BN-CO-106 Standard Procedure for Field Purchasing

Table of Contents

1. Introduction
2. Requisition for Field Purchase
3. Request for Purchase Register
4. Bids
5. Completion and Distribution of Requisitions
6. Field Purchase Order
7. Unit Price Order
8. Purchase Order Register
9. Vendor Register
10. Purchase Order File
11. Petty Cash Purchases
12. Field Office Commitment Authority
13. Instructions for Preparation of Third Party Equipment Rental Orders
14. Attachment Summary

FIELD PURCHASING

1. Introduction

In principle Home Office Procurement purchases all permanent items. However, apart from accounts X, Y and Z, the Field Buyer, after approval from the Project Manager, has to purchase permanent items as well, due to e.g. field changes, errors, omissions etc.

For Purchase Orders on accounts X, Y and Z placed by Home Office prior to having a Construction Team in the Field, the Field Buyer should issue an Internal Field Purchase Order to Home Office for Cost Control Purpose.

All Field Purchases, except Petty Cash Purchases, must be supported by a Purchase Order issued and distributed prior to receipt of the goods or invoice. Prices must be obtained prior to placing the order, but in rare cases where circumstances dictate, and it is not possible to obtain a price prior to placing an order, the Purchase Order may still be issued and an estimated cost (inserted as a blind note) is to be shown for all items. This cost must be plainly shown to be an estimate and must be corrected by an Amendment to the Purchase Order immediately upon receipt of firm prices. These firm prices must be obtained as early as possible and the Amendment issued without delay. Purchase of materials must be by competitive bids, whenever possible.

The purpose of Field Procurement is to expedite construction - hence, fast action by the Field Buyer is essential.

2. Requisition for Field Purchase

No purchases whatsoever will be made without an approved Requisition.

A Requisition for Purchase can be initiated by a Company Craft Specialist or other Company supervisory personnel, using form BN-UC 14. This requisition will be submitted to the Engineering Department. For materials appearing on drawings or isometrics, the site Engineering will contact the Material Administrator to ensure that the required items are not outstanding on an existing Purchase Order, or are available from stock. If not, the Material Administrator will bring this to the attention of the Material Supervisor, who will contact Home Office Procurement to ascertain that an order for such items is not in the process of being placed.

Every Requisition for Purchase will show the following:

• Date of Requisition.
• Clear description of the required items.
• To be used for (area, line no., isometric no., etc.).
• A realistic required delivery date and not always "ASAP" or "RUSH".
• The name (in printed letters) and signature of the originator.

After proper coding by the Cost Engineer, a copy of the requisition will be listed in an Engineering Requisition Register, (Attachment 2).

The original will be passed on to the Field Buyer. Under no circumstances will the Field Buyer accept VERBAL purchase request.

3. Request for Purchase Register

On receipt of a requisition for purchase, the Field Buyer will enter the request in a REQUEST REGISTER allocating a sequence number for each requisition.

The register will show:

• Date of Requisition
• Requisition Number
• Originator of Request
• Brief Description
• Cost Code
• Purchase Order Number

4. Bids

Bids will be requested from at least three competitive vendors whenever possible unless otherwise noted in the "Construction Coordination Procedure".

After receipt of the bids, the Field Buyer will complete the Bid Comparison (form BN-UC 14) and submit it for approval to the Project Construction Manager or his authorized delegate (and on reimbursable projects to the Client).

5. Completion and Distribution of Requisitions

After the material is ordered, the Field Buyer will markup the original requisition with:

• Order Date.
• P.O. Number.
• Selected Vendor and Vendor's Contact Personnel.
• Promised Delivery Date.

He will then send a copy of this marked-up requisition to:

• The Originator of the Requisition.
• The Material Supervisor.
• The Site Engineer.
• Others as per "Document Distribution Schedule" or "Construction Coordination Procedure".

The original requisition is to remain in the Buyer's Purchase Order file.

6. Field Purchase Order

Field Purchase Orders will be initiated only by approved Requisitions.

The Field Purchase Order, signed by the Buyer on behalf of Company or the Client, will be issued immediately.

Distribution of Field Purchase Orders will be as follows:

• Original and confirmation copy to Vendor.
• Field Accounting (with copy of requisition).
• Field Buyer.
• Site Engineer.
• Others as per "Document Distribution Schedule" or "Construction Coordination Procedure".

