SCENARIO OF POWER IN INDIA

Power development is the key to economic development. The power sector has been receiving adequate priority ever since the process of planned development began in 1950. Hydro-power and coal based thermal power have been the main sources of generating electricity. Nuclear power development is at slower pace, which was introduced, in late sixties. The concept of operating power systems on a regional basis crossing the place, the power supply industry has been under constant pressure to bridge the gap between supply and demand. State of the Industry: Demand is expected to grow 6-7% over the medium term. Capacity additions of around 50 GW are expected in the 11th Plan (60% of government targets) Addressal of key issues such as fuel supply, land availability, environmental clearances . Budget Impact: There were no major announcements impacting the sector. The basic customs duty on project imports has been reduced from 7.5 to 5%. However, the exemption on additional duty of 4% has been withdrawn for nonmega power projects. Thus, the overall impact of duty changes on power sector project imports is neutral. The budgetary allocation for Accelerated Power Development and Reforms Programme (APDRP) has been maintained at Rs 800 crore in FY 08 - 09 The government has proposed to set up a National Transmission and Distribution Fund to address higher losses at the transmission and distribution level and for the sector’s development as well. The overall impact on the sector is neutral. and equipment supply are key to success.

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SOURCE'S OF POWER

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ABOUT NTPC

NTPC, India’s largest power company, was set up in 1975 to accelerate power development in India. Today, it has emerged as an ‘Integrated Power Major’, with a significant presence in the entire value chain of power generation business. NTPC ranked 317th in the ‘2009, FORBES GLOBAL 2000’ ranking of the world’s biggest companies. With a current generating capacity of 30,144 MW, NTPC has embarked on plans to become a 75,000 MW company by 2017.

VISION, MISSION & VALUES OF THE ORGANISATION

VISION “A world class integrated power major, powering India’s growth, with increasing global presence”

MISSION “Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and ecofriendly technologies and contribute to society”

CORE VALUES- BCOMIT
• •

Business Ethics Customer Focus
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• • • •

Organizational and Professional Pride Mutual Respect and Trust Innovation and Speed Total Quality for Excellence

OVERVIEW OF THE ORGANISATION

India’s largest power company, NTPC was set up in 1975 to accelerate power development in India. NTPC is emerging as a diversified power major with
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presence in the entire value chain of the power generation business. Apart from power generation, which is the mainstay of the company, NTPC has already ventured into consultancy, power trading, ash utilization and coal mining. The total installed capacity of the company is 30,144 MW (including JVs) with 15 coal based and 7 gas based stations, located across the country. In addition under JVs, 3 stations are coal based and another station uses naptha/LNG as fuel. By 2017, the power generation portfolio is expected to have a diversified fuel mix with coal based capacity of around 53000 MW, 10000 MW through gas, 9000 MW through hydro generation, about 2000 MW from nuclear sources and around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a multi-pronged growth strategy which includes capacity addition through green field projects, expansion of existing stations, joint ventures, subsidiaries and takeover of stations. NTPC has been operating its plants at high efficiency levels. Although the company has 18.79%of the total national capacity it contributes 28.60% of the total power generation due to its focus on high efficiency.

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In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as offer for sale by Government of India. NTPC thus became a listed company in November 2004 with the Government holding 89.5%of the equity share capital. The rest is held by the Institutional investors and the Public. NTPC is among the largest 5 companies in India in terms of market capitalization.

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The concept of Corporate Social Responsibility is deeply ingrained in NTPC's culture. Through its expansive CSR initiatives NTPC strives to develop mutual trust with the communities that surround its power stations.

Diversified Growth

NTPC’s quest for diversification started about a decade back with its foray into Hydro Power. It has, since then, been moving towards becoming a highly diversified company through backward, forward and lateral integration. The company is well on its way to becoming ‘an Integrated Power Major’, having entered Hydro Power, Coal Mining, Power Trading, Equipment Manufacturing and Power Distribution. NTPC has made long strides in developing its Ash Utilisation business. In its pursuit of diversification, NTPC has also developed strategic alliances and joint ventures with leading national and international companies.

Hydro Power: In order to give impetus to hydro power growth in the country and to have a balanced portfolio of power generation, NTPC entered hydro power business with the 800 MW Koldam hydro project in Himachal Pradesh. Two more projects have also been taken up in Uttarakhand. A wholly owned subsidiary, NTPC Hydro Ltd., is setting up hydro projects of capacities up to 250 MW.
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Coal Mining: In a major backward integration move to create fuel security, NTPC has ventured into coal mining business with an aim to meet about 20% of its coal requirement from its captive mines by 2017. The Government of India has so far allotted 7 coal blocks to NTPC, including 2 blocks to be developed through joint venture route. Coal Production is likely to start in 2009-10.

Power Trading: 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned subsidiary was created for trading power leading to optimal utilization of NTPC’s assets. It is the second largest power trading company in the country. In order to facilitate power trading in the country, ‘National Power Exchange Ltd.’, a JV between NTPC, NHPC, PFC and TCS has been formed for operating a Power Exchange.

Ash Business: NTPC has focused on the utilization of ash generated by its power stations to convert the challenge of ash disposal into an opportunity. Ash is being used as a raw material input for cement companies and brick manufacturers. NVVN is engaged in the business of Fly Ash export and sale to domestic customers. Joint ventures with cement companies are being planned to set up cement grinding units in the vicinity of NTPC stations.

Power Distribution: ‘NTPC Electric Supply Company Ltd.’ (NESCL), a wholly owned subsidiary of NTPC, was set up for distribution of power. NESCL is actively engaged in ‘Rajiv Gandhi Gramin Vidyutikaran Yojana’programme for rural electrification and also working as 'Advisor cum Consultant' for Ministry of Power for implementation of Accelerated Power Development and Reforms Programme(APDRP) launched by Government of India.

Equipment

Manufacturing:

Enormous

growth

in

power

sector

necessitates augmentation of power equipment manufacturing capacity. NTPC has formed JVs with BHEL and Bharat Forge Ltd. for power plant equipment manufacturing. NTPC has also acquired stake in Transformers

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and Electricals Kerela Ltd. (TELK) for manufacturing and repair of transformers.

Subsidiaries NTPC Electric Supply Company Ltd. (NESCL) The company was formed on August 21, 2002. It is a wholly owned subsidiary company of NTPC with the objective of making a foray into the business of distribution and supply of electrical energy, as a sequel to reforms initiated in the power sector.

