Bilfinger Group is one of the largest service and construction companies operating in Europe, North America and Asia. In Poland, it has been present since mid-90s as a shareholder of Hydrobudowa-6, and in 2008 on the foundation of three large construction companies (Hydrobudowa-6, WPRD and PPRM), Bilfinger Berger Budownictwo (now Bilfinger Infrastructure) was established, best known for the construction of roads, bridges and enclosed structures.
As a member of the Bilfinger Infrastructure Group, the Polish company uses the corporate SAP ERP solution, which supports more than 70 companies of the group. The system is located and maintained at the German headquarters, and the IT Service Center (SCIT), a separate unit in the organizational structure serving as an IT / SAP competence center, is responsible for its administration. In addition to maintaining the system, SCIT also carries out further SAP rollouts to Bilfinger companies in different countries.
Rollout or implementation?
When it was finally decided that the Polish companies of the group would use the SAP ERP system, the question arose how to do it? To roll out the corporate SAP solution to the Polish branch as other entities did or use a different approach due to the size and specificity of the company?
To reduce the project risk and as a result develop a solution that best meets the expectations of the business and the Polish accounting and tax regulations, managers of the Polish company opted for hiring a third party, a consulting company with experience in the implementation of projects adapting the SAP system to the realities of the Polish company while maintaining the greatest possible consistency with the corporate solution.
The cooperation with BCC was established. The GAP analysis session conducted late 2012 together with SCIT showed that while in the controlling and project management (PS) areas the corporate system template covers business needs to a great extent, in finance, accounting, fixed assets and materials management areas business processes in the Polish branch differ significantly from the corporate processes embedded in the SAP system. This is partly due to the Polish law and the generally accepted practices in the construction industry.
It has been estimated that the adjustments that would be necessary in the Bilfinger’s SAP system in this area would very much interfere with the corporate solution and would not guarantee the full range of functionalities expected by Polish users.
Finally, having collected information about rollout projects and after internal discussions, Bilfinger Infrastructure decided to use a mixed approach: to roll out CO and PS from the central solution with the help of SCIT employees. On the other hand, FI, FI-AA, MM and SAP Workflow were to be implemented in a conventional way by SNP, according to the business needs of Bilfinger Infrastructure Poland.
The execution of implementation tasks in accordance with the above arrangements began in February 2012, and the system went live in January 2013.
As a consequence of this approach, an independent client was created in the enterprise system, where appropriate SAP ERP solutions were developed for the Polish company. It is worth noting that it was the first time Bilfinger decided to take such a step. All previous rollouts of the SAP system were carried out within a consistent, one-client installation.
The main activity of Bilfinger Infrastructure is carrying out construction projects, so it was reasonable to use the PS module. During its implementation, considerable efforts have been made in order to ensure that the project structure always reflects cost estimate items, which greatly facilitates the comparison of accounting data with the information about the actual progress on construction sites, recorded in the systems dedicated to the advanced technical control of the construction progress. With the PSP element hierarchy and the Joint Venture partners assigned to them, it is possible to freely report on projects, both as a whole investment and in parts executed by individual divisions.
During the implementation, huge emphasis was placed on minimizing the effort when entering data into SAP. For this purpose, the interface was developed to allow easy transfer of budget plans to the PS module. Additional reports were created, listing the progress for each project at any time and showing the actual and planned values broken down to individual months and cost categories.
In addition to the standard SAP functionality allowing for the calculation and posting of revenues from long-term contracts in the FI module, a special program has also been developed for such postings in CO.
Cash flow is a very important factor in controlling. For the cash flow control and planning, the “internal money" solution existing in the enterprise system was implemented, which is based on postings in the Joint Venture module and the revenue and expenditure plans. The developed reports, including a project balance sheet, allow the on-going monitoring of the net cash flow at each construction site.
Reporting for corporate needs
The decision to deploy the group’s solutions for the CO module allowed for a fairly quick implementation of most reports that are available directly in the SAP system and used by other companies of the group.
Reporting to the group headquarters takes place via SAP Financial Data Warehouse (FDWH). In the existing solution, the data was imported to the warehouse in the CO currency, which is euro. Bilfinger Infrastructure is obliged to report in a local currency, which is converted at the end of each month according to the group’s exchange rates, different for actual and planned data. It was necessary to create mechanisms for providing data both in local currency and euro in accordance with the group’s requirements.
Due to another group’s project conducted in parallel, which involved all BW consultants from SCIT, additional solutions for our company, such as accounting notes for financial statements or the manager’s dashboard, were implemented in the second half of 2013.
