PURCHASING POLICY To establish a policy to ensure that commitments of Operating Company funds are properly authorized and controlled. SCOPE This Policy applies to all divisions, subsidiaries and joint ventures, which are accounted for under the consolidation or equity method (hereinafter, “Operating Company”) of Frito Lay International (“FLI”). STATEMENT of POLICY It is a FLI’s policy that procurements will be made to the best advantage of Frito Lay Company without favoritism. Best advantage is defined as the most favorable offer available in the competitive market (need to take into consideration engineered cost structures (non competitive bidding) and product insulation) considering quality, responsiveness to specification, delivery, price, transportation, cost, performance and payment terms. Therefore, a formal purchasing policy must be developed for each Operating Company in order to conduct our purchasing activities with the best advantage. 1.0 Definitions Requisitions Authorizations to procure goods or services. Requisitioning Identifying the items, materials, commodities and services needed. Purchasing Procuring the items requested 2.0 Objectives

3. This manager will have full responsibility and authority to administer and control the process of purchasing all goods and services for the Operating . 2. To provide additional focus to the planning of future purchasing requirements and identify methods which can be employed by the Operating Company in order to meet its purchasing needs at the most favorable prices. Purchasing. 3. • The use of competitive quotation procedures. review and use of qualified vendor lists.2 The Purchasing Policy encompasses three major objectives: 1. To accomplish this objective. Receiving. Requisitioners must ensure that expenditure is proper and is either within budget or is an approved capital appropriation. The department heads are responsible for initiating requisitions. Each function/department maintains requisitioning authority. the policy provides guidelines for: • The development. To make the most advantageous procurement decisions possible. and • The use of different methods of procurement. To provide an effective control mechanism within the procurement process by establishing separate lines of authority for: • • • • Requisitioning.0 GENERAL PROCEDURES ADMINISTRATION Each Operating company (and region office) shall assign an individual as the functional manager of the purchasing process. and Safeguarding of assets.

a Purchasing Committee may need to be established. Where an Operating company has determined that a Purchasing Committee is not necessary (e. etc. • Approval of the Annual Purchasing Plan (Head of Operations and General Manager). the General Manager or Head of Operations should fulfill the above responsibilities in the absence of a Purchasing Committee with the assistance of Finance (CFO/Controller) in developing and assuring policy compliance.3 Company. and • Review and approval of bidding process (Head of Purchasing. procedures (Head of Purchasing) and performance (Head of Operations) of the Purchasing Department. PURCHASING COMMITTEE Depending upon the size of the Operating Company and the Company’s particular needs. In smaller Operating Companies.e. impractical due to size of company). . the manager of purchasing may be the only individual in a functional area empowered to commit the Operating Company to the purchase of raw and packaging material and other goods and services. the purchasing manager may need to appoint additional qualified staff who will have authority to make purchase commitments. In larger Operating companies. A Purchasing Committee should have ultimate responsibility and authority to control the Purchasing function.. Operations.).g.. under the provisions of this policy. including of quote documentation). The Committee should be composed of representatives from all relevant business functions. ( i. • Review and approval of the Operating Company’s Authorization Limits (jointly Controller and Head of Purchasing). Finance. Responsibilities include: of the Purchasing Committee should • Review of policies (Controller).

below) SEGREGATION of DUTIES Proper checks and balances must be established to control purchasing transactions and safeguarding assets. . • Receiving goods and verifying amounts and specifications against shipping documents (receiving department). The plan should identify all major items and services to be procured during the next year as well as estimates of quantities and cost for each item. • Approving vendor’s invoices: the accounts payable department must receive a signed receiving document before a vendor invoice can be approved for payment. ( See also. Separate individuals shall have responsibility for the following duties: • Committing the Operating Company to the purchase and preparation of the Purchase Order (purchasing function). Responsibility for approving purchase orders is assigned to the purchasing function.4 ANNUAL PURCHASING PLAN To achieve the objective of planning future purchasing requirements and improving methods of meeting the Operating Company’s purchasing needs at the most favorable prices. • Disbursing cash: when the vendor invoice is approved for payment. technical competency. in accordance with this policy. • Internal control: the accounting function shall have responsibility for maintaining proper records for inventories. Commodity Buying. the manager of the purchasing function should compile and the Purchasing Committee should review an Annual Purchasing Plan (APP). operating and capital expenditures. alignment. quality and reliability. competitive insulation. proper authorization must be obtained to disburse funds in accordance with the Operating Company’s cash disbursement policies and procedures (cash disbursement clerk should not be part of the payable department).

