Final Report on e Procurement at ONGC

A Report On

E-Procurement Process at ONGC

By:Shailendra Choudhary

Rajiv Gandhi Institute of petroleum Technology

NOIDA

SUMMER INTERNSHIP PROGRAM

Report

On

E-Procurement process at ONGC

By

Shailendra Choudhary

Prepared for

ONGC, Scope Minar,

New Delhi

UNDER GUIDANCEOF

Mr. Upendra Goyal

G.G.M (Finance), ONGCScope Minar, New Delhi

RAJIV GANDHI INSTITUTE OF PETROLEUM TECHNOLOGY

NOIDA

CERTIFICATE

This is to certify that the report on

“E-Procurement Process at ONGC” Is a Genuine work carried out

By

Shailendra Choudhary

To

Rajiv Gandhi Inst. Of Petroleum TechnologyNOIDA

In partial fulfilment of award of

Post Graduate Diploma in ManagementThe work carried out by them under our supervision and

guidance.

Guide GuideRonak Singhania Abhijit Saha

(F & A Officer) (Deputy Manager, F&A)

ACKNOWLEDGMENT

In this highly complex society no work can be accomplished by a single individual but needs

inspiration and sincere guidance of intellectuals.

With an overwhelming sense of obligations, I avail this opportunity to express my deep sense of

gratitude to Shri Upendra Goyal G.G.M. (Finance) Corporate MM, finance, who gave me the

opportunity to work with finance section attached with corporate material management, Scope

Minar Delhi.

I emphatically express my profound thanks and heartfelt gratitude to my guide Mr. Abhijit saha

and Mr.Ronak Singhania for his valuable guidance, timely suggestions and constant

encouragement during the entire course of my training.

It is my privilege to express my profound thanks and gratitude to Mr. C.K Sengupta coordinator

RGIPT) and Prof. D. C Chawala for their kind encouragement and benevolent guidance at

every step during the course of my training.

Finally, I thank all those who helped me directly and indirectly during the course of my summer

training.

i

ii

ABSTRACT

The main activity of ONGC is to focus on domestic and international oil and gas

exploration and production business opportunities. This involves various activities

like survey, drilling, production, transportation, joint ventures etc, and it requires the

technical expertise of experts and various equipments of material to achieve the

mission. Most of these materials are of both domestic and foreign origin and their

procurement requires definite criteria to be followed.

This project was undertaken to study the procedures involved in the procurement of

the “A” category items centrally at Dehradun using e-procurement, embedding all the

rules and regulations to be followed as were being followed in legacy system. After

the successful implementation at Dehradun, the e-procurement will be extended to

other category items in all other locations of ONGC.

ContentsAuthorization………………………………………………………………………………….…i

Acknowledgement………………………………………………………………..……………….ii

Executive Summary……………………………………………………………………………...iii

Introduction

i. Purpose………………………………...…………………………………………………1ii. Limitation………………………………………………………………………………….1iii. Methodology…………………………………………..…………………………………1

iv. Company profile…………………………….…………………………………………….2

Material Management………………………………………………………………….....5

ABC Analysis……………………………………………………………………………….6

Overview of Purchasing Procedure……………………………………………………………….9

ONGC Centralized Procurement………………………………………………………………11

Business Processes……………………………………………………………………………….14

Vendor Access Authorization for E-Tendering Application…………………………………..14

E-Tendering

i. Open Tender-2 bid system……………………………………..………………………..14

ii. Open Tender-single bid system………………………………..……………………..…15

iii. Limited Tender-2 bid system…………………………….…………………………15

iv. Limited tender-single bid system………..………………………………………………16

v. Single Tender……………………….………………………………………………..…16

Open Tender-2 bid system

i. Brief explanation…………………………………………………………………….…16

ii. Process flow chart……………………………………………………………………..18

iii. General explanation……………………………………………………………………19

Quick tour of ONGC E-Procurement………………………………………………………….32

Payment Process

i. Indigenous payment……………………………………………………………………43

ii. Imported payments…………………………………………………………………….44

a. Letter of Credit…………………………………………………………………44

i. Types of L.C………………………………………………………….....48

ii. Bill of Lading………………………………………………………..….49

Findings……………………………………………………………………………………………

……50

Recommendations…………………………………………………………………………………

…..51

Annexure

i. Annexure A…………………………………………………………………………...…53

ii. Annexure B………………………………………...……………………………………55

iii. Annexure C………………………………………...……………………………………58

Bibliography……………………………………………………...

………………………………………60

Executive Summary

I, Shailendra Choudhary a student of RGIPT NOIDA, got an opportunity to carry out my

internship project in ONGC, Delhi as a part of the curriculum. This prestigious organization is

one of the nine Navratnas recognized by the Indian Govt.

During my internship tenure at ONGC, I strived to investigate and study the e-procurement

system thoroughly. The objective of my project is to highlight the benefits of the e-procurement

process to the parent organization in terms of reduced material and operating costs, improved

compliance, and increased total spend under management. This is a new and exciting area of

study with unprecedented benefits if the opportunities are identified and pursued.

In order to achieve the aforementioned objective, I carried out a thorough preliminary research of

the entire procurement process. I had a detailed study of the existing documented records of such

procurement process. I also had the opportunity to study the impact of the novice procedure of

the novel payment terms on international clients and suppliers by analyzing them individually. I

also had several brainstorming sessions with my fellow executive trainees and my senior

company executives regarding the indispensable benefits of this system

This report shows how new dimension such as Reverse Auction, have been added to the

procurement system which enables the company to get the quality product at the most reasonable

prices. This work also reflects the process of making payments to the international suppliers

using a financial instrument known as Letter of Credit. It also emphasizes on the various security

concerned issues related to the E-Procurement

Introduction

Purpose

The main activity of ONGC is to focus on domestic and international oil and gas exploration and

production business opportunities. This involves various activities like survey, drilling,

production, transportation, joint ventures etc, and it requires the technical expertise of experts

and various equipments of material to achieve the mission. Most of these materials are of both

domestic and foreign origin and their procurement requires definite criteria to be followed.

This project was undertaken to study the procedures involved in the procurement of the “A”

category items centrally at Dehradun using e-procurement, embedding all the rules and

regulations to be followed as were being followed in legacy system. After the successful

implementation at Dehradun, the e-procurement will be extended to other category items in all

other locations of ONGC.

This study will also focus on the payment procedure adopted by the company. Once the material

is procured than how the payment is being made to the supplier and what all are the issues that

need to be checked before making a payment.

Limitations

Limitations are extent above which the process should not exceed. Every work has its own

limitation. Similarly in our case also we have certain limitations, these are as follows:

Some issues related to procurement are highly confidential such as bidding process, to which we

have no access. Thus it hinders us to understand some concepts.

This procurement process deals with different department of the organization, but we have

access to only one department that is finance. This also limits our understanding of certain

concepts.

Methodology

Subjective Analysis

ONGC

Oil and Natural Gas Corporation Limited (ONGC) (incorporated on June 23, 1993) is an

Indian public sector petroleum company. It is a Fortune Global 500 company ranked 335th, and

contributes 77% of India's crude oil production and 81% of India's natural gas production. It is

the highest profit making corporation in India. It was set up as a commission on August 14,

1956. Indian government holds 74.14% equity stake in this company.

ONGC is engaged in exploration and production activities. It is involved in exploring for and

exploiting hydrocarbons in 26 sedimentary basins of India. It produces about 30% of India's

crude oil requirement. It owns and operates more than 11,000 kilometers of pipelines in India.

Until recently (March 2007) it was the largest company in terms of market cap in India.

ONGC is the only fully–integrated petroleum company in India, operating along the entire

hydrocarbon value chain:

Holds largest share of hydrocarbon acreages in India.

Contributes over 80 per cent of Indian’s oil and gas production.

About one tenth of Indian refining capacity.

Created a record of sorts by turning Mangalore Refinery and Petrochemicals Limited

around from being a stretcher case for referral to BIFR to the BSE Top 30, within a year.

Interests in LNG and product transportation business.

ONGC has single-handedly scripted India’s hydrocarbon saga by:

Establishing 6.61 billion tonnes of In-place hydrocarbon reserves with more than 300

discoveries of oil and gas; in fact, 6 out of the 7 producing basins have been discovered

by ONGC: out of these In-place hydrocarbons in domestic acreages, Ultimate Reserves

are 2.36 Billion Metric tonnes (BMT) of Oil plus Oil Equivalent Gas (O+OEG).