From the perspective of the controlling director, the advantage of SAP is the capability to create its own reports, rapid access to data in the selected layout and detailed drill-down analysis, allowing navigation from aggregated values to individual line items.
With the implemented corporate solutions, the time spent so far on the creation of reports can be dedicated to analytical work, facilitated by free filtering, sorting, and item sum up.
The controlling department in Bilfinger Infrastructure performs typical controlling tasks, which means that it is responsible for providing financial information to the management board of the company and timely reporting to the group headquarters. In practice, its task is to collect the plans from construction sites, branches and central units, assessment of deviations from the plans, identification of opportunities and threats, and creation of a variety of ad hoc analyses. What makes controlling in a construction company different is the diversity of ongoing projects. There are never two identical projects, therefore each of them must be analysed individually.
The SAP implementation in Bilfinger Infrastructure took place in extremely adverse conditions. When in September 2011 the final decision was made on the selection of the system, no one believed that the following year, we would face problems with projects conducted for GDDKiA, widely described in the press, with redundancies in the company, which resulted in several people leaving the implementation teams in the final phase of the project. In parallel, we conducted a large corporate project which had a significant impact on our implementation.
An additional challenge was the project language – English, foreign to all participants, as well as the construction and SAP terminology, where the same words have a completely different meaning.
Also, working on a live system, with its existing architecture and regular quarterly copies of the production system to the test system did not facilitate our task.
The strength of our trilateral cooperation was very good communication. Clear rules and division of responsibilities established at the beginning, weekly coordination meetings and the system for reporting the project progress to the Steering Committee in place, allowed for fast identification of risks and adoption of the necessary preventive actions.
The successful go-live in January 2013 was possible thanks to all the project participants, whose determination to achieving the goal and hard work enabled us accomplish the desired result despite all adversities.
Agnieszka Rzeszotek, Controlling Director, Bilfinger Infrastructure SA
Financials in SAP
In the financial area, the implemented SAP solutions included standard financial and accounting processes and fixed asset management. The Polish version of SAP FI is fully adapted to the Polish law and the requirements of financial accounting standards. SNP consultants made the necessary extensions and adjustments to the system in this regard.
In a large construction company such as Bilfinger Infrastructure the biggest challenge in implementing the FI module are settlements and payments. A large number of subcontractors and suppliers of materials in construction projects is reflected in financials in a very large number of documents, and thus in special cases. Payables and receivables must be recorded in accordance with the statutory and group reporting requirements.
Different types of settlements with the contractor must be posted on different General Ledger accounts: performance bonds, guarantee deposits, settlements with consortium members, damages, interest, prepayment invoices, and other. In SAP, it is a problem in that the system considers these as special transactions, while for the company it is everyday life. For example, purchase invoices entered by the logistics invoice verification for an order are posted by default only without special transactions to a supplier account. Since the basic assumption for the implementation was the principle that all purchase invoices were to be processed through workflow, SNP consultants had to prepare an extension to allow posting of invoices with special transactions.
The process which required the development of additional tools in SAP FI was payment approval, which is a complex and multi-stage process in Bilfinger Infrastructure.
The specificity of construction companies conducting large infrastructural projects such as road and bridge construction is that these projects involve many parties, even hundreds of co-operators, suppliers and subcontractors, whose invoices flow into the central accounting department. In these types of investments, enormous sums of money are involved and invoices often amount to millions.
The financial security, a clear assignment of responsibility for payment approval and the correctness of accounting processes are ensured by the proprietary solution designed to support the payment approval process, developed and implemented by BCC consultants. The tool supports the multi-stage approval of a payment before it is physically made. In Bilfinger, each purchase invoice is posted with a payment lock and is subject to a three-step approval before it is released for payment. Payment locks cannot be changed directly in the document or in the payment proposal because it is not allowed by appropriately designed authorizations.
In Bilfinger Infrastructure, payments are made in a weekly cycle. First, an employee of the financial department responsible for payables verifies and approves maturing invoices. Then, they are forwarded to the manager responsible for payables (the payment lock is changed to the second level). Here, another check is carried out and after approval the document goes to the last level – the financial director or the general director. The director’s approval removes the document lock, which in turn allows for its inclusion by the payment program and the preparation of the transfer order in the banking system.
The payment approval does not include people responsible for construction activities (e.g. construction site managers), since the verification of compliance of the order with the invoice and entry of possible changes to the payment takes place within an invoice processing workflow. During the approval, the employee of the financial department checks whether e.g. remarks of the construction site manager relating to payment for the invoice have been taken into account while posting.
