Outsourcing Justification

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The disadvantages of the process of Outsourcing for the National Oil Industry include: reduction of the business transferred. The resistance of the workforce. The loss of experience in the development of the activity now transferred. Increase the transfer of activities to third parties. Some restrictions statutory rate.

Risks in the quality of service and response time. And finally, loss of confidentiality. There are some specific guidelines for technical and financial, on the transfer of non-core activities of industry to the private sector. Among which are that each project should carry its own characteristics and risks, to use technology and so forth. Each case is subjected to analysis. From the economic point of view, is indispensable condition value creation.

That is, the contractor should be able to perform the activity at lower cost and with the best technology and personnel, because such activity has been transferred is its core business. This transfer was handled by BOT schemes (Build, Operate and Transfer), an investment that returns to the industry at the end of the contract; type BOO (Build, Own and Operate), where someone reversed and the asset belongs, while the industry pays a fee. Any scheme used must comply with the law of tendering and procurement rules of Petroleum of Venezuela. It adds that once established the scheme with the contractor, the industry generates management indicators to be met by the contractor to ensure the creation of added value, also establishes penalties and / or incentives as appropriate to the level of compliance the contractor with the agreed commitments. Other items required to participate in the process of outsourcing with the National Oil Industry (PDVSA) are: Description of the project. Outsourcing Justification (feasibility analysis, profitability, value creation, reasons for non-core) mode selected profile of the company and its financial status after application of technology outsourcing is expected that the new structure of Petroleum of Venezuela has three businesses: Exploration & Production, Manufacturing & Marketing, and Services. Apart from these three, there remains the Center for International Education and Development (CRED) and INTEVEP, everything else is below these three holding. The holding of exploration and production will be the merger of the exploration and production of Marven and Corp-oven in a company, and also there will Carbolic and all companies that develop into that category. Manufacturing and Marketing in a company will be the result of merging the operations of trading and refining subsidiaries are operating, and there are also other companies like Interven (external companies), PROESCO (new projects current refining) and Citgo (responsible for U.S. operations). The rest of the activities taking place in the oil industry, will become part of the service company. The reform is already beginning and now, the goal is to reach out to have the final schedule for the first quarter of 1998, for which, for the president of Petroleum of Venezuela there is much work to accomplish, since it is a step that considers essential and that will allow the industry to make substantial savings by eliminating duplication of functions. One of the tangible results of this restructuring by function, is a parent company PDVSA smaller. Of the 600 people groups today, it will be 350. It should be the exception that the difference will not be 250 people outside the industry, will be relocated in areas that are growing within enterprises formed.

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