ATR on ‘9 Vendor Meet-2010’ and - ONGC :: Tenders · valid till final settlement of LD. ... • CMD, ONGC shall nominate 3 outside experts, one each from Fin./Commercial, Tech

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to

1st Business Partners’ Meet - 2012

31st March, 2012, Mumbai

PMC, Corporate-MM,ONGC, Delhi

31.03.2012

ATR on ‘9th Vendor Meet-2010’and

Updates on Latest Policy Initiatives

PMC, Corporate-MM,ONGC, Delhi 2

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VISION OF ONGC

To be Global Leader in Integrated Energy Business, through

Sustainable Growth, Knowledge Excellence, and Exemplary Governance practices.


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Objectives of Vendors’ Meets

Building Business Partnerships for :

Maximizing “Value in Procurement” and creating a “Win-Win environment”.Contributing towards environmental responsibility and sustainability.Ensuring “Best-in-Class Technology”.Improving Competitiveness.Reducing delays and eliminating disputes.Setting a high level of “Code of Conduct”.


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The Dynamic Process

Procurement Policy and Procedures in ONGC are constantly reviewed to meet the following objectives:

Improve transparency, equity & fairness.Transformation of Buyer-Seller relationship into Business Partnership.Thrust on Collaboration rather than Confrontation. Speeding up the Tendering process for award of contracts without delay.Timely execution of Contracts.


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Actions Taken on Major Issues


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ATR on Vendors’ Meet-2010

Sl. Category of issues raised by vendors No. of Issues

1 Number of issues raised 322 Action Taken 174 Not Acceptable

*Beyond the purview of ONGC or Vendors to take up with Govt/other agencies.

11

5 Action not required-Existing instructions adequate.

4


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Major issues - Action taken

Issue No. 1: In LSTK contracts due to deduction of LD, cash flow problems are faced by Contractor during final stages of contract execution.

In order to address this problem, provisions incorporated that in such scenario, contractor can submit a Bank Guarantee towards maximum amount of applicable LD. This BG to be initially valid upto a period of 1 year beyond revised completion date and shall be kept valid till final settlement of LD. After submission of BG, amount withheld on account of LD, if any, shall be released. After final settlement, applicable LD shall be remitted by contractor, failing which same will be recovered by invoking the BG.


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Major issues - Action taken….

Issue No. 2: Difficulty reported in locating tender box for submission of bid (in physical form)/ physical documents in e-procurement tenders.To facilitate submission of bid / physical documents, name and designation of the Tender Receiving Officer alongwith complete address of the office where the bids are required to be submitted are indicated in NIT. In addition to this, names of such officers are also displayed at the place where Tender Box is installed.


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Issue No. 3: Name of bidders short-listed for price bid opening should be known to all the short-listed bidders. In order to facilitate bidders who have been short-listed for price bid opening, besides mentioning date, time and venue of price bid opening, names of all the short-listed bidders are also mentioned in the communication being sent for price bid opening.


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Issue No. 4: Delay in release of EMD.

EMD of unsuccessful bidder is to be released positively within 7 days of finalization of tender. Instructions also issued that concerned Work Center should obtain necessary approval for release of EMD at the time of finalization of tenders itself so as to avoid any delay in seeking of fresh approval for release of EMD.


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Issue No. 5: Process of resolution of disputes through Arbitrator is expensive as well as time consuming, alternate process may also be introduced.Provisions incorporated that all disputes in cases above Rs. 5 lakhs to be first referred to Outside Expert Committee (OEC).

Main features of OEC provisions incorporated in tenders:• Desirous party shall send notice of 30 days to other party.• CMD, ONGC shall nominate 3 outside experts, one each from

Fin./Commercial, Tech. and Legal fields from panel maintained by ONGC.

• No interest shall be claimed on claims after notice.• Proceedings of OEC shall be governed by Arbitration and

Conciliation Act, 1996.• Recommendations of OEC shall be non-binding on parties. • Expenditure incurred shall be equally shared by parties.