and for conducting periodic audits and physical inventory counts to verify records. This plan should be reviewed quarterly by the Purchasing Committee to monitor success of the plan in achieving the purchasing objectives of the Operating Company ( see below. section 10.0 Post-Audit of Purchasing Transactions) Participation in commodity trading will be protective forward buying of commodities to be normal course of the Operating Company’s Trading on a speculative basis for the gaining windfall profit is prohibited. Chicago Board of Trade. intent of Forward Buying Forward buying means the use of trading instruments to enter into agreements to purchase commodities in the future at predetermined prices. futures and/or forward contracts.e. An annual plan for the procurement of agricultural material should also be developed. and plans for purchasing (i. spot purchases. COMMODITY BUYING The manager of purchasing should develop detailed procedures for and closely monitor the purchasing of certain ingredient commodities used in the normal course of the Operating Company’s operations. Chicago Mercantile Exchange) . The plan should include projections of the Operating Company’s needs for commodity products. storage needs).. • Maintaining custody of assets: the requisitioner will have responsibility for maintaining custody of assets received and for verifying the receipt of services. Sugar and Cocoa Exchange.g.. current and prior year’s market prices and estimates for the future prices. Coffee.5 accounts payable and cash payments. limited to used in the operations. Trading instruments include: • Futures Contracts Standardized agreements traded on organized exchanges (e.

The quantities to be purchased forward must be reasonable (i.500 per order. cannot be excessive) given the Operating Company’s forecasted annual requirements to the commodity. Shopping will be used for procurement of items costing below USD$2. works.e. or services that meet standard specifications. To be considered protective. usually a minimum of three. Specifications are often complex and the evaluations of proposals thus take significantly longer than evaluations of normal bids. Criteria such as delivery time. • REQUEST FOR QUOTATION Request for quotation are informal solicitation documents that are normally used for contract values and commercial terms for goods. availability and quality of on-site support . the forward buying must involve commodities that are used in the normal course of the Operating Company’s business. • SHOPPING Is a procurement method based on comparing price quotations obtained from several suppliers.6 • Forward Contracts Non Standardized agreements between the purchaser and seller that obligate the purchaser to accept delivery and the seller to make delivery of an agreed-upon quantity of a commodity at a specified future date or during a specified future period for a specified price. Quotations will be sought from registered vendors. Awards for business will be made to the supplier offering the lowest price. Such informal quotations are typically requested from local suppliers. • REQUEST FOR PROPOSAL Request for proposals are generally issued for high-value service contracts that require services to be customized to fit unique circumstances. • Protective Forward Buying The use of trading instruments which provide protection to reduce the Operating Company’s exposure to market price and/or supply fluctuations..

000 or more. Basically.g. Contracts are typically awarded to the offer that presents the best value in accordance with the evaluation criteria. the pre qualifying process requires the supplier to prove that the/she can meet specific requirements detailed by the Operating Company. . and ability to dispatch skilled personnel to a field missions. LIMITED INTERNATIONAL COMPETITIVE BIDDING (LIB) Limited International Competitive Bidding is typically only open to pre qualified suppliers. e. clarity of technical manuals. ability to understand local language and culture. the Contracts Review Committee (CRC) at headquarters is established to formulate recommendations to the Executive Director on any contract that Operating Company proposes to enter into for a purpose totaling US$100. are likely to be determining factors – other than price – for the award of contract. technically acceptable bidder or best value. etc. This method of bidding is mostly used in emergency or urgent situations where lead times need to be kept at a minimum and for certain categories of commodities. PURCHASING COMMITTEE CONTRACTS REVIEW In accordance with the Operating Unit financial regulations and rules. The Executive Director approves the final decision on award of contract.7 services. Invitation to bid is open a typically advertised on a public access media. products with short shelf lives and/or with specific quality requirements. Submission of the registrations form will serve as a request for pre qualification for potential supplier of items in the above categories. Potential suppliers submit bids based on the requirements outlined in the Bidding Document and the award is made to the lowest priced. INTERNATIONAL COMPETITIVE BIDDING Invitations to bid are issued for high-value contracts that require formal competitive procedures.

