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CM-PE-708 Procedure for Purchasing Page 2 of 14
Company standard forms shall be used for all purchasing and material receipt Design Guides
activities covered by this procedure, except where otherwise requested by the (/design-
client. guides.html)
Engineering
All records, reports, bid analysis, etc., shall be in a currency required by the
Guides
client with conversions from other currencies at the client agreed rates.
(/engineering-
The language for purchasing documents and communications shall be English. guides.html)
General
Company shall give the client advance notice in good time of proposed
Standards
meetings between Company and suppliers, together with date and time and
(/general-
subject of meeting.
standards.html)
2.1 Function and Policy Design Standards
(/design-
The Purchasing Group, as part of the overall procurement effort, has the
standards.html)
responsibility to develop and execute the source, evaluation, placement and
Engineering
administration of all purchases necessary for the successful completion of
Standards
projects undertaken by Company
(/engineering-
It is the intent that the purchasing of materials and services be at minimum standards.html)
costs for the required quality consistent with completion of the project within the Specifications
specified time. Purchasing therefore shall be conducted on a worldwide (/specifications.html)
competitive basis except where Government Regulations or client Requisitions
specifications require otherwise. Where client's approvals are required (/requisitions.html)
Company shall secure such approvals prior to initiating action with suppliers Forms
and/or subcontractors. (/forms.html)
Cost Codes
Purchasing will only be executed through proper transactions with financially
(/cost-
sound reputable firms who have been pre-qualified as suitable and acceptable
codes.html)
suppliers.
Papers
2.2 Organization (/papers.html)
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CM-PE-708 Procedure for Purchasing Page 3 of 14
These duties are described in more detail in paragraphs 4.2 through 4.7.
4.2.1 At the start of a project the Manager of Purchasing will assign a Project
Procurement Manager or a Senior Project Buyer to be responsible for the
organization, control, recording and reporting of all procurement matters for the
project. In addition, he will act as a liaison contact between Company and the
client regarding procurement. 4.2.2 The initial action to be taken by the Project
Procurement Manager or Project Buyer is to carefully review the procurement
procedures issued by the client and clarify with the client any areas which are
not clear and specific.
4.2.3 In the event that client requirements are at variance with Company's
standard procedures or paperwork, then these variances must be discussed
with the client with the aim of minimizing changes. Following Company/client
agreement, the project procurement requirements shall be documented in the
appropriate sections of the Project Procedure and Execution Manual or in
separate Project Procurement Procedures/Standards (ref. 6.5).
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CM-PE-708 Procedure for Purchasing Page 4 of 14
either (a) a brief description of the material and/or work, together with the
reference numbers and issue status of the drawings, specifications, standards
or codes/norms applicable (for example: requisitions for pressure vessels,
structural steel, etc.).
or (b) a full technical specification of the material (for example requisitions for
piping materials, mechanical equipment, instruments, etc.).
In case of piping and other bulk materials, or for equipment where the
requisition and attachments have been checked and approved for purchase,
the first issues of the requisitions and attachments will be certified.
In all other cases, the first issues of the requisition and attachments will be
marked "for bids". Requisitions and attachments "for bids" must be replaced by
certified issues before the order can be placed.
RP's are prepared and initialled by specialist groups or project engineers and
approved by the responsible Project Manager.
The original RP is used for transmittal of original issues of requisitions and their
attachments to the Project Procurement Manager for action.
4.3.2 Immediately upon receipt of the request for bid package, the Project
Procurement Coordinator shall register receipt in the "Purchasing Status
Report" and distribute package to the appropriate buyer for checking and
process. In the event that the information is incomplete, insufficient or
inaccurate, the matter is referred to the Project Manager for resolution.
4.3.3 Concurrently and prior to the issue of each inquiry for major supplier
designed equipment and package units, Company shall advise the client by
means of a notification form in duplicate, the list of proposed bidders will be
selected from the approved supplier list, together with the requisition number
and a brief description of the equipment or materials. These bidders should be
considered by Company to be satisfactory in respect of technical capability to
meet specification, adequacy of shop facilities and capacity and past
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CM-PE-708 Procedure for Purchasing Page 5 of 14
performance, quality and delivery wise. One copy of this list will be signed and
returned by the client together with their approval or comments and
instructions.