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Issue No.6: In cases of supply of certain type of items such as tubulars and chemicals, fractional quantity remains undelivered by supplier resulting in delay in payments and release of PBG. On account of allowance required in manufacturing process, transportation conditions including packing, shipping, loading/unloading, if undelivered qty. is less than 1% of total item wise ordered quantity, ONGC shall close PO after deducting amount towards short supplied quantity, if any, without any penalty on the vendor.


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Issue No 7: Clarifications required on granting of Price Preference in ICB tenders for Services/LSTK contracts.(i) Provisions incorporated that Consortium led by Indian firm shall be eligible for price preference provided it fulfils the stipulated conditions.(ii) For being eligible for price preference in ICB tenders, domestic bidders are required to submit certificate (in original) from their Statutory Auditors indicating various sub-contracting details in percentage terms as well as in absolute value.

Issue No. 7…contd


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Issue No 7 contd…….

(iii) Following documents required for claiming price preference in e-procurement tenders, should be uploaded by bidders in “C Folder” without disclosing price details.

– Proof of being registered within India.– Proof for having majority ownership by nationals

of India and– Copy of Statutory Auditors certificate with price

details blanked out.


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Issue No. 8: Submission of documents in e-procurement tenders.

i. For submission of physical documents in e-tender, period of 5 working days prescribed for Indian bidders and 3 days for foreign bidders should be equal.

ii. ‘Working Days’ for submission of documents to be re-defined as ‘Calendar days’.

i. Provisions modified by stipulating uniform time period of 7 days for Foreign as well as Indian bidder.

ii. Time mentioned in ‘working days’ re-defined as ‘Calendar days’.


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Issue No. 9: Parent company should also be allowed to participate on the strength of its 100% subsidiary.

Provisions modified to accept bids submitted on the basis of technical experience of parent / 100% subsidiary company.

However, parent/subsidiary company of bidder to itself meet tech. experience without relying on its sister subsidiary/co-subsidiary or through arrangements like tech. collaboration etc.


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Issue no. 10: Bids submitted on the basis of technical experience of sister / co-subsidiary company should be allowed.

Provisions incorporated to consider bids based on experience of their Sister/Co-subsidiary company within same ultimate parent/holding company subject to following conditions;

Sister/co-subsidiary company and the bidding company should be both 100% subsidiaries of an ultimate parent/holding company.Sister/co-subsidiary company on its own meets technical experience criteria.Turnover of ultimate/holding parent company in last financial year is more than US$ 1 billion.In contracts involving multifarious activities, bidding company can draw on experience of their multiple subsidiary sister company(ies)/co-subsidiary company(ies) specializing in each sphere of activity.


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Issue. No. 11: Subsidiary Company should be considered on the financial strength of its parent/ultimate parent/holding company.Provisions incorporated to consider bids submitted based on financial strength of parent/ultimate parent/holding company, subject to following conditions:Bidder should be a 100% subsidiary company of the parent/ultimate/holding parent company.Turnover of parent/ultimate parent /holding company should be more than 30% of the annualized bid value.Net worth of the parent/ultimate parent company should be positive.A Corporate Guarantee should be submitted by parent/ultimate parent/holding company undertaking that they would financially support their 100% subsidiary company for executing the project/job.


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Issue No. 12: As per clause on ‘Liability Under the Contract’, parties should not be liable for any indirect or consequential damages. ‘Indirect or consequential damages’ need to be defined.

Provisions modified to the extent that in no event shall either party be liable to other whether in contract, tort or otherwise for any consequential loss or damage, loss of use, loss of production, or loss of profit or interest costs or environmental pollution damage whatsoever arising.


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Issue No. 13: Under Warranties and Guarantees clause liability of supplier should be limited to repair/replacement of the defective equipment.

Provisions modified to stipulate that liability of the supplier under Warranty and Guarantee clause shall be exclusive of labour or any other costs involved in removal or reinstallation of the goods.


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Issue No.14: Clarifications required on applicability of the provisions regarding submission of details of EPF/ESI in contracts where manpower is deployed.