Each Purchase Order must clearly show:

• Purchase Order Number.
• Requisition Number.
• Cost Code.
• Quantity.
• Unit Description.
• Unit Price.
• Total Price.
• Discounts.
• Taxes.
• Promised Delivery Date.
• Payment Conditions, when these differ from those stated at the reverse side of the Purchase Order or Amendment.
• Contact Person at Vendor's Office.
• In case of an Amendment to the Purchase Order, the increase or decrease and new total of the Purchase Order Value, including latest Amendment.

For Purchase Orders placed on behalf of Client, it is imperative, that the following clause is included:

"This Purchase Order is placed for, on behalf and to the account of ................. (name of Client) and is subject to the conditions and instructions listed on the reverse side which forms part of this order".

Field Purchase Order for contract work will include as an attachment the "Terms and Conditions applicable to Orders for Field Labor" and a copy of "Site Rules and Safety Regulations".

For additional purchases or changes and/or modifications on a Purchase Order, an Amendment to Field Purchase Order will be issued.

This Purchase Order Amendment is prepared in much the same manner as a standard purchase order.

The Field Buyer must ensure that the Confirmation Copy of Purchase Order or Amendment is promptly returned by the Vendor, duly signed.

7. Unit Price Order

Unit Price Orders are commonly issued to cover Bulk Purchases, such as oxygen, acetylene, welding rods, cement etc., services, rentals, etc. Many factors influence the usage of Unit Price Orders, such as delivery requirements, and they greatly reduce the number of Field Purchase Orders, resulting in reduced field office clerical costs.

Great care shall be exercised in the selection of suppliers and the initial order shall state in language that cannot be misunderstood, that the order may be terminated at the discretion of the Purchaser without penalty.

Materials/Services should be delivered as and when required, (to be indicated by the Field Buyer). For each delivery the necessary Material Receiving Notice must be completed and delivery notes signed for vendor's records to substantiate his invoice.

The original Unit Price Order is a Committing Document and therefore must contain price estimates.

As soon as it becomes evident that actual expenditures will exceed the original estimate a revision to the requisition is issued with the revised estimated amount for approval by the Project Construction Manager and Project Manager if applicable. After approval, an amendment is prepared and issued for "internal purposes only" indicating the new amount.

A final amendment should be issued at job-end in order to equate actual expenditures with commitments.

Unit Price Orders require special attention and control, since an order may cover a long period of time and may generate many receiving reports, invoices and other documents.

Unit Price Orders must show time conditions during which unit prices are valid. In case of a price change, or after a long period, new comparison with other vendors should be considered.

Estimated amounts must not be shown on vendor's copies, but entered as a "blind note" for Company (and Client) purpose only.

8. Purchase Order Register

A Purchase Order number in sequence is given for each vendor.

The Buyer records the Purchase Order number on a Purchase Order Register.

This register shows the date, requisition number, vendor, description of material ordered, and amount (excluding TAX).

The "Construction Coordination Procedure" will indicate whether the numbering of the Purchase Orders is to be done in a block series.

The Purchase Order Number is also entered in the Requisition Register next to the respective request number to ensure that all requests have been handled.

If a request for Purchase has to be split up between several vendors, the request will have one number and the various Purchase Order numbers will be listed against this request.

9. Vendor Register

The Field Buyer will maintain a card system or an alphabetical register indicating names of vendors, description of material ordered and Purchase Order number.

This applies to Home Office Purchase Orders as well as Field Purchase Orders. This register helps to locate Purchase Orders if only the vendor name is known.

10. Purchase Order File

The Buyer will maintain a separate file for each Purchase Order, its Amendment and its respective Purchase Requisition.

Whenever a Purchase Requisition has been splitup between various vendors, copies should be made for each Purchase Order file.

MRN's, OSR's, OS and D's and all correspondence pertaining to a Purchase Order must be filed in the same folder.

The Field Buyer/expediter is responsible for prompt delivery of materials ordered and constant follow-up should be maintained to ensure delivery as required and promised.

