PURCHASE MANAGEMENT

The Frame work including Vendor

Enlistment

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 PURCHASE MANAGEMENT
• BUYING IS GETTING THE BEST RESULTS IN
TERMS OF VALUE FOR MONEY
• PUBLIC BUYING
– SPECIALISED FUNCTION
• NEEDS EFFICIENT, RESPONSIVE AND TRANSPARENT
PURCHASE PROCEDURE..
– MORE PRICE SENSITIVE AND LESS QUALITY
SENSITIVE
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 PURCHASE MANAGEMENT
• MATERIALS ACCOUNT FOR NEARLY 60% OF
TOTAL EXPENDITURES IN MOST OF PVT. AND
PUBLIC SECTOR ORGANISATIONS.

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OBJECTIVE OF PURCHASE
Objective of Purchase

Right Price Right Source

Right Material Right Time

Right Place

Right Quantity Right Quality

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 ESSENTIAL ELEMENTS OF PURCHASE

• OFFER AND ACCEPTANCE

• LEGAL RELATIONSHIP
• LAWFUL CONSIDERATION
• CAPACITY OF PARTIES:COMPETENCY
• FREE & GENUINE CONSENT
• LAWFUL OBJECT
• AGREEMENT NOT DECLARED VOID
• CERTAINTY & POSSIBILITY OF PERFORMANCE
• LEGAL FORMALITIES
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 PURCHASE CYCLE
• CLEAR & COMPLETE SPECIFICATION
• COMMERCIAL REQUIREMENTS:
• PERFORMANCE CRITERIA,ELIGIBILITY CRITERIA
• BIDS
• INVITATION
• OPENING
• EVALUATION
• PURCHASE ORDER
• POST PURCHASE ORDER
• FOLLOW UP WITH VENDOR
• INSPECTION BEFORE DESPATCH
• RECEIPT & STORE
• RELEASE OF PAYMENT
• FINALISATION & CLOSING OF CONTRACT
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DEFECTIVE TENDERS
• UNSOLICITED
• FROM AGENT WITHOUT PROPER AUTHORISATION OF
MANUFACTURER
• NOT ACCOMPANIED WITH EMD
• AMBIGUOUS
• OFFERS WITH SHORTER VALIDITY
• OFFERS WITH CONDITIONAL DISCOUNT
• POST TENDER MODIFICATION
• OFFERS FROM AGENTS OF FOREIGN FIRMS NOT REGD WITH DGS&D

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DISPUTE & RESOLUTION
• ARBITRATION & CONCILIATION ACT 1996 IS PRESENTLY APPLICABLE.
• ARBITRATION AGREEMENT IS MADE BY TWO PARTIES BETWEEN WHOM
SOME DIFFERENCES HAVE ARISEN WHEREBY THEY APPOINT A PERSON AND
AGREE TO BE BOUND BY HIS DECISION.
• ARBITRATION IS DONE WITHOUT THE INTERFERENCE OF THE COURT.
• IN THE ARBITRATION & CONCILIATION Act 1996, there are very limited
grounds for challenging award of arbitration

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 Liquidated Damages
• TIME IS THE ESSENCE OF THE CONTRACT
• LIQUIDATED DAMAGES NOT PENALTY
• AS PER PROVISION OF INDIAN CONTRACTS ACT
1877(SEC 74) AND AS INTERPRETED BY COURTS,
DAMAGES IN A CONTRACT CAN BE CLAIMED /
RECOVERED FROM A SUPPLIER TO THE EXTENT ACTUAL
COST SUSTAINED BY PURCHASER, NOT EXCEEDING
THE AMOUNT STIPULATED IN THE CONTRACT DUE TO
BREACH OF CONTRACT AND THAT TOO NOT BY WAY OF
PENALITY.
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 RATE CONTRACT
• RATE CONTRACT IS AN AGREEMENT BETWEEN
THE PURCHASER AND SUPPLIER TO SUPPLY
STORES AT SPECIFIED PRICES DURING THE
PERIOD COVERED BY THE CONTRACT

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FEATURES OF RATE CONTRACT
• NO QUANTITY IN THE RATE CONTRACT
• NO GUARANTEE FOR MINIMUM DRAWAL
• STANDING OFFER FROM THE SUPPLIER
• EACH ORDER IS A SEPARATE CONTRACT
• ORDER MAY BE PLACED UPTO THE LAST DATE OF
CURRENCY OF RATE CONTRACT; IT WILL
REMAIN VALID FOR THE PURPOSE OF DELIVERY
• FALL CLAUSE IN RATE CONTRACT 11
 RATE CONTRACT FOR WHICH
ITEMS?
• ITEMS OF STANDARD TYPES & SPECIFICATION
• ITEMS IDENTIFIED AS COMMON USER AND NEEDED ON
RECURRING BASIS
• ITEMS FOR WHICH PRICES ARE LIKELY TO BE STABLE AND NOT
SUBJECT TO CONSIDERABLE MARKET FLUCTUATIONS.
• ITEMS FOR WHICH PRICES ARE SUBJECT TO FLUCTUATIONS
RATE CONTRACT MAY BE FINALISED WITH PRICE VARIATION
CLAUSE.
• ITEMS FOR WHICH RATE CONTRACT IS CONVENIENT TO
OPERATE
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 VENDOR REGISTRATION
• VENDOR REGISTRATIOIN IS TO STANDARDISE
SOURCE & SUPPLIER TO THE POSSIBLE EXTENT
FOR THE VARIOUS POWER STATIONS AND
OTHER PROCUREMENT AUTHORITIES WITHIN
THE ORGANISATION.

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 VENDOR REGISTRATION
• IDENTIFICATION OF ITEMS:
– FALLING UNDER ‘A’ CLASS BY ANNUAL USAGE SHALL BE ENLISTED
ITEMWISE
– FALLING UNDER ‘B’&’C’ CLASS SHALL BE ENLISTED TRADE GROUP WISE
• PROCEDURES :
– AN ADVERTISEMENT IN NEWSPAPERS MAY BE GIVEN FOR INVITING
APPLICATIONS AS PER THE PRESCRIBED FORMATS
– A COPY OF THE ADVERTISEMENT SHALL BE SENT TO REPUTED
MANUFACTURERS INVITING THEM TO GET THEMSELEVES REGISTERED.

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 VENDOR REGISTRATION
• PROCEDURES :
– Categorization (Value & Items)
– Screening of application
– Scrutiny by Committee
– Recommendation for Enlistment
– Approval

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EVALUATION PARAMETERS
1 Organization Details a).Individuals/Partnership/Public/PVT Ltd
b).Market Standing, Reputation & Reliability

2 Technical Expertise a). Resource Availability

3 Financial Soundness a). Balance Sheet

b).Solvency

4 Past Experience a).Value of Individual Works & Turnover(3 Yrs)

b). Client Certificates
c).Experience in Buyer’s Organisation / Other
Power Plants
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THANK YOU...

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