Procurement Manual

1.0.0 INTRODUCTION
It has in fact been estimated that over sixty percent (60%) of projects cost is spent on materials and components, the economic purchase, storage and control of which can make a significant contribution of project success and increase profit margin. The ever widening range of technical equipments in the project locations and the growing importance of materials in the activities of the yard and project sites serve to emphasize the value of adequate procurement processes, effective store-keeping procedures and stock control in the company operations. The management from the interview received so far has a keen interest in the effective and efficient purchasing system and proper stores management and I am pleased to see the increasing tendency towards the establishment of an integrated purchasing and Stores Department thus providing for users not just separate buying and stores function but fully co-ordinate supplies services covering all aspect of material supply. All procurement of goods, works or services therefore deserves the highest degree of public trust and must be conducted within the standards of global best practice. This manual shall serve as a guide to all staff engaged directly or indirectly in the procurement of goods, works, and services to ensure that best practice, efficiency, effectiveness, economy and competitiveness are achieved.

1.1.0

OBJECTIVES

Effective and efficient service delivery to all operational units-material user departments, maintenance, etc is the principal objectives of Purchasing and Stores department, but it is obviously desirable to provide that service economically. On this note, Purchasing and Stores function must ensure that there must be value for every naira spent.

1.2.0 RESPONSIBILITIES 1.2.1 General

The general responsibility of the Purchasing and Stores Department is To make available a balance flow of materials, components, tools, equipments, petroleum products etc to meet operational requirement as at when needed

1.2.2

Specific Responsibilities

The specific responsibilities of the Purchasing and Stores Department is

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To determine and establish material requirements for any project from Design and Project department for materials forward to planning and budget allocations. To buy the project and companys requirements of materials, components, machineries, industrial equipments, consumables, and services in the required quantity and quality at the most advantageous price and economic cost. To advice on materials availability, lead times, alternative materials available and potential delay in obtaining delivery. To build up supplier goodwill by such means as fair dealing, the provision of cooperation and assistance and ensuring prompt payment. To integrate the purchasing activities with all related functions of the undertaking by working in close collaboration with those functions especially concerning the interchange of information and expertise. To ensure efficient and effective storekeeping to promptly meet operational requirements. To keep losses in inventory arising from duplication, waste, deterioration, obsolescence or pilferage to a minimum and dispose of surplus items in the most favorable terms.

To keep under review purchase policies, procedures and staff development so that the above objectives can be most effectively achieved.

2.0.0

CARDINAL PRINCIPLES

To provide an efficient and effective procurement system that ensures optimal value in the acquisition of goods and services, procurement in shall be anchored upon the following cardinal principles.

2.1.0

Value for Money

Procurement staff shall in all procurements seek to obtain efficiently, ethically and with best judgment, the best value for monies spent on goods, works and services.

2.2.0

Transparency and Accountability

Procurement in shall be conducted in a manner that will enhance credibility and public trust in all processes without impropriety or any appearance of impropriety. All business transactions on behalf of must be reflected accurately and fairly in accordance with best commercial practice and ethical standards and shall be subject to both internal and external audit.

Procurement Manual

2.3.0

Competition

Competition shall be the foundation of procurement and all vendors shall be given a fair opportunity to participate without discrimination or preferential treatment. All cases requiring waiver to competition shall adhere to strict reviews and approval process to ensure that it is not abused.

2.4.0

Minimization of Risk

Procurement in shall seek to minimize risks by appropriately apportioning risks, liabilities and obligations to all parties involved in procurement contracts. It shall also seek to guide against non-compliance with specification and terms of contract, overpayment for goods and services, loss of commercial opportunity, acceptance of defective supplies, unnecessary exposure to uninsured liabilities, as well as financial and reputation loss in all procurements.

