Procurement Manual




1.        Executive Summery                                                                         3

2.        Introduction                                                                                      4
3.        Goals & Objectives                                                                          7
4.       Discussion                                                                                        9                                                                                
5.       Execution Works                                                                            12

6.       Record Keeping                                                                             20

7.       Policies for minimum delivery                                                      21

8.       Procurement on Different Cases                                                     22

9.       Materials Name & Specification                                                     25

10.     Conclusion                                                                                      28

1. Executive Summery

Procurement is not a pompous word for buying; Buying is just one part of the procurement process which spans the whole cycle from identification of needs, through to the end of a service contract, to the end of the useful life of an asset. It involves options appraisal and the critical ‘make or buy’ decision – whether to provide services in-house or to procure services in other ways.

Procurement decisions based on total cost assessments tend to be more effective than those based only on cost of purchase and cost of maintenance and repair. Hidden costs always come back to bite. Making sure that all possible costs are included also makes for better comparison between suppliers and those looking cheaper at the outset that make their money after purchase, will then not have the advantage as before.

The main objective of the Procurement Department of MACON ENGINEERING is to define a documented process to maintain proper control and process of all purchasing activities in order to ensure quality on all procured materials that affect the quality of the end product, minimizing the cost of the product, growing high supplier’s loyalty, and satisfy all demand.

2. Introduction

Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quantity and quality, at the right time, in the right place and from the right source for the direct benefit or use of corporations or individuals, generally via a contract. Simple procurement may involve nothing more than repeat purchasing. Complex procurement could involve finding long term partners – or even 'co-destiny' suppliers that might fundamentally commit one organization to another.

The importance of procurement is of strategic importance because it:
  • has a direct impact on the company’s overall expenditure, and the cost of service.
  • directly affects the company’s delivery of its services
  • contributes to the achievement of corporate, departmental and service objectives.
  • provides a mechanism for delivering key policy objectives, including sustainability, partnership working, equality and economic development.
  • operates within a complex regulatory framework that must be adhered to.
  • is an area of potentially high risks; It has an impact on service, it has financial and legal issues and it influences and contributes to the reputation of the company.
  • develops the role of the company as ‘Community Leader’ particularly in relation to sustainability and local economic development.

The principal hallmarks of proficient procurement are:
·      Economy;
·      Efficiency;
·      Fairness;
·      Reliability;
·      Transparency; and
·      Accountability and Ethical Standards.

Economy: Procurement is a purchasing activity whose purpose is to give the purchaser best value for money. For complex purchases, value may imply more than just price, for example, since quality issues also need to be addressed. Moreover, lowest initial price may not equate to lowest cost over the operating life of the item procured. But the basic point is the same: the ultimate purpose of sound procurement is to obtain maximum value for money.

Efficiency: The best procurement is simple and swift, producing positive results without protracted delays. In addition, efficiency implies practicality, especially in terms of compatibility with the administrative resources and professional capabilities of the purchasing entity and its procurement personnel.

Fairness: Good procurement is impartial, consistent, and therefore reliable. It offers all interested contractors, suppliers and consultants a level playing field on which to compete and thereby, directly expands the purchaser’s options and opportunities.

Transparency: Good procurement establishes and then maintains rules and procedures that are accessible and unambiguous. It is not only fair, but should be seen to be fair.

Accountability and Ethical Standards: Good procurement holds its practitioners responsible for enforcing and obeying the rules. It makes them subject to challenge and to sanction, if appropriate, for neglecting or bending those rules. Accountability is at once a key inducement to individual and institutional probity, a key deterrent to collusion and corruption, and a key prerequisite for procurement credibility. A sound procurement system is one that combines all the above elements. The desired impact is to inspire the confidence and willingness-to-compete of well-qualified vendors. This directly and concretely benefits the purchasing entity and its constituents, responsive contractors and suppliers, and the donor agency providing the project finance. Conversely, a procurement system that takes the above elements stimulates hesitation to compete, submission of inflated bids containing risk premia, or submission of deflated bids followed by delayed or defective performance. Other direct results include collusion in bribery by frustrated or unscrupulous vendors and purchasing entities, bad value for those entities and their constituents, and betrayal and abuse of the public trust for personal gain. In sum, proficient procurement is not difficult to describe in principle or to distinguish from its antithesis in practice. But it does require varied professional and technical know-how to establish, as well as discipline and determination to administer.


