NNPCL SCM_Determine Procurement Method.pdf

NNPC Limited SCM Processes and Procedures 5.0 Determine Procurement Method This section covers all activities involved in the purchase and contracting of goods and works. The term goods apply generally to all materials, furniture, fixtures, raw material, spares, machinery, equipment, industrial p...

NNPC Limited SCM Processes and Procedures 5.0 Determine Procurement Method This section covers all activities involved in the purchase and contracting of goods and works. The term goods apply generally to all materials, furniture, fixtures, raw material, spares, machinery, equipment, industrial plant, office supplies and equipment, IT equipment, and other commodities. While works are related to engineering and related works (civil, mechanical etc.); this includes new construction of structures of all kinds, renovations, extensions, and repairs. The objectives of the Determine Procurement Method process are to: • • • Ensure the procurement of goods and works is fair, unbiased, consistent and delivers value (quality, cost and risk) to NNPC Limited. Ensure an efficient and effective process that meets the expectations of the various stakeholders. Ensure compliance with the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, 2010 and supports the development of local supplier capacity. 5.1 Determine Procurement Method Policies S/N Description 1. Procurement Mode Based on the estimated value of the procurement, type and timing of procurement need, a determination of the mode of procurement shall be proposed by the Business Department and validated by Supply Chain Management. In the event both unit heads do not align on the mode of procurement, it shall be escalated to the relevant reporting line for a decision. The determined mode of procurement shall guide subsequent activities in the processing of the procurement requisition. 42 NNPC Limited SCM Processes and Procedures 5.1 S/N Determine Procurement Method Policies Description S/N Mode Basis See Policy Reference below for more details a. Competitive The preferred mode of procurement in many instances because it gives the business the opportunity to drive value for money. 2, 3, 4, 5, 6 b. Sole / Single Sourcing This applies for purchasing via a single source on the grounds of urgency or the proprietary /specialized nature of goods and/or services to be procured. 7 c. Emergency This applies when the objective of the procurement will be defeated if it follows competitive or sole/single sourcing. There are additional criteria that define an emergency procurement. Details listed in Emergency Procurement Process. 8 d. Call-Off Items relate to procurement needs covered by an existing Framework Arrangement / Agreement. Typical examples include IT equipment & office consumables category as defined by the Supply Chain function. e. Reverse Auction Price is the only key differentiator in the procurement category and the Supply Chain function has 9 43 NNPC Limited SCM Processes and Procedures 5.1 S/N Determine Procurement Method Policies Description identified the procurement category for Reverse Auction. f. 2. P-cards Unplanned and urgent official expenditure for small items where it’s not convenient to follow the typical procurement modes. 10 Competitive Bidding This is the procedure for purchasing goods through a competitive process. The type of competitive bidding will be determined by value, nature, and complexity of supply. Types of competitive bids include: a. Open Competitive bidding (International and National): This entails sending out an invitation to tender with detailed asset specifications and requirements stating the deadline and mode of submission. To eliminate unwanted bids, NNPC would define criteria and requirements so that quality bids are attracted to the competition. b. Restricted Tendering: For restricted tendering, the supplier shall be invited to compete in the tender. The competition is limited to certain select suppliers instead of being open to all suppliers in the market. These suppliers are those who are known by their track record to be suitable for a contract of that size, nature and complexity required. The purpose of this process is to invite only high-quality bids from suppliers who have the capabilities to deliver a project. c. Selective Bidding (Request for Quotations): This is the procedure for purchasing goods using pre-qualified and approved vendors by comparing price quotations obtained to assure competitive prices; in line with the procurement method selection guidelines and decision matrix. 44 NNPC Limited SCM Processes and Procedures 5.1 S/N Determine Procurement Method Policies Description d. Two-Stage Bidding: This is for large and complex contracts where it is necessary to obtain first greater clarity in technical specification and possible alternative technical approaches. The objective of the two-stage bidding is to ensure that all technical proposals conform to the same acceptable technical standard and meet the technical solution required by NNPC Limited. All potential bidders must receive the same information and business requirement at the same time. A dedicated bidding platform will be used as advised by Supply chain. 