NTPC Vidyut Vyapar Nigam Ltd. (NVVN) The company was formed on November 1, 2002, as a wholly owned subsidiary company of NTPC. The company’s objective is to undertake sale and purchase of electric power, to effectively utilise installed capacity and thus enable reduction in the cost of power. NVVN

NTPC Hydro Ltd. (NHL) The company was formed on December 12, 2002, as a wholly owned subsidiary company of NTPC with an objective to develop small and medium hydroelectric power projects of up to 250 MW. More>>

Pipavav Power Development Co. Ltd. (PPDCL) A memorandum of understanding was signed between NTPC, Gujarat Power Corporation Limited (GPCL) and Gujarat Electricity Board (GEB) in 2004 for development of a 1000 MW thermal power project at Pipavav in Gujarat by forming a new joint venture company between NTPC and GPCL with 50:50 equity participation. Pursuant to the decision of Gujarat Government, NTPC Ltd. has dissociated itself from this company. PPDCL is under winding up.
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Kanti Bijlee Utpadan Nigam Limited, (formerly known as Vaishali Power Generating Company Limited) To take over Muzaffarpur Thermal Power Station (2*110MW), a subsidiary company named ‘Vaishali Power Generating Company Limited (VPGCL)’ was incorporated on September 6, 2006 with NTPC contributing 51% of equity and balance equity was contributed by Bihar State Electricity Board. This company was formed to renovate the existing unit and run the plant. The second unit has been successfully re-synchronised on October 17, 2007 after 4 years of being idle. Renovation and modernisation of the first unit is under progress. The company was rechristened as ‘Kanti Bijlee Utpadan Nigam Limited’ on April 10, 2008.

Bharatiya Rail Bijlee Company Limited (BRBCL) A subsidiary of NTPC under the name of ‘Bharatiya Rail Bijlee Company Limited’ was incorporated on November 22, 2007 with 74:26 equity contribution from NTPC and Ministry of Railways, Govt. of India respectively for setting up of four units of 250 MW each of coal based power plant at Nabinagar, Bihar. Investment approval of the project was accorded in January, 2008. Joint Ventures Name of the Joint Venture Company

Date

of Promoter’s Holding 31.3.2008 as

Equity on Area(s) of Operation

Incorporation

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NTPC 5.28%

NHPC 5.28%

PFC PTC Limited India 5.28% 16.04.99 Power Grid Corp 5.28%

Trading purchase identified of

of power

power, from power

import/export of power and private

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projects and selling it to identified SEBs/others.

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NTPC 50%

Reliance Utility 2 Powertech Limited (UPL) 50% Infrastructure 23.11.95 Ltd.

To take up assignments of construction, erection and supervision in power sector and other sectors in India and abroad.

NTPC 50% NTPC-SAIL 3 Power Company Pvt. Ltd. SAIL 08.02.99 50% To own and operate plants a for at and to be capacity of 564 MW as captive power facilities Durgapur, MW is SAIL’s steel manufacturing located Rourkela expected

Bhilai. Another unit of 250 commissioned shortly.

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NTPC 50%

NTPC-Alstom Power 4 Services Private Limited

Alstom Power 20.09.99 Generation AG 50% To take up Renovation & Modernization assignments of power plants both in India and abroad.

NTPC 50% To set up a coal-based Tamil Nadu NTPC Tamil Electricity 5 Nadu Energy 23.05.03 Board Company Ltd. 50% power station of 1000MW capacity, at Vallur , using Ennore port infrastructure facilities. The construction work at site is under progress.

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NTPC Ratnagiri Gas 6 and power 08.07.05 Pvt. Limited 28.33%

To take over and operate gas based Dabhol Power Project terminal. shareholding is revised to 32.88%. alongwith to LNG NTPC’s be

NTPC 50%

Indraprastha Power Generation Co. Ltd. 25% Aravali Power 7 Company Private Ltd. 21.12.06 Haryana Power Generation Corp. Ltd. 25% To set up coal based power Project of 1500 MW (3x500 MW),in Jhajjar District of Haryana. NTPC would also operate and maintain the station 25 years. on Management Contract basis for at least

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NTPC 50%

Singareni NTPC-SCCL 8 Global Venture Ltd. 50% Collieries 31.07.07 Company Pvt. Ltd.

To &

jointly

undertake of

the coal in

development and operation maintenance Blocks and integrated coal based power projects India and abroad.

9 Meja Limited

Urja 02.04.08 NTPC 50%

To set-up a power plant of 1320 MW (2X660 MW) at Meja Tehsil or any other suitable site in Allahabad district in the state of Uttar Pradesh.

Nigam Private

Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited 50%

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NTPC 50% To carry out Engineering Procurement Bharat NTPC BHEL 1 Power 0 Projects Ltd. 50% Heavy 28.04.08 Electrical Pvt Ltd Construction and to engage and (EPC) in

activities in the power sector manufacturing and supply of equipment for power plants and other infrastructure projects in India and Abroad.

NTPC 49% To establish a facility to take up BF-NTPC 11 Energy Systems Limited Bharat Forge 19.06.08 Limited 51% manufacturing forgings, of fittings castings,

and high pressure piping required for power projects and Balance sector other of industries, Plant (BOP)

equipment for the power

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NTPC 50% To set-up a coal based Nabinagar Power 1 Generating 2 Company Private Limited 50% NTPC Bihar State 09.09.08 Electricity Board power capacity project of 1980 having MW

(3X660 MW) and operation & maintenance thereof at Nabinagar Aurangabad Bihar. in of district State of

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NTPC 16.67%

NHPC 16.67%

National 1 Power 3 Exchange Limited 11.12.08

PFC 16.66% To operate a Power

Exchange at National level. TCS 50%

Installed Capacity Be it the generating capacity or plant performance or operational efficiency, NTPC’s Installed Capacity and performance depicts the company’s outstanding performance across a number of parametres.
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NO. OF PLANTS NTPC Owned Coal Gas/Liquid Fuel Total Owned By JVs Coal & Gas Total 4 26 15 7 22

CAPACITY (MW) 23,895 3,955 27,850

2,294 30,144

Regional Spread of Generating Facilities REGION Northern Western Southern Eastern JVs Total COAL 7,035 6,360 3,600 6,900 8,14 24,709 GAS 2,312 1,293 350 1,480 5,435 TOTAL 9,347 7,653 3,950 6,900 2,294 30,144

Recognitions

&

Awards

NTPC has a glorious record of excellence in every field of its activities ever since its inception in 1975. Leading the country’s power sector with a vision to become a 75,000 MW company by 2017, we take pride in our people and their performance which has been acknowledged time and again at various national and international forays.

