ONGC

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• ONGC
• AND
• BUSINESS PARTNERS

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• The Change Process
• Sweeping changes initiated in Contracting Policy
  and Procedures since August 2001 to
• Speed up the Process.
• Improve transparency equity.
• Change from confrontation to collaboration.
• First Vendor Meet held on 5th April 2002.

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• The Change Process
• Specifications BECs
• Tendering Policy
• Tendering Process
• Contract Management
• Internal Processes
• Legal Terms Conditions
• Dispute Resolution
• Others

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Specifications and BEC

• Removal of ambiguity in framing specifications
• Specifications should be focused on
• Compliance with National and International codes.
• Exact operational requirements.
• Sourcing Best-in-Class Technology in critical
  areas.
• Indentor/ user has exclusive authority on
  specifications.

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Specifications and BEC

• In Turnkey Contracts, specifications to be based
  on CRINE.
• Vendor inputs welcomed in framing the
  specifications BECs.
• BEC followed in the last contract to be adopted
  unless specific changes are justified. Such
  changes to be approved by immediate superior to
  CPA.

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Specifications and BEC

• BEC Standardization
• BEC for purchase of goods standardized and issued
  in April, 2003.
• Standardized BEC for Service Contracts to be
  issued in June, 2003.
• Standardized BEC for Turnkey Contracts to be
  issued in August, 2003.
• Standardized BEC to be uniformly incorporated in
  all tenders by all Work centers.
• Changes in standardized BEC can not be approved
  by any authority other than EPC.

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Specifications and BEC

• Vendors suggestions on BEC may be considered in
  Pre-bid conference.
• No change in BEC allowed after bid opening.

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Tender Policy

• Reduction in number of Tenders at Asset/ Basin/
  Service/ Corporate level by clubbing all
  requirements.
• Thrust on long term contracts.

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Tender Policy

• For procurement of certain high value items of
  regular consumption like Casing Pipes, Line
  Pipes, Production Tubing etc., procurement has
  been centralized and ONGC has entered into Long
  Term Contracts leading to reduction in number of
  tenders. Also, long term contracts being entered
  for C/H of drilling rigs/ Vessels.
• For procurement of spares, ONGC intending to
  enter into long-term Rate Contracts with OEMs.
• Post contract commitment for supply of spares
  during the life cycle of equipment .

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Tender Policy

• ONGC to have a policy for entering into AMCs with
  OEMs.
• Under CRINE concept, if improvements in design
  etc. are effected by the contractors after award
  of contract, 20 of incremental benefit could be
  offered to the contractor.
• Bonus linked to IRR to be paid in case of Project
  completion ahead of schedule (Min. one month)

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Tender Policy

• Provision for facilities to ONGC executives
  deleted from Turnkey Contracts.
• Commitment on Training made an enabling clause.
  Cost of Training excluded from evaluation.
• For critical equipment, Inhouse expert
  committee(MDT) to evaluate technical bids.
• Revised guidelines sought from CVC for specific
  type of tenders like Rig hiring etc

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Tender Policy

• No opportunity for clarifications will be given
  after opening of bids.
• Clarifications required by bidders , if any,
  should be only through Pre bid conference.

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Tender Policy

• Concept of Pre-bid Conference introduced to
  resolve doubts of bidders on the various BEC and
  tender clauses as well as on tender
  specifications.
• Pre-bid conference being chaired by senior
  Executives from ONGC side.

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Tender Policy

• New domestic bidders to be considered for
  placement of development orders upto 20 of the
  tendered quantity.
• Vintage criteria of vessels deleted. Prospective
  bidders to offer vessels meeting ONGC
  specifications along with the Statutory
  certificates conforming the class requirement at
  all times, IMO codes and having a minimum
  residual life to cover Primary period plus
  extension also.

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Tender Processing

• From September2002 all the NITs are being
  published on ONGCs Tender Website
  ongctenders.net.
• Action on hand to improve the Website so that the
  complete tender document can be accessed by the
  prospective bidders.

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Tender Processing

• Standard time frame of 30 days(Non-EPC Cases) and
  45 days(EPC Cases) laid down for award of
  contract from the date of bid submission.
• Technical Bid evaluation on GO or NO GO
  basis. One time clarification stopped. Bids with
  any deviation to be rejected.

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Tender Processing

• LOI to be placed within 5 days (Non-EPC cases) or
  15 days (EPC Cases)of Price Bid opening.
• Tender Documents to be issued only to those
  bidders who meet the major Pre-Qualification
  criteria specified in NIT.

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Tender Processing

• PBG to be submitted within 15 days of LOI failing
  which LOI stands lapsed.
• No delay permitted in submission of tenders.
• Tender Committee can not over-ride specifications
  given by users/ indentors

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Tender Processing

• Bidders to confirm in the Matrix that no
  deviation taken by them in their bid. Bids with
  deviations stands to be summarily rejected.

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Tender Processing

• For ascertaining financial capability of bidders,
  following Financial Criteria to be uniformly
  incorporated in BEC of all tenders exceeding Rs.5
  Crs

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Tender Processing

• Financial Criteria for Supply of Goods
• 1. Turnover of Bidders 50 of annualized
  contract value
• Net Worth of the bidders Positive

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Tender Processing

• Financial Criteria for Turnkey/Service Contracts
• 1. Turnover of Bidders 50 of annualized
  contract value
• Solvency Certificate 30 of annualized contract
  value
• Net Worth of the bidders Positive

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Tender Processing

• Bidders should not submit any unsolicited
  clarification / modification/ propositions after
  submission of bids.
• Bidders should not attempt to induce external
  pressures/ interventions etc.
• In case any bidder wants to represent with regard
  to processing of tender, they should represent
  only to Competent Purchase Authority directly,
  whose name is specified in the tender document.