Clause modified to clarify that provisions shall not be applicable in following types of contracts:

Where service is performed in premises of contractor. Wherein contractor employs only their full time regular employees for execution of contract.Information pertaining to EPF is not required to be submitted wherein pay of employees of contractor exceeds Rs. 6500/- pm. Information pertaining to ESI is not required to be submitted wherein pay of employees of contractor exceeds 15000/- pm.


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Issue No.15: For obtaining visitor passes at 11 High Complex and Vasudhara Bhavan, appropriate sitting arrangements for visitors to be provided.

In both 11 High building and in Vasudhara Bhavan, proper space has been developed as waiting area for visitors.


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Revised Arbitration Clause

Issue No. 16: With respect to Arbitration clause (introduced in 2008) bidders brought out that contractor has no role in appointing Sole Arbitrator(s) where claim amount is below Rs. 5 crores. In such cases ONGC has all the powers for appointing sole Arbitrator.

Based on above feedback, provisions of Arbitration clause have been revised as under:


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Revised Arbitration provisions

Claim amount Nos.of arbitrator Appointing authorityUpto Rs. 50 lakhs

Sole Arbitrator appointed from a panel of retired officers from ONGC/other PSU/Non-PSU organizations.

ONGCONGC will forward a list of

five retired officers from ONGC/other PSU/Non-PSU organizations to other party for selecting one from list who will be appointed as sole arbitrator.

Above Rs. 50 lakhs to Rs.5 crores

Sole Arbitrator to be appointed from a panel of retired Jurists

ONGCONGC will forward a list of

five jurists to other party for selecting one from list who will be appointed as sole arbitrator.

Above Rs. 5 crores

3 Arbitrators One arbitrator by each party and 3rd presiding arbitrator, by two arbitrators. ONGC will appoint its arbitrator from the panel of jurists.


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Issue No 17: Provision for loading Anti dumping duty on imports of seamless tubes, pipes & hollow profiles of iron, from China PR, should be withdrawn.

In accordance with Govt. notification dated 18.11.2010, provisions on anti dumping duty have been taken back.


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Action not required Existing instructions adequate


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Action not required….

Issue No. 1: Provide realistic time for project execution in line with current market conditions dictating vendor deliveries and specifically based on type of equipment and material involved in the facilities – turbines, inconelmaterial, etc.

Guidelines exist that while specifying mobilization / delivery / completion period in the tenders, realistic approach should be adopted by taking into account the experience gained during the past in similar type of tenders and feed back received from bidders.


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Issue No. 2: Avoid stringent specification leading to limited suppliers/extended deliveries/increased risk to the EPC contractor. Guidelines already exist to formulate broad-based and optimum specifications of materials/services so that competition is not restricted.

Issue No. 3: In tenders involving hiring of multiple services and where list of vendors from whom services can be sub-contracted are specified, whether a potential sub-contractor can provide service to bidder without violating the provisions of IP.Provisions of IP would not be violated if a sub-contractor provides service to two bidders because, only by being a sub-contractor, a firm does not become a constituent of another bidder and also a sub-contractor is not in a position to influence the offer of the bidders.


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Issue No. 4: ONGC should ensure payments to the Indian sub-contractors who are employed by the LSTK contractors.Payment to sub-contractor by the main LSTK contractor is governed as per the contract between them. As ONGC has no contract with the sub-contractor, it can not interfere between the contractual relationship of the contractor and the sub-contractor.


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Issues Not Acceptable(Beyond purview of ONGC)

Issue No. 1: Price Preference Benefits to Domestic bidders should be withdrawn to provide level playing field to Foreign bidders.

The issue is pertaining to Govt. policies, beyond the purview of ONGC.


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Issues Not Acceptable…..

Issue No.2: For complex projects involving extensive bid engineering, ONGC to set strict prequalification criteria to select capable and experienced bidders and provide compensation for bid costs involving extensive engineering/innovation.

BEC and tender conditions are framed keeping in mind the scope of work, complexities, past experience etc. and to allow maximum competition in the tender so as to ensure maximum participation by genuine and capable bidders.