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NTPC has been awarded No.1, Best Workplace in India among large organisations for the year 2008, by the Great Places to Work Institute, India Chapter in collaboration with The Economic Times.

Shareholding Pattern

SWOT ANALYSIS OF NTPC
STRENGTH OF NTPC: • • The company has kept with itself sufficient liquid funds to meet any kind of cash requirement. Efficient working capacity of plants.

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• • • • • • • • •

Efficient and timely completion of projects. A minimum risk factor. Best-integrated project management systems. Company with an excellent record and high profits. An early starter-more than 30 years experience in power sector. Highly motivated and dedicated workers and officers- no industrial relations problem. Excellent growth prospects with significant additions, modifications and replacements. Employee-friendly personnel policies. Low project cost of NTPC’s plants.

WEAKNESSES OF NTPC: • • Depleting raw materials. Some of the Plant have become old and need investment in Renovation & Modernization. OPPURTUNITIES: • • • Demand and supply gap. Upcoming hydro and nuclear sector. Huge opportunity in consultancy services.

• • •

Rising prices of raw materials Huge competition from SEB’s, Reliance Energy, Tata power and other Private Development. Coming up of other sources of power.

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Huge Capital requirement for expansion, diversification, horizontal & vertical integration and R & M.

FINANCIAL HIGHLIGHTS OF THE COMPANY

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ABOUT THE TITLE
A contract in its simplest form defines a promise, or group of promises, that the law will enforce. The promise is to do, or refrain from doing, a particular thing. Taken in a commercial context, the contract is a document in which the terms of a promise are recorded. Extending this further, the contract is an agreement enforceable at law between two or more parties to undertake or perform a particular thing. In undertaking or performing that something, both parties accept certain responsibilities, and in return, receive certain benefits. OBJECTIVES The objective of the contracts/ procurement function in NTPC is to make available the required equipment / materials /works /services of the right quality at the right time of right quantity and at right price so as to reach the specified place at the right time – after giving equal and fair opportunity of bidding to all competent tenderers. IDENTIFICATION OF RESPONSIBILITIES: NTPC being a utility organization with projects located away from the corporate office, has divided the responsibility of contracts management, both pre-award and post award, between the corporate office and project site. A contract management function as an independent specialized techno commercial function to meet the overall corporate objective in the area of project procurement has been in place since inception as a department named as “Corporate Contracts” within the organization structure of NTPC. The ‘Corporate Contracts’ procures plants/ equipment and services for its projects, which are characterized by adherence to the procurement of external funding agencies, factoring of long process owner for award of all such contracts including high value civil works, its monitoring and post award follow up till the delivery of equipment from the suppliers works till the closure if the contracts. The Corporate Contracts division

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is the receipt and installation of the plant and equipment and its execution is the responsibility of the project site. There are a number of other small value contracts with lesser of engineering coordination, whose pre-award and post-award contracts are handled by the project sites. The principles and guidelines followed for these site contracts are similar to those applicable for the Corporate Contracts. In view of the complexity involved in the construction of thermal generation projects, the Contracts Management Systems calls for further sharing of responsibilities for specialized functions such as Engineering, Finance, Cost Engineering, Quality Assurance, and Inspection at Corporate Center and Erection, Site Finance, Field Quality Assurance etc. as the Project Site. Role of FINANCE will be explained while explaining the procedure in awarding the contract. It also includes what all I did there being trainee in Finance department. NTPC develops power plants across India and each plant requires huge investments in form of time and money. For this purpose NTPC divides its work into different packages for each power plant. Tenders are floated for each package for the purpose of erection of power plant instead of the whole project being given on turnkey basis to a single bidder. These packages are distinguished on the following basis: • • • Corporate Packages Regional Packages Site Packages

Details of some of the above packages are given below: CORPORATE PACKAGES

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MECHANICAL PACKAGES 1 Steam Generator with Electrostatic Precipitator 2 Steam Turbine Generator Package 3 Station piping 4 Ventilation System 5 Air conditioning System 6 Fire Detection and Protection System 7 Ash Handling System Package 8 Coal Handling Plant 9 Pre-Treatment Plant 10 DM Plant & CW Treatment System 11 Condensate Polishing Plant 12 CW System Equipment Package 13 Cooling Towers 14 Make up Water Pipes

ELECTRICAL PACKAGES 1 Power Transformers 2 Outdoor Transformers 3 Generator Busducts & Associated Equipment, MV Busducts

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4 MV Switchgears 5 Lt Switchgears And Lt Bus Ducts 6 Electrical Equipment Supply & Erection Package 7 Switchyard Package C&I PACKAGES 1 Station Control and Instrumentation 2 Instrumentation Cables

CIVIL PACKAGES 1 Site Leveling & Infrastructure Works Package 2 Main Plant & Off Site Civil Works Package 3 Chimney and Chimney Elevator 4 Ash Dyke Package 5 CW and Make Up Water System Civil Work Package 6 Railway Siding and S&T System

CONSULTANCY PACKAGE REGIONAL PACKAGES

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1 Ash Water Recirculation System 2 Ht Power Cables 3 1.1 KV Power Cables 4 Control Cables SITE PACKAGES SITE PACKAGES ASSOCIATED WITH PLANT 1. Survey 2. Geotechnical Investigation 3. Workshop & Lab Equipment 4. Drinking Water Pipeline To Township SITE PACKAGES ASSOCIATED WITH TOWNSHIP 1. Township site leveling and land development 2. Construction of Residential Quarters and associated 3. Misc. works

Each package consists of works that has to be completed according to the schedule, developed at the planning stage of the project. Tenders are floated for award of contracts for each package through the sale of bidding documents. The last date of receipt of bids is also mentioned in the advertisements, as well as at the time of sale of bidding documents. The bidders duly fill the bidding documents according to the specifications laid by NTPC and submit their bids before the last date along with Bid Security and Certificate of Compliance to Important Conditions in separate sealed envelopes.