In the construction industry very often invoices for the services of subcontractors are partially locked for payment in accordance with the arrangements in the work acceptance protocol. Such invoices must be appropriately broken down into different payment dates when posting.
The payment approval report available in the solution displays the supplier items for a given approval level. An authorized user can select an item based on the selected criteria (such as amount, payment date, supplier number, construction site, etc.), and then move them to the next approval level or reject them to the previous level. The approval / rejection changes a payment lock in an accounting document. With a user-friendly form, the rejected items are highlighted, and the user can check the reason for rejection – in accordance with the accepted rules, the person rejecting the payment should enter a comment with the reasons for rejection in an appropriate field.
With the amounts of money Bilfinger is dealing with, care for the correct and safe posting of payables and monitoring of invoice payments in accordance with the terms of the contracts and the actual state of works is a key task.
Ergonomics and international standards
Another key process in financials is settlement of VAT and CIT. Also in this scope, the supporting mechanisms have been implemented: substitution that supports automatic settlement of VAT accounts which further facilitates the analysis of items on these accounts, as well as substitution and validation of cost types for the CIT form.
Due to a project-based activity of Bilfinger Infrastructure, settlements with employees are an important financial process. Here, standard functionalities of the SAP FI module were used, but SNP consultants paid a lot of attention to make this process ergonomic for accounting employees, because also in this case a very large number of documents are involved.
In the FI-AA module, a typical solution for international companies in Poland was implemented. It allows a parallel balance sheet valuation, tax valuation, and the valuation in accordance with International Financial Reporting Standards (IFRS) that are used in the Bilfinger Group. In this area, the challenge was the large number of asset groups resulting from overlapping of statutory and corporate requirements, and a large amount of data (more than 11,000 components). This required much attention in the migration process.
New chart of accounts
In parallel with the SAP implementation project in Poland, a large-scale project to develop and deploy a new chart of accounts was executed in the entire Bilfinger Group. The goal of this large project was to harmonize financial reporting across the enterprise.
The scale of this project far exceeded the SAP-related work, and an additional challenge was the involvement of the same employees in both projects, which was a heavy load for them, in addition to their normal duties associated with the position held. Certainly, in SAP FI a chart of account meeting new corporate requirements was implemented.
Joint Venture is a SAP module which is very seldom implemented in Poland. As the name suggests, it is intended for organizations that require a joint-venture accounting. Originally, it was a key area in the oil & gas industry solution, and later also used in the solution for the design, construction and engineering industry. Technically, this is an additional ledger to record accounting data broken down into shares of the company in a joint venture. In the Bilfinger Group, this module has been applied primarily due to the possibility of recording all journal entries both on cost accounts and balance sheet accounts broken down into CO objects (projects, cost centers and statistical internal orders in Bilfinger Infrastructure). As a result, company codes can report for example receivables or payables broken down into construction sites and organizational units. JV documents are also used in a dedicated payment approval tool whose one of its basic functions was to analyze payments in a project breakdown.
MM, that is asphalt and steel
Beside the departments which are responsible for the construction of roads and bridges, one of the pillars of the company is the Technical Base covering the whole country. Its primary tasks include the provision of maintenance services for machinery and equipment from the fleet of the company and above all production for the needs of its investments. Also this activity, which is related to the complex and multi-stage process of internal revenue and cost settlement, was reflected in MM and CO modules of the SAP system.
In the Materials Management module, a proprietary solution was developed for the comprehensive settlement of production of asphalt and concrete masses as well as steel structures. For this purpose, dedicated transactions were prepared that with little effort of the user will enable automatic consumption of raw materials used in the production based on a previously created recipe (BOM), receipt of a finished product from production into the warehouse, then its issue, for example to a construction site or as part of external sales.
In addition to standard material and accounting documents created as a result of stock transfers, the implemented functionality also allows for further automatic posting in the background, for example between direct and indirect production cost accounts and the corresponding work in progress account, and the automatic reversal of created documents in the event of an error and termination of the transaction.
The applied solution not only minimizes the risk of erroneous recording of a complex business operation, which is production, but also supports the proper execution of the production process by ensuring the conformity of the composition of the finished product with a developed bill of materials entered into the system.
Purchase invoices in SAP Workflow
In terms of work organization, project work is specific to the construction industry. Each investment – a road section, bridge or viaduct – is a separate construction project managed and settled separately. In Bilfinger Infrastructure, each cost document is assigned to a relevant work type within a project, reflected in the SAP PS module. This approach allows for accurate cost control based on actual data for each stage of the work, such as the cost of earthwork, foundation or individual engineering facilities.
