procurement process transformation project new processes

Blank.potx 0

Procurement Process Transformation

Project

New processes & procedures

Corporate MM, Delhi

The Need…

The previous MM Manual was released in the year 1998

Need was felt to benchmark the MM processes with the international best

practices, practices followed by other PSUs considering the Govt./CVC

guidelines & feedback from the work centers

To Simplify, Systematise and Standardise the Manual and Tender Documents in

order to reduce procurement lead time

Mapping on SAP system also taken into account

New Initiative – Following New Documents prepared

• Integrated MM manual for materials, services and LSTK including manual for

warehouse and inventory management

• Tender documents & BEC for ICB and Indigenous tenders

Procurement of goods (Indigenous and ICB) Procurement of spares from OEM Hiring of various types of services Charter hiring of Rigs Hiring of Consultancy Contracts Hiring of Vessels Hiring of Facility Management Services Award of various types of LSTK contracts Civil Works

The entire MM value chain has been mapped

Material forecasting

Scope of work

Cost estimation

Budgeting

Indenting and PR

Bid submission

Tender evaluation

Rate reasonability

PR to sale of tender

Storage into main warehouse

Consumption, return of material

Inventory mgmt. & stock verification

Obsolescence and Disposal

Despatch to user

Receipt of material and inspection

Negotiation, contract award

End-to-end value chain of procurement

Order fulfillment, monitoring and

payment

Major new processes conceptualised in the MM

Manual for effective Business partner relationship

Vendor Registration

Process features Rationale

• Vendors register on portal providing

basic information and indicating the

category of goods they want to supply.

• Login id and password assigned to

vendor after preliminary check

• Vendors to upload their documents on

financial statements, certifications past

experience, etc that can be used

throughout the year across tenders and

quote the unique document reference

number while submitting bids

• Provide data base to

ONGC about prospective

bidders to whom LT/

advance intimations on OT

can be sent

• Limits multiple submissions

of same documents by

vendor

• Limits multiple approvals of

same documents by MM

officers

Vendor Empanelment


• Vendors empanelment is to be done

annually for a period of 3 years.

• The empanelment window for fresh

empanelment shall be opened every

year for a 1 month period.

• Price quote will be sought from the

empanelled vendors

• Phase wise implementation starting

with selected centralized

procurement of Type-A items

• Ensures long term supplier

relationship

• Faster procurement

turnaround time

• Better vendor selection and

vendor performance

Vendor Ratings


• Vendors to be rated objectively on

their performance on delivery on

milestones (during tender process

and performance of contract)

• Vendor ratings to impact future

technical/quality scores of vendor in

subsequent tenders

• Continuous vendor feedback process

to facilitate execution / delivery without

delays and actively work with quality

vendors to further improve on project /

item / service metrics (cost, time,

quality etc.)

• Vendor ratings give an

objective view to ONGC and

the vendor of their

performance

• Inclusion of vendor ratings in

future tenders motivates

vendors to perform well in

current tenders

Category Management

Changes proposed Rationale

• Position of category manager /

category management team created

with responsibilities

• Develop procurement strategy

• Perform cost assessment

• Conduct vendor management

• Category management brings a

strategic view to procurement

• Category manager responsible

for end-to-end procurement

used in many IOCs

Quality and Cost based selection (QCBS)

Process features o Rationale

Quality and Cost based selection (QCBS) taking

into account the quality and the cost of the

proposal in the selection of the successful firm

To be considered for procurement of items and

services with high degree of technical influence,

value impact of tender

o Selection of most economically

advantageous tender instead of just

lowest cost

o Improved quality of vendors in critical

categories

o Improved effectiveness in procurement

Re-introduction of Reverse Auction


• Reverse auctions to be only used in

procurement of common goods/services –

where specifications / requirements are

unambiguously understood

• Used when competitive market of suppliers

exist for category of procurement

• Minimum bid decrement of bidders to be

0.25-1% of the starting reserve price of the

reverse auction instead of 0.01% of last

bid as in previous RA process of ONGC

• Improved cost

competitiveness through

intensified competition

• Faster procurement

• Transparent negotiation

process

Life cycle costing


• Life cycle costing method of evaluation in

procurement of long life cycle equipments with

operations and commissioning and

decommissioning costs being a significant

proportion of life cycle costs.