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Following are three types of tenders: Types of tenders Based on the materials classification and Delegation of Powers (DOP) handbook of NTPC, following three types of tendering is adopted in NTPC:
(a) Open tender:

Procurements of value Rs 15 lakh and above must be done through open tendering, as it involves a lot of cost and time. Open tender is accessible to all known reliable and proven sources of particular equipment/ material. For the above purpose, advertisement is given in two or more newspapers of all India repute in addition to one or more local newspapers, where the work is to be executed. However, in case of Empanelment, the process of invitation for bids will take place, only once in every three years, by advertising in newspapers as stated above. Empanelment is done in case of award of contract for Environmental Impact Assessment (EIA), Flora-Fauna study etc. The criteria for pre-qualification will inter-alia consist of past performance, financial soundness, technical competence, organizational capability etc., but for the items valued less than 15 lakh, the pre-qualification can be done on the basis of data available in trade journals, manufacturer’s directory or approved vendors list of state government and central government. For new ventures, methodology of Expression of Interest (EOI) is adopted and by means of advertisement, new bidders are invited to provide their credentials and based on it, short listing of appropriate bidders is done. (b) Limited tender: Limited tender is a tender, where instead of sending bid enquiry to all the possible vendors through newspapers, a limited number of vendors are intimated through post or fax. But, a limited tender may be invited only for the procurement worth less than Rs. 15 Lacs. In case of a limited tender, minimum of four bidders are invited to quote the prices for the required equipment/materials/services and these four bidders must be from the
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approved list of vendors mentioned in the open tender. However, a limited tender is a special case and cannot be issued without proper explanation and requirement. In case of urgency& exceptional cases, items worth more than Rs.15 Lacs may also be procured though a Limited Tender Enquiry (LTE), with authorization of competent authority and the reason must be recorded in the indent documents/note sheet. Further, as per the circular No. 265/2007 the selection of vendors are to be done through a screening committee before approval by the competent authority. (c) Single tender: Where procurement is made by contacting only a single source on grounds that the item to be procured is of a proprietary nature or on account of standardization or on grounds of urgency of requirement, it will be treated as a single tender. In case of proprietary items, a certificate to that effect has to be issued by the indenter at appropriate laid down levels in each case. Orders on basis of single tender will be issued with the approval of General Manager or any competent authority to which powers are delegated. However, a Single Tender Enquiry (STE) is to be done only on exceptional cases and is not encouraged by NTPC.

CONTRACT MANAGEMENT PROCESS
1. PRE-AWARD ACTIVITIES Pre-award contract management system is one of the major sub-systems of contract management system which has interfaces and inter-related activities with various departments like Engineering, Quality Assurance, Corporate finance, Cost Engineering etc. The pre-award contract management system covers all activities from the stage of preparation of draft Technical Specification to issue of final Letter of Award/ Notification of Award for contracts.

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Supporting activities like contract packaging, Contract numbering, Cost estimate preparation, Qualifying requirements approval, Finalization of work schedules are also covered within this sub-system. 1.1. Contract Packaging As the first step in procurement for a project, the total project works are broken down into smaller, well defined `Packages’. This is done with a view to optimize the number of contracts to be handled for better planning, coordination and implementation of the whole project and at the same time to execute the Project at an optimum cost. For break-down the total projects works into smaller packages, the following factors are to be considered: • The packages formed should be compatible considering the prospective bidders. Thus the contents of a package should be interrelated in such a way that prospective Bidders can tie-up with suppliers of the various equipments and services involved in order to be able to bid for the entire package. This will ensure adequate competition in bidding and consequent procurement at optimum cost. • The packages formed should include such combinations of equipment and services that can be advantageously engineered for the preparation of specifications for bid documents and subsequent product designs including manufacture/ construction drawings. • The packages formed must be mutually exclusive as well as collectively exhaustive. Thus each package should be independent of all other with regard to its content. The number of package and their sizes should be at an optimum level for effective implementation. It should be possible to clearly define the responsibility for a package to individual Engineering Coordinators to look after all technical aspects and Contracts Coordinators to handle all commercial aspects of the packages. The terminal points of

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each package should be clearly defined and proper tie-ups of these technical points between packages ensured. • • • • • • Availability of prospective bidders Project execution schedule Combination/ clubbing of equipment/services that can be advantageously engineered. Independence with regard to its work content and clear cut terminal points for interfacing. Project financing. Organization setup.

Package List Preparation System for finalization of contract package list for a project is provided by ISO procedure no: CS-QS-P-091 • Contract package list is finalized by a duly constituted committee comprising members from contracts (P&S), engineering, finance and corporate planning departments. • Contract package list is approved at the apex level i.e. by CMD.

1.2. Preparation and Finalization of Bidding Documents MNW (Master Network) is finalized by CMG and qualifying requirements (QR) is finalized by a standing committee headed by Director (Tech) with ED (CC&M), ED (Engg.) and ED (Fin) as its members. Cost Estimate (CE) acting as an internal guide in broad evaluation of the bids and in determining the amount of Bid security and the cost of bidding documents is finalized by Cost Engg. group. With the MNW, QR and CE, Bidding documents for Contract packages are
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finalized keeping in view the principles of transparency, fairness & equity and the procurement guidelines issued by the concerned funding agency and in accordance with ISO quality procedure no. CS-QS-P-092. a.) Technical portion of bidding documents is prepared by Engg Department .It comprises of Technical Specifications, Drawings, Technical Data Sheets. b.) Commercial portion of bidding documents is prepared by contract department with relevant techno-commercial inputs from Engineering and Corporate Monitoring Group. It comprises of Instruction to Bidders, General Conditions of contract, Special Conditions of Contract, Bid Proposal sheets. These are vetted by finance and engineering and finally approved by GM (CS). A copy of finalized bid documents is send to the funding agency as the case may be. 1.3. Tendering/bidding: Normally an open tendering system for procurement is adopted by NTPC during construction stage of a project. However depending on the circumstances and the requirements, limited tendering or single tendering system is also adopted in specific cases.

1.4. Qualification Requirements For Bidders : Normally the post qualification procedure is adopted for determining the capacity and capability of the bidders as to whether he would be able to successfully execute the contract in case of award. The Qualification Requirements (QR) has two parts, the Standard or General QR, which is common for all contract packages, and the specific QR as finalized for a particular package. In the notice
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inviting tender / invitation for bids only the specific part of the QR is published. However the bidding document stipulates the complete QR i.e. the standard part of the qualification requirements as also the specific requirements for a particular contract package. The QR’s for each of the contract package are based on intensive and well-researched interdisciplinary efforts and finalized by a standing committee headed by the Director (Tech.). Such qualification criteria inter-alia includes the status of a bidder i.e. manufacturer / project executing agency, financial status, technical requirements to be fulfilled etc. in case of post qualification procedure, the analyses of bidders qualification data is carried out during the bid evaluation process. Conformity by the lowest evaluated bidder to the stipulated qualification requirements is a prerequisite for the award of the contract. If required, a pre-qualification procedure is adopted for obtaining offers only from pre-qualified bidders who meet the specified criteria. In case of pre-qualification procedure, the bidders are required to furnish documents/data to validate past performance, financial status, technical capability, organizational capacity for specific works through a pre qualification notice published in leading newspaper.

