Procurement is a work process of obtaining or buying goods, services and getting suppliers, and deliver procured items to the project team, mainly construction team.
Procurement Work Process (Cycle) is series of work steps to procure equipment or materials or services. Identify items (grouping, to be handled together) to be purchased is the first step, and finalise bidder list with pre-qualification, generate a Request for Quotation (RFQ, Inquiry and Requisition), release the RFQ to approved bidders, evaluate their commercial and technical proposals, select a successful bidder (vendor or supplier or sub-contractor) through clarification and negotiation, award and make contract (release a Purchase Order (PO)), expedite and inspect supplier's work progress and performance, held an acceptance test, hand-over material or service from supplier and make a final payment, and perform an appraisal for record and close-out.
Procurement Management is managing and controlling procurement work process to supply required equipment and materials or services to the project team on time, within budget and respected quality and quantity. The procurement work process is developed based on a fair and open competition. The procurement team evaluates and records a performance of suppliers (vendors) with project team and related organisation to update company's bidder list for future business. Responsibility of the procurement team can be extended to a whole bulk material handling work process (from the bulk material take off (MTO) to field material control) (Refer to Material Management)
Material Management is a systematic measuring and trending of bulk material quantities improves forecasting and control of the cost associated with the purchase and installation of materials. A tracking including quantity forecasting and supply of bulk material quantities, from BM take-off to construction installation, including material handling is one of the critical item for the project success. The Material Management within the procurement organisation is an integrated effort between estimating, project controls, engineering disciplines, and construction including field material control.
C. Other Definitions
Inquiry is 1) any process that has the aim of augmenting knowledge, resolving doubt, or solving a problem. 2) Inquiry is a bid document (or request for quotation (RFQ)) sent by the buyer to suppliers listing general item descriptions and quantities, and terms and conditions (not-technical).
Requisition is a document or set of documents that describe technical information (Refer to a Material Requisition (MR) and Inquiry)
Request for Quotation (RFQ) is a normally combined Inquiry (non-technical) and Requisition (technical) document.
Material Requisition (MR) is a source document that engineering disciplines prepared and developed and use to request materials for technical manufacturing process: data sheet including bulk material quantity, applicable code and specifications, etc.
Purchase Order (PO) is a type of agreement for the acquisition of material or equipment or service issued by a buyer to a seller. A PO document includes both parties signature, dates including key milestones, a purchasing specification, description of purchasing goods or services, a quantity and quality, performance, delivery timing, prices, payment conditions, and a general and special terms and conditions.
Bid is an offer or complete proposal in response to a Request for Quotation (RFQ) or Inquiry. The Bid includes price, time frame, and terms of sale and description of goods and services to be supplied. (Called as a Proposal)
Bidder is a potential contractor or supplier to be selected through a bidding process. (Called as a tenderer)
Bidder List is a potential equipment or bulk material suppliers or manufacturers list for the project procurement, and candidate of third party company list for study, review, test and inspection, audit, survey, verification, authority approval and any other activities which performs by third party including construction sub-contractors list. The Bidder list is an agreed document between contractor and client (owner).
Bid Evaluation is an evaluation work process to select a successful supplier among proposed bidders. The Bid Evaluation consists of a Commercial Bid Evaluation (CBE) and Technical Bid Evaluation (TBE).
Bid Evaluation Criteria includes proposed cost and commercial terms and condition and other commercial related proposal converted to cost for the commercial bid evaluation, and experiences, technical capability, resources and execution plan, etc. for the technical and execution bid evaluation. The Bid Evaluation Criteria is weighted for each evaluation categories including bidder management commitment, and should be prepared and developed prior to the bid receives.
Technical Bid Evaluation (TBE) is an evaluation and examination of bidders or subcontractors' technical bid document or proposals. The TBE includes technical capability including quality, compliance with specifications, operating cost, and performance penalties to meet the project requirement as well as execution capability.
Commercial Bid Evaluation (CBE) is a cost and commercial related items (e.g. proposed currency, payment method, guarantee and liability, bond and insurance) comparison table for proposed bidders or contractors or subcontractors. The Bid evaluation performs based on a bid evaluation criteria includes categorized weighted values including proposal terms and conditions, financial stability of the bidder, terms of payment, delivery schedule, and price analysis.
Vendor is a supply chain who supply the procurement tagged item and commodity bulk material. The Vendor is a successful bidder and contracted as a supplier or manufacturer or fabricator through commercial and technical bidding process among approved bidder list to supply their goods for construction.
Supply Chain is to cover the entire physical process of procurement work from obtaining the raw materials through all process steps until the final product are delivered and installed and tested at the site.
Supply Chain Management is managing and controlling the supply chains effectively and efficiently to support the project requirement.
Logistics is a term associated with the procurement movement and storage of procured equipment and materials for construction.
Logistics Management is that part of the procurement management including planning, implements, and controls the logistics work process efficiently and effectively forward procured items. The Logistic Management include related information from point of origin to the point of end user, and inbound, outbound, internal and external movement manage and control to achieve the cost effective movement and to meet the project requirements.