Verification of invoices is based on assigned, approved (in accordance with a relevant strategy) and fulfilled purchase orders. However, this approach also means that the assignment of purchase orders, preparation of account assignment and acceptance of invoices and other cost documents is a task done by many people involved in the work at different stages of the investment and different levels of the organization. These are directors, salespersons and contract managers.
Several thousand invoices are processed at the same time, and every day there are tens or even hundreds of new ones. Each document must reach the responsible person who after its maintenance and approval will forward it to the next approval level. This means that for each invoice type the process must be carried out according to the designed model.
In order to ensure the smooth flow of cost documents, it was decided to apply the SAP Business Workflow technology. The target business process has been designed based on the arrangements related to MM processes defined for the needs of Bilfinger. According to the assumptions, the solution was designed to be logically consistent with the SAP standard (the workflow makes use of the purchase invoice processing cycle designed in SAP from parking to posting).
All purchases are recorded as purchase orders in the MM module; invoice verification is done on the basis of assigned and executed purchase orders. Each cost document is subject to a two-step approval. Working with an invoice consists of automatic opening of the second session with a visible invoice scan, which makes its verification easier. Every morning, the employees responsible receive an e-mail with a list of invoices ready for handling.
The solution enables direct execution of tasks from the workflow inbox in SAP (transaction SBWP). After approval, the document is automatically forwarded to the next approver, and eventually reaches the accounting department, which is responsible for posting invoices and payments.
The developed solution completely eliminates the flow of paper documents and allows the handling of invoices in any location. These features are particularly important in situations where the approvers work on construction sites scattered throughout the country. The intuitiveness of the solution (e-mail notifications, document preview, etc.) provides a lot of support for users.
The developed solution ensures that the accounting department gets an invoice that is properly assigned, checked and approved by an authorized person.
It is worth noting that prior to the implementation of SAP ERP; Bilfinger Poland used an external application for handling the flow of cost documents, which met the business needs of the company. However, in order to ensure data integrity, as well as to maintain stability decision was made to develop a solution within the SAP standard. A uniform architecture guarantees a greater degree of safety and also allows the company to avoid additional licensing costs.
IT project like a construction project?
Implementation of information systems, especially so complex and multiarea as SAP ERP, is usually a big organizational effort, an event requiring a great mobilization of project team members, and that has an impact – to a lesser or greater extent – on the entire company.
Similar was the case in Bilfinger Infrastructure. However, project work is an everyday situation in a construction company, so the SAP project participants very easily adapted to the working conditions during the implementation.
The list of tasks, schedule, acceptance of project phases, stages settlement, tasks performance within the budget, etc.: the SAP implementation reality – at least from an organizational perspective – does not differ so much from the organization of construction work.
The high degree of openness of Bilfinger employees to the use of the tools recommended by SNP is also worth noting. The Share Point project portal, the Go Forward methodology and best practices in work organization recommended by SNP were willingly used and evaluated as useful at work.
When carrying out the construction, Bilfinger also developed its own best practices for needs of its industry and perfectly understands the importance of these elements for the final success of the project.
In turn, for SNP consultants, although accustomed to working for customers in various industries, the innovation was the need to learn a different type of project during the consultation or training courses conducted at production bases.
The project was carried out in a difficult time for the construction industry, in 2012. Its first half was engulfed in the fever prior to Euro 2012, which meant the focus on completing and putting into service the road and communication infrastructure, while in the second half of that year the economic crisis was noticeable, which in infrastructural construction was particularly painful after Euro. These conditions could not remain without influence on design work, but in spite of a difficult period for the company, thanks to the organization and determination of project team members, they did not have a major impact on the final results of work.
High organizational culture and employee engagement permit us to describe the project in Bilfinger Infrastructure as a model in terms of project organization.
Application support in SNP outsourcing
As already mentioned, the administration and maintenance of the system in Bilfinger is provided by the SCIT competence center. However, a consequence of the new approach to the SAP rollout in the corporation and the independent system implementation in selected areas is the continuation of the cooperation with BCC in the scope of application support in finance and asset management, as well as in material management and developed SAP Workflow solutions.
The user support, maintenance and minor development of functionalities implemented by SNP is provided based on the contract covering SLA provisions, in a high service standard offered by the SNPOutsourcing Center.
Cooperation: Magdalena Pawlukiewicz, Karolina Wazelin, Tomasz Gerke, Krzysztof Usowicz