1.5. Bidding Documents (a) In the pre- award contract management’ preparation of bidding documents is aman very vital step as these execute the procurement policy of the organization, procedures and regulations, lay the basis for competitive bidding, describe the nature of goods and works for which bids are to be invited and later on become the basis for execution of contract after the work has been awarded.

For preparation of bidding documents for the contract packages funded by external funding agencies such as World bank, ADB, OECF,SFD, KFW etc.,
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NTPC follows the standard bidding documents of the respective funding agencies. However, if the stenderd bidding documents of any funding agency are not available, the bidding documents in such cases are developed based on the procurement guidelines and procedures of the concerned funding agency. These documents are also revised from time to time based on the experience gained during the course of execution of various contracts. (b) Contents of bidding documents the format and content of bidding documents may slightly vary according to the type and nature of contract. However, the bidding documents generally consist of the following sections: Sec 1 - Invitation for bids ( IFB) Sec 2- Instruction to bidders (ITB) Sec 3- Bid Data Sheet (BDS) Sec 4- General Condition of contract (GCC) Sec 5- Special condition of contract (SCC) Sec 6- Technical Specification (TS) Sec 7- bid Form and price sehedules(FP) Sec 8- technical data requirement sheets

Invitation for bids the IFB provides brief information to prospective bidders on loan/ credit agreement (in case the package is funded by any external funding agency), type of bidding procedure whether it is international competitive bidding or domestic competitive bidding, description of plant & equipment to be supplied and

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installed, qualification criteria for bidders, important bid evaluation criteria and the schedule for issue of bidding documents, receipts and opening of bids etc.

Instructions to bidders It provides necessary information to bidders enabling them to prepare responsive bids. It normally contain the following information: • • • • • • • • • • • A summary description of the scope of work; The eligibility criteria and qualifying requirements for participating bidders; Procedures for clarifying and/or amending the bidding documents; Currency of bid price and payments; Price adjustment provisions; Requirement of bid security; Time period for completion; Procedure and deadline for bid submission and bid opening; Bid validity period; Domestic/purchase preference, if applicable; Procedure for contract award;

Bid data sheets This section is applicable for procurements under world bank funding and provides specific information to corresponding clauses in ITB for each specific contract package. It provides Specific information to major corresponding clauses of ITB such as price basis, bid currency, bid security, bid validity,evaluation criteria, completion time, price preference etc. General conditions of contract

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This section stipulates all the rights and obligations of the parties and the terms and conditions applicable for contract execution. Some of the major provisions of the general conditions of contract include definition and interpretation of contract terms; subject matter of contract; payments; work execution; guarantees and liabilities; settlement of disputes and governing laws etc. Special conditions of contract The special conditions of contract complement and modify the general conditions of contract for taking into account the contract-specific requirements. The clauses in this section provide contract-specific information in respect of corresponding clauses in GCC. Some of the major clauses which supplement the provisions of GCC are governing laws, settlement of disputes, scope of work, payments, completion time, contract price adjustment, contract securities, LD for delay, defect liability etc. Technical specification The technical specifications are normally fully descriptive and give complete requirements in respect of plant &equipment/services required. It generally contains the following: • • • • • • • • • • Intent of specifications Scope, terminal points and specific exclusions. General technical conditions as applicable to a specific contract. Standards. Design criteria, technical design specifications. Performance parameters and guarantees. Performances guarantee tests. Shop and site tests. Special inspection requirements, if any. Drawings.
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• • •

Construction/erection conditions. Bill of quantities. List of mandatory spares.

Bid form and price schedules It provides formats for bid form, price schedules and attachments to be filled in by the bidders to complete their bids. An indicative list of schedules/attachments covered in this section is as follows: (a) Bid price along with its break-up. (b) Details of major items of supply or services proposed to be subletted by the bidder. (c) Commercial and technical deviations (d) Guarantee declaration. (e) Price adjustment data. (f) Special maintenance tools and tackles. (g) Work completion schedule. (h) Additional information, if any. (i) Alternative bid.

Technical data requirement sheets It provides formats for technical information to be furnished by the bidders. It identifies nature and the extent of required details and manner in which they are to be presented by the bidders. This section also gives the list and formats (whichever applicable) for the information required from the bidders after the award of contract to him. 1.6. Issuance of invitation for bids

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The invitation for bid (IFB)/notice inviting tender (NIT) for all Contract packages is given wide publicity in various Newspapers, Websites and reputed trade journals for information of bidders having relevant experience. A copy of NIT/IFB is also forwarded to each of the Embassies/High Commissions of member countries of funding agency for publication of the same in Business magazines/trade journals of their respective country, in case of International Competitive Bidding. Text of NIT/IFB is also concurred by Engineering and Finance. Abridged NIT is published in one leading news paper in each region and one local language news paper after sending the approval to Corporate Communication Dept and detailed NIT is hosted on website ntpctender.com. Further incase of ICB detailed NIT/IFB are to be published in ITJ and other International Forum besides, it is also sent to the embassies of the various countries of the bidders to whom the invitation is intended to be sent. 1.7.Cost of Bidding Documents: The cost of bidding document to be charged from the prospective bidders and the exchange rate to be adopted for computing, the cost of the same when documents are issued to the foreign parties are stipulated vide circular no.CSQS-C-570. 1.8. Nomination of Tender Committee Initiate proposal for the nomination/constitution of Tender Committee as per DOP having members from Contract, Engineering & Finance for evaluation of the bids and co-ordinate nomination and approval from competent authority. 1.9. Submission, receipt and opening of Bids Bid Submission In addition to communication sent to bidder regarding date & timings of Bid receipt & opening display the venue & timings of Bid Receipt/ Opening at appropriate places for the convenience of bidders. Bids are received in sealed condition at the place, date and time specified in the NIT/IFB.
40