• Most economic offer over the

entire life cycle of procurement

will be chosen

Major changes to existing tendering processes

Tender sale period


• Tender sale till bid submission due date.

• In physical tenders, bidders can download

tender documents from ONGC tender

website and submit bid along with tender

fee within due date.

• Physical sale of tender documents to be

discontinued

• However, in order to participate in pre-bid

conferences , the bidders will be required

to submit tender fee within 21 days.

• To enhance competition

• To comply with CVC guidelines

in this regard

Purchase of bidding documents by Agents


• Agents/ consultants/ retainers/

representative/ associate of foreign

principals are not authorised to buy the

bidding documents on behalf of their foreign

principals.

• To relevant in view of

introduction of e-procurement

and allowing bidders to down

load tender documents and

submit bid along with tender fee

in case of physical tenders

Threshold limit for open & limited tenders


• Open tender to be used where value is

above Rs. 10 lacs

• Limited tender to be used in procurement

cases upto Rs. 10 lacs or limited number

of suppliers are available or if vendors for

the category of procurement are

empanelled.

• To enhance transparency in

tendering.

• For better competition

Simplified Process for Procurement from OEM


• Cost estimation process simplified

• User sends enquiry to specific OEM

• In case OEM is not interested, OEM

asked to provide the name of only

one dealer / distributor / supplier

• No LD/PBG clause for OEM

• Warranty capped in cases of

replacement.

• To reduce procurement lead

time

• For realistic pricing

Time Norms for bid submission

Description of Activity Tenders without Pre-

bid conference

Tenders with pre bid

conference

(i) Receipt of queries from

bidders

…. 28 days

(ii) Scrutinizing the queries and

holding pre bid conference

…. 8 days

(iii) Approval of Pre-bid

minutes and issue of the same

…. 8 days

(iv) Submission of offers and

opening of techno-commercial

offers(TBO)

31 days 21 days

TOTAL

31 days

65 days

Post bid Clarification


• Only one round of clarification will be

sought , if required from bidders after

opening techno-commercial bids

• To reduce the tender processing

time.

Earnest Money Deposit / Bid security


• Threshold limit of tender value for

submission of earnest money deposit / bid

security to be raised from Rs 5.00 lakh to

Rs. 10.00 lakhs

• However, the maximum limit of EMD/Bid

Security for a tender to be raised to US$

one million for foreign bidders and Rs. 5

crores for Indian bidders from US$ 0.5

million and Rs 2 crores respectively

• To benefit small suppliers

Change orders


• Option of Milestone based payments for

change orders with milestones negotiated at

the time of amendment of contract

• Approval of change orders delinked from

approval of variation in quantities

• Requirement of 3 quotations in respect of all

material being purchased as part of the

change order need not be provided

considering the numerous items that are

typically required to be purchased in such

change orders

• Improve WC position of

vendors through milestone

linked payments

• Efficient approval process

by removing arduous

requirement of 3 quotations

and delinking quantity

variation from approval of

change orders

Major changes in GCC across tender

documents considering best

international practices

Force Majeure

Existing clause Changes proposed

The term " Force Majeure" as

employed herein shall mean

acts of God, War, Civil Riots,

Fire directly affecting the

performance of the Contract,

Flood and Acts and

Regulations of respective

government of the two parties,

namely ONGC and the

CONTRACTOR.

The term Force Majeure as employed herein shall mean

i. war, invasion,

ii. rebellion, terrorism, sabotage by persons other than

the Contractor’s Personnel, revolution, insurrection,

military or usurped power, or civil war,

iii. riot, strike or lockout by persons other than the

Contractor’s Personnel,

iv. munitions of war, explosive materials, ionising

radiation or contamination by radio-activity, except

as may be attributable to the Contractor’s use of

such munitions, explosives, radiation or radio-

activity, and

v. Acts of God such as such as earthquake, hurricane,

typhoon or volcanic activity

Arbitration

Salient features of Existing

clause

Salient features of proposed clause

• For claim amounts upto Rs. 50 lakh

Sole arbitrator appointed by ONGC

• For claim amounts above Rs. 50 lakhs

up to Rs 5 Crores: Sole arbitrator to

be selected by party from list

provided by ONGC

• For claim amounts above Rs 5

Crores: 3 arbitrators ,One arbitrator

by each party and the 3rd arbitrator,

who shall be the presiding arbitrator,

selected by the two arbitrators

• Fees, general Guidelines specified by

ONGC

Arbitration shall be as per rules and guidelines of

independent arbitral institutions namely,

Indian Council of Arbitration (IAC) ;

Delhi International Arbitration Center;

Nani Palkhiwala Arbitration Center, etc.