Cumulatively producing 788.273 Million Metric Tonnes (MMT) of crude and 463 Billion

Cubic Meters (BCM) of Natural Gas, from 111 fields.

ONGC has bagged 85 of the 162 Blocks (more than 50%) awarded in the 6 rounds of

bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government.

ONGC’s wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian

multinational, with 44 Oil & Gas projects (7 of them producing) in 18 countries, i.e.

Vietnam, Sudan, Russia, Iraq, Iran, Myanmar, Libya, Cuba, Colombia, Nigeria, Nigeria

Sao Tome JDZ, Egypt, Brazil, Congo, Turkmenistan, Syria, Venezuela and United

Kingdom. OVL has a committed overseas investment of over 5 billion US dollars.

International ranking

ONGC ranks as the Numero Uno Oil & Gas Exploration & Production (E&P) Company in the

world, as per Platts 250 Global Energy Companies List for the year 2008 based on assets,

revenues, profits and return on invested capital (ROIC).

ONGC ranks 20th among the Global publicly-listed Energy companies as per ‘PFC Energy

50” (Jan 2008)

ONGC is the only Company from India in the Fortune Magazine’s list of the World’s Most

Admired Companies 2007.

Occupies 152nd rank in “Forbes Global 2000” 2009 list (up 46 notches than last year) of the

elite companies across the world; based on sales, profits, assets and market valuation during

the last fiscal. In terms of profits, ONGC maintains its top rank from India.

ONGC ranked 335th position as per Fortune Global 500 - 2008 list; up from 369th rank last

year, based on revenues, profits, assets and shareholder’s equity. ONGC maintains top rank in

terms of profits among seven companies from India in the list.

Financials (2007-08):

ONGC posted a net profit of Rs. 167.016 billion, the Highest by any Indian Company.

Net worth Rs. 699 billion

Practically Zero Debt Corporate

Contributed over Rs. 300 billion to the exchequer

Performance of the Company (2008)

DISTRIBUTION OF SHAREHOLDING PATTERN

Shareholding Pattern

Category No. of SharesPercentage of Shareholding

A. Promoter’s Holding

1. Promoters

- Indian Promoters 1,585,740,673 74.14

- Foreign Promoters NIL --

- Persons Acting in Concert NIL --

Sub Total 1,585,740,673 74.14

B. Non-Promoters Holding

2. Institutional Investors

a. Mutual Funds and UTI 36,656,577 1.71

b. Banks, Financial Institutions, Insurance Companies (Central / State Govt. Instts. / Non-Govt. Institutions)

105,054,973 4.91

c. FIIs 116,097,133 5.43

Sub Total 257,808,683 12.05

3. Others

a. Private Corporate Bodies 256,472,098 11.99

b. Indian Public 37,456,781 1.75

c. NRIs/OCBs/Clearing Members 1,394,295 0.07

Sub Total 295,323,174 13.81

Grand Total 2,138,872,530 100.00

MATERIALS MANAGEMENT

The main activity of ONGC is exploration and exploitation of hydrocarbons. This involves

various activities like survey, drilling, production, transportation etc. and it requires the technical

expertise of experts and various equipments of materials to do the same.

Materials management is the branch of logistics that deals with the tangible components of a

supply chain. Specifically, this covers the acquisition of spare parts and replacements, quality

control of purchasing and ordering such parts, and the standards involved in ordering, shipping,

and warehousing the said parts.

Aim of the Materials Management Organisation is to procure, preserve and deliver materials in

proper time to ensure smooth progress of the project works and administrative machinery.

Every effort is made by the Materials Management Organization to meet the needs of the

Engineers and the Scientists with regards to the Materials. But the success of the aspiration of the

Materials Management depends very much on the proper planning and timely intimation by the

concerned Engineers/Scientists to the Materials Management. It is therefore, essential that these

aspects are kept in view to ensure timely procurement of materials/services.

First the targets of the corporate are set based on the MOU (Memorandum of Undertakings)

entered with the government.

Once targets are fixed action for implementation thereof is taken by working out the inputs

required for achieving these targets and necessary budget provision is made in consultation with

attached finance for procurement of capital items, stores and spares etc.

Based on the provision in the approved budget, proposals are initiated for obtaining approvals of

the competent authority for individual items of expenditure with the concurrence of attached

finance wherever required.

After the competent authority approves expenditure and funds are embarked by finance, the

purchase procedure commences.

ABC ANALYSIS

ONGC has to maintain several types of inventories. It is not desirable to keep the same degree of

control on all the items. ONGC pays maximum attention to those items whose value is the

highest. ONGC, therefore, classifies inventories to identify which items should receive the most

effort in controlling. The firm is selective in its approach to control investment in various types

of inventories. This analytical approach is called the ABC analysis and tends to measure the

significance of each item of inventories in terms of its value.

The high-value items are classified as Category “A” items and would be under the tightest

control. “A” class items which are critically important and require close monitoring and tight

control – while this may account for large value these will typically comprise a small percentage

of the overall inventory count.

Category “B” items are in between “A” and “C” limits, defined by the respective department as

required.

Category “C” represents relatively least value and would be under simple control.

The ABC analysis concentrates on important items and is also known as control by importance

and exception (CIE).

The following steps are involved in implementing the ABC analysis:

Classify the items of inventories, determining the expected use in units and the price

per unit for each item.

Determine the total value of each item by multiplying the expected units by its units

price

Rank the items in accordance with the total value, giving first rank to the item with

highest total value and so on.

Compute the ratios (percentage) of number of units of each item to total units of all items

and the ratio of total value of each item to total value of all items.

TYPE ‘A’ ITEMS (FOR CENTRALISED PROCUREMENT)

1. Drill pipes of all sizes and grades

2. Heavy weight drill pipes of all sizes and grades

3. Casing pipes of all grades and sizes

4. Liner Hanger

5. Drill collars of all sizes

6. Drill bits of all rating and sizes

7. Drill hoses of all ratings and sizes

8. Floating equipment

9. Resignated Lignite

10. CLS

11. KCL

12. Chrome Lignite

13. Spotting fluid

14. EP lube

15. Sulphonated asphalt

16. Drilling detergent

17. Production tubings of all sizes

18. Well head of all pressure rating and sizes

19. X-Mas tree of all pressure rating and sizes

20. Perforation material

21. Geophone strings of all types

22. Line pipes of all sizes

23. Kelly all types

24. All import substitution items

25. POL (Diesel,lubricants etc.)

26. CMC

27. Oil well cement

28. Bentonite

29. BarytesThe list is not exhaustive and the items may get added or deleted as per the

decision of the management

CENTRALISED / DE-CENTRALISED PURCHASES

In Drilling Business Group, purchase functions of the following items would be handled as

under:-

Sl. No. Item Base

1. Pipes of all size delhi

2. CMC Dehradun

3. Oil Well Cement and Cement additives Mumbai

4. Bits

IndigenousImported

DehradunDehradun

5. Blow Out Preventors and accessories Dehradun

6. Rig (purchase and service contracts)

OnlandOffshore

DehradunMumbai

7. Spares and assemblies for on-land rigs Dehradun

8. Spares and assemblies for offshore rigs Mumbai / Chennai

9. Well HeadsOnlandOffshore

DehradunDelhi

10. Imported mud chemicals and mud additives Dehradun

11. Casings 30” and 20” required for offshore operations exclusively

Mumbai, Delhi

12. Others - whether indigenous or imported for on-land and off-shore operations

Dehradun

An Overview of Purchasing Procedure

Different steps of E-procurement

ONGC CENTRALIZED PROCUREMENT

ONGC Centralised Procurement

MM Dept.

Procurement Payment

Legacy System E-procurement

Indigenous Imported

Tenders

ONGC Centralised Procurement

FinanceUser/Indenter

Transportation

& shipping

ONGC Corporate MM Department deals in centralized procurement of ‘A’ Category items.

These items are purchased for use in the work centers staggered length and breadth of the

country. To procure an item, the corporate MM Department, after receiving the demand with

necessary expenditure sanctions, floats tenders to obtain Bids for the required item. The tenders

are floated in Legacy System or E-Procurement System. The items are procured from indigenous

sources or imported sources.