3. Goals and Objectives of Procurement Department:

Procurement Department has established to co-ordinate the projects and fulfills their requirements as a part of management and a plan for the Procurement operation. Procurement Department mainly deals with:
·      Materials delivery as per requirement
·      Accounting for Materials
·      Part of project administration for materials control.
·      Departmental Human Resource Development including Posting, Transfer & Training etc.

The goal and objective of Procurement Department is to achieve and ensure the above stated points and thus contribute to achieving the organizational goals as a whole.

Five Rights:
     1. Right Time           (Construction Period)
     2. Right Materials    (Considering Quality, Quantity & Cost etc.)
     3. Right Price           (Minimum Cost)
     4. Right Source        (Manufacturer, importer, dealer)
     5. Right People         (H/O + Projects) (ensuring above rights & perfect use)

Standard Operating Procedures (SOPs) of Procurement Department:

1.    MPR receives from Project(s)/ Site(s)
2.    MPR is authorized by EICs and Approved by ZICs
3.    For Price & Supplier selection – rate is to be collected and C/S is to be prepared for approval
4.    Issue Purchase Order (PO) and send it to the corresponding supplier.
5.    Send a copy of the PO to the Warehouse before the delivery so that the Construction Dept/ Warehouse Management could make concerned well conversant about the consignment.
6.    Supplier is to submit Bill along with the received challan copy.
7.    After receiving the materials, site will issue MRR with original challan and send that to the Procurement Dept within 48-hours of the material delivery. MRR will be prepared by Store-Keeper, Quality checked bay EIC Authorized by ZIC & approved by Head of Warehouse.
8.    Challan must be signed by the Warehouse personnel. If any deviation is there in terms of quantity, it should be mentioned there.
9.    After checking the bill Procurement dept. forwards the bill to Audit Dept. with supporting (Original MPR, W.O, Challan with MRR, Bill and approved Statement).
10. After setting the bill by Audit Dept. forwarded to A/C for Payment.   
11. Accounts Department will ensure the payment timely.

4. Discussion

Scopes and Activities:


The responsibities or the working scopes of the procurement department of MACON are as follows:

a)    Market analysis and finding the best possible source.
b)    Checking and authentication of demand.
c)    Searching alternative source to ensure crisis delivery.
d)    Price negotiation in optimum level.
e)    Ensuring purchasing using best possible credit line.
f)     Establishing healthy supplier’s base.
g)    All materials purchasing.
h)    All IT materials purchasing.
i)     All Electro Mechanical Equipment (EME) purchasing for all project/Sites & Concerns.
j)     All stationary material purchasing for all concerns.

Operational activities:

The operational activities of the procurement:

Materials purchase requisition (MPR) come from the construction site to procurement department twice a month. MPR is authorized by EIC and approved by ZIC. Procurement department will collect the price rate of the materials according to the requisition and prepare comparative statement. At lest 3(three) nos. quotations from reputed suppliers are needed for the preparation of the comparative statement. The statement is then approved by the audit department and followed by the Director of the corporate division. In condition of the approval of the rate, procurement dept. issues work order (W.O). Supplier deliveries material at site as per W.O. with original challan. After receiving the material, site personnel issue material receiving report (MRR) with original challan. MRR will be prepared by store-keeper, quality checked by EIC, authorized by ZIC & approved by Head of ICMD. Supplier submits their bill to head office. After checking the bill procurement dept. forwards the bill to audit dept. with supporting (Original MPR, W.O, Challan with MRR, Bill and approved Statement). After setting the bill by audit dept. forwarded to A/C for Payment. Accounts Department will ensure the payment timely.


The total operational activities of procurement dept. of MACON are shown as follows: 



Planning Work (Pre Execution):
·      Material Analysis
·      Source Finding
·      Information Collection
·      Market Survey
·      Negotiation with Suppliers
·      Necessary formats Preparation
·      Various statement & report Preparation
·      Liaison with other Department
·      Departmental Meeting arrange and participation in other Departments meeting.

1)    Pre-Execution Steps of Procurement

a.     MPR Receive
b.    Comparative Statement Approval
c.     Work/ Purchase Order Issue

2)    post-Execution Steps of Procurement

a.     Delivery Ensure
b.    Bill & supporting Challan Receive
c.     Enclosures
d.    MRR Received
e.     Supplier Accounts.

Execution Procedures of Material Purchase Requisition (MPR)


Execution Flow Chart of MPR

Activity - 01:
MPR is prepared by Project Account at Project level by the requirement / demand of Project Engineer. A lead-time of fourteen days is required to deliver / ensure the materials at the sites from the date of receiving the MPR by Proc. Dept. Project send the MPR to Head Office through Zonal Office.

