Multiple charges for accounts / projects / task / award lines
Contract compliance
Preferred suppliers enforcement rules
Page 12 of 12