45 NNPC Limited SCM Processes and Procedures 3. Open Competitive Bidding Except as otherwise provided in this Policy, NNPC Limited shall use open competitive bidding for the procurement of goods and works. Priority may be given to companies who have the required capability from within Nigeria and to goods manufactured in Nigeria. There are two categories of OCB: a. National Competitive Bidding (NCB): This shall apply to goods or works that are available within Nigeria at prices significantly below those in the international markets. The invitation to bid may be advertised on the NNPC Limited official websites, in two widely circulated national newspapers not less than two (2) weeks before the deadline for submission of the bid for the goods and works, depending on the complexity of the procurement. b. Community Based Sourcing: NNPC Limited Subsidiaries with operations in local communities, may advertise using physical notice boards to ensure effective engagement with the host community. The notice board shall be used to communicate important sourcing related information. c. International Competitive Bidding (ICB): i. The award of the contract shall not be solely based on the principle of the lowest bidder where a Nigerian indigenous company has the capacity to execute, the company shall not be disqualified on the basis that it is not the lowest financial bidder, provided that the value does not exceed the lowest bid by 10% (NCDMB section 16). This may be the most suitable method of procurement for large contracts/purchase of goods and works under the following circumstances: ii. When the capacity of the domestic contractors, suppliers, or service providers is limited. iii. For foreign-funded projects, where the funding agency agreement requires NNPC Limited to resort to ICB procedures. iv. However, in the case of works contracts in view of the development of the domestic construction industry, the possibility of slicing the contract and following "slice and package approach " to suit domestic Contractors may be considered. v. The invitation to bid may be advertised on the NNPC Limited official websites, or widely circulated national newspapers, and the relevant internationally recognized newspapers not less than six weeks before the deadline for submission of the bid for the goods and works. 46 NNPC Limited SCM Processes and Procedures 5.1 S/N 4. Determine Procurement Method Policies Description Restricted Tendering (RT) Only short-listed suppliers may submit offers. Suppliers are selected in a non-discriminatory manner from pre-qualifications processes, requests for expression of interest, and/or market research. This is for contracts for which only a limited number of qualified Suppliers or Contractors exist. This method may be used for reasons of economy and efficiency and if: a. Only a few known sources are available (e.g., in the procurement of a small number of vehicles or machine tools). b. There are exceptional reasons, such as emergency actions related to a major natural disaster, which may justify the waiving of advertising for competitive bids. c. Goods to be procured are such as pharmaceuticals, or highly specialized equipment for the construction of dams or where there are only a limited number of known Suppliers or manufacturers. d. The procedure is used as an exception rather than the norm. e. In using Restricted Tender, NNPC Limited shall prepare, a list of eligible national or international potential Suppliers, or Contractors as the case may be, which shall be broad enough to assure competitive prices. 5. Selective Bidding (Request for Quotations) a. This method is used for small contracts, where it is sufficient to obtain written/electronic quotations from at least three (3) reputable domestic registered Suppliers or Contractors, and at the international level from at least three (3) reputable Suppliers. b. Requests for Quotations for small civil works shall be issued to at least three (3) reputable domestic Contractors. c. NNPC Limited shall not allow bidding by phone or other unverifiable means. d. Quotations for goods shall indicate the description, technical specifications, quantity, and cost of the goods, including the cost of inland transportation and insurance, as well as the estimated delivery time if not immediate. 6. Two-Stage Bidding This is for large and complex contracts where it is necessary to obtain first greater clarity in technical specifications and possible alternative technical approaches. a. Bidders first submit their technical proposals, in accordance with the specifications, but without prices. The technical proposals are opened at the date and time advised in the bidding document. The technical 47 NNPC Limited SCM Processes and Procedures 5.1 Determine Procurement Method Policies S/N Description proposals are evaluated and discussed with the bidders. Any deficiencies, extraneous provisions, and unsatisfactory technical features are pointed out to the bidders whose comments are carefully evaluated. The bidders can revise or adjust their technical proposals to meet the requirements of the purchaser. The objective of the exercise is to ensure that all technical proposals conform to the same acceptable technical standard and