 Activity - 02
BOQ checking and Brand selection of the requisite materials are done by the Construction Management Department (CMD).

Activity - 03
ICMD authorizes the MPR with:
·      Counter checks the quantity with estimate,
·      Searches the existing stock in the respective Project.
·      Decides the necessity of purchasing or inter project transfer or any others solution for supplying the materials.
The MPR is finally approved & forwarded to the Procurement Department.

Activity - 04
After getting approved MPR, PROCUREMENT DEPARTMENT will give Purchase Order to respective supplier (1st Copy) and 3rd copy is to send to related project by outgoing box and messenger. The 2nd copy of PO goes to A/C dept. and 4th copy is retained at Proc. Dept.

Comparative Statement Approval:

In case of CS preparation, at lest three quotations are collected from reputed suppliers. After receiving quotations from suppliers, procurement will deal with the suppliers for market survey and negotiation. A comparative statement (C. S) is then prepared. After preparation, the CS is checked and authorized by the Dept. Head of procurement. Then the CS is forwarded to the internal audit department for approval of final checking. The CS must be finally approved by the Director of MACON.

Execution Procedures of Purchase Order / Work Order:
Execution Flow Chart of Purchase Order / Work Order

Work Order

Activity – 1
After receiving approved MPR Procurement Department will issue Purchase Order to the effective Supplier as per approved rate of Comparative Statement.

Activity – 2
Supplier will deliver the materials as per Purchase order to respective Project/Site directly and project will receive the same accordingly.

Activity – 3
After completing delivery of Materials as per Purchase order respective Supplier will submit Bill to head office against completed work order.

Please note that, sometimes or in case of some items make us go through Cash Purchase which does not contain Purchase Order. In that case, we receive the cash from AFM Dept. and submit adjustment with necessary documents in time.

Post Execution Stage (After Delivery)

Post Execution Sequence:
a.     Delivery Ensure
b.    Challan & Bill       - Invoice & Supplier Bill
c.     Enclosure               - Supporting Documents
d.    MRR                      - Material Receiving Report
d.  S/A                         - Supplier’s Account 

a.     Delivery Ensure:
     Procurement Dept. ensures deliveries up to the site. They have to follow up time to time. Procurement Dept. will ensure the quality and quantity as per our standard and mentioned in CS. Procurement Dept. will also present at the time of delivery if needed to ensure the measurement or quality. No inferior quality is allowed to receive by the site. All materials must meet the quality as ordered.

If there is any problem in quantity and quality (which noticed later), the site must inform the procurement department within 24 hours. Procurement department will take the necessary action for the replacement immediately.

b.    Challan & Bill:

     The suppliers submit us bill and receiving copy of delivery Challan for their payment.

c.     Enclosure:

          Enclosing papers of Fund Requisition: The 1st copy MPR or attested photocopy, Triplicate copy of purchase order, Original copy MRR, Original Bill copy, Receipt copy delivery challan copy and other supporting documents if applicable.

d.    MRR:

    1.  MRR Prepared by PA/APA after considering document like MPR 3rd copy, work order, challan and physical check. 
    2. Materials are received by taking proper measurement or weighing where necessary as the case may be.
    3.  The project sends two copies of MRR to Head Office Inventory section with all necessary information (MPR No & Date, PO # & Date, Delivery Challan #, Supplier’s name & address, Material Quality, Quantity etc). MRR should be sent to head office within 48 hours from materials receiving.

    4.  More than one MRR can be produced against one MPR but one MRR cannot be produced against more than one MPR. Without MRR no bill is forwarded to A/C Dept. for payment. 
    5.  MRR should be produced of 3 copies. 1st copy (white) is sent to Proc. Dept. followed by A/C, 2nd copy (pink) is sent to ICMD and the 3rd copy (yellow) is sent to Site store.
    6.  MRR is submitted to Project Engineer for quality check. After checking and duly signed by Project Engineer, MRR is authorized by EIC or ZIC in the case of asset type materials. Then the MRR is sent to ICMD for approval. After proper approval, 1st and 2nd copies of MRR enclosed with challan are sent to Procurement Dept.

Execution Procedures of Material receiving Report (MRR):

Execution Flow Chart of MRR

 Suppliers Accounts:
Individual suppliers account is maintained to keep necessary records of material purchased, Credit Time, Credit Limit, Total due amount, Billing date, maturity date etc.

Payment Time:
We use to make payment to our supplier from Sunday to Wednesday every week.