3.0.0

PURCHASING ORGANISATION

The organization of the Purchasing and Stores Department will be centralized under the direction and management of Purchasing Manager. This will give the following advantages. a. Economies Of Scale Centralized purchasing enables an undertaking to use its bargaining power and resources to the best since - Consolidation of quantities can take place resulting in quantity discounts or rebates - Suppliers dealing with a central purchasing department have the incentive of competing for the whole or a substantial proportion of the undertakings requirements. - Cheaper prices may result from aggregate purchasing. b. Coordination Of Activity - Uniform purchasing policies can be adopted - Uniform purchasing procedures can be followed. - The determination of order quantities and delivery dates is facilitated. - Back-up services, especially stock control and progressing, can be coordinated. - Purchasing research into sources, quantities and suppliers performance is facilitated. c. Control Of Activities- In centralized purchasing, - Budgeting control may be applied both to purchasing department and to the total expenditures on supplies. - Uniformity of purchase prices obtained by centralized purchasing assist standard costing. - Inventory may be controlled, reducing obsolescence and loss of interest on capital locked up in excessive stocks. - Performance of the purchasing department can be monitored by fixing objectives and comparing actual results with predetermined standards.

Procurement Manual

3.1.0 PROCUREMENT AUTHORITY AND JOB DESCRIPTION FOR PURCHASING AND STORE STAFF Procurement functions shall include all actions necessary for the acquisition, by purchase or lease of goods, works and services.

3.1.1

The Procurement Manager

The oversight authority for all procurement functions is delegated to the Procurement Manager. He shall coordinate and oversee all procurements

3.1.2

Responsibilities of Procurement Manager

- Coordinate all procurement activities of in order to ensure timely and consistent supply of all goods, works and services required. - Review procurement requisitions submitted by departments to ensure compliance with procurement procedures. - Oversee preparation and dispatch of tender/bid notices and follow up replies. - carry out comparative evaluation and shortlist firms to be included in requests for quotation and invitation to bid. - Keep accurate records of market trends, data on the prices of products, list of vendors of various products and services. - Monitor and follow up deliveries, verify goods, works and services received to ensure strict compliance to specification and conditions of contracts, approve the Goods Received Note and rate supplier performance. - Prepare contracts and service level agreements for Vendors, liaise and negotiate to finalize terms and conditions of contracts. - Maintain proper records and files on procurement activities - Maintain cordial relationship with other units and departments by providing professional/expert information and advice on their procurement needs.

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3.1.3

Responsibilities for Buyers

Duties and Responsibilities 1. Receiving purchase request and register same 2. Sourcing for items and issue request for quotation/ bids to suppliers 3. Receiving and analyzing quotations for comparison and prepare Local Purchase Order for approval. 4. Follow up with supplier to ensure prompt delivery. 5. Maintaining records of the quantities and value of orders placed with different suppliers. 6. Compiling statistical information on suppliers and prices. 7. Dealing with queries on requisition and checking authorization before orders are placed 8. Supervising with responsibility for some price negotiation and placing of orders for more important items under the direction of the Purchasing Manager.

3.1.4

Responsibilities for Store Controller

Duties and Responsibilities 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Assessing the items to be held in stock Deciding the extent of stockholding of items individually and collectively. Receiving and issuing materials as required. Accept and store scraps and other discarded materials as it arises. Ensuring safety of all items an all location. To collect on daily basis Goods Receive Note, Store Issue Voucher, Waybill and invoices from storekeeper and process same for Purchasing Manager approval. To prepare daily, weekly and monthly reports of stock items and send same to the Purchasing Manager. Stores supervision/periodic stock taking in the various units and inventory of office equipments and guest rooms. To handle work order and follow-up for a successful completion. To ensure proper identification, classification and coding of all stock items in various stores. Compile list of damage, obsolete, scrap and surplus materials and report same to the Purchasing Manager. Preparing daily balances of major and important items. Maintenance of stock records.