4.3.5 Inquiries for equipment items shall be issued in rational groups as regards
dimensions, material specifications, equipment types, standardization etc.,
each group containing a sufficient number of items to encourage low price
quotations.
4.3.6 Inquiries shall request the supplier to include the following in his
quotation:
f. delivery point.
g. details of start-up assistance included in bid and rates for such work not
included in bid, etc.
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4.3.9 Allowed bidding time should normally be not more than 4 weeks for the
average lot of equipment items, except for large machines and complicated
package units. Every effort to be made by expediting, commencing shortly after
inquiry issue, to have suppliers submit their quotations with the allowed bidding
time.
4.3.10 In cases where the client requires sealed bidding, bidders shall be so
notified in the inquiry together with the firm closing date for submission.
4.3.13 Suppliers shall be instructed to direct all questions on the inquiry to the
buyer, who will see that they are properly processed within the Company
organization.
4.3.14 Concurrent with the dispatch of the "Request for Quotation" to the
suppliers, a Procurement file shall be established including a copy of the
inquiry, listing the names of the suppliers consulted and copies of the
requisition, drawings, specifications, etc., applicable.
4.3.16 Suppliers shall be expedited to ascertain whether they will or will not
quote and to confirm that they will quote on time. Notes regarding the answers
received from these queries are to be indicated on the file. Suppliers declining
to bid should confirm their refusal in writing, which should subsequently be
referenced on the "bid analysis".
4.3.18 In the event that a sealed bid procedure is required, the procedure for
opening shall be contained in the project procurement requirements document
and will be executed accordingly. Distribution is then per DDS
4.3.19 All quotations shall be treated as confidential and their contents shall not
be divulged to other bidders or parties other than Company and client
personnel.
4.3.20 If Company, or any of its associated companies are to bid, then that
quotation, together with the quotations from all other suppliers for that same
requirement, shall be sent unopened to the client, who will prepare the bid
summary and notify Company of the successful bidder.
4.3.21 Whenever any supplier is given the opportunity to discuss a "Request for
Quotation" and as a result received additional and/or clarifying particulars, all
other suppliers bidding for these same requirements should be receiving the
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c. for bulk materials, the buyer shall perform the complete analysis of bids and
supplier recommendation, consulting with specialist engineers in cases of doubt
regarding specification.
4.4.3 During the bid analysis phase, exceptional care should be exercised in all
supplier contacts, in order to produce maximum advantage to the purchaser
from a competitive market.
4.4.4 Bid analysis forms shall show the evaluation of all bids on a comparable
basis, proper account being taken where applicable of differences in
installation, operating, maintenance, spare parts and expediting costs, together
with any important cost effects on other equipment, materials or construction
work. The client will advise Company the payout period to be used for the
evaluation of comparative operating and maintenance costs.
4.4.5 Complete bid analysis forms shall also include the cost control budget
value, certified correct by signature of the Company cost engineer for all
equipment and material orders, and all engineered package items, and the
delivery time in the field, based on the quoted delivery time and possible
slippage, compared with the schedule date in the field.
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4.4.7 Following agreement between the Project buyer and engineers, the
selected supplier(s) shall be indicated on the bid analysis form together with the
reason for selection. Where negotiation with one or more suppliers is proposed
by Company, an indication of this intention shall be given against the name of
the supplier(s) in the tabulation.
4.4.13 For bulk materials, the suppliers' agreement shall be obtained on price
levels for eventual additional requirements. Where sizes, types, shapes, etc.,
not specifically included in the original inquiry quotation, or purchase order shall
be supplied at prices compatible with those for items included in the original
listing.
4.4.14 Every effort should be made to negotiate out of the price any rebates
granted to foreign suppliers by their government for export business. Where
such rebates are granted to the exporter of goods, Company as consignor,
shall rebate this to the client.