Inform Engg. & Finance member of TC about venue & timings of Bid Opening and request them to depute their representatives to attend the Bid Opening. Upon receipt of the bid, ensure that the envelopes/packets comprising the bid are as per requirements of the procedure laid down in Bidding Documents for submission of bids and that these are properly sealed. Check the following before opening the bids: • • • Letter of Undertaking, Bid Security Certificate of Acceptance of Important Terms & Conditions

Keeping in view the very comprehensive (and therefore bulky) offers that may be submitted, only the essential portions of the bids are read out during the bid Opening. Normally, those items which have direct impact in evaluation should be read out. • • • Lump sum prices, and their break –up Prices (lump sum) for alternatives, if any Discounts offered, if any

Minutes of bid opening are prepared by the Contract Coordinator immediately after the bid opening and A bid opening statement is to be prepared jointly by Corporate Contracts and finance. 1.10. Evaluation of Bids The bids received and opened are evaluated by the Tender Committee. The Committee determines the lowest evaluated bid for contract award in terms of criteria for evaluation of bids stipulated in the bidding documents and puts up its recommendation for the approval of competent authority in accordance with the ‘Delegation of Powers’. The co-ordination of the committee meetings and finalization of Evaluation Reports based on the decisions taken by the committee is the responsibility of Contract Services. Technical Evaluation Report (TER) is

41

prepared by engineering member of the Tender Committee. Commercial Evaluation Report(CER) is prepared by contracts Deptt. with inputs from finance. Bid Evaluation Procedure An evaluation report is prepared by the tender committee after duly examining the completeness and responsiveness of Bids submitted by Bidders the purpose of the report is to determine the lowest evaluated and substantially responsive bid and following procedure for the same. The bid evaluation procedure consists of the following steps: 1.) Preliminary Evaluation Short listing of bidders to be taken up for detailed evaluation is done by the Tender Committee based on the following details furnished by various bidders: 1. Check bid security & validity of bids 2. Check if bid properly signed, dated & stamped 3. Check power of attorney 4. Check JDU / JV agreement, if applicable 5. Check deviations to important conditions 6. Check if bids cover complete scope 7. Check for computational errors 8. Check for material deviations A statement of quoted prices is prepared.

Factors to Be Considered For Evaluation Short Listing
42

1. Bid price as per scope 2. Taxes and duties

3. Domestic, Price or other preferences
4. Differential price factors

Preliminary Evaluated Price

= +

arithmetically corrected bid price

Taxes & duties (if applicable) + Adjustment for Functional Guarantees + Differential price preference 2) Detailed Evaluation Detailed technical and commercial evaluation of short listed bidders are done w.r.t. provisions of bid documents and necessary prices on account of technical/ commercial deviations w.r.t. scope of work , technical compliance, deficiencies in type test and mandatory spares, guaranteed parameters, work schedule are worked out. Detailed Commercial Evaluation CER is prepared by Contracts and includes the following: • • • • • Statements of commercial deviations Cost compensation on each of these declared deviations. A Write-up on the detailed commercial evaluation List of clarification/confirmation required from the bidder. No cost of withdrawal will be provided for undeclared declarations

Detailed Technical Evaluation
43

A detailed technical evaluation is prepared by Engineering and QA&I. This includes the following: • • • • Statement of technical deviations Cost compensation on each of these declared deviations A write-up on the detailed technical evaluation List of Technical clarifications/confirmations required from the bidder. Evaluation Report also contains the analysis of Qualification

The

requirements, Quality Assurance and Work Schedule aspects. The Evaluation Report is put up to competent Authority. In case of contracts financed by external agencies, the report is also sent to such agencies, as required. Evaluated Price = Arithmetically Corrected Bid Price + Taxes & Duties (If Applicable) + Deficiency in mandatory Spares + Adjustment for Functional Guarantees + Cost of Deviations (technical/commercial) + Facilities to Be Provided By Employer +

44

Differential Price Preference 1.11.Award Recommendations • A qualified bidder’s after which is lowest evaluated technically and commercially responsive is recommended for award, if the bidder meets the necessary standards of capacity and capability. • The Award recommendation has to be approved by NTPC competent Authority, as per DOP , as well as the external funding agency (in case involved)

1.12. Pre-Award Discussions and Finalizations of Contract After necessary approvals, pre-award discussions with the recommended bidder are conducted with the participation of Tender Committee Members, Corporate Quality Assurance and Corporate monitoring group (for finalizing work schedule). Following issues are tied up with the party in course of discussion: • • • • • • Technical Deviations Commercial Deviations Quality Assurance Aspects/Plan Detailed schedule in the form of pert network Engineering information flow schedule Site mobilization plan

1.13. Placement of Letter of Award (LOA)/Notice of Award (NOA) Prepare draft LOA/NOA after approval of award and forward the same to TC members for vetting. Further finalize the LOA/NOA incorporating comment of TC

45

members. Enter the details of LOA/NOA in control register and issue the LOA/NOA to bidder in duplicate and take acknowledgment on office copy. Expedite the acceptance of LOA/NOA and furnishing of contract performance guarantee from contractor and finalize the contract agreement within stipulated time. After satisfactory resolution of all the points, and approval by Competent Authority, contract is awarded to successful bidder in form of LOA/NOA. Subsequent to issue of Letter of Award, the documents are finalized 1.14. Contract agreement A contract agreement is signed normally within 30 days after placement to LOA after the receipt of performance security for 10% of contract price and it contains the following documents: 1. Contract Agreement and the Appendices hereto 2. LOA/NOA 3. The Bid and Price Schedules submitted by the Contractor 4. Procedures (as listed) 5. Terms and procedures of payment 6. Price adjustment 7. Insurance requirements 8. Time schedule 9. List of approved subcontractors 10. Scope of work and supply by the employer 11. List of documents for approval or review 12. Functional guarantees 2. POST AWARD ACTIVITIES Post award follow up is performed to • Ensure timely deliveries of all equipments and supplies to site

46

• •

Ensure that erection and commissioning is done as per overall project schedule Identify in advance the factors that may affect the price schedules so that necessary remedial action can be taken.