LEGACY SYSTEM

A Tendering Process by which ONGC seeks prices and terms for a particular project to be

carried out under a contract. The sealed offers themselves, including company information, a

project outline, and a price quote, are known as tenders or bids. These bids are obtained

physically as hard copies in the legacy system from the vendors.

E-PROCUREMENT

E-Procurement is the term to describe the use of electronic methods in every stage of the

purchasing process from identification of requirement through to payment, and potentially to

contract management. Electronic enablement of the purchasing process can be more specifically

identified as:

E-Sourcing: - For contractual processes. Tools include e-tendering, e-RFQs (Request for

quotations/evaluations) and e-auctions.

E-Procurement: - For transactional processes. Tools include market places using

techniques such as e-catalogues and punch-out.

E-Payment: - Tools include virtual or embedded GPC (Government Procurement Card),

e-invoicing and self-billing.

E-Sourcing is a suite of collaborative, web-based tools that enable procurement professionals and

suppliers to conduct the strategic activities within the procurement lifecycle over the internet.

These strategic activities including requirements/specification definition, tendering and supplier

selection, and contract award and management are designed to deliver value for money

procurement solutions to the public sector.

E-Sourcing helps to encourage consistency with policy and best practice and increase sourcing

and contract management efficiency and effectiveness.

E-Sourcing delivers the following benefits to public sector procurement professionals: The E-

Sourcing service will deliver the following benefits to customers: -

Process efficiencies: - e-Sourcing reduces tendering and contract management time and

effort for both buyers and suppliers.

Improved public sector savings: - e-Sourcing helps public sector procurement

professionals to focus on core, value-added procurement activity rather than

administration.

Policy: - e-Sourcing helps users to ensure compliance with the requirements of the

efficiency review and the national procurement strategy for local government.

Best practice: - e-Sourcing encourages users to adopt procurement best practice,

enabling a more consistent approach to sourcing.

Collaboration and aggregation: - e-Sourcing makes it easier for public sector

procurement professionals to work collaboratively on common sourcing projects across

geographically dispersed units and different departments.

Direct costs for buyers and suppliers: - e-Sourcing reduces the direct costs of preparing and

issuing the ITT and responding with tenders. Direct costs include paper, printing and

distribution costs such as couriers. Collaborative working reduces the need for teams to

travel for face to face meetings.

ONGC uses E-Procurement process for purchase of required Category “A“ Items. E-

procurement is the business-to-business or business-to-consumer purchase and sale of supplies

and services through the Internet as well as other information and networking systems, such as

Electronic Data Interchange and Enterprise Resource Planning.

ONGC e-procurement Website allows qualified and registered users to look for requirement of

goods and services. Companies participating expect to be able to control parts inventories more

effectively, reduce purchasing agent overhead, and improve manufacturing cycles.

This process includes:

Selecting the supplier.

Submitting formal requests for goods and services to suppliers.

Getting approval from the buyer.

Processing the purchase order

Fulfilling the order.

Delivery.

Receipt.

Payment.

Shipping.

First the targets of the corporate are set based on the MOU (Memorandum of Undertakings)

entered with the government. Once targets are fixed action for implementation thereof is taken

by working out the inputs required for achieving these targets and necessary budget provision is

made in consultation with attached finance for procurement of capital items, stores and spares

etc.

Based on the provision in the approved budget, proposals are initiated for obtaining approvals of

the competent authority for individual items of expenditure with the concurrence of attached

finance wherever required.

After expenditure is approved by the competent authority and funds are embarked by finance,

indents for purchase of equipments, stores and spares are to be sent on STR_6 (Store taking

receipt) form to purchase department preferably on the annual requirement basis. The indent

should be routed through MPPC and should be accompanied with detailed specifications and

financial sanctions.

On receipt of indents, MM department initiates procurement action as per instructions contained

in “Store Procedures”.

Business Processes

For procurement of material through online process the company will follow following steps:

1. Vendor Access Authorization for E-Tendering Application

2. SRM: E-Tendering

Open Tender with 2 Bid system

Open Tender with Single Bid system

Limited Tender - 2 Bid system

Limited Tender - Single bid system

Single Tender

Vendor Access Authorization for E-Tendering Application

Brief Explanation :

Vendor access authorization for e-tendering application is the process in which the vendor

requests access for submitting bids through the e-tendering application. The process results in a

vendor code created in R3 and SRM for the vendor or if the vendor code in R3 already exists, the

same will be replicated to SRM.

SRM: E-TENDERING

Open Tender – 2 Bid Systems

Brief Explanation:

Open tenders are restored to when tender value is more than Rs. 25 lakhs except for the cases

falling under single tender and limited tender categories. For all large and complex bids, open

tender 2-Bid system is followed. In a 2-Bid system, bidder submits the bid documents in 2 sealed

covers. One cover consists of technical bid and the another cover consists of price bid. The bid

opening date is different for both the bids. The technical bid is opened first and a short listing of

bidders based on the technical criteria is done. Price bids of short listed bidders will be opened

on the price-bid opening date.

In all open tenders, certain payments are involved at tendering stage. Vendors need to pay

‘Tender Fees’ to purchase/download the ‘Tender Document’. During the submission of tenders,

vendors need to pay “Earnest Money Deposit” (Either as payment or bank guarantee). Certain

categories of bidders are exempted from payment of Tender fees and/or EMD (NSIC regd.,

CPSU etc)

Open Tender – Single Bid System

Brief Explanation:


falling under single tender and limited tender categories. For some open tender single bid system

is followed. In a single bid system, bidder submits the bid documents in one sealed cover, both

technical bids as well as price bid. There is only one bid opening date for both technical &

commercial bids.


‘Tender Fee’ to purchase/download the ‘Tender Document’.

During submission of tenders, vendors need to pay Earnest Money Deposit (either as payments

or Bank Guarantee). Certain categories of bidders are exempted from payment of Tender fee

and/or EMD (NSIC regd., CPSU etc.)

Limited Tender – 2 Bid System

Brief Explanation

Limited tenders are restored to when tender value is less than Rs. 25 lakhs except for the cases

falling under single tender and limited tender categories. Some high value cases may be taken as

Limited tender also. For all large and complex limited tender bids, 2-Bid system is followed. In a

2-Bid system, bidder submits the bid documents in 2 sealed covers. One cover consists of

technical bid and the another cover consists of price bid. The bid opening date is different for

both the bids. The technical bid is opened first and a short listing of bidders based on the

technical criteria is done. Price bids of short listed bidders will be opened on the price-bid

opening date.

In all limited tenders, certain payments are involved at tendering stage. During submission of

tenders, vendors need to pay “Earnest Money Deposit” (Either as payment or bank guarantee).

Limited Tender – Single Bid System

Brief Explanation

Limited tenders are restored to when tender value is less than Rs. 25 lakhs except for the cases

falling under single tender and limited tender categories. Some high value cases may be taken as

Limited tender also. For some limited tender, single bid system is followed. In a single-bid

system, bidder submits all the bid documents in a single sealed cover which consists of both

technical bid and price bid. The bid opening date will be common for both the bids.

In all limited tenders, certain payments are involved at tendering stage. During submission of

tenders, vendors need to pay “Earnest Money Deposit” (Either as payment or bank guarantee).

Single Tender

Brief Explanation

In case of single tender there is only one bidder. Generally, single tender is floated in the

following cases: -

PAC items (Purchase of proprietary articles).

OEM in case there are no authorized dealers/distributors.

On nomination basis.

SRM: E-TENDERING

Open Tender – 2 Bid Systems

Brief Explanation


falling under single tender and limited tender categories. For all large and complex bids, open

tender 2-Bid system is followed. In a 2-Bid system, bidder submits the bid documents in 2 sealed

covers. One cover consists of technical bid and another cover consists of price bid. The bid

opening date is different for both the bids. The technical bid is opened first and a short listing of

bidders based on the technical criteria is done. Price bids of short listed bidders will be opened

on the price-bid opening date.


‘Tender Fees’ to purchase/download the ‘Tender Document’. During the submission of tenders,

vendors need to pay “Earnest Money Deposit” (Either as payment or bank guarantee). Certain

categories of bidders are exempted from payment of Tender fees and/or EMD (NSIC regd.,

CPSU etc)

PROCESS FLOW CHART

General Explanations

Note: The complete process is explained step wise. In each step, first paragraph details the

process in general rest of the paragraph refers to system mapping of the process.

