Procurement
Procurement:
Before anything can be purchased as per the project requirement, you will have to get a price quote of the item from the enlisted vendor.
The standard method of getting the price quote from the vendor’s or manufacturers is to send a request for quotation (RFQ) which contains
detailed technical specifications and delivery period of the item to be purchased.
The RFQ is basically sent to the potential vendors and if the process is followed correctly, all the vendors receive the same information and bidding on the same item.
After evaluating the item bidders will give their quote for the item to be procured. In this way, we get the quote of the same item from different bidders for technical
and commercial bid analysis.
Issuing the RFQs and using the bidding process, you are informing the bidders that the project is following the standard accepted business
practices as mentioned in the RFQ. The bidding process brings transparency and eliminates the practice of favoring the specific vendors. The bidders list to be kept
minimum as it makes no sense to get lots of bidders as it only makes more work for you and there may be no cost advantage.
In the government-owned project, anyone can bid whose is qualified. There are no restrictions on the number of bidders,
whereas privately owned business does not operate on the same model and they can limit the number of bidders.
Request for quotations – Types
There are generally two types of RFQs
• In the first type of RFQ, only “Supply” is considered while no manpower required for installation and commissioning. e.g.
Ball Valves, Gasket’s, Vessels, etc.
• In the second type of RFQ “supply and erection”. It means along with the material supply site work is also required, assistance during erection/
commissioning/testing and training.
To give bidders sufficient information to respond with a meaningful price, the RFQs should contain the documentation listed below.
For both Type 1 and Type 2 RFQs the following documentation will have to be generated:
Part of MR:
Equipment Specification:
You will have to prepare the equipment specification. The plant may have standard forms available, which should be used or followed.
The form is important as it describes what you want and should address the following items:
a) Detailed Scope of Work and Supply along with mandatory and commissioning spares list.
b) Engineering Datasheets along with Quantity.
c) List of Applicable standards and specifications.
d) Instructions to bidder’s e.g
It is understood that
• The quoted price includes the “HOLDS” details of which are indicated on the Drg.
• The weights indicated on DEC Engineering Drgs. do not form the basis for the offer, since these are approximations only.
e) Unit Rates for addition/deletion.
f) Vendor drawing submission schedule.
g) Job Standards.
h) Job Specifications.
Erection and Supervision charges for Type 2 Only:
Per diem rate, including subsistence cost, for qualified field engineering personnel deemed necessary by the manufacturer to
supervise the erection of their equipment. Per diem rate for an experienced operating engineer to assist startup and initial operation.
Note:
Remember to include everything which will be required from the vendor or supplier if they are awarded
the order – such as drawings for review, test certificates, inspection report, freight charges, etc. otherwise these will become
additional expenses and costs later.
Payment terms, delivery dates shall be mentioned and venue when the bids shall be opened.
Once the vendor proposals are received, the bids are evaluated on the basis of technical and commercial terms. At this stage, TQ
(Technical query) & CQ (Commercial query) is raised if there is any deviation from the bidding document. The benefit of establishing
the minimum requirements prior to reviewing the vendor proposals is having an objective method of evaluation. The vendor proposals
either meet the requirements or they do not, and if they do, the prices as quoted by bidder are easy to compare.
After the completion of TQ & CQ, TBA (Technical bid analysis) & CBA Commercial bid analysis) is prepared by technical and commercial teams.
In most cases, the job is awarded to the technically qualified and lowest quoted bidder.
In-house cost estimation to be prepared by the costing department for evaluating the vendor price reasonability if there is gap of more then 10%-15% between the in-house
cost estimate and the vendor’s quote than the vendor will be called for negotiation.