Administrative and Overhead costs for bid preparation are part of any business, which is to be borne by the individual company.


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Issue No. 3: Provide sufficient time for preparation of bids and respond to bidders queries promptly.

Wherever pre-bid conference is held, after tender sale period, 7 days is provided to bidders for sending their queries. After issuance of minutes of pre-bid conference, 21 days time is given to the bidders for submission of their bids.

Issue No. 4: For complex projects hold individual bid clarification meetings to discuss and resolve all queries/clarification.

As there are provisions for holding pre-bid conference wherever required, it is not possible for ONGC to hold individual bid clarification meetings.


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Issue No. 5: Introduce incentives for innovation and benefit to tenderer for engineering based optimizations and alternative solutions. Bids received against each tender are to be evaluated as per the specifications contained therein and all bidders who adhere to the technical specifications are treated at par and thereafter lowest price is the only parameter for selection of bidder for award of contract. Issue No. 6: Selection should not be based on L-1 prices, rather due weightage should be given to Track Record, Competence, Long Term focus, Resources (equipment, facilities and personnel) available to deliver the project, Trust based on previous performance and contractor’s market credibility.

While formulating eligibility criteria in the BEC, above parameters are considered and bids are evaluated based on these parameters.


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Issue No. 7: Provide acceptable cap on liability.

As per international practice (including that of World Bank), liability of contractor is limited to 100% of contract value. ONGC has already brought down the limit to 50% of total contract value (from earlier limit of 100%).Further, clause on ‘Limitation of Liability’ is a two way clause, hence the cap is equally applicable for both ONGC and contractor.

Issue No. 8: Reimbursement of increase in prices of commodities like that of steel, copper, nickel.

Risks and advantages prevailing due to uncertainty in the market are equally applicable for buyer as well the seller.


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Issue No. 9: Provisions should be made that Contractor would be granted relief from levy of LD that may be imposed as a result of a breach occurring elsewhere. In addition, the time allowed for completion should be extended and any resulting resource standby time should be compensated by ONGC.Liquidated Damages are levied only on the portion of delay which is attributable to the contractor.

Issue No. 10: Alliancing approach should be adopted which involves selecting a contractor for full field development from concept to commissioning on a risk-reward basis.ONGC is adopting the tendering process for award of contracts wherein the scope of work, technical specifications, evaluation parameters and the terms and conditions are specified in detail. Bids which are received are evaluated as per the parameters specified in the tender and contract is awarded to the bidder who emerges as the lowest on the price.


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Issue No. 11: Due to confidentiality obligations the copies of Contracts of other clients can not be submitted for ascertaining the experience of bidder.

In order to evaluate the responsiveness of a bidder with respect to the experience criteria copies of Contracts are required by ONGC to ascertain whether the bidder has executed contracts for similar type of services / projects. Bidders can give the copies of Contracts with the price element blanked out.


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Policy initiatives & Latest provisions(implemented after previous ‘Vendor Meet’)


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Putting erring vendors on holiday due to termination of Contract

To penalize those erring vendor who are unable to execute the order, clause incorporated in the tender documents that in case of termination of contract due to non-submission of Performance Security/Non-execution of contract / un-satisfactory performance/delay in mobilisation/ insolvency, after conducting inquiry, ONGC may put defaulting contractor on holiday for a period of 2 years from the date of termination of contract, if it is found that fault is attributable to the contractor.

However, pending completion of inquiry, neither any tender document shall be issued to the defaulting Contractor nor their offer shall be considered in any on-going tender.


31.03.2012

Change Order Clause.

Change Order clause modified to include following:i. In case of variation of quantities during the execution of the

contract, if unit rates for such items are available in the contract, then such variation in quantity shall not be considered as change order.

ii. If an item specified in scope of work is substituted by another item of same category, such change due to obsolescence / non-availability / no-response from manufacturers of that item shall be considered as change order and value shall be determined based on differential cost implication.

iii. All new/fresh/additional works not defined in contract shall be considered as Change Order.