1. Receipt of approved Indent: - Approved consolidated indent to be transferred from

SAP-R/3. Detailed requirements documents etc. is created in Collaboration Folders (c-Folders).

Requirements are transferred automatically based on the material code, material group and

purchasing group combination maintained in the Purchase requisition. The material group and

purchasing group combination is maintained in a structure in SAP-MM by SRM Master Data

administrator. Material code for SRM is determined by assigning class in material master.

Requirements can also be manually transferred to SRM by executing the report provided for this

purpose.

2. Form Tender Committee: - This is optional and manual process. A tender committee is

formed to recommend changes from standard/previous approved BEC (Technical Evaluation

Matrix, Commercial Evaluation Matrix and Price Format) and special conditions. If required,

PQC (Pre-Qualification Criteria) is also recommended by TC.

3. Finalize BEC, PQC & Special Conditions: - The tender committee or Tender Dealing

Officer finalizes Bid Evaluation Criteria and Pre-Qualification Criteria. Bid evaluation criteria

are set of documents consisting of criteria for both technical and commercial evaluation. BEC

also consists of a matrix which need to be filled by bidder with compliance ‘Yes/No and Specific

Details’. The BEC also consists of price format in which he needs to submit the price-bid. The

evaluation of bid is done based on these criteria. Sometimes, Pre-Qualification Criteria are also

required. Vendor should confirm compliance to PQC before obtaining tender document.

The BEC documents and PQC documents are created in c-Folders. Evaluation matrix is

maintained as Data Sheets in c-Folders.The price format is typically the pricing conditions as

maintained in R/3 pricing procedure. Pricing conditions are maintained in SRM.Tender

Committee minutes are kept in c-Folders.

4. TC recommendations and approval: - The documents should be approved by the competent

purchasing authority. Competent purchasing authority’s comments are maintained in c-Folders.

Approval Procedure in the system: - A status profile will be assigned to the documents folder.

The status profile consists of complete approval route with a series of statuses (e.g. Prepared →

TC Review → Endorsement by Chief-MM → Approved by EPC) and authorizations for each of

the status. Dealing officer sends notifications to the approvers from the folder containing tender

documents. The approver can access the folder with the link in the notification and set the status.

If the approver needs clarification before approving, then a notification is sent to the dealing

officer or any other officer with the comments.

5. Prepare Tender Document: - A tender document is prepared with details of

requirements/specifications, standard conditions which include checklist and appendices of

ONGC tender booklet, special conditions and BEC. Tender fee amount, EMD amount, last date

of selling tenders, tender submission dates, pre-bid conference dates etc are mentioned.

The approved tender document(s) are digitally signed and uploaded in c-Folders by the dealing

officer. The following documents will be in c-Folders:

Standard Instructions to Bidders

Standard Conditions with Checklist & other Appendices

Special Conditions

BEC

Technical/Commercial Evaluation Matrix

Specification Sheets

Quantity Distribution Chart, if required

For the documents that need to be filled by the vendor such as technical specifications, an excel

sheet with protected cells to be used. The left side columns of the excel sheets contains the

points/specifications filled by the ONGC officer for which vendor need to give inputs. These

columns should be protected. Vendor fills his inputs in the right side of the columns and for each

point vendor can fill his response. This folder will be shared with vendors. A bid invitation in

SRM is created with reference to the indent (PR). C-Folders are linked to the bid invitation. Bid

invitation is signed by dealing officer. In SRM, digital signature of dealing officer would be

required.

Some Main fields in Bid Invitation: -

Bid invitation No: System generated serial number.

Description of tender: The tender number generation in R/3 is used and copied in this

field so that uniformity is maintained in tender numbering. The entry in SRM is validated

with the tender number in R/3.

Type of tender

Bidding System (Single or 2 Bid system)

Tender Value (INR)

Tender Fee (INR)

Tender Fee (INR)

Date and time of closure of tender selling

Last date and time to receive queries for clarification

Last date and time to apply for access to e-Tender Application

Date of PBC (optional)

Closing date and time for submission of bids

Opening date and time of unpriced techno-commercial bids (only in 2 bid system).

Opening date and time for price bids (only in 2 bid system)

Opening date and time of Bid (in case of single bid system)

Bid Validity Date

EMD/Bid Bond/ Bid Security (Given in tender documents in c-Folders)

Security deposits/Performance bank guarantee (Given in tender documents in c-Folders)

Address for correspondence

Port consignee (Header and for each item)

Ultimate consignee (Header and for each item)

Delivery dates (Given in tender documents in c-Folders)

Payment terms (Given in tender documents in c-Folders)

Item details (Material description, UOM, Qty, Price, Delivery date, Valuation type, Port

consignee, Ultimate consignee etc)

Price related documents, if any, will be attached with Bid invitation (Not in c-Folders).

6. Publish notice inviting tenders (NIT): - NIT is published in leading newspapers (global or

local depending upon the type of bid). NIT along with the Tender document is published in

ONGC website (www.ongctenders.net).

Dealing officer shall download the bid invitation details required for NIT and upload in

ONGCtenders.net for publishing. The NIT consists of a link to SRM application. All prospective

bidders can logon to SRM application with Guest user ID and view the documents. If the

prospective bidder wants to participate in bidding, access to SRM is required and the process of

obtaining access is explained in process ‘Vendor Access Authorization for e-tendering

application’.

7. Send advance intimation to prospective bidders: - Advance intimation is sent to prospective

bidders in case of open bidding.

Prospective bidders are maintained in Bid invitation. As soon as the bid invitation is published,

an email is sent to the vendors.

8. Receive Tender fees and PQC Compliance from prospective bidders: - This step is

required only in open tenders. Prospective bidders need to submit DD/Pay order for the tender

fee amount and buy the tender document from the tender selling counters of the organization.

The tender fee is normally waived for selected categories of vendors. In cases where PQC is

required, bidders have to certify that they comply with PQC. Tenders documents are sold till the

prescribed last date and time of selling tenders.

When vendor clicks on ‘Buy Tender’ for a bid invitation, payment gateway interface is activated

to collect tender fee. Access to bid will be provided after the payment of tender fees.

For the vendors who want a waiver need to request ONGC for the same with supporting

documents. ONGC officers enter the details in the tender fee application in R/3 and generate a

http://www.ongctenders.net/

transaction number to allow vendors without payment of tender fee. The bidder will then have to

be included in the SRM Bid invitation as a prospective bidder.

9. Give tender document to bidder: - Covered in the above step.

10. Receipt of Queries from bidders: - Optional. This step is common in large and complex

requirements. Bidders who bought tender documents might need clarifications and hence submit

their queries to tender dealing officers.

Bidders can access c-Folders collaboration folder and upload the query documents up to a

specified time in c-Folders.

11. Forward Queries to all concerned and form suitable reply: - Copies of the queries from

bidders are forwarded to tender committee or all concerned departments/people in the

organization (Engineering or technical, finance and purchase). The response from different

departments is collated and suitable replies are framed for all the queries.

All concerned users shall be given authorization to specific folders in c-Folders for the bid

invitation. Users can view the documents from various bidders in c-Folders. Final document

consisting of suitable replies is uploaded into c-Folders. This document is not shared with

vendors.

12. Pre-Bid Conference (PBC): - Optional. A Pre-bid conference is organized on the pre-

determined date to clarify all the queries of prospective bidders.

13. Process PBC minutes: - The minutes of the pre-bid conference are prepared.

Minutes of PBC are kept in c-Folders. These minutes will be approved by CPA.

Approval Procedure in the system: A status profile is assigned to the documents folder. The

status profile consists of complete approval route with a series of statuses (e.g. Prepared → TC

→ Review → Approved by CPA) and authorizations for each of the status. Dealer officer shall

send notifications to the approvers from the folder containing PBC minutes. The approver can

access the folder with the link in the notification and set the status. If the approver needs the

clarification before approving, then a notification is sent to the dealing officer or any other

officer with comments.

An abstract of approved PBC minutes is prepared and this abstract is shared with all vendors.

14. Modify tender documents and circulate: - The modifications to tender documents, if any,

are deliberated by tender committee and approved by Competent Purchasing Authority. The

modifications to tender documents circulated to all bidders who bought the tender documents.

