1. Contractors HSE Incentive / Deduction Program Version # 1

2. Contents Introduction Why do we need such a program ?
Provision for HSE Incentives & Deductions
Key Features of HSE Incentives
Key Features of HSE Deductions
Key Performance Indicators
Query if any

3. Introduction – Group Members
Mr. Adli Abu Amarah
KOC Manager, Contracts Group
Waleed Yagoub Al-Beaijan
KNPC Manager, Operations, SHU
Walid Adeeb Al Ghawas
KNPC Manager, MOG KNPC
Abdulhakeem Ibrahim Alesmail
KNPC Manager, Quality Assurance, SHU
Khalil Esmaeil
KNPC Manager, Project Dept. II
Wael Salmeen
KPI Manufacturing Advisor
Imad Abdulrahman Al-Hadlaq
Manager, KPI Marketing Asia

4. Introduction – HSE Incentive Program
HSE Performance Incentive/ Deduction provisions to be included in future Contracts (in-line with international best practices and experience adopted by K-Companies).
Basic Principles:
A balanced provision for HSE Incentives / Deductions in future Contracts.
Incentives based on combination of Proactive Measures and Reactive Monitoring based on Company HSE Systems and Procedures
Monitoring at Quarterly basis for Incentive / deduction purposes.
Company to make budget provisions for Incentives purposes.
Cancellation of whole provision for a Contractor in case of fatality.

5. Introduction – Objective
In view of our Corporate Vision & Mission (achieving highest HSSE standards, social responsibility towards our workforce and people of Kuwait), this Incentive Program is proposed to enhance HSE Performance of Contractors with an objective of avoiding / reducing number of HSE Incidents by;
Recognizing and rewarding both Contractor and its Workforce for high standards of HSE performance &
Contractor being financially and contractually responsible for poor standards of HSE performance

6. Introduction – Scope & Applicability
All future Contracts involving site activities excluding consultancy services
Work locations within Company premises
Enhance commitment & positive ownership of HSEMS from Contractors.
Encourage Contractors to improve HSE performance
Reduce incidents and unacceptable levels of HSE performance
Positive impact on the image of the Company.
Benefits:

7. Why do we need it ?
The burden of occupational injuries and diseases is significant, for both Company & its Contractors, resulting in losses from early retirements, staff absence and rising insurance premiums.
Effective Management of Occupational Health & Safety in a business environment where two or more entities work together requires commitment & cooperation from each of their management.

8. Why do we need it ? (continued..)
Unfortunately, HSE is of minimum interest to Contractors because of;
Cost-cutting & profitability policies.
HSE
Incentive
HSE incentive policies are ignorable comparing to their investment on HSE.
Investment on
HSE
Higher impact of accidents on Company’s reputation than the Contractor.

9. Key Features of HSE Incentives
Incentive Calculation:
Provisional Sum for HSE Incentives will be the maximum amount that may be earned by the Contractor over the Contract Period.
1% of Tender Check Estimate value (for medium to large Contracts)
2% - 4% of Tender Check Estimate value (for low value Contracts)

10. Key Features of HSE Incentives (continued..)
Criteria for incentives:
Leading & Lagging HSE KPIs in distinct Quarterly Assessment Periods
Performance will be evaluated on Quarterly Basis between Start of work and completion of work on Site.
Base Incentive Amount shall be applicable to each Assessment Period, comprising the Provisional Sum divided by number of Assessment Periods
Contractor’s HSE Performance Data (HSE records and statistics on a monthly and cumulative basis including sub-contractors if any)
50% of Incentive shared with Subcontractors /Workforce

11. Key Features of HSE Deductions
Deductions from Contract Price made in following circumstances:
- A fatality
- Occurrence of frequency rates greater than norm for Industrial Disabling
Injuries, Motor Vehicle Accidents or Environmental Incidents
- A major HSE violation/incident
Amount of deduction increases with number of incidents
Shared with subcontractors (as applicable)

12. Key Performance Indicators
Leading KPIs
Threshold
Target
Stretch
Lagging KPIs
Leadership Engagement
(HSE Site Visits by Contractor / Subcontractor Senior Management)
Lost Time Injury Freq. Rate
HSE Training Intensity
(Contractor / Subcontractor employees)
Total Accident Freq. Rate
Near Miss Reporting Frequency Rate
No. of Lost Workday Cases
Periodic Medical Examination of employees
No. of Medical Treatment Cases
Timely Closure of HSE Audit Recommendations
No. of recordable Fire Incidents
Note: - 1 HSE Incentive is applicable only in case of Contractor’s quarterly performance meets the target of all the 10 KPIs.
Note: Base Incentive Amount will NOT BE APPLICABLE in case of Contractor’s quarterly performance on any one KPI has gone ≤ Threshold level.
Note: - 3 Provisional Sum of HSE Incentive will not be applicable in case of any fatality.

13. Q & A
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14. Thank you