31.03.2012

Transparency in Procedures

In the interest of transparency all the standard tender/contract conditions, complete MM Manual and internal executive guidelines have now been made available in Public Domain at Corporate website of ONGC viz. http://www.ongcindia.com.

Also, all the NITs and complete tender documents are published on the following websites: http://www.tenders.ongc.co.inhttp://tenders.gov.in


http://www.ongcindia.com/

http://www.tenders.ongc.co.in/

http://tenders.gov.in/

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Cost of Pollution & Contamination and control of Blowout

In cases of charter hire of offshore rigs, maximum limit of Rs. 50 Lakhs towards liability of contractor for cleaning up and controlling pollution or contamination and Cost of Control of blowout reviewed and increased to US$ 1 Million.


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e-Procurement

The task of implementation of e-procurement across ONGC in phased manner has been completed.

Now, with effect from 01.12.2011, all cases valuing above Rs.1 Crore are being dealt through e-procurement process.


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Expectations from Vendors


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Compliance with Basic Tender requirements.

Bidding Documents are Non-Transferrable. (Therefore, bidding documents should be purchased in name of the entity who intends to quote).

Bid should be signed by an authorised official with official seal. Name & designation of signatory should be clearly stated in the bid.

Legal constitution of bidding company should be clearly stated and person signing bid shall state his capacity and source of ability to bind the bidder.

Power of Attorney, (or) authorisation, (or) any document consisting adequate proof of ability of signatory to bind the bidder , should be annexed to the bid. Bid not supported by adequate proof of signatory’s authority shall be REJECTED outright.


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Deviations from standard conditions during pre-bid conference/tendering stage.

Standard tender / contract conditions for each type of tender (which are uniform all over ONGC) are approved by the highest authority in ONGC.Request for any modification to same needs examination of its implication in all types of situations and requires approval of the same authority.Hence, any exception/deviation to standard conditions are not accepted against individual tenders.Therefore, bidders are advised not to take any exception/deviation during pre-bid conference/tendering stage.In case modification is felt necessary for any of the standard conditions, vendors can take up separately with concerned authorities, or raise the same in forums such as Vendor Meet.


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Deputing officials for meetings with ONGC. For having fruitful and meaningful interactions in Pre-bid conference and other important meetings with ONGC (like price negotiations etc.), representatives deputed should be

senior and competent executives, authorized to take on the spot decisionshaving sufficient in-depth knowledge on commercial and technical aspects


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Submission of clear bids.

To avoid post tender clarifications and to ensure speedy finalization of tenders, vendors should submit fully compliant bids meeting the tender requirements :

Submission of all documents / information as per tender.Submission of duly filled matrix, confirming compliance with techno-commercial requirements of the tender. Submission of all information against tender/BEC requirement, in clear terms without any ambiguity.Documents submitted should be valid as per requirements.Even against those conditions whose actual compliance can be known only after price bid opening like turn over requirement under Financial Criteria or quoting of mobilization charges within the limits specified etc. specific confirmation on compliance with the requirement should be given in ‘Un-priced bid’.


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Adherence with Cut-off time specified for various events.

Requests for issuing Bidding Documents received after specified ‘Closing time for Sale’ are not entertained, It is made clear in NIT and tender conditions that LATE OFFERS ARE NOT ACCEPTABLE. Hence, bidders should ensure timely submission of offers. Clarifications sought should be submitted within specified Cut-Off time and reply should specifically address only to query / clarification sought.


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Submission of e-bids.Bidders should ensure that each file is digitally signed by duly authorized representative of bidding company and then uploaded. File (s) should not be zipped in a folder and then digitally signed.In e-procurement tenders, on many occasions, bidders have not been able to upload their bids due to connectivity problems or not being well conversant with the e-procurement system. Bidder are advised to upload their bid well in time before the cut-off date and time and also get conversant with the e-procurement system.

No prices in physical form, in e-procurement tendersIn e-procurement tenders, prices should be quoted only through the portal.Bidders should ensure that prices are not revealed in the physical documents, to avoid rejection.