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3.1.5

Responsibilities for Store- Keepers

Duties and Responsibilities 1. 2. 3. 4. 5. 6. To receive goods from supplier, buyer and other store unit in the organization. To issue materials out to the user after proper authorization. To keep stock records and post bin cards any time issues are made To arrange the item of stock neatly and according to there classification. To label each bin accordingly for easy identification of stores. To conduct stock checking at interval and ensure that physical counts tallies with the records balance and in good condition. 7. To return or submit GRN and invoices daily for posting. 8. Inspection or examination of incoming items for quality with assistance of technical or users department before the items are accepted into stores.

3.2.0

PURCHASING AND ITS FUNCTIONAL RELATIONSHIP.

This is to emphasis the importance of all subsystems working together to achieve the corporate objective of the organization. Purchasing and store probably works mostly with all the departments and a close contact with finance and Accounts.

4.0.0

PROCUREMENT POLICIES

Policy comprises the body of principles express or implied laid down to direct an undertaking or a department towards the achievement of its objectives and guides the officials in making their decisions. It is important for to fulfill social responsibilities demanded of a corporate organization. Based on this understanding, procurements in shall adhere to the following policies. a. Management and protection of information All classified or otherwise sensitive information obtained through procurement activities shall not be divulged without the express written consent of the other party. Such information shall be treated as confidential. b. Provision of fair participation opportunities. All eligible bidders both foreign and local shall be given the same information and equal opportunity to compete in providing goods, works and services.

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c. Selection of vendors/ suppliers Aside the cost, other factors such as reliability of management, quality, safety, accuracy of supplies, after-sales service etc. shall be reviewed as a whole before selection is made. d. Establishment of mutual trust with suppliers. Crest shall seek to establish mutual trust with vendors through fair purchasing transactions; and shall work to establish a trade relationship that lasts and allows both parties to prosper in the long run. e. Strict adherence to Financial policy All procurement shall be carried out in strict adherence to and without deviation from financial regulations f. Terms of payment for goods and services Payment of suppliers for goods, works or services shall not be earlier than seven (7) working days after delivery or completion of work order to enhance company cash flow system and adequately budgeted for. g. Security, Safety and health Safety and health measures shall be emphasized, observed and secured in all procurements.

4.1.0

PROCUREMENT ETHICS

The procurement department shall seek to increase public confidence in its procurement process by allowing vendors to compete for transaction opportunities on a fair basis. Staff associated with the procurement function shall be responsible for protecting the integrity of the procurement process and maintaining fairness in the treatment of all suppliers. The standard of conduct for all staff involved in procurement activities shall include: a. At the pre-bidding phase, staff shall not allow supplier(s) access to information in a particular acquisition before such information is made available to the business community at large. b. Staff shall not use unnecessary restrictive specifications of work that may discourage competition. c. Staff shall not solicit or accept, directly or indirectly any gratuity, gift, favor, entertainment or any promise of future gratification from anyone who has obtained or is seeking to obtain contact from. d. Any staff member found to have financial interest in the bidding process shall be prohibited from any involvement in the procurement action. e. Staff shall not disclose proprietary and source selection information, directly or indirectly, to any person other than a person authorized to receive such information. f. Any staff that procurement authority is delegated to, shall ensure that he/she obtains high quality goods and services at the lowest possible cost and must ensure that all procurement procedures

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are conducted in a fair and impartial manner without any impropriety or appearance of impropriety.

5.0.0

PURCHASING PROCEDURES

Apart from pre-purchase activities such as participation in design and budget decision, all purchasing falls into three main phases.

5.1.0

The Notification Phase

Notification of the need to purchase is usually in the form of either A requisition issued by the stores unit or user department (see appendix one), or A bill of materials issued by the design and project units.