meet the technical solution required by the purchaser. b. Bids of bidders who are unable or unwilling to bring their bids to conform to the acceptable technical standard may be rejected as deficient bids. c. After the evaluation of technical proposals has been approved in accordance with the delegation of authority, the second stage is to invite bidders to submit price proposals and revised technical proposals in compliance with the acceptable technical standard. d. The revised technical proposals and price proposals are opened in public at a date and time advised by the purchaser. In setting the date, the purchaser will allow sufficient time for bidders to incorporate the changes involved in the technical proposals and prepare price proposals. The price proposals and revised technical proposals are evaluated. e. Following NNPC Limited's approval, the contract is awarded to the bidder whose bid has been determined to be the lowest evaluated substantially responsive bid. 7. Sole/Single-Source Procurement (Direct Contracting) This is the procedure for purchasing goods via a single source on the grounds of urgency or the specialized nature of goods and/or services to be procured. In any circumstance, that the requirement to obtain quotes and perform a competitive bidding process is not followed, thereby resulting in sole sourcing, this waiver and justification should be documented and communicated to the appropriate authority in line with the procurement delegation authority matrix. NNPC shall proceed with direct contracting of a particular Supplier or Contractor without competition in the following circumstances: a. When goods, works, or services are only available from a particular Supplier or Contractor, or if a particular Supplier or Contractor has exclusive rights in respect of the goods and works and no reasonable alternative or substitute exists. b. Examples of sole/single-source procurement include replacement parts or servicing of major pieces of equipment available only through the original equipment supplier, or when there is one manufacturer of a particular product. 48 NNPC Limited SCM Processes and Procedures 5.1 S/N 8. Determine Procurement Method Policies Description c. There is an urgent need for the goods, works, or services and engaging in tender proceedings or any other method of procurement is impracticable due to unforeseeable circumstances giving rise to the urgency which is not of dilatory conduct on the part of NNPC Limited. d. In the event, there is an urgent need for goods, works, or services, making it impracticable to use other methods of procurement because of time constraint. e. When standardization or compatibility is important and equipment and spare parts required for expansion or repair of existing equipment must be procured from the original Supplier or a Supplier of identical goods. f. An extension of an existing contract is necessary as works are already underway and were procured through competitive procurement procedures. g. A repeat procurement of goods works or services which has recently been competitively tendered and satisfactorily executed/received or is still work in progress, and for which the Supplier or Contractor is willing to maintain his tender prices/rates. Repeat procurement can be applied only within a period not exceeding two years from the date of the original tender. h. There's a need for compatibility with existing goods, equipment, technology, or services, considering the effectiveness of the original procurement in meeting the needs of NNPC Limited. i. The required equipment is proprietary and obtainable only from one source (such as proprietary software, textbooks, spare parts) and no alternative equipment or products with equivalent performance characteristics are available. j. When a Contractor responsible for a process design requires the purchase of critical components or materials from a particular Supplier as a condition of a performance guarantee. k. In the case of national security, and when the goods originally envisaged for the project have been procured through ICB, an additional quantity of the same goods is urgently needed to meet the requirements of the project. l. Procurement of low value frequent purchases should be through a rate card which should be reviewed on an annual basis. m. The Contract Board/Committee must approve the sole/single source Contracting Strategy Proposal in advance. Emergency Procurement 49 NNPC Limited SCM Processes and Procedures 5.1 S/N Determine Procurement Method Policies Description All procurement made under Emergencies shall be handled with the expedition, but along principles of accountability, with due consideration being given to the gravity of each emergency. NNPC Limited may engage in emergency procurement where: a. The country is either seriously threatened by or confronted with a disaster, catastrophe, war, insurrection, or act of God. b. The condition or quality of goods, equipment, building or publicly owned capital goods may seriously deteriorate unless action is urgently and necessarily taken to maintain them in their actual value or usefulness, or c. When time is limited and business circumstances require a product or service in an emergency, the goods or services may be ordered before setting up a Purchase Order and obtaining approval. Emergency purchasing should only occur when there is a legitimate work or operation stoppage, health, safety, damage to property or environmental emergency requiring immediate supplier support. d. All appropriate documentation and approvals must follow the purchase as soon as possible. Written approval should be obtained in line with the defined delegation of authority. 