reduce purchasing agent overhead and improve manufacturing cycles. buyers or sellers may specify prices or invite bids. CONFLICT of INTEREST All purchasing personnel are subject to the PepsiCo Worldwide Code of Conduct in the performance of their duties and shall avoid all conflicts of interest ( see. Department heads will have the requisitioning authority for his/her function within the limits established by the Operating Company. A standard requisition form shall be used to provide written notification to the manager of purchasing that goods or services are required. FLI Policy). such as electronic data interchange (SDI) and enterprise resource planning (ERP). FUNCTIONAL REVIEW The manager of purchasing should conduct the appropriate review of the purchasing function on an annual basis. 4.8 E-PROCUREMENT E-Procurement (Electronic Procurement) is the business-tobusiness purchase and sale of supplies and services through the Internet as well as other information and networking systems. . Detailed generic specifications of the items needed should be provided on a timely basis so the manager of purchasing may solicit and evaluate competitive quotes from vendor. E-procurement software makes it possible to automate some buying and selling. EProcurement web sites allow qualified and registered users to look for buyers or sellers of goods and services. Depending on the approach. select a vendor and issue a Purchase Order. Companies participating expect to able to control part inventories more effectively.0 REQUISITIONING of GOOD and SERVICES All purchases (greater than $2M) must be initiated by an approved requisition.

competitive quotations be solicited from vendor.9 5. Vendor name and address. Bidding Process The bidding process will be carried as follows: • Preparation of bid requirement and getting authorization based on the purchase request. Information to be included with the quotations includes the following: Vendor name and address. it is preferable that at least three. . • Mailing bids. Any unique item specifications. Expiration date of quotation.000 (to be tailored to each specific country) or more requires bids in writing for a minimum of three suppliers. Shipping terms and delivery date: Shipping terms and delivery date: Item number.0 COMPETITIVE QUOTATION / BIDDING PROCESS In order to ensure that purchases are made at the most favorable price and terms. All companies responding to a request for quotation should submit their best bid. • Tabulating the results of the bid process. • Performing follow-up of non-responsive bids. Payment terms. • Filling out the quotation form including all replies with a summary of the financial terms and conditions. Any unique item specifications. All quotes should be written. but no less than two. Expiration date of quotation. Warranty / guarantee information. Warranty / guarantee information. quantities and price. Item number. Payment terms. oral quotes should be confirmed in writing. Signature // title of the representative Signature title of the representative Purchase of goods and services for $5. quantities and price.

• Payment terms. The purchasing manager should then document the reasons for the selection of a particular quote. Factors to consider other than price when considering competitive bids include: • Maintenance of adequate or multiple sources of supply. • High standards of quality and reliability. • Ability to simplify and bundle leveraging another’s company competency more broadly (outsourcing). Bids within 5% of the lowest bid are deemed to be equally competitive. • Financial stability of the vendor. CONTROL OF QUOTATIONS • No one shall disclose a bidder’s quotation to other bidders. . • Effect upon relations with customers in the local business community. The purchasing manager should select one of the bids. reliability of the vendor. taking into consideration factors such as quality of the product. • Long term/strategic relationship/partnership. giving this as well as other bids to the purchasing committee for review. VENDOR SELECTION Selection of the vendor should be based on the most favorable price and terms consistent with quality and on the vendor’s ability to perform in a timely manner. etc. • A deadline date shall be set for receiving quotations from vendors. price. The Purchasing Committee should review and approve the bid selected as well as the bidding process a s whole. • Need for specific brands. • Ability to meet service and delivery dates.10 Quotes should be obtained by the purchasing department.

and that the transactions are at arm’s length. Action should be taken to eliminate the vendor dependency and promote relationships with other capable suppliers. SOLE –SOURCE PURCHASING . that the price charged is not excessive in comparison to other vendors. delivery or special expertise. Situations may arise where an operating company function or location may become dependent on a vendor for a particular food or service for reasons such as: • Vendor has a long and positive work history with the Operating Company • Vendor has a working knowledge of the Operating Company’s machinery/equipment or plant specifications • Vendor is convenient to the location In these situations. Although alternative sources may exist. purchases from single-sourcing suppliers must be reviewed by the manager of purchasing to ensure the following: that an acceptable alternative source is not available. the appropriate Purchasing Official should review the purchasing rationale and balance the needs with the barrier(s) to entry by other suppliers. one vendor may be preferred because of better terms. Al least annually. If single-sourcing is evaluated to be in the best interest of the Operating Company. service.11 All instances of selection of other than the lowest bidder must adequately justified in writing and maintained in the purchasing records. refer to the paragraphs below. giving consideration to the additional benefits received from the preferred source. SINGLE-SOURCING PURCHASING For certain items. Review by regional purchasing for ensuring that a regional supplier would not provide competition. that will provide similar benefits at a lower or equal price. the Operating Company may prefer a particular vendor.