Amendments to tender documents and approved abstract of PBC minutes and clarifications are

kept in c-Folders after digitally signing them. Bid invitation is modified, if required. Last date of

submission also may be modified, if required. An email is sent to all bidders informing the

modifications.

15. Receive Bids, EMD: - Vendors submit techno-commercial bids and price bids in separate

sealed covers. When vendors electronically submit bids, nobody should be allowed to open the

documents till the pre-determined tender opening date and time. Also, while opening the techno-

commercial tenders, price should not be visible to anybody. Prices should be visible only after

pre-determined price bid opening date and time. EMD may be received in the form of a Bank

Guarantee or DD/Pay Order. EMD will be forwarded to accounting department.

Bids: Vendor shall fill the bid invitation with required inputs (Dynamic attributes, price etc

details). The complete tender document (technical & commercial documents only) without price

details shall be uploaded after digitally signing into c-Folders. The data sheets, if any, are filled

in c-Folders.

Complete check lists, appendices and any other documents shall be uploaded in c-Folders.

Bidders can submit bids till the last date of submission given in the bid invitation. Once a bid is

submitted, vendor will not be able to submit the bid again. However, he may request the dealing

officer through email to return the bid for resubmission. In such cases, dealing officer shall

return the bid (Dealing officer will not be able to view the bid) by giving the bid number.

Dealing officer will be able to return the bids only before last date of submission.

Price details (all price conditions) should be only in Bid invitation. Any price related documents

shall be attached in bid invitation (not in c-Folders) only. These documents have to be digitally

signed. A set of pricing conditions relevant for vendor entry are maintained in the system.

Instructions are given to vendor on the price conditions applicable in a bid invitation.

Bidder is required to sign on the bid as well as all documents attached with bid. Accordingly

provision for digital signature as per IT Act 2000 required on bid submission as well as

documents in c-Folders. These signatures are to be verified upon tender opening.

In SRM tenders, all vendors shall be insisted to submit bids along with all appendices involving

dynamic attributes, evaluation matrix, check list etc through SRM only. Bidders would be

allowed to submit only the following documents physically prior to date/time of unpriced bid

closing:

Documents essentially required in physical form:

Tender fee in foreign currency, if applicable

Bid bond in original

Solvency Certificate in original

Any other certificates/documents required to be furnished in original or as certified true

copy as per tender requirement (mandatory)

Documents which can be submitted either in e-form or in physical form

Annual reports

Supporting documents for past experience

Technical catalogues

Any additional information/document bidder wants to furnish.

16. Open Techno-commercial bids (unpriced): - On the pre-determined date and time of

opening technical bids, the technical bids shall be opened in the presence of vendor

representatives.

The system should allow the bids to be opened with due simultaneous electronic authorization of

representatives from purchasing & finance departments. Currently SRM does not support this

functionality. The technical/commercial folders are available only for viewing after opening of

techno-commercial bids. Vendors shall be able to view only their respective documents.

Summary of the documents received from each bidder (either through SRM or manually)

prepared and kept in c-Folders for viewing by respective bidders.

17. Prepare & Sign Evaluation Matrix: - The evaluation matrix comparison is prepared and

signed by the tender committee.

In c-Folders Data sheet comparison gives an excel based report of the values filled by all the

bidders. This report is saved as an excel file and kept in c-Folders for adding the ONGC

comments. Thus this new file gives the complete details of the data given by vendors and also

the comments of the ONGC officers.

18. Forward bids to all concerned for technical/commercial evaluation and obtain

comments with approval: - The technical bidding documents are printed and sent to technical

evaluation committee or indenters, as required. The relevant officers shall receive the copy of

bidding document and deliberate. The officer in charge shall approve the comments and return

the documents. The approved documents are uploaded into c-Folders.

Relevant officers are authorized to view the technical documents in c-Folders. The officers make

a document with their comments and on approval upload the approved document in c-Folders.

This is an internal document and not shared with bidders.

Similarly, the dealing officer verifies the commercial documents and prepares an evaluation

document which is vetted by a finance officer. The vetted document is uploaded into c-Folders.

This document is not shared with bidders.

19. TC meeting for confirmations and approval: - The comments are received and a TC

meeting is convened to prepare TC recommendations for short listing of bidders or to seek

further confirmations from the bidders. The recommendations document is signed by TC

members and endorsed by chief MM and approved by CPA (if CPA is not Chief MM).

The document is uploaded in c-Folders and an appropriate status profile is assigned by the

dealing officer/administrator for approval process.

20. Seek clarifications from bidders: - Optional. Dealing officer shall make a document on

clarifications to be obtained from each bidder and send it to respective bidders. The bidders

should submit their clarifications before a cut-off date.

Final approved document is uploaded into public c-Folders for the vendors to view. A

notification is sent to vendors to inform then regarding the document. Bidder can see the

documents and provide the confirmations. The bidder’s confirmation document is uploaded in c-

Folders in his private area.

20a. Obtain clarifications from bidders and consolidate: - Optional. Clarifications received

form all the bidders are compiled and circulated to all concerned in the organization.

Bidder’s clarifications are compiled and the consolidated document is kept in c-Folders. A

notification is sent by dealing officer to all concerned informing the receipt of clarifications from

bidders.

It is recommended that all required clarifications are obtained once without repeating the process

of seeking clarifications many times to cut cycle time.

21. Final technical comments from all concerned: - Optional. If required, the step 18 is

repeated.

22. TC meeting for short listing of bidders & approval: - Optional. This step is similar to step

19. The comments are received and a TC meeting is convened to prepare TC recommendations

for short listing of bidders. The recommendation letter is signed by TC members and approved

by CPA or endorsed by Chief MM and approved by CPA (if CPA is not Chief-MM). Price bids

of these short listed bidders only will be opened.

The document is uploaded in c-Folders and an appropriate status profile is assigned by the

dealing officer/administrator for approval process.

The short listing of bidders is indicated in c-Folders by setting status for unshort listed vendors

and an interface program between SRM & c-Folders shall update the bids in SRM. The rejection

indicator in SRM will be checked in SRM for the unshort listed bids. The rejection indicator is

renamed as ‘Under Review’.

23. Intimation of price-bid opening date and time to short listed bidders: - Price Bid opening

date & time is intimated to short listed bidders.

The price bid opening date is modified, if required and informed to all short-listed bidders.

23a. (Optional) As per ONGC’s tender conditions variations of tendered quantity up to ± 20% is

allowed for each item at ONGC’s options prior to price bid opening. In case this option is

availed, tender quantity is modified and intimated to short listed bidders.

Modification to bid invitation after the submission date is not allowed in the system and hence

this cannot be done in SRM. However, the same is informed to vendors through c-Folders

notification.

23b. Adjustment Price Bids: - Optional. In exceptional cases, bidders need to submit

adjustment bids (Delta price only) based on the modifications to the bid. Sometimes, they are

allowed to submit only ‘decrease in price’.

Modification to bid invitations/bids after the submission date is not allowed in the system and

hence this cannot be done in SRM. However, obtaining the adjustment bids details can be done

through c-Folders and update the details in comparison statement.

24. Opening of price bids: - Price bids of short listed bidders will be opened in the presence of

vendors’ representatives.

The system should allow the bids to be opened with due simultaneous electronic authorization of

representatives from purchasing & finance departments. Currently, SRM does not support this

functionality.

Bids as given in SRM and adjustment price bid, if any, received in c-Folders should be opened.

Bidders present are informed of the prices quoted by other short listed bidders at this stage.

25. Prepare & sign comparative statement: - A comparative statement is prepared and signed

by dealing officer and checked by one higher officer.

The price comparison statement is generated by the BW system which is seen from SRM.

Domestic price/purchase preference factors etc, if any, are applied while making the comparative

statement. Landed cost is determined in the comparative statement for each item (or group of

items, as the case may be) in the bid also for overall bid. Ranking for each item or group of items

as the case may be, is done. The comparison statement is downloaded from the report; loading

factors are applied and uploaded into c-Folders for further processing.

Comparisons are also made of L-1 rates (Evaluated rates) with respect to corresponding last

purchase rates (LPR) as well as estimates for briefing TC/CPA. Last purchase rate is taken from

R/3 and estimates are taken from PR values and comparison sheet is prepared in BW.

25a. Vetting of comparative statement: - The comparative statement is vetted by appropriate

finance authority.