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Tender Processing

• If requirement of tendered quantity can not be
  met by L-1 bidder, negotiations will be carried
  out with all other acceptable bidders by advising
  them to submit their confirmations of matching
  their rates with rates of L-1 bidder in sealed
  envelopes.
• These covers will be opened in the order of
  original ranking, till the total requirement is
  met.

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CVC guidelines

• ONGC strictly following guidelines issued by
  CVC.
• No negotiations. In case competition is limited
  or rates unreasonably high, negotiation with only
  L-1 bidder, except in cases L-1 bidder does not
  meet the entire requirement.
• One Indian agent can not represent more than one
  foreign bidder in a tender.

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Contract Management

• Third party inspection introduced in all global
  tenders, except Chemicals, to expedite inspection
  process.
• Names of 3-4 reputed inspection agencies
  specified in the tender documents and the
  Supplier is required to get the material
  inspected by any one of them.
• Cost of Third Party Inspection to be borne by the
  supplier and included in their quote.

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Contract Management

• Payment to be released within 15 days (instead of
  30 days earlier) in Service/ Turnkey contracts
  from the date of receipt of clear/ undisputed
  invoice, complete in all respects.
• Amendment to LC, if required, to be issued
  immediately to avoid delay in contract execution.

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Contract Management

• In turnkey Contracts, project completion to be
  monitored jointly by ONGC and bidders
  representatives. In case of delay in project
  completion, LD to be levied on the basis of joint
  certification of bidder and ONGC representative.
  Post facto LD negotiations disallowed.

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Contract Management

• Delay in release of payments is being monitored
  at senior management level.
• Provisions have been introduced for release of
  payment to contractors through Electronic Fund
  Transfer.

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Contract Management

• Performance Bank Guarantee to be released within
  60 days of successful execution of the contract.
• ONGC to pick up the variation in the custom duty
  / Excise duty in case of change / abolition of
  Deemed Export Benefits within contractual
  delivery period.

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Internal Processes

• Review of ONGCs standard terms and conditions
  vis-à-vis World Bank, ADB and EU is being taken
  up.
• ONGC personnel on deputation to foreign tour not
  to accept any kind of services or facilities or
  considerations from the Contractors and their
  associates.

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Internal Processes

• All MM heads to fix one day in a month to attend
  to suppliers complaints for resolution of
  issues.
• Key Executives to review of all pending issues
  with respect to old cases with a view to resolve
  them expeditiously.

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Dispute Resolution

• Cases of disputes valuing above Rs.1 Crs,
  which are for/ under Arbitration, can be referred
  to Outside Expert Committee (OEC), after
  obtaining written consent of the Contractor, for
  speedy dispute resolution.
• OEC members are selected at CMDs level.

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Legal Conditions

• In case of delay in supply/completion beyond the
  scheduled date, Liquidated Damages to be imposed
  as per the terms of the contract. Honble Supreme
  Court has laid down the Law that LD amount
  stipulated in the contract is a genuine
  pre-estimate and the contractor who is in default
  is liable to pay the sum stipulated.

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Legal Conditions

• Total liability of the supplier arising out of
  the sale or use of the equipment / material/
  goods supplied by them , if found defective, will
  now be limited to the contract value.

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Legal Conditions

• New provisions have been incorporated stipulating
  that the goods purchased would be used by ONGC
  for Exploration and Exploitation of Hydrocarbons
  in India only, as required under Export /
  Re-export control regulations of some parent
  countries. Further, if for any reasons
  whatsoever, if these goods are to be taken for
  use outside India, ONGC would request the
  supplier to obtain consent from the concerned
  authorities in their country.

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Implementation Results

• Tender Processing expedited. Examples are
• Hiring of MWD equipment Services Tender
  finalized in 21 days of bid opening.
• Hiring of SDMM equipment services Tender
  finalized in 23 days of bid opening.
• Hiring of Whipstock Window milling services
  Tender finalized in 10 days of bid opening.

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Others

• Code of conduct for suppliers and contractors
• Tendency to take deviations/ omissions even on
  well established Terms Conditions.
• Tendency to submit post bid unsolicited
  propositions
• Tendency to seek external interventions
  especially by certain suppliers contractors of
  long standing.
• Tendency to reopen pre-bid conference issues
  after opening of bid.
• Tendency to take short cuts on HSE/ Maintenance
  requirements during contracts.
• Tendency to misuse fax especially at the last
  minute.
• Tendency to reduce competitiveness.

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Implementation Results

• Success Stories
• In a high value tender, a bid was technically
  rejected by the Evaluation Committee. On review,
  the Approving Authority found the offer to be
  technically acceptable and authorized opening of
  Price Bid. This offer turned out to be lower than
  the earlier recommended offer by US 12 million.
  Award was accordingly made. Decision sustained
  not withstanding representations from various
  quarters.

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Implementation Results

• Success Stories
• Decision for purchase of software for Virtual
  Reality center implemented.
• Charter hiring of Modular rig accomplished in
  record time.
• The last case of hiring of Jack up rig was
  finalized in 100 days.

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Commercial Audit

• Commercial Audit introduced to ensure internal
  compliance to laid down policies and procedures
  at Tender Committee level through all India
  random sample checking on all types of tenders.
• Commercial Audit would help in implementing the
  new policy concepts in procurement procedures to
  ensure uniform compliance at all work centers.

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• ONGC awards contracts for goods/ services/ works
  worth more than US 2.00 billion every year.
• ONGC and Suppliers/ Contractors must build
  mutually rewarding relationship on the basis of
  transparency, equity and cost effectiveness.

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• THANK
• YOU