Goods - Warranty and Guarantee


clause


• SUPPLIER shall fully warrant that all the

stores, EQUIPMENT and components

supplied under the ORDER shall be new and

of first quality according to the specifications

and shall be free from defects (even

concealed fault, deficiency in design,

Materials and Workmanship).

• In the case of equipment, the warranty for a

period of 18 months from the date of

shipment or 12 months from the date of

commissioning of the equipment, whichever

is earlier, will be obtained.

• Equipment or spare parts thereof replaced

shall have further warranty for a period of 12

months from the date of acceptance.

• The Supplier warrants that all the Goods supplied under this contract are

new, unused, and of the most recent or current models, and that they

incorporate all recent improvements in design and materials, unless

provided otherwise in the Contract. The Supplier further warrants that the

Goods shall be free from defects arising from any act or omission of the Supplier

or arising from design, materials, and workmanship, under normal and applicable

standards as mentioned in the scope of work

• Unless otherwise specified in the SCC, the warranty shall remain valid for

twelve (12) months after the Goods, or any portion thereof as the case may

be, have been delivered to and accepted at the final destination indicated in

the SCC, or for eighteen (18) months after the date of shipment from the

port or place of loading in the country of origin, whichever period

concludes earlier.

• Equipment thereof replaced shall have further warranty for a period of 12

months from the date of replacement. Warranty will be capped at 24

months from the date of acceptance at the destination specified in the SCC

or 30 months from the date of shipment from the port or place of loading

in the country of origin, whichever period concludes earlier.

Goods - Liquidated Damages


clause


LD amount: 1%(one percent) of the

contract/supply order price of the whole unit

per week for such delay or part thereof , subject

to maximum of 5%.

LD will be imposed on the total value of the

order unless 75% of the value ordered is

supplied within the stipulated delivery

period.

Where 75% of the value ordered has been

supplied within stipulated delivery period, LD

will be imposed on the order value of

delayed supply(ies). However, where in

judgement of ONGC, the supply of partial

quantity does not fulfil the operating need,

LD will be imposed on full value of the

supply order.

LD amount: 1%(one percent) of the contract/supply order price of the

particular item ordered for the particular ultimate consignee in stipulated

delivery schedule, per week for such delay or part thereof , subject to

maximum of 10%.

Where 75% of the value of particular item ordered for the particular

ultimate consignee in stipulated delivery schedule, has been supplied

within stipulated delivery period, LD will be imposed on the order

value of delayed supply(ies) of particular item ordered for the particular

ultimate consignee in stipulated delivery schedule.

However, where in judgement of ONGC, the supply of partial quantity

does not fulfil the operating need, LD will be imposed on full value of

particular item ordered for the particular ultimate consignee in stipulated

delivery schedule

(In case the requirement of the ordered items are interdependent for

usage in operations then the LD would be levied on the group wise/total

value of the order as the case may be).


• ONGC may give a notice to the Contractor

stating the nature of the default and requiring the

Contractor to remedy the same. If the

Contractor fails to remedy or to take steps to

remedy the same within fourteen (14) days of its

receipt of such notice or as per the timeframe

specified in the written notice from ONGC, then

ONGC may terminate the Contract forthwith by

giving a notice of termination to the Contractor. If

the default has been resolved but the same is

identified again by ONGC within 6 months of the

resolution, ONGC may terminate the contract

with immediate effect with no further notice.

• Ensure that the vendor does

not repeat the same default

multiple times

Termination due to unsatisfactory performance in service contracts

27

Expectations from Business partners

• Complete and clean bids

• Ensure POA ,integrity pact & digital signature from same person

• Avoid taking exceptions/ deviations

• Adhere to tender due dates- restrain from seeking extensions of due dates

for submission of bids/clarifications

• Avoid disruptive representations and accept healthy competition

• Limit IEM references to genuine issues relevant to Integrity pact.

• Adhere to contractual delivery/ completion schedule.

• Maintain quality standards

• Timely service responses on warranty issues.

• Submission of genuine/ authentic of supporting documents

• Support to new process initiatives of ONGC

Offshore Logistics Group

Logistics support for offshore operations Thank You