PROCUREMENT

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OVERVIEW
Procurement varies with contracting strategy & project size
Procurement functions for larger project: Purchasing,
Expediting, Inspection, Receiving, Account Payable
Split of responsibility: equipment & critical bulk material
by main contractor, bulk material by subcontractor
Procurement involves much more than just placing
purchase order: vendor screening, vendor list, expedite
certified drawing & vendors activities, inspect vendor shop
& facilities, witness equipment inspection, testing &
acceptance, shipment & delivery
Effective procurement require tremendous paper work and
record keeping: Inquiry, bid analysis, communication with
vendors, procurement logs (Requisition, PO, Inspection &
acceptance, invoice and payment), claim processing
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INQUIRY guidelines
Bidder list must be based on qualification &
ability to perform
Spec must be complete & sufficiently detailed to
ensure meaningful bids but avoid over-specifying
Search hungry vendors
Pre-qualify bidders of special equipment
Allow reasonable time for bidding but avoid
premature inquiries
Requests to extend bidding deadline may be early
indicator of future troubles (work accumulation
and indication of unreliability)
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INQUIRY (2)
Competitive bidding is highly desirable
Sole sourcing may be considerable yet must
be justified & documented
Request firm price quotation including unit
prices and required spares
All contact with bidders/ vendors should be
channeled through purchasing agent

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TECHNICAL BID EVALUATON

guidelines
Proposal must respond to the inquiry &
satisfy technical specification
If economically attractive alternatives are
offered, determine technical acceptability
Evaluate maintenance & operating cost and
other impacts (lay out, spare parts etc)

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COMMERCIAL BID EVALUATON

guidelines
Make sure that cost for extras are properly segregated
Place a value on the operating & maintenance cost and
intangibles
If delivery is not acceptable determine cost of
improvement
If delivery is critical ascertain the proposed schedule
Compare bids with budget estimates and determine the
cause of substantial deviation
When low bidder is not the recommended one, justify the
reason and document it
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PURCHASE ORDER
Make sure all negotiated changes have been
incorporated
Make sure verbal confirmations on critical items
are documented
If P/O involves start up &/or check out assistance
ascertain that appropriate documents &
information are included in P/O (insurance
certificate etc)
Do not issue open ended P/O
Selecting a vendor and placing the P/O is usually
the easiest part of procurement
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INSPECTION & EXPEDITING

guidelines
P/O must be expedited to insure timely delivery
Fabrication of equipment and materials must be
inspected to insure quality
Inspection guidelines
Define frequency and extent for every item
Beware of contractor with large inspection group for
overdoing the job
Dont do inspection for contractor. Do not relieve them
of their responsibility

Owner specialist participate for critical equipment

inspection through visit to fabricator shop
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EXPEDITING
Contractors normally use field inspectors or
design engineers for expediting
Expeditor is expected to
Verify and obtain vendor schedule for critical/ long
lead items
Ascertain vendor drawing requiring approval
Obtain un-priced copies of vendor sub-order
Review shop fabrication schedule and evaluate to meet
overall schedule
Discover vendor potential problem
Prepare reports to inform Project Manager
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INSPECTION
Pre-purchase inspc: Vendor facilities, capabilities
assessment (engineering, equipment, fabrication
techniques, welding certifications, QA/QC)
Post-purchase inspc

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Verify material of construction

Verify heat treatment (pre & post weld)
In progress inspection (fit up before welding, NDT etc)
Pressure and tightness test
Performance test for rotating equipment
Final inspection (cleaning, painting etc)
Review documentation
Release for shipment
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INSPECTION-2
Inspection must be performed by qualified
personnel
Even when it is handled by contractor, the owner
must retain the option to do independent
inspection
Equipment normally included in an inspection and
testing: tanks & pressure vessel, heat exchangers,
process equipment (dryer, filter, centrifuges etc),
compressor and turbines, special pumps, special
valves, boilers/ furnace, package equipment
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PERFORMANCE TESTING
Testing either in vendor shop or field
Degree of test should be established before issuing
P/O
No load testing and functioning aux equipment
Full performance test
Frequent test procedures are available from
ASME, API etc

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