5.2.0

The Ordering Phase

On receipt of the Purchase Requisition Form or Bill of materials, the buyer responsible or the purchasing Manager will check item for accuracy, conformity to any standard specifications and with purchase records to ensure whether the items have been previously purchased and if so, in what quantities and the sources of supply. If the item is standard and has been previously purchased from a satisfactory supplier at an acceptable price, a repeat order may be issued. If however, the item is not standard and has not been ordered before, or for some reason a change of supplier is required, the following steps will be involved. (See appendix two flow chart units for purchasing procedure). Enquiries will be sent to possible suppliers accompanied by additional documents, e.g. drawings, specifications etc which will enable them to quote. Quotations will be received in response to the enquiries and compared with respect to price, quality, delivery, total costs etc and terms of business. When quantities are substantial and quality and/ or delivery of great importance, further negotiation with suppliers including an evaluation of their capacity to undertake the order may be required. A Local purchase order will be issued to the supplier whose quotation, amended where necessary by subsequent negotiation, is most acceptable. copy of the order will be

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Retained in the Purchasing Department for filling. Further copies of the order may be distributed as follows: a. To department originating requisition b. Accounts An order acknowledgement should be required from the supplier. On receipt the acknowledgement should be examined to ensure that the order has been accepted on the terms and conditions agreed and filed.

5.3.0 The Post- Order Phase

- It may be necessary to progress the order to ensure that delivery dates are met or to expedite delivery of overdue orders. - On receipt, the goods will be checked for quantity by the stores where matters of quality or specification are involved they will be examined by the inspection department. If satisfactory, a Goods Received Note will be completed and copies sent to the purchasing department. If not satisfactory, the purchasing department will be notified so that the complaint can be taken up with the supplier. - An invoice for the value of the goods will be received from the supplier. This will be compared with the Local Purchase Order and Goods Received Note. Usually prices will be checked by the purchasing department paying special attention to the legitimacy of any variation from the quoted price. If satisfactory, the Invoice will be passed to the account department for payment. - On completion, the order will be transferred to a completed Local Purchase Order File.

6.0.0 PURCHASING AND STORES DOCUMENTATION 6.1.0 Basic Documents

With both manual and computerized purchasing system, the basic documents used in the purchasing are: Purchase Requisition or Bills of Materials (BOM) see appendix one. Enquiry forms or Request For Quotation (RFQ) see appendix three Local Purchase Order (LPO) see appendix five In addition to the above, we have the stores documentations.

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6.2.0
Purpose: -

Purchase Requisition or Bills of Materials (BOM)

To notify the purchasing department that a need exist. To specify what is required to meet the need. To authorized procurement. To provide evidence as to what was requisitioned, when and by whom.

6.3.0
Purpose:

Enquiry form or Request for quotation (RFQ)

To obtain information from possible supplier relating to price, quality, delivery and terms of business for brought-out items. It is a major tool for sourcing and selecting supplier for effective and competitive business transactions. Number of copies: Two (2). One copy will be kept for reference in the purchasing department, the other for return, will be sent to each prospective supplier who is asked to quote. The number of vendors approached will depend on the importance of the order but a minimum of three (3) is usual. The enquiry should be accompanied by drawing, specifications/ samples and the buyers terms and conditions of purchase.

6.4.0
Purpose:

Local Purchase Order (LPO)

To communicate to the supplier particulars of the purchasers requirements, the price and delivery applicable and the conditions on which the order is placed. A local Purchase Order becomes legal tender or contract. When it constitutes an acceptance by the buyer of a formal quotation submitted by vendor. When it is accepted unconditionally by the vendor if it is submitted without a prior quotation to the buyer.

Number of copies: Five (5) copies are okay as in the existing one and to be distributed as follows. White Suppliers; Pink accounts; Blue store; Yellow Office; Green Booklet. See the appendix five for the required entries in the form. 10

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Remarks: Terms and condition of purchase shall be stated on the reverse of the form. 6.5.0 In addition to the above three (3) major documents, the following forms shall also be in use for effective and smooth running of the department 1. Quotation comparison sheet for analysis of quotations. 2. Cancellation or Amendment to LPO 3. Vendor Appraisal Sheet.