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4.4.15 The total value of payment at any time during execution of the order
shall not exceed the value of the work done to that date. All progressive
payment terms shall be tied to easily identifiable stages of progress.
4.4.16 Prior to negotiations with suppliers, Company shall discuss with the
client on their proposed strategy. Following conclusion of negotiations, bid
analysis forms shall be updated to show the results of the negotiations. Client's
agreement must be obtained by the Company Project Manager to the final
supplier selection and to the final commercial conditions agreed upon based on
the results of the negotiations.
4.4.18 In cases of non-competitive bidding, the normal bid analysis shall still be
completed stating the reason and then processed as normal.
4.5.1 The Project Manager shall not release any equipment, material, or
services for purchase, unless final bid analysis approval has been given by the
client. The necessary documentation consisting of a "certified" for purchase
requisition and attachments is transmitted to the Project Procurement Manager
under cover of a request for purchase.
4.5.2 The Project Procurement Manager registers the receipt and passes the
package to the relevant buyer who prepares a purchase order.
4.5.3 The purchase order number shall consist of the Company project number
followed by the Company requisition number and the suffix letter "A" for the first
or only order covering the requisition and letters B, C, D, etc., for subsequent
orders in the event that the requisition is split for ordering (ref. 6.2).
4.5.4 The text of the purchase order shall normally include the following
clauses:
d. statement that price is firm for the life of the order or details of agreed
escalation formula.
e. statement that price excludes added value tax or equivalent and clarification
regarding exclusion or inclusion of packing, import duties, customs clearance
costs, etc., in the total price.
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j. for the unit price orders, where it is not possible to fix an exact total price, the
file and distribution copies of the order shall bear an approximate total price
based on the unit prices and estimated total quantities which will finally be
required for the entire project.
q. quotation reference together with statement that this is for reference only and
does not apply where it is in contradiction with the purchase order or its
attachments.
b. the Project Procurement Manager reviews and signs all PO's and amend-
ments with a value up to US$ 250,000 or equivalent amount, the Purchasing
Manager all PO's and amendments up to US$ 1,000,000 or equivalent amount
and the Procurement Manager signs all PO's and amendments with an
equivalent order value of > US$ 1,000,000.
4.5.8 Should the supplier refuse to accept any of these terms and conditions,
Company and the client shall liaise together to determine the action to be taken
with the supplier.
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The following do not require prior price change approval by the client:
b. changes foreseen in the purchase order terms and for which the price or
other basis for calculation is clearly established in the purchase order and
which fall within the limits of estimated extra costs included in the approved bid
analysis.
in this category shall include, for example nozzle changes, support clips, etc.,
for pressure vessels, escalation amounts, priced technical alternates, sliding
discount scales, etc., provided that the supplier's invoices properly explain the
changes and the purchasing files contain the documented basis for changes.
Note:
Although price changes foreseen and established in the purchase order do not
require prior client approval if included in the approved bid analysis, all
changes, additions, and/or deletions of a technical nature must always have
prior client approval. In any case, client will be notified.
4.5.10 If any item exceeds the provisions referred to above, it must have the
approval of the client before the amendment is issued. This is normally done
using an amendment request form developed to suit the requirements of the
project.
4.5.11 Each amendment shall show the previous total value of the order, the
total value of the addition or reduction in cost due to the amendment and the
new total value.
4.6.1 As noted in clause 4.3.7, the supplier shall be instructed to submit with
their quotations for equipment a supplementary quotation for recommended
spare parts for one year operation.
4.6.2 As soon as equipment has been selected and before commitments have
been made, suppliers shall be requested to update or give a firm
date/percentage for updating existing quotations covering recommended spare
parts for start-up and twelve months operation, with identification between parts
needing replacement due to wear and parts recommended as insurance
spares.
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4.6.4 Company shall review the list of parts recommended by suppliers for
start-up and twelve months operation, will make changes to the list where
considered necessary and submit the corrected list to the client for approval,
following which Company will place the order for the spare parts unless the
client decides to place direct orders themselves.
5. Flowchart
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6. References
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