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 GUIDANCE
OF

Mr. Upendra Goyal

G.G.M (Finance), ONGC
Scope 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 Technology
NOIDA
In partial fulfilment of award of

Post Graduate Diploma in Management

The work carried out by them under our supervision and
guidance.

Guide Guide
Ronak 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.

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.

 Contents
Authorization………………………………………………………………………………….…i

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

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

Introduction

i. Purpose………………………………...…………………………………………………1

ii. Limitation………………………………………………………………………………….1

iii. 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

Percentage of
Category No. of Shares
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 105,054,973
Companies (Central / State Govt. Instts. / Non- 4.91
Govt. Institutions)
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.
1TYPE ‘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

Indigenous Dehradun
Imported Dehradun

5. Blow Out Preventors and accessories Dehradun

6. Rig (purchase and service contracts)

Onland Dehradun
Offshore Mumbai

7. Spares and assemblies for on-land rigs Dehradun

8. Spares and assemblies for offshore rigs Mumbai / Chennai

9. Well Heads
Onland Dehradun
Offshore Delhi

10. Imported mud chemicals and mud additives Dehradun

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

12. Others - whether indigenous or imported for on-land and Dehradun

off-shore operations
 An Overview of Purchasing Procedure

Different steps of E-procurement

 ONGC Centralised
ONGC Centralised Procurement
Procurement

MM Dept. User/Indenter Finance

Procurement
Payment

Tenders

Indigenous Imported

Legacy System E-procurement

Transportation

& shipping
 ONGC CENTRALIZED PROCUREMENT
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:
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 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.
In all open tenders, certain payments are involved at tendering stage. Vendors need to pay ‘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
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 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)
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
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.

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

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

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

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 auction

Process continued till highest bid is received Process continues till lowest bid is received
The seller, buyers physically present at the The purchaser and sellers are present on web and
place of auction 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 item details

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.
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 Responsible officer(s)

(M)/
Electronic
(E)
1 Consolidation of PRs generated in E In Charge P&E Section of
SAP R3/MM. Corporate MM for Type-A items.
2 BEC formulation M T.C.
3 BEC approval M CPA
4 Creation of Bid Invitation in SRM E Dealing Purchase Officer(s).
5 Uploading of scanned copies of all E Dealing Purchase Officer(s).
related noting/documents of T.C
after approvals in C-folders
(internal folders)
6 Release of tender document in E I/C MM
system for publishing tender.
7 Affixing digital signature on E Dealing Purchase Officer(s)
documents and Publishing of
tender in SRM
8 Issue of authorization on internal E Dealing Purchase Officer(s)
documents and e-bids to other
ONGC officials as necessary in
process of e-tenders.
9 Access Authorization to new E I/C MM
vendors.
10 Allowing tender fee exempted E Dealing Purchase Officer(s)
vendors to participate in particular
tender against request.
11 Return of E-Bid before the due E Tender Administrator.
date for bid submission against
specific request from the vendor
mentioning Bid number.
12 Pre-Bid Conference M T.C.
13 Uploading of minutes of pre-bid E Dealing Purchase Officer(s)
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
11 Activity Manual Responsible officer(s)
(M)/
Electronic
(E)
without tender fee.
14 Issue all amendments to tender E Dealing Purchase Officer(s)
documents in system with
necessary approvals.
15 E-Bid opening on specified due E Automatic
date and time

16 Opening of original documents M Nominated tender opening officers

permitted to be submitted in
physical form on due date and
time. (Manual process).
17 Uploading of bid opening report E Dealing Purchase Officer(s)
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 M TC
Matrix.
19 Uploading the evaluation matrix in E Dealing Purchase Officer(s)
internal Folders.
20 Technical Evaluation of E-Bids. M P&E section / Technical
evaluation committee
21 Price Comparative statement E Dealing Purchase Official/Officer.
generation.
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 E Dealing Purchase Officer(s)
through system (C-folders)
25 Seeking Adjustment prices from E Dealing Purchase Officer(s)
bidders, if any prior to price bid
opening with approval of
competent authority
26 Price Negotiations with L-1 M T.C
wherever applicable
27 Purchase related M T.C
Recommendations after viewing E-
bids.
11 Activity Manual Responsible officer(s)
(M)/
Electronic
(E)
28 Approval of T.C recommendations. M Competent Authority

29 In case of EPC cases, uploading E Dealing Purchase Officer(s)

EPC agenda in specific folder in
the system after endorsement of
Director
30 Uploading Scanned copies of E Dealing Purchase Officer(s)
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 E P.O Signing authority
placement of order as per approval
of CPA.

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 MATRIX

Tender 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. BEC / TENDER REQUIREMENTS Company Company Company

NO. A B C
Bidders to confirm that they have not
taken any exception/deviations to the
bid document even after Pre-bid
1 conference.
Confirm that the product offered
strictly conform to the technical
specifications as appended in the
2 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