Within contracts the responsibility for all post award follow up of a particular contract is that of the concerned contract coordinator. The contracts coordinator is supported by expeditors who are required to monitor the manufacturing status of a contract with respect to the detailed work schedule and inspectors who are responsible for ensuring that the contractor confirms completely with the Engg. Specifications and the other quality plans as laid down in the quality assurance program forming part of the contract agreement. Expeditors and inspectors feed the contract coordinator with the contract progress information. Engg. Coordinators for each contract are responsible for the coordination of all technical matters including vendor drawing receipt, approval etc. They provide regular information to the respective contract coordinators on the progress of such matters. 2.1. Post contract schedules Manufacturing Schedule After award of contract the further detail manufacturing schedule (L3 Schedule) based on L2 Schedule is reviewed periodically for the purpose of detailed monitoring at the time of visits of expediting engineers / contract coordinator to the work of the contractor. Engineering information schedule At the time of award of a contract, a detailed schedule is agreed with the contractor for the flow of Engg. Information L2 Network

47

The post award\ activities start after the placement of LOA/NOA. Before issue of LOA/NOA a network consisting of many activities is agreed to with the contractor, this network forms a part of contract agreement. The Contract monitoring is based on this network. Dispatch Schedule Dispatch Schedule along with the likely package list is normally agreed with the contractor after placement of letter of award. Schedule of bought out items Procurement schedule of all the bought out items which are procured from third party source are also identified after issue of LOA.

2.2. Major Post Award Activities • • •

Obtaining advance securities(responsibility of CS) Release of initial advance payment to the contractor Approval of sub-vendors Approval of drawings(responsibility- Engg) Approval of data sheets Finalization and approval of quality plans(responsibility- QA) Inspection/testing of equipment at supplier’s works(responsibility- QA&I and Engg) Issue of amendments/modifications to the contract(responsibility- CS in association with Engg) Co-ordination of work at project site including monitoring of receipt of material, identifying space for contractor’s site office establishment, ensuring timely receipt of contractor’s erection/ construction equipment.


• •

• •

Dispatch/receipt of equipment Progressive/receipt payments
48

2.3. Contractors’ Progress Reporting System The contractor is required to submit monthly contract progress reports covering all the aspects of contracts such as Engg. Manufacturing and placement of order for sub delivery items. The reporting is done at the activity level as discussed and agreed during pre-award discussion. The contractors’ progress reporting system is based on agreed L2 network The post award contract progress reporting system envisages initiation of progress reports broadly by four departments namely Engg, Contracts, project site and CMG. The Engg, contracts and project site initiate reports at detailed activity level whereas CMG compiles these reports on exception basis and initiates the report for top level management. Periodic contract review meetings (CRMs) between employer and contractor (responsibility- CS) Project review team (PRT) meetings on monthly basis (responsibility- CMG, meeting is chaired by head of project) Preparation of exception reports indicating hold ups/bottle necks for close monitoring of critical areas (responsibility- CMG) 3. CONTRACT CLOSING After fulfillment of all the obligations by the Contractor and completion of warranty period, the Contractor is discharged of its obligations in the Contract by formally closing the Contract To ensure that contractor has fulfilled all obligations under the contract following certificates from different Depts. of NTPC associated with contract is obtained before closing of the contract. The system also envisages receipt of a ‘No claim certificate’ from the contractor. After receipt of all the requisite certificates, the contract is considered for formal closing after approval of the competent authorit

49

LIVE PROJECT
RESEARCH METHODOLOGY
Primary Objective: - The objective is to study the Contract awarding procedures followed at NTPC. To understand the working of NTPC and the way NTPC procures raw materials for its various power plants. Understand the competion and the selection of right bidder at reasonable bid rate. Sample Design: - For the research activity to turnout into a success, a careful selection of a Project was done in order to know the Contract awarding procedure. All possible effort was made to choose the unbiased data such that the analysis and findings made bring fruitful results. Research Design: To achieve the objectives stated above, I have done “Descriptive Research” and for that data is collected from secondary sources. Scope of the Study: This effort is to understand the contract awarding procedure to the deserving party among various parties. Collection of Data:The research methodology comprised of secondary data collected from various NTPC records and through NTPC website. Secondary data 1. NTPC website 2. Manuals of NTPC 3. NTPC Records 4. Other websites Details about the research undertaken: I have taken the data from above mentioned sources on a project undertaken by NTPC. As I have already mentioned in the contract awarding procedure that each project is divided into various packages. So the package I had undertaken is
50

“Fire Detection and Protection System Package for Vindhyachal Super Thermal Power Project-IV (2 x 500 MW)”.

FACTS OF THE CASE
Package Name: for Vindhyachal STPP IV (2 x 500 MW) Bidding Document No.: Estimated cost: duties) Date of Bid opening: Mode of Financing: Mode of Tendering: Bid Response: 12th May 2009 ECB/ Own resources ICB 05/10 CS-2250-151-2 INR 246.89 million (excluding taxes and Fire Detection and Protection System Package

Tendering Committee Members: Mr. H.K. Dash, DGM (CS-IV) Mr. S.K. Jha, DGM (PE- Mechanical) Ms. Minu Gupta, DGM (Finance) Following are the prices quoted by the bidders: S.No. Name Bidder of the Quoted Price Discount Net price after

discount(excluding taxes and duties) INR Sureland US$ 960,486.70+ 13% on Schedule 209,081,262 Fire INR 195,370,529 1 & 2 and 19% on
51

1.

M/s Industrial

Safety 2.

Co.

Ltd.,

Schedule 4 8.5% on quoted 223,532,183 price 10% price on quoted 229,662,284

Beijing, China M/s Lloyd INR 244,297,468 Insulations (India) Ltd., New Delhi M/s Tyco Fire & INR 255,180,316 Security India (P)

3.

4. 5.

Ltd., Bangalore M/s Nohmi Bosai US$ 518,058.38 + 14% on Schedule- 243,376,463 Ltd., Japan M/s Bridge Roof Co. INR 247,405,736 and INR 279,277,969 (India) 2 prices 279,277,969

Ltd., Kolkata Exchange Rate as on 12.05.2009 1 US$= Rs. 50.10

Data provided to me is not only limited to these figures. These figures are only the synopsis of the entire data provided to me, that is, the bid documents of all 5 bidders mentioned above. For the sake of brevity, I am just giving the above mentioned data that gives the overview of the case. Apart from this all 5 bidders in their respective bidding documents submitted following documents: (a) Attachment 1: Bid Security (b) Attachment 2: Power of Attorney A power of attorney, duly authorized by a Notary Public, indicating that the person(s) signing the bid has/have the authority to sign the bid and thus that the bid is binding upon the Bidder during the full period of its validity. (c) Attachment 3: Bidder’s Qualifications The Bidder shall provide satisfactory evidence that he and/or, where applicable, his collaborator/associate/partner(s) of Joint Venture:
52