9. Reverse Auction This procurement approach will benefit non-critical standardized items where there are many suppliers/ vendors. A reverse auction shall be conducted where sellers underbid each other to provide goods to NNPC Limited. Platforms like the Nigerian Petroleum Exchange (NIPEX) can facilitate such bidding process. It can also be used for asset disposals where salvage buyers overbid each other. 10. Purchasing Cards (P-Cards) For non-critical and low-value procurement, NNPC Limited shall introduce the use of Purchasing Cards (Bank Cards) to introduce sourcing efficiency of incidental or urgent purchase needs (e.g., unplanned travel expenses) in the organization. Specific goods or services and spending limits shall be defined for P-cards. Utilisation shall be reviewed and approved by the Head of Department to ensure usage of the P-Cards are appropriate and within policy. The P-card policy shall also address accidental misuses of the cards, issuance of cards, cardholder liability/responsibility, monthly statements, dispute resolution, lost or stolen cards and exceptions. 50 NNPC Limited SCM Processes and Procedures 5.1 S/N 11. Determine Procurement Method Policies Description Other Procurement Methods a. Use of Procurement Agents and Management Contractors: Where NNPC Limited lacks the necessary organization, resources, and experience, it may employ as its Agent, a firm specializing in handling procurement. The Agent shall strictly follow all the procurement procedures outlined in the contract on behalf of NNPC. b. Inspection Agents: Management Contractors may be employed similarly for a fee to contract for miscellaneous works involving reconstruction, repairs, rehabilitation, and new constructions in emergencies, or where large numbers of small contracts are involved. NNPC’s Guidelines for the Use of Consultants shall be used to acquire the services of the Procurement Agent or a Management Contractor on a competitive basis. 12. Financial Authorization Limits by Type of Tendering Based on the approved Delegation of Financial Authority, limits by type of tendering are as defined in the tables below: Contracting Limits by type of Tendering – NNPC Limited Approving Competitive Single source Contract Authority Tendering ($) ($) Variation* NNPC Limited Unlimited >$100m >$8m Board Level 1 Tenders 15% committee (Company >$8m, <=$100m >$4m, <=$8m Tender Committee) Level 2 Tenders Not Applicable Committee (Directorate <=$8m <=$4m Tender Committee) Level 1 (CEO) <=$1m <=$0.5m 15% 51 NNPC Limited SCM Processes and Procedures 5.1 S/N Determine Procurement Method Policies Description Approval Limits for Expenditure – NNPC Limited Approving General and Significant CAPEX Authority Admin Recurring Expenses OPEX**** NNPC Unlimited** Not Unlimited** Limited Applicable** Board Level 1 (CEO) >$8m, Unlimited** >$8m, <=$100m <=$100m Level 2 (GED Not <=$8m <=$8m equivalent) Applicable** Emergency* ** Unlimited** $0.25m Not Applicable** The Contracting Limits by type of Tendering and Approval Limits for Expenditure for the subsidiaries are detailed in the Delegation of Financial Authority manual. 13. Criteria for Consultant Selection Methods There are several critical factors that will determine the choice of the selection method. These factors include: a. Technical complexity of the assignment. b. Size and value of the assignment. c. Downstream impact of poor performance by the consultant whether high or low. d. Whether proposals are comparable (i.e., assignment can be carried out in a different way). e. Budget constraints. NNPC shall determine the appropriate method for selection of consulting firms by reference to the Terms of Reference (TOR), Types and Complexity of Tasks, Annual Procurement Plan, Approved Expenditure and Schedule for Implementation of Project. NNPC shall use any of the following selection methods: S/ N a. Service Selection Method Quality and Cost-Based Selection (QCBS) Selection Method is Ideal for Most service assignments will fall under this method –considers both 52 NNPC Limited SCM Processes and Procedures 5.1 S/N Determine Procurement Method Policies Description quality and cost in selection of service providers. b. Quality Based Selection (QBS) i. Assignments in which the objective is to have the best experts. ii. Assignments that can be carried out in substantially different ways, such that proposals will not be comparable; or iii. Complex or highly specialized assignments for which it is difficult to define precise TOR and the required input from the consultants or there is an expectation of innovation. c. Least-Cost Selection (LCS) d. Fixed Budget Selection (FBS) The time and personnel inputs can be accurately assessed, has a well-defined TOR and a defined limit for the expenditure. e. Consultants Qualification Selection (CQS) i. Highly specialized expertise is required for the assignment. ii. Recruitment time is critical, and the assignment is, typically, short-term. f. Sole Source Selection (or Direct Contracting) (SSS) i. Assignments that represent a natural continuation of previous work carried out by the firm. ii. In emergency cases. such as in response to disasters. iii. When only one firm is qualified or has the experience of exceptional worth for the assignment. Assignments of a standard or routine nature (audits, engineering design of noncomplex works, and so forth) where well-established practices and standards exist. 