An annual review of all sole-source procurement must be conducted by the manager of purchasing to assess these relationships and develop a program to seek alternative sources. Charitable contributions.12 Certain items may only be available from a single supplier. postage. Example of these situations are set out below: Specialized purchasing functions. • When raw materials are available in the open commodity market. rent. Utilities. The manager of purchasing has the responsibility to ensure that sole-sourcing is to the best advantage of the Operating Company. including: • • • • • • Law firm services. The Head of Operations and Chief Operating Officer may waive the requirements for obtaining competitive quotations in the following situations : • When it is clear that an item can be obtained from one source only. Acquisition of real state. . Annual audit by public accountants. WAIVER of OBTAINNING COMPETITIVE QUOTATIONS Situations will arise where obtaining competitive quotations is not feasible or practical. dues and subscriptions. Taxes. Operating personnel may waive competitive quotations under the following circumstances without prior permission: • When purchasing an item(s) for which a bid has been received for the identical item(s) within the past six months.

All contracts for the purchase of capital assets or for capital leases are to be covered by a Capital Appropriation Request.13 • When an emergency requirement exists for an item or service: (emergency situations should be rare-frequent “emergency” requests should be monitored by the purchasing manager to ensure this allowance is no abused). in writing. long-term commitments or large blanket orders and services. Authority to approve Purchase Orders and contracts is vested in individuals by the manager of purchasing with the . the following items to be maintained with the purchasing records: • Name and signature of the purchaser. All Purchase Orders issued to the manager of purchasing must be numerically accounted for. 6. When competitive quotations are not obtained. • Vendor name and address. the purchaser should document. and • Reason for the waiver. non-standard purchases. building construction. Copies of all issued and canceled forms (marked “Void”) must be retained on file. Contracts are required for real estate acquisitions. The manager of purchasing will be assigned pre-numbered Purchase Orders and will have responsibility for controlling the receipt and issuance of all Purchase Orders. Purchase Orders document an agreement by the Operating Company and a vendor for the purchase and delivery of goods at the specified price and terms.0 METHODS OF PROCUREMENT All purchases must be made via properly prepared and approved Purchase Orders or written contracts. For Capital Expenditure refer to CAPEX manual and Accounting for Property. • Cost of the purchase. Plant & Equipment.

Blanket Purchase Orders must all be approved by the General Manager. The original Purchase order should not be altered. only when high volume centralized buying or other advantages offset the negotiated price. The guidelines for obtaining competitive quotations apply to Blanket Purchase Orders. Changes require the same level of control and approval as the original. . Under no circumstances will Purchase order be accepted. indefinite quantity purchases which are negotiated with a qualified supplier. quality and other terms. service. performance. an “after-the-fact” Authority limits for requisitioning and approving Purchase Orders must be established by the manager of purchasing. The Operating Company shall establish review procedures to ensure that limitations on Purchase Order authority are not exceeded by the con current placement of several Purchase Orders below the limit for the same item. and should not be issued for periods in excess of one year or for amounts in excess of specified limits. the total value being the value of the original Purchase Order plus the value of the revision.14 approval of the General Manager and is subject to the limits defined in a signing authority Limits Table. The limits must be approved by the Purchasing Committee or its equivalent and the CFO of the Operating Company. Approval for multiyear contracts must be obtained by the Region. Any changes to an order must be executed through the issuance of a revised Purchase order. Blanket Purchase Orders may be used for longterm. Such arrangements must be reviewed at least semi-annually by the manager of purchasing with regard to price.

Past performance. Technological expertise. Innovation. The extent of a vendor evaluation should be related directly to the amount and nature of the purchase. The decision for selecting a vendor should be based on a balance of the following: • • • • • • • • • • • Price and terms. Alignment. time of payment and entity to be paid.15 7. Related parties. Financial stability.0 REBATES All procurement transactions involving rebates from vendors must be formally documented through a Rebate Agreement specifying the rebate amount. It is the responsibility of the Operating Company’s Controller to ensure all rebates are accrued on a timely basis. Productivity.0 APPROVED VENDOR LIST The Purchasing Committee shall establish the relevant criteria upon which to evaluate vendors. Convenience. Reputation and professionalism. The Committee shall also establish procedures to conduct and document vendor evaluations and approval decisions. these criteria should be documented in the Operating Company’s purchasing manual. 8. Quality and service. Before a vendor . The purchasing manager will be responsible for conducting the evaluation and maintaining the necessary documentation related to the evaluation.

the Purchasing Committee must review the records and approve the recommendation. .16 may be added to the Approved Vendor List.