NNPCL SCM_Reverse Auction.pdf

NNPC Limited SCM Processes and Procedures 12.0 Reverse Auction This is a competitive process in which NNPC Limited (the Buyer) solicits bids from Sellers during a period set by the company. During the reverse auction, Sellers could submit a single bid or multiple bids that decrease in price. This p...

NNPC Limited SCM Processes and Procedures 12.0 Reverse Auction This is a competitive process in which NNPC Limited (the Buyer) solicits bids from Sellers during a period set by the company. During the reverse auction, Sellers could submit a single bid or multiple bids that decrease in price. This procurement approach will benefit non-critical standardized items where there are many suppliers/ vendors. Objectives The objective of the reverse auction is to ensure: • • • • • Quick comparison of the products and services needed and accordingly decide the best amongst all. NNPC limited finds out the products or service’s real price, without extra charges. Time is saved in researching the market and gathering bids from suppliers. Full transparency and, therefore, no corruption in the process. Cost savings by procuring quality goods and services at lowest possible prices. 12.1 Reverse Auction Policies S/N 1. Description Criteria for Reverse Auction The choice of the reverse auction relating to the procurement of goods, works, and services is influenced by the nature of the supplier relationship, numbers of suppliers, supply risk management, operational response, cost, and time savings in a transparent and objective manner. 2. Use of Reverse Auction NNPC Limited shall allow the use of reverse auctions in a three-round competitive bidding process for any procurements where price is a material determinant or when it is determined that the procurement method would increase procurement efficiency. A reverse auction shall be conducted where sellers underbid each other to provide goods to NNPC Limited. It can also be used for asset disposals where salvage buyers overbid each other. 102 NNPC Limited SCM Processes and Procedures 12.2 Reverse Auction Procedures S/N Responsible Party Description 1. SCM (N-5/6) If Procurement Request meets Reverse Auction Criteria Job Aid MS Excel Conduct an Expenditure Analysis of current Indirect Procurement Spend and Identify similar Goods or Services that NNPC Limited purchases from multiple suppliers. Note: Ideally three or more incumbent suppliers per category. The higher the number of suppliers, the better. 2. SCM (N-5/6) Once the product or service is identified, conduct an in-depth study of the spend volume and spend patterns related to that spend category and forward findings to SCM (N-4/5). MS Excel Note: This would include identifying the total spend for the past 12 months as well as the overall volume annually as well as per transaction. 3. SCM (N-4/5) Create detailed specification documentation related to the product or service NNPC Limited plan on purchasing using this auction format and forward to SCM (N-3/4). Specification Template Note: Specifications should include drawings, spend value, spend patterns, quality and delivery requirements, supplier capability requirements, etc. 103 NNPC Limited SCM Processes and Procedures 12.2 Reverse Auction Procedures S/N Responsible Party Description Job Aid 4. SCM (N-3/4) Identify the suppliers NNPC Limited wish to invite to the auction process and provide sufficient training and documentation to the suppliers so that they are fully aware of the overall purchasing process via e-Auction. Email & Use an auction software that is cloud hosted and easy to use to ensure optimum participation from suppliers. Auction Software 5. IT (N-3/4) Training Documentati on Note: Realistic opening prices should be set for all items and services that are part of the reverse bidding process. 6. SCM (N-2/3) Communicate award timelines to the participating suppliers once the eAuction is over. Email 7. Relevant Tenders Committee Review e-Auction bids and approve. Live Discussion 8. Tenders Committee Secretary Prepare and transmit meeting extracts and approval decision to SCM(N-2/3). Email 9. SCM (N-2/3) Communicate award decisions thank all participating suppliers. Email 10. SCM (N-5/6) Update database with new agreed price. Note: Typically, the award decision is based on a combination of factors such as price, quality, delivery capability, etc. It is not necessary that the lowest price supplier wins the auction. and SCM Repository 104 NNPC Limited SCM Processes and Procedures 12.3 Reverse Auction Input Output Documents & Document Description Type Frequency Source Recipient 1. Spend Analysis Report Input As required SCM (N-5/6) SCM (N-4/5) 2. Specification Template Input As required SCM (N-4/5) SCM (N-3/4) 3. Auction Training Output Documentation As required SCM (N-3/4) Vendor 4. Award Notification As required SCM (N-2/3) Vendor S/N 12.4 Output Reverse Auction Key Performance Indicators S/N Performance Measure Basis of Measurement Time frame Target 1. Timeliness of the Reverse Auction Process Latest date for completion of reverse auction process. As required 30 days 2. Accuracy of the Spend Analysis Report Number of material errors, omissions, and misrepresentations in the report. As required Zero error 3. Accuracy of the Specification Template Number of material errors, omissions, and misrepresentations in the template. As required Zero error 4. Cost Reduction Items Reduction in price and better payment terms. As required >=5% on 105 NNPC Limited SCM Processes and Procedures 106