Is a manufacturer, who regularly manufactures equipment of the type specified and/or undertakes the type of work specified and has adequate technical knowledge and relevant experience for the works covered in the bidding documents. Does not anticipate a change in ownership during the proposed period of execution of work (If such a change is anticipated, the scope and effect thereof shall be defined). Has adequate financial stability and capability to meet the financial obligations pursuant to the Works covered in the Bidding Documents. (The Bidders should submit five (5) copies of their profit & loss account and balance sheet for the last five (5) years). Have adequate design, manufacturing and/or fabrication capability and capacity available to perform the work within the time period specified. Has an established project management organization covering the areas related to engineering of equipment/systems, interface engineering, procurement of equipments and the necessary field services required for successful construction, testing and commissioning of all the power plant equipments and systems covered in the scope of work for the package. Has established quality assurance systems and organization designed to achieve high level of equipment/system reliability, during manufacturing and/or fabrication and field installation activities. A company formed by the merger of two or more companies or divisions of such companies engaged in supply and installation of power generation equipments can also participate provided the constituent companies or divisions before merger individually or jointly meet the stipulated qualification requirements fully.

(d) Attachment 4: Eligibility and Conformity of the Facilities Documentary evidence that the facilities offered by the Bidder in its bid or in any alternative bid, (if permitted) are eligible and conform to the bidding documents. Attachment 4A: Special Tools and Tackles
53

The bidders provided the details regarding Special Maintenance Tools and Tackles. (e) Attachment 5: Subcontractors Proposed by the Bidder The Bidders included in its bid, details of all major items of supply or services that it proposes to purchase or sublet, and shall give details of the name and nationality of the proposed Subcontractor, including vendors, for each of those items. (f) Attachment 6: Deviations Deviations, if any, from the terms and conditions of Bidding Documents or Technical Specifications is listed. The Bidder shall also provide the additional price, if any, for withdrawal of the deviations. Attachment 6A: Certificate Regarding Acceptance of Important Conditions Bidders are required to furnish a certificate indicating their compliance to the provisions, duly signed and stamped by the bidder, in a separate sealed envelope. (g) Attachment 7: Alternative Bids Bidders wishing to offer technical alternatives to the requirements of the bidding documents must first price the NTPC’s design of the facilities as described in the bidding documents, and shall further provide all information necessary for a complete evaluation of the alternatives by the NTPC, including drawings, design calculations, technical specifications, breakdown of prices, proposed installation methodology and other relevant details. Only the technical alternatives, if any, of the lowest evaluated bidder conforming to the basic technical requirements shall be considered by the NTPC. (h) Attachment 8: Local Representation

54

If a foreign bidder has engaged an Indian agent, it will be required to give the following details in its bid as per the format enclosed in the Bidding documents:    The name and address of the local agent; What Service the agent renders; and The fixed amount of remuneration for the agent included in the offer.

(i) Attachment 9: Deemed Export Benefits The CIF (Cost of Insurance & Freight) value of import content in the Ex-works (India) price quoted in Schedule-2 of the bid, if any, shall be necessarily declared by the bidders in Attachment-9 to the bid. The relevant certificate for claiming the deemed export / custom duty benefits shall be issued on the aforesaid declaration basis only. Attachment 9A: Customs Duty Benefits for Import of Construction Equipment Declaration regarding the Customs Duty Benefits, for Import of Construction Equipment Considered in the bid. (j) Attachment 10: Functional Guarantees The declaration on the Guaranteed parameters and declaration on demonstration parameters as per NTPC's format. (k) Attachment 11: Erection Tools and Tackles List of Erection Tools and Equipments which the bidder proposes to bring to site in case the contract is awarded to him. (l) Attachment 12: Technical Data Sheets Technical Data Sheets duly filled in as per the NTPC's format. (m) Attachment 13: Bought Out Items Details of bought out items to be directly dispatched by the sub-vendor(s) to site.

55

(n) Attachment 14: Quality Assurance Programme Details regarding the overall quality management & procedures which the bidder proposes, to follow during various phases of execution of the contract. (o) Attachment 15: Additional Information Any additional Information which the bidder wishes to provide in his bid. (p) Attachment 16: Milestone Schedule Details regarding the timing & sequence of all key activities necessary for successful completion of the facilities and giving the important milestone as per NTPC's format. (q) Attachment 17: Price Adjustment Data Details regarding Price Adjustment as per NTPC's format. (r) Attachment 18: Equipment and Mandatory Spares to be imported from Associate/Collaborator Details of Equipment (including type test) and Mandatory Spares to be imported from Associate/Collaborator by the Manufacturer or the bidder, as per NTPC's format.

(s) Attachment 19: Electronic Fund Transfer Authorization Form Electronic Fund Transfer Form duly filled in as per NTPC's format. (t) Attachment 20: Declaration on Fraud Policy Form of Acceptance of Fraud Policy duly filled in as per NTPC's format.

PRICE SCHEDULES

56

Schedule No. 1- Plant and Equipment including Type Tests charges and Mandatory Spares Parts supplied from Abroad Schedule No. 2- Plant and Equipment including Type Tests charges and Mandatory Spares Parts to be manufactured within Employer's (NTPC) Country. Schedule No. 3- Local Transportation including port handling, port clearance, port charges, Inland transit Insurance and other local cost incidental to delivery of Plant & Equipment and Mandatory Spares. Schedule No. 4- Installation Services including Erection Works, insurance covers other than inland transit insurance and other services. Schedule No. 5- Grand Summary (Schedules Nos. 1 to 4) Schedule No. 6 -Recommended Spare Parts Schedule No. 7 -Taxes and Duties, applicable on Ex-Works (India) Price Component (Schedule-2) in respect of direct transaction between the Bidder and Employer (NTPC), not included in Bid Price. Schedule No. 8A - Break up type test charges quoted in Schedule-1 Schedule No. 8B - Break up type test charges quoted in Schedule-2 Schedule No. 9 - Unit Adjustment rates.

The gist of all these above mentioned documents provided by bidders has already been provided in beginning, now I will hereby analyze these documents. Such that I can make available to NTPC the required package of the right quality at the right time of right quantity and at right price so as to reach the specified place at the right time – after giving equal and fair opportunity of bidding to all competent tenderers. In analyzing the documents I have to follow the “WORKS AND PROCUREMENT POLICY” as mentioned in the NTPC’s brochure titled “Delegation of Power”. The procedure of selecting a party to award the