6.6.0

STORES DOCUMENTS

Stock records are expected to show particulars of receipt, issues and balances remaining in stock for each individual item held in the store house, from day to day. Because a system of records of this kind indicates at any time the quantity of goods on hand, it is sometimes described as a perpetual inventory. Purpose of Stock Records: The reasons for keeping stock record are: To indicate the amount of stock of any item at any time without it being necessary for the stock to be counted physically. To establish a link between the physical stock and the stores account. To provide means of provisioning, i.e. determines how much should be ordered to maintain stocks at the required level. To supply information for stock taking, whereby the quantities of all items in the storehouse are ascertained by physical checking and are compared with the corresponding quantity balances on the records. To provide a method of informing storehouse staff of the location of goods in the store.

The following are the basic stock records required for effective inventory management. a. b. c. d. e. f. g. Bin card Store Receipt Voucher/ Goods Receipt Note. Stores Issue Voucher. Stores Requisition Note Transfer Form Return To Store Other forms in addition to the above include Delivery Register/ Good Inward Register, Stocktaking Sheets, Damage report, and waybill. 11

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6.6.1

Bin Card:

It is kept with each physical item to record and show description of the item, unit of issue, quantities received and issued and the balance remaining in the bin.

6.6.2:

Store Receipt Voucher/ Good Receipt Note.

Purpose: It is use to record every goods or item received from supplier, buyers, transfer from other store unit or project site etc.

6.6.3

Store Issue Voucher:

It is a form to record and give details of items being given out by the Store-keeper to user on request. It must be properly authorized and signed by the collector of the item. Number of copies required: It is usually in (4) four copies and distributed as follows: 1. 2. 3. 4. 6.6.4 To user To Purchasing For posting To Account for budget monitoring Retained by Store-keeper for his records and posting of bin cards.

Stores Requisition Note:

It is used to request for stock items from the Store-keeper. Number of copies: It is usually in duplicate. The original is sent to the purchasing for approval and serves as authority to the Store-keeper to release. 6.6.5

Transfer Form:

It is a document used to move stock items from one store house to another. Number of copies: It is used in four (4) copies and distributed as follows: 1. 2. 3. 4. Original to receiving Store- keeper. A copy to purchasing department A copy to Accounts. Book copy to be retained by the issuing Store-keeper. Note: the receiving Store-keeper is required to raise GRN for all transfer form and goods received 12

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6.6.6 Return-to-store:
To return materials that has been drawn from the storehouse and found either to be in excess of their needs or unsuitable for the intended purpose. Number of copies required: The (3) three copies are required and distributed as follows: 1. Original to receiving store-keeper. 2. A copy to Purchasing department 3. To be retained by the concerned user department.

6.6.7

Stores Received voucher/ Goods received Notes

A Goods received Notes (GRN) is maintained by all Store-keepers showing materials received from: Suppliers Buyers Transfer from any location within the organization.

Distribution: A duly prepared GRN and signed by the Store-keeper will be sent to purchasing and distributed as follows: 1. Original to Accounts and finance 2. Blue copy retained by Purchasing 3. Green copy is retained as book copy with Store-keeper. Note: Approved or confirmed GRN (original copy) with payment instruction and copies of invoices by the Purchasing department will be sent to Accounts for processing and payment for the goods purchased and received.

7.0.0

STOCK MOVEMENT PROCEDURES

- Request for stock item: any request for stock item is to be done by the user department through Stores Requisition Note (SRN) duly signed by the HOD.

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- A duly signed SRN must be sent to the Purchasing Department for approval before taken to stores for collection. - Store-keepers are required to confirm the authorization of the stores Requisition Note (SRN) i.e. approval by the purchasing department and HOD before issuing and delivery of the required item. - Store-keepers are required to raise a store Issue Voucher for any item supplied and this must be duly acknowledged by the receiver.

PLEASE NOTE THAT THE Process of creating Requisitioning, Approval and Placement of Purchase Orders Can Be Fully Handled by Advance Computer Technology. One of the examples of such technology is the use of MICROS FIDELIO MATERIALS CONTROL SOFTWARE.

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