11. Petty Cash Purchases

Petty Cash Purchases are generally employed for one or more of the following reasons:

a. The purchase is for material or service which is low-cost and not covered by a blanket order.

b. The cost of issuing a formal Purchase Order is not justified, in relation to the value of the Purchase.

(The limit of this justification will be given in the "Construction Coordination Procedure").

c. The normal cycle would cause a serious delay.

For a Petty Cash Purchase, the Field Buyer will hand the approved Purchase Requisition to Job Accounting with a note "To be purchased from Petty Cash Funds", by which he is authorized to make the Petty Cash Purchase. Each Petty Cash Purchase/Expenditure is supported by a "paid" receipt or signed Field petty cash voucher. The voucher is filled out in detail including the Account Code(s) affected by the transaction.

12. Field Office Commitment Authority

In the "Construction Coordination Procedure" for each project, the authorized limits for making purchase commmitments will be listed.

If these limits are exceeded for emergency purchases, prior approval from Project Manager through Home Office Construction Department should be obtained.

13. Instructions for Preparation of Third Party Equipment Rental Orders

The authority for procuring third party rental construction equipment is vested in the Project Construction Manager.

Competitive quotations shall be obtained from at least three suppliers.

Each order written for rental equipment must clearly define all the responsibilities pertaining to rental period, rate basis, terms of payment, freight charges, taxes, insurance, consumables, fuels, lubricants, and cost of repairs.

Further comments on the above items are as follows:

13.1 Rental Period

The order shall clearly state whether the rent commences upon receipt at jobsite or when shipped from lessor's warehouse. The order shall also define the termination of rental period, either at receipt at lessor's shop or at the moment Company dispatches the equipment to be returned or any other terms reached during negotiation of the order.

13.2 Rent Basis

The order shall clearly state that the rental rate is limited to 40 hours per week for a maximum of 173 hours per month and clearly define the overtime terms. If no overtime charges are applicable, the order should clearly state so. Overtime is not allowed unless the job is scheduled for an extended work week.

13.3 Overtime

The order must clearly state the method for computing overtime if it is applicable.

Suggested methods are:

• 1/173th of the monthly rate for each hour in excess of 173 hours within a 30-day period.
• Two shifts at 1-1/2 times the base rate, three shifts at two times the base rate. Fractions of a shift adjusted proportion­ally.

Method "A" is the preferred method if overtime provisions are required.

13.4 Mechanical Condition

The purchase order must state that the lessor is responsible for furnishing the equipment in good mechanical condition. The Material Receiver must complete an OS&D report if inspection at the time of receipt reveals that the equipment is damaged or missing pieces. The lessor must be immediately notified in writing of the exceptions.

13.5 Cost of Repair

Each purchase order must state that the lessor is responsible for corrosion and normal wear and tear. Normal wear and tear is defined as use of the equipment under normal working conditions with qualified personnel providing proper operation maintenance and service.

13.6 Freight

The purchase order must be explicit in the freight terms for in­coming and outgoing freight. If any additional charges are applicable for loading, erection, dismantling or demurrage, these charges must clearly be defined in the purchase order.

13.7 Taxes and Insurance (Duty, Customs, etc.)

The purchase order must state what taxes and amount of taxes are applicable to the order. The responsibility for insurance coverage for fire, theft and other insurable risks must be clearly stated on the face of the order. If the lessor insists that we carry the insurance, the lessor must show the acquisition value of the equipment and the depreciated value and age at the date of the purchase order.

13.8 Fully Operated and Maintained Equipment Rental

Purchase orders for the use of fully operated and maintained equipment must also to include Items 13.1 through 13.7 above.

In addition, the following clause shall be included in each of the orders for fully operated and maintained equipment:

"Lessor will indemnify Company, its officers, employees, or agents from and against any and all loss or liability in respect of injury or death while engaged in the work and from and against any loss or liability arising out of any damage to property of whatsoever kind".

The lessor must also furnish a certificate of Workmen's Compensation insurance and liability insurance.

All rental orders shall require the lessor to sign and return the acknowledgement copy before the first invoice is approved for payment.

The original issue shall show the estimate period of rental and the estimated total commitment. These orders shall be reviewed each month to adjust the commitment. Revisions to purchase orders must be written to adjust the commitment and distributed for internal use only.

14. Attachment Summary