25b. Preparation of brief to TC: - Total financial implication for placement of orders at L-

1prices is to be worked out both vendor wise and work centre wise. Comparison to be made w.r.t

required fund and available funds for each work centre. In intimation/alert to indenter and

concerned work centers to be made for additional funds.

The comparison sheet with LPR and PR values as described in point 25 is provided.

25c. TC meeting & Approval: - A TC meeting is convened and recommendations are prepared

and signed by TC members. The recommendations document is signed by TC members and

approved by CPA or endorsed by Chief MM and approved by CPA (if CPA is not Chief-MM)

26. Negotiations with L1: - This step is optional. CPA/Director shall authorize price

negotiations as per internal guide lines. In case, order for same item is to be distributed between

more than one bidders, same is specifically spelt out in tender. In such cases, negotiations with

bidders (say L-2, L-3) i.e. other than L-1 bidder will be involved.

Price may be changed as a result of negotiations. Price comparison w.r.t LPR/Estimates (step

25a) and TC brief (step 25b) are to be repeated, if required.

Modifications to bid invitations/bids after the submission date are not allowed in the system and

hence this cannot be done in SRM. However, obtaining the adjustment bids details can be done

through c-Folders and update the details in downloaded comparison statement.

27. Proposal for successful bidder: - Successful bidder is decided based on the ranking in

comparative statement or to the L1 bidder based on the negotiation. Sometimes, multiple bidders

are declared as L1 bidder.

A proposal is prepared and kept in c-Folders. This is not shown to bidders.

28. TC meeting for award of contract and approval/endorsement: - A formal TC meeting

decides to award the contract to successful bidder(s) and the contract terms are finalized. The

proposal is approved by competent authority. If the bid requires approval of EPC, then steps 25a

and 25b are also required.

Necessary documents are kept in c-Folders and approvals are obtained in c-Folders.

28a. Preparation and submission of EPC brief: - A proposal for EPC approval is prepared

with summary bid data. This proposal is forwarded to EPC members. These are specific formats

for check list, summary and annexure of brief to EPC. SRM to generate these documents.

System shall provide reports from objective data like comparison sheets. These reports can be

downloaded and kept in c-Folders along with other necessary documents. These documents are

either printed and sent to EPC or can be accessed from the c-Folders.

28b. EPC approval: - EPC members deliberate on the proposal and approve the document.

Sometimes, EPC may ask for review of the proposal. Then the entire process (or some steps in

the above process) may have to be repeated based on the comments of EPC. Within two days of

EPC meeting, EPC cell with approval of director issues a summary of EPC decision. Detailed

minutes of EPC meeting is issued later on by EPC cell. These approvals are confidential and to

be accessed by select few only.

EPC record note can be kept in c-Folders. Based on the EPC record note some of the steps

described above may be repeated.

29. Issue of LOI to successful bidder(s): - Letter of Indent or Letter of Authority is issued to

successful bidder(s). (In EPC cases, upon the receipt of summary of decision).

The bid invitation in SRM is accepted based on the approvals o CPA/EPC.

Then a PO is created in the backend R/3 system based on the acceptance.

30. Release of EMD’s of unsuccessful bidders: - EMD of unsuccessful bidders is released.

This step is done in R/3 and current R/3 process is continued.

31. Receive security deposit from successful bidders and release EMD: - Security deposit

(Either Bank Guarantee or DD/Pay order) is received from the successful bidders before

awarding the contract.


32. Prepare PO/Contract: - A PO/Contract is prepared based on the successful bid.


33. Sign PO/Contract & Transmit: - The PO/Contract is approved (may be more than one

vendor) and transmitted to vendor.

New Dimensions Offered by e-Procurement solutions

Reverse Auction: -

Process of reverse auction: -

May use purchaser’s own servers or a hired auction site

Auction open to those who are authorized to access the site

Prequalification

Electric bidding takes place for specified set time period

Advantages of reverse auction

Process Efficiency – Reduction of Negotiation Cycle time

Transparency with increased competitiveness

Each bid is a negotiation in itself, expanded market

Real Time Submission of bids and Competitive Response

Perfect Competition – Market is the Price Driver

Supplier negotiates with market, not with buyer

Difference Between Normal Auction And verse Auction

Normal Auction Reverse Auction

Seller conducts auction Purchaser conducts auctionProcess continued till highest bid is received Process continues till lowest bid is received

The seller, buyers physically present at the place of auction

The purchaser and sellers are present on web and each participant can see the bids given by others

A Quick Tour of ONGC e-Procurement

List Open Bid Invitations

Click on ‘Process Bid’ in the left Pane to find Bid Invitations relevant for you.

Process Bids Page appears in the right pane as shown below. Click on ‘Start’ button to see the

list of Bid Invitations relevant for you along with Submission Deadline and the processing status.

If you want to restrict the number of Bid Invitations displayed, please click on Extended Search

hyperlink.

Select the Sub Deadline from the list as required and click on Start button

A list of Bid Invitations appears in Search Result. Click on any Bid Invitation number hyperlink

to view the Bid Invitation.

The selected Bid Invitation will be displayed (Please see the screen shot below). The Bid

Invitation is displayed in multiple screens (General data-Basic Data, General data-Information

from Purchaser, Item Data etc).

General Data-Basic Data

Basic details of Bid Invitation, important dates and Tender Fee details are shown here.

General Data-Attributes

Click on this tab to see important queries to be replied before submitting a Bid.

Bid Invitation Documents (Attachments)

Link to Attachments

General Data - Information from Purchaser: Click on this tab to see the link to documents

pertaining to the Bid invitation.

Purchase Officers also may give important information about the Bid invitation under the

heading – Vendor Text.

Click on the Collaboration Bid Invitation to see document attachments pertaining to the given

Bid Invitation. Please note that you should allow pop-ups on this site. A pop-up ‘Application is

starting….’ appears. Click on OK button in the pop-up.

The document attachments site will open in a new window. You might see a Security Alert

window as shown below. Click on Yes button to proceed.

Documents Folder Structure

The Document Attachments window appears as shown below.

The Document Attachments window appears as shown below.

Note1: If you get a screen to enter user id and password, please enter User Id ‘Guest’ and

password ‘Guest’.

Note2: If you get a screen with an error ‘No Collaboration exists’. Click on ‘Home’ link below

the ONGC logo. From there, select the ‘Collaboration Bid Invitation Zxxxxxxxx’ where

Zxxxxxxxx is the current bid invitation.

The left pane shows the folders and right pane shows the contents of the active folder. Click on

the arrow to see the complete folder structure.

The complete folder structure is shown as below. Click on any folder to see the folder contents.

The Tender Documents folder contains all the documents pertaining to the given tender except

amendments. The Amendments to Tender Documents folder consists of all Amendments. The

Booklet folder contains Tender Booklet. Bidders’ Documents folder contains the outline of

mandatory documents to be submitted by the bidder.

Documents – View & Download

Each folder consists of documents. The attachment link is given under Current Version column

against each document name. The documents will normally have an extension .SSIG indicating

that they are digitally signed and encrypted. To view or download any document, click on the

link under Current Version column. Please note that pop-ups should be allowed on this site.

The digital signature of the attachment is verified before allowing you to view the contents of the

document. The verification window is opened as shown below. Click on OK button in the pop-

up.

Digital Signature Verification window appears as follows. The digital certificate of the person

who digitally signed the document appears in this window. Click on View Content link at the

bottom of the window to view the attachment. To download the attachment, right click at View

Content hyperlink and click on ‘Save Target as’

Once all the documents are viewed, close the windows to return to Display Bid Invitation screen.

Bid Invitation - Item Data

Item Data : Click on Item Data tab to display List of Items and their details in the Bid Invitation. Item Overview screen appears as shown below on clicking on Item Data.

Click on Item number hyperlink to see details of the item as shown below.

Item Data – Basic Data : The item details like description, quantity, and Group and Consignee

wise distribution of the quantity are shown in Basic Data. Port Consignee wise quantity (Pt

Consign and Qty columns) and Ultimate Consignee wise quantity (Ult. Consign and Qty

columns) are displayed here.

Click on Item Number hyperlink to see item details

Item Data – Information from Purchaser : More details about the item like specifications are

shown here under Vendor Text.