Payment Disbursement Sheet:
After payment the accounts dept. sends a cheque disbursement list against payment requisition, which consists the suppliers name with FR# and Amount. Then we deduct the disbursed amount from supplier’s individual accounts.

6. Record Keeping:

Filing works:

1)    Supplier wise (major material)
2)    Material wise (major material)
3)    Quotation /Catalogues
4)    Comparative Statement (Materials wise)
5)    Work Order / Agreement / Contract

Other working files:

·      Fresh non executed MPR
·      MPR with PO (work on process)
·      MPR with Bill/MRR (payment on process)
·      Other necessary file 
·      Register for cash purchase

7. Policy for minimum delivery time for materials supply:

The objective of this policy is as follows: -
a)    Submitting the MPRs from the respective project sites in pre-fixed time (ref. office notice dated 20/1/04)
b)    Fill-up the delivery date column of MPR properly giving the sufficient slack time to procurement dept. as required for that particular item considering the real situation
c)    All structural phase projects will be allowed to submit MPR once in a month (i.e. 18-22 of each month)
d)    Only finishing projects (this will be confirmed and controlled by the respective ZIC & HSC) will be allowed to submit MPR twice in a month (10-12 & 18-22 of each month)
e)    To update and provide the list of mobilization projects, structural projects, finishing projects and hand over stage projects to PD in due time from MACONso that they can plan accordingly.
f)     To check & control the MPR submitting out of the scheduled time (which create extra burden to PD)
g)    To check & plan very carefully by the respective EIC at the time of MPR posting (considering the sufficient stock during lead time use).
h)    Min. delivery date for 18-22 & 10-12 MPR slot would be 1st day of next month and 21st day of current month OR min. delivery time, whatever is maximum to be counted.
i)     Credit purchase is to be preferred in all respect, expect if the item need to pay in advance.

8. Procurement on different cases:

Electro Mechanical Equipment (EME) materials purchasing:

An all through specification for specified EME Items will come to Procurement department through EME department authorized by the HOP, HSC, Head of EME, CSD & Head of Construction. Procurement Department will deliver the specified requirement to the existing or promising new suppliers considering brand, origin, company loyalty, previous dealings with MACON. After collecting the offer EME department prepares technical comparison. After preparing technical comparison Procurement Department will prepare financial comparison. Procurement department will seat with every vendor individually for the price negotiation and to clear all the issues which may not clear from their offer. The CS will then be checked by Audit Department, Audit will settle/ negotiate price. Finally the price and party is approved by the management. WO will issue by Procurement Department.

The suppliers will arrange the delivery by own up to site. The suppliers will arrange all preparation for commissioning as per WO. The suppliers will arrange a test run in presence of correspondent of purchaser.

All payment will make as per the terms and condition of the WO. All payment will be forward by procurement dept through a requisition. The bill will be forwarded accordingly with signing of HOPD, EME Dept. and approval authority. Final bill will also be paid as per WO with signing of HOP.

Stationary materials purchasing:

Requisition will come from unit quarterly. HR department (where there is no Procurement personnel) & CPD will jointly arrange the procurement. Party search, rate collection and CS preparation will made by procurement department. After proper approval WO issue and delivery is ensured. Respective HR will ensure the quality and store will ensure the quantity. Respective HR for cash advance will make a requisition. Adjustment will be prepared in cooperation of CPD.

Computer & accessories:

Requisition will come to Procurement Department with proper approval. Procurement Dept will search for the suitable party. The bidders submit their quotation for the computer. CS will be prepared by Procurement Department, which is verified by IT Dept to authentic it technically and approved by the management after auditing. WO will be given by Procurement Department to the vendor. The IT department will ensure the quality.

MRR will be prepared by store. Bill will prepare attaching Requisition, WO, CS Copy, Challan, and MRR. Payment will be made as per condition. Computer accessories will purchased in cash from a well known computer market/place. The cash will arrange for the purchase by the respective HR Dept.

Cleaning Materials Purchasing (for RSL):

Requisition will come from unit once in a month. Maintenance dept (where there is no Procurement personnel) & Procurement Department will jointly arrange the procurement. Respective Maintenance Personnel for cash advance will make a requisition. Adjustment will be prepared in cooperation of Procurement Department.

Uncommon Item (Special selection for special work):

Requisition will be made with proper approval. Procurement department will arrange the procurement in consulting with HOCP. First need to find the source and the available stock. It the item is possible to arrange in credit facilities than the purchase must be done in credit facilities with proper audit checking. Procurement department can search for any substitute or alternate brand to reduce cost.