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Declaration from bidders.Bidders to submit a declaration to the effect that neither the bidder themselves, nor any of their allied concerns, partners or associates or directors or proprietors involved in any capacity, are currently serving any banning orders issued by ONGC.


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Conflict of Interest.Firms or any of their affiliates engaged to provide goods/works for a project should not bid for providing consultancy for same project and vice versa firms or any of their affiliates hired to provide consulting services for preparation or implementation of a project should not bid for goods or works or services related to initial assignment for same project. Consultants or any of their affiliates will not be hired for any assignment, which by its nature, may be in conflict with another assignment of the consultants.

Disclosing Price, prior to Price- bid opening.In ‘Two Bid’ system, disclosure of Price prior to “Price-Bid opening”, will lead to Rejection of offer.


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Submission of particulars for electronic payment.

As on-line payment is made in all cases, bidders should provide the following particulars along with their offers:

– Name & Address of Bank – Type of Bank account & Account Number– IFSC / NEFT/ MICR code. – PAN under Income Tax Act;– TIN/Sales Tax Registration Number and Service Tax

Registration Number. (as applicable)– e-mail address.


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Mobilization Charges.Bidders quoting mobilisation charges in excess to the limit specified in BEC are liable to be rejected.

Stand by day rates/non operating day rates.Bidders quoting standby day rates/non-operating day rates in excess to 95% of quoted operating day rates are liable to be rejected.


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Requirements against procurement of OEM spares and Proprietary items.In procurement of OEM spares and Proprietary items, OEM / manufacturer should confirm that Quoted prices and Terms & conditions offered are at par (or, not more than) those offered to other customers worldwide. Violation of Provisions of IP.

While submitting bid, bidders should not take deviation from the provisions of IP failing which their offers are liable to be rejected.

Bidder should also ensure compliance of all the provisions of IP during the entire procurement process. Any violation shall attract punitive action against the bidder as per the provisions of IP.


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Submission of contract security and signing of contract.

On many occasions performance security is not received within the stipulated time, which leads to avoidable delays.Successful bidder should submit Contract Security within 15 days from the date of issue of LOA. Signing of the contract shall take place only after receipt of the acceptable Contract Security.Late submission of acceptable Contract Security will lead to delays in issuing detailed Purchase Order (or, Signing of contract), opening L/C etc.

Taking Insurance policies.Wherever contractor is required to take various insurance policies before commencement of works, he should ensure that required insurance policies are as per the requirements of contract and are in full force and effective.


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Execution of contracts within stipulated time schedules.Vendors to ensure that they execute the POs/Contracts strictly within the stipulated delivery / mobilization / completion period. Submission of Payment documents.Invoices should be submitted alongwith complete supporting documents as per contractual requirements .All Invoices (with supporting documents) to be submitted at designated IMS desk, as specified in PO/contract.Cover containing invoices should indicate particulars such as Vendor Code, PO number, Invoice Number, Invoice Date, e-mail ID to which “Tracking Number” is to be sent.


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Unsolicited Communication, Representation & External interventionFollowing tender provisions need to be noted for strict compliance:

Unsolicited communication will lead to rejection of offers.

Representation(s), if any, related to tender processing be addressed directly and only to the specified Authority whose address is indicated in Bidding Document.

Vendors should desist from taking recourse to either VIP or legal intervention, intended to influence tender processing.


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Ethics and Conduct

ONGC and its Business Partners have built a strong bond of relationship - under mutual trust and upholding high values of moral and ethics. There is no place for any un-ethical practices.

Any attempts for unethical practices (through malpractices, fraudulent activities, forgery, mis-representation of facts etc.)would definitely strain this relationship.

Though Integrity Pact is formally applicable only for high value cases, let us commit ourselves to observe the principles of Integrity Pact in all Tenders & Contracts (irrespective of value), so as to maintain high standards of ethics in all the spheres of our business dealings.


31.03.2012 PMC, Corporate-MM,ONGC, Delhi