PAYMENT PROCESS

INDIGENOUS PAYMENTS

The term Indigenous Payment refers to making payments to the vendors for the supplies made

with in India. After placing the purchase order and when the required material is ready after

inspection with the supplier, supplier sends intimation to ONGC that the items are ready to be

transported and seeks for the decision on transport. ONGC either arranges the transport or

requests the vendor to transport on their transportation depending on the cost of transportation.

The supplier sends the material to the concerned ONGC Department. After sending the material,

the vendor submits the documents as per the Purchase order conditions to ONGC work center for

payment along with the invoice and Lorry receipt or rail receipt through the bank. After receipt

of the documents the concerned finance section of the work center verifies the documents and

the payment is released through the bank if no discrepancies are observed. If there are any

discrepancies the matter will be sorted out by Corporate MM section with the supplier and the

payments are released accordingly.

Thus, the material reaches work centre from the vendor by rail or road as the case may be.

IMPORTED PAYMENTS

Imported Payments refer to the payments made to the vendors who are in foreign countries. For

making imported payments, some financial tools are used which are describes below:

LETTER OF CREDIT

A letter of credit (also called LC or Documentary Credit) is a secure payment method undertaken

by the buyer’s bank on behalf of the buyer, to pay a seller a given amount of money. On

presentation of specified documents representing the supply of goods within specific time limit.

The documents involved conform to terms and conditions set out in the letter of credit. And are

to be presented at a specific place.

Documentary letter of credit are usually regarded as low risk, as the bank only pays the

beneficiary upon presentation of the documents evidencing that the shipment of the goods has

been made of the services provided.

The whole process of opening of L.C. and making payment via L.C. is shown through a

flow chart:

The following Parties are involved in this procedure:

Beneficiary

The beneficiary is the supplier who is entitled to payment as long as he can provide the

documentary evidence required by the letter of credit.

Issuing Bank

The issuing banks' role is to provide a guarantee to the seller that if compliant documents are

presented, the bank will pay the seller the amount due and to examine the documents, and only

pay if these documents comply with the terms and conditions set out in the letter of credit.

The issuing bank's liability to pay and to be reimbursed from its customer becomes absolute

upon the completion of the terms and condition of the letter of credit. Under the provisions of the

Uniform Customs and Practice for Documentary Credits, the bank is given a reasonable amount

of time after receipt of the documents to honor the draft

Advising Bank

An advising bank, usually a foreign correspondent bank of the issuing bank will advise the

beneficiary. Generally, the beneficiary would want to use a local bank to insure that the letter of

credit is valid. In addition, the advising bank would be responsible for sending the documents to

the issuing bank. The advising bank has no other obligation under the letter of credit. If the

issuing bank does not pay the beneficiary, the advising bank is not obligated to pay.

Buyer

A buyer is one who requires material and in order to fulfill its requirement he purchases the same

from the supplier.

Flow of events that takes place in making payment via L.C. are as follows:

1. Buyer and seller agree to conduct business.

2. The seller wants a letter of credit to guarantee payment.

3. Buyer applies to his bank for a letter of credit in favor of the seller.

4. Buyer's bank approves the credit risk of the buyer, issues and forwards the credit to its

correspondent bank (advising or confirming). The correspondent bank is usually located in the

same geographical location as the seller (beneficiary).

5. Advising bank will authenticate the credit and forward the original credit to the seller

(beneficiary).

6. Seller (beneficiary) ships the goods, then verifies and develops the documentary requirements

to support the letter of credit. Documentary requirements may vary greatly depending on the

perceived risk involved in dealing with a particular company.

7. Seller presents the required documents to the advising or confirming bank to be processed for

payment.

8. Advising or confirming bank examines the documents for compliance with the terms and

conditions of the letter of credit.

9. If the documents are correct, the advising or confirming bank will claim the funds by debiting

the account of the issuing bank.

10. Advising or confirming bank will forward the documents to the Issuing Bank.

11. Issuing Bank will examine the documents for compliance. If they are in order, the Issuing

Bank will debit the buyer's account.

12. Issuing Bank then forwards the documents to the buyer.

13. Buyer than send the documents to the respective ports and thus the material is received.

TYPES OF L/C

Revocable

A revocable letter of credit allows for amendments, modifications and cancellation of the terms

outlined in the letter of credit at any time and without the consent of the exporter or beneficiary.

Because this places the exporter at risk, revocable letters of credit are not generally accepted.

Irrevocable

An irrevocable letter of credit requires the consent of the issuing bank, the beneficiary and

applicant before any amendment, modification or cancellation to the original terms can be made.

This type of letter of credit is commonly used and preferred by the exporter or beneficiary

because payment is always assured, provided the documents submitted comply with the terms of

the letter of credit.

ONGC opens irrevocable Letter of credits.

Transferable

An irrevocable letter of credit may also be transferable. With a transferable letter of credit, the

exporter can transfer all or part of his rights to another party. Transferable letters of credit are

often used when the exporter is the importer's agent or a middleman between supplier and

importer, and not the actual supplier of merchandise. With a transferable letter of credit, the

exporter uses the credit standing of the issuing bank and avoids having to borrow or use his own

funds to buy goods from a supplier. Hence, it is a viable pre-export financing vehicle.

ONGC has tied up with STATE BANK OF INDIA to open Letter of Credit on its behalf.

ONGC has paid Apporx Rs.750 Crores as the LC Fee to SBI in FY-2007-08.

SBI offers Letters of Credit to facilitate purchase of goods in international trading operations.

Backed by SBI's strong reputation ONGC is able to build better trust in trade and forge business

relationships faster.

The bank's vast network of branches and correspondent banks enables ONGC to sustain a

seamless flow of business on a wide platform.

The Documents required for opening of LC with the bank are:-

Purchase order with all its amendments (if any)

Bill of Lading

Undertaking

Judicial stamp paper of Rs 100

L/C cover note which includes all the clauses of PO :

PO no. and Date.

Delivery date and negotiation date.

Transshipment allowed or not allowed

Certificate of test & inspection and recent manufacturer

Beneficiary address & its banker name

PO. value in figure & words.

Port of export

Port of unloading

Certificate of warranty to quality.

Forwarding letter showing the PO no., date, value & party name, and chapter no & item

no. is mentioned as per import & export policy.

BILL OF LADING

A Bill of Lading is a type of document that is used to acknowledge the receipt of a shipment of

goods and is an essential document in transporting goods overland to the exporter's international

carrier. A through Bill of Lading involves the use of at least two different modes of transport

from road, rail, air and sea. The term derives from the noun "bill", a schedule of costs for

services supplied or to be supplied, and from the verb "to lade" which means to load a cargo onto

a ship or other form of transport. In addition to acknowledging the receipt of goods, a Bill of

Lading indicates the particular vessel on which the goods have been placed, their intended

destination, and the terms for transporting the shipment to its final destination. Inland, ocean,

through, and airway bill are the names given to bills of lading.

In the hands of the shipper a bill of lading serves as evidence of the contract of carriage though it

contains the terms of carriage. The contract with the shipper is likely to have been concluded

orally long before the issue of the bill of lading. The document may vary some of the agreed

terms or contains terms that have not been agreed to by the parties.

Findings:

Enterprises today are using e-procurement to manage more requisitions, spend categories, and

suppliers than ever before. Launching an e-Procurement solution can help in reducing both direct

costs and indirect costs. Through this company can increase purchasing efficiency; reduce

overall production time; and improve purchasing controls.

The key benefits of E-Procurement are: -

Improved Supplier Management: - E-Procurement solutions enable your company to locate

suppliers with the best price and quality, and help streamline the negotiation and contracting

processes.

Cost Reductions and Procurement Savings: - E-Procurement helps to increase the

productivity and lower the cost of purchasing staff. Company can reduce reliance on paper-

based documents, such as request for proposals, responses and purchase orders. It can also

leverage company’s buying power by qualifying for volume discounts or special offers. On

average, E-Procurement cost reductions and savings range from 15 to 35 percent, depending

on your level of integration.

Improved Documentation: - E-Procurement helps improving reporting and record keeping

by electronically tracking and recording transactions. This helps to increase order fulfillment

accuracy and eliminate untracked or sporadic buying habits.

Increased Speed: - e-Procurement helps employees automate many routine purchasing tasks,

eliminate redundant tasks (such as requisition approval), and increase purchasing efficiency.