Urgent basis purchasing:

Requisition will make with proper approval. Respective Unit will arrange the procurement in consulting with HOCP. Respective unit will arrange necessary cash for the purchase. If it is possible by CPD to arrange the materials in short notice by WO placement than will go through it.

9. Materials Name & Specification

The following matters are to be followed by Project and H/O relevant personnel during execution:
Main Materials Name & Specification are to be mentioned clearly for ensuring right material:

1. Cement              : Finest, Dry, Uncrushed packed, as usual color.
2. Rod                    : Smooth surface, Fresh, Rushed free, Actual Dia
3. Bricks                : Category -  Auto, Semi Auto, and Hand Made.
          : Kinds -       1st Class, Picket, 2nd class, Shape, Molding, Metallic             sound, Color, Size, etc.
4. Sand:
Sylhet: Color, 2.5 FM or equivalent (Eye measurement), Coal free & other foreign materials free.                          
Medium: Red or White or Grey color, 1.5 F.M. Coal, Mud, Caker & other Waste Materials free.
Filling: F.M below 1 FM, Clean River sand by dazing
*Both of the above to be checked by a glass of clean water, Salinity test by tang and Mud of Mud color.

5) PVC conduit-               Wall thickness (as per sample), Color, Strength, Weight,                                            Flexibility etc.
6) PVC/UPVC Fittings-   Color, Brand, Seal, B/S, Wall thickness, Crack etc.
7) C.I Fittings-                 Smooth surface, crake, Hole, Wall thickness, Heavy/Light,                                  Dia
8) G.I Pipe-                      Brand seal, Wall thickness, Dia, Thread, Smooth of outer
                                         surface, Galvanize.
9) G.I. Fittings-                Brand, Good finishing, Smooth surface, Weight, Crake,                                            Thread etc.

10) Polythene-                           Color, Thickness, Width, Roll, Crake, Weight
11) Jute Chatt                             Length, Breadth, Thickness, Density, etc.

12) Jute Rope                             Light/Heavy, Dryness, Old/New, Weight etc.
13) Door Clamp                         Flat bar breadth, Thickness, Length, Weight etc.
14) Door Frame & Shutter         Thickness, Length, Breath, Pal, Crake, Hole, Bend,                                                    Fiber etc.
15) Bamboo                               Dia, Wall thickness (Top & Bottom), Straight,                                                          Light/Heavy, Length etc.
16) Mango Wood                       Width, Thickness (1/8” under from delivery challan                                                size), Straight, Side off free, Length etc.
17) Electric Cable                      Seal, Insulation, Copper thickness, Flexibility,                                                               Length, Color, Packet seal.
18) Steel Boxes                          Gaze, Finishing, Size, Options, Sheet Color, Options       perfect specification, Joint, Grinding, Punch, Lock System, Channel, Basbar etc.
19) Safety Net                            Rope-dia, Gap area, Weight, Area (Sft)
20) Marble/Granite/Tiles           Thickness, Length, Breath, Brand Name, Color, Code                                                   No etc.

Flow chart

10. Conclusion:

From above discussion we can states that the Procurement life cycle in modern businesses usually consists of seven steps:
a)    Information Gathering: If the potential customer does not already have an established relationship with sales/ marketing functions of suppliers of needed products and services (P/S), it is necessary to search for suppliers who can satisfy the requirements.
b)    Supplier Contact: When one or more suitable suppliers have been identified, Requests for Quotation (RFQ), Requests for Proposals (RFP), Requests for Information (RFI) or Requests for Tender (RFT or ITT) may be advertised, or direct contact may be made with the suppliers.
c)    Background Review: References for product/service quality are consulted, and any requirements for follow-up services including installation, maintenance, and warranty are investigated. Samples of the P/S being considered may be examined, or trials undertaken.
d)    Negotiation: Negotiations are undertaken, and price, availability, and customization possibilities are established. Delivery schedules are negotiated, and a contract to acquire the P/S is completed.
e)    Fulfillment: Supplier preparation, shipment, delivery, and payment for the P/S are completed, based on contract terms. Installation and training may also be included.
f)     Consumption, Maintenance and Disposal: During this phase the company evaluates the performance of the P/S and any accompanying service support, as they are consumed.
g)    Renewal: When the P/S has been consumed and/or disposed of, the contract expires, or the product or service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be re-ordered, the company determines whether to consider other suppliers or to continue with the same supplier.


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