53 NNPC Limited SCM Processes and Procedures 5.1 Determine Procurement Method Policies S/N Description 14. Compliance with Logistics and Warehousing Policy SCM shall adopt the Door-to-Door Strategy/ Delivered-Duty-Paid (DDP) incoterm for all Materials Procurement and Engineering, Procurement and Construction (EPC) Contracts company-wide. This is intended to mitigate the financial risks associated with the complicated nature of foreign procurements and customs clearance by transferring all procurement and logistics risks to the Seller/ Contractor at a cost. 5.2 Determine Procurement Method Procedures S/N Responsible Party Description Job Aid On receipt of approved Purchase Requisition Analyse and identify the procurement category, mode of procurement, contracting strategy, budget estimate and approving authority based on the Delegation of Financial Authority (ERP) • • 1. N-5 • • • • Where procurement is for minor works (less than N5m with no call off agreement), go to step 2. Where the procurement is major works (more than N5m with no call off agreement), go to step 6. Where procurement relates to a Call off Agreement, go to Framework Agreement Process. Where procurement relates to a Reverse Auction, go to Reverse Auction Process. Where procurement relates to an Emergency Need, go to Emergency Procurement Process. Where procurement relates to Procurement Card, go to P-Card Administration Process. ERP 54 NNPC Limited SCM Processes and Procedures 5.2 Determine Procurement Method Procedures S/N Responsible Party Description Job Aid Where procurement is for minor works 2. N-4 Determine the mode of procurement (Selective Tendering or Sole Sourcing). Where procurement is for sole sourcing, go to step 3. Email Where procurement is for selective tendering, go to step 5. Where procurement is for sole sourcing, 3. N-5 4. N-4 Prepare a justification for sole sourcing, including preferred OEM/ vendor name and forward to N4. Review justification, update and approve as appropriate. Email/Excel Email Where procurement is for selective tendering 5. N-5 Access ERP for the Vendor List for the area of specialization being procured, develop a shortlist of Vendors and forward to the N4 for review. ERP Go to Issue RFP/ RFQ Process. Where procurement is for major work 6. 7. N-5 N-4 Determine the mode of procurement (competitive, sole sourcing, emergency, call off, etc), prepare Terms of Reference for the Evaluation Team and send for review Review recommended mode of procurement, update as appropriate, recommend membership of Evaluation Team as well as Terms of Reference and forward for endorsement Email/Excel Email 55 NNPC Limited SCM Processes and Procedures 5.2 Determine Procurement Method Procedures S/N Responsible Party Description Job Aid Note Consider and advise on need for • Advertisement. • 2 Stage Tendering (Technical and Commercial). • 3 Stage Tendering (EOI/ Prequalification, Technical and Commercial) 8. 9. N-3 Tenders Committee Review and endorse recommended mode of procurement and Terms of Reference and constitution of Evaluation Team update as appropriate and forward to the relevant Tenders Committee for approval. Tenders Committee Review recommended mode of procurement and constitution of the Evaluation, update and approve as appropriate. Email Email Send formal email to notify Evaluation Team on assign task including the approved Terms of Reference. 10. N-3 Where prequalification is required, go to Issue EOI Process. Email Where prequalification is not required, go to Issue RFP/RFQ Process. 5.3 Determine Procurement Method Input & Output Documents S/N Document Description Type Frequency Source Recipient Approved Purchase Requisition Input As required User department SCM 1. 56 NNPC Limited SCM Processes and Procedures 5.3 2. 3. 4. 5. Determine Procurement Method Input & Output Documents Justification for Method of Procurement Input Vendor shortlist Output Draft Terms of Reference Approved Terms of Reference Input Output As required As required As required As required N-4 N-3 N-5 N-4 N-4 N-3 Tenders Committee SCM 5.4 Determine Procurement Method Key Performance Indicators S/N Performance Measure 1. 2. Basis of Measurement Timeframe Target Timeliness in determining the method of procurement Latest date for approval of the method of procurement. Based on method of procurement Within 2 weeks of the receipt of Purchase Requisition Compliance of method of procurement with internal policies and local legislation (e.g., NOGICD Act, 2010) Number of internal audit findings/regulatory breaches. As required Zero breach 57