Recommendations:

Concern about security and privacy is one of the major factors restricting the growth of e-

Procurement. In summary, an organization should consider securing itself against:

Damage to business reputation

Failure to comply with internal policies, national requirements and the law

Loss, corruption or sharing of commercially sensitive or business critical information

Loss of business continuity due to loss of business critical systems or information

Loss of commercial position due to inappropriate sharing of commercially sensitive

information or the inability for potential suppliers to participate.

In general, the types of security breaches that may occur include:

Fraud and financial loss, including misappropriation of funds and leaking of sensitive

information (e.g. pricing information).

Lack of commercial awareness amongst employees.

Theft of data on laptops or other hardware items.

Thus sufficient care must be taken to prevent such kind of thefts. Some of the measures are as

follows:

When transferring information over the Internet you must be assured of:

Confidentiality – no one apart from authorized parties can read any of the details of the

transaction. To ensure confidentiality over the Internet, encryption should be used.

Integrity – ensure no one has tampered with the transaction en route. This is typically done

through the use of algorithms and check digits. If a transaction is found to be corrupt, then it can

automatically be re-sent.

Authentication – both sending and receiving parties can positively identify each other. The use

of user ids, passwords and digital certificates ensures that electronic impersonation cannot occur.

Non-Repudiation – evidence of the details of a transaction can be provided, so that neither party

can deny it has taken place, i.e. the audit trail. Solution providers determine how this will be

done in each case.

Backup and Recovery

The increasing dependence on systems and technologies for business critical processes is making

organisations vulnerable. This is enhanced by the trend of using systems and technologies that

are outside our IT department’s immediate control. More and more systems are being hosted and

managed by third parties, i.e. Application Service Provision (ASP), and delivered to end users

using the Internet infrastructure. From a Procurement point of view this includes Internet

services such as marketplaces, suppliers’ web sites and e-Sourcing solutions, but it can also

include the external hosting of core business systems such as Finance.

Organisations intending to use Internet-based solutions need to satisfy themselves that:

System functionality is accessible at all times that it is needed by all stakeholders

The service provider has adequate contingency plans in case of physical or technical

disaster and that these are regularly tested.

Company must have a contingency plan which can be implemented in the case of the

system provider ceasing trading (a very real risk in today’s technology sector)

Any service provider used has the same levels of confidence and contingency with its

third party technology providers.

Annexure-A

The activity-wise responsibilities in the e-procurement system.

11 Activity Manual (M)/ Electronic(E)

Responsible officer(s)

1 Consolidation of PRs generated in SAP R3/MM.

E In Charge P&E Section of Corporate MM for Type-A items.

2 BEC formulation M T.C.3 BEC approval M CPA4 Creation of Bid Invitation in SRM E Dealing Purchase Officer(s). 5 Uploading of scanned copies of all

related noting/documents of T.C after approvals in C-folders (internal folders)

E Dealing Purchase Officer(s).

6 Release of tender document in system for publishing tender.

E I/C MM

7 Affixing digital signature on documents and Publishing of tender in SRM

E Dealing Purchase Officer(s)

8 Issue of authorization on internal documents and e-bids to other ONGC officials as necessary in process of e-tenders.


9 Access Authorization to new vendors.

E I/C MM

10 Allowing tender fee exempted vendors to participate in particular tender against request.


11 Return of E-Bid before the due date for bid submission against specific request from the vendor mentioning Bid number.

E Tender Administrator.

12 Pre-Bid Conference M T.C.13 Uploading of minutes of pre-bid

conference after due approvals with restricted access to those bidders who have paid tender fee or who have been allowed to participate in particular tender




without tender fee.14 Issue all amendments to tender

documents in system with necessary approvals.


15 E-Bid opening on specified due date and time

E Automatic

16 Opening of original documents permitted to be submitted in physical form on due date and time. (Manual process).

M Nominated tender opening officers

17 Uploading of bid opening report with restricted access to bidders who have submitted the bids for unpriced bids and short listed bidders in case of price bids


18 Compilation of Bid Evaluation Matrix.

M TC

19 Uploading the evaluation matrix in internal Folders.


20 Technical Evaluation of E-Bids. M P&E section / Technical evaluation committee

21 Price Comparative statement generation.

E Dealing Purchase Official/Officer.

22 Checking of C.S E Purchase Officer at the required level, based on the monetary limits as specified in MM Manual.

23 Vetting of C.S E Finance Officer at the required level, based on the monetary limits as specified in MM Manual.

24 All correspondences to bidders through system (C-folders)


25 Seeking Adjustment prices from bidders, if any prior to price bid opening with approval of competent authority


26 Price Negotiations with L-1 wherever applicable

M T.C

27 Purchase related Recommendations after viewing E-bids.

M T.C



28 Approval of T.C recommendations.

M Competent Authority

29 In case of EPC cases, uploading EPC agenda in specific folder in the system after endorsement of Director


30 Uploading Scanned copies of technical comments approved T.C minutes and EPC decisions immediately on receipt of same in appropriate internal folders in system.


31 Acceptance of bids in SRM for placement of order as per approval of CPA.

E P.O Signing authority

Annexure-B

Comparative statement (technical)

Comparative Statement of Tender No.------------- for supply of ------------- (Un-priced Bids)

Tender no:

Tender opening officers: 1.

2.

Estimated Value:

Date of opening:

No. of tender documents Sold:

No. of tender sets received in time:

No. of late tenders received:

Techno-commercial

points

Name of the Bidders

Items Quoted

Submission of bid in e-portal and Physical documents within scheduled date and time

Category of Bidders

Submission of Back up authority Letter

Currency of Quote

Submission of “Certificates of Compliance” for having necessary financial strength

Acceptance to ONGC tender conditions

Submission of “Bidders Response Sheet-Appendix-9

Submission of Evaluation Matrix

Submission of certificate of declaration that the firm is not under banning orders.

Submission of Power of Attorney

EMD/Bid Bond

Bid Bond Validity

Validity of offer

Delivery Schedule

Payment

Integrity Pact

Indian Agent Commission PAN No.

CST / VAT

Insurance

Octroi

Documents submitted towards Financial Strength

Financial strength

(Vetted by Finance, copy at sl. )

ii) Average Turnover

ii)Net Worth

Name of Manufacturer

Place of offer

Acceptance of terms & conditions of tender as well as Booklet

ONGC/MM/01

Letter from manufacturer for having testing facilities and agree for inspection by TPI.

Prepared By: Checked By:

Vetted By:

Annexure-C

BID EVALUATION MATRIXTender no: for supply of Tender opening officers: 1. Date of opening: 2.Estimated Tender Value: No. of tender documents No. of tender sets received in time: No. of late tenders received:

SL. NO.

BEC / TENDER REQUIREMENTS Company A

Company B

Company C

1

Bidders to confirm that they have not taken any exception/deviations to the bid document even after Pre-bid conference.

2

Confirm that the product offered strictly conform to the technical specifications as appended in the tender documents ?.

B.1 TECHNICAL CRITERIA B.1.1 Is the bid complete in all aspects

covering entire scope of supply for each item quoted and conform to the

technical specifications indicated in the bid document duly supported with catalogue/technical literature wherever applicable ?

B.1.2 Whether manufacturer has submitted documentary evidence for offered item(s) along with the techno-commercial bid for the following:

(a) Minimum3 years of experience of manufacturing drill collars. For this purpose the period reckoned shall be the period prior to the date of opening of the techno-commercial bid.

(b) Should have manufactured and supplied drill collars at least 10% of tendered quantity to various oil and gas specific companies in the last 7 (Seven) years.

BIBLIOGRAPHY

ONGC Website

ONGC Annual Report 2007-08

Financial Express: http://www.financialexpress.com/news/Focus-on-EampP-ONGC-

told/221214/#

Alexanders Gas and Oil Connections: January 12, 2006;

http://www.gasandoil.com/goc/company/cna60207.htm

CIA World Fact book: 1,129,866,154 (2007 Est.)

Yahoo Finance: http://biz.yahoo.com/ic/57/57106.html

Strategic Management: Case Section Pg 273

University of Alberta: December 21, 2005 Reuters,

http://www.uofaweb.ualberta.ca/chinainstitute/nav03.cfm?

nav03=44239&nav02=43874&nav01=43092

Yahoo Finance: http://biz.yahoo.com/ic/ll/120mkt.html. This site gives all the major

players in the oil and gas industry.

Yahoo India News: http://in.news.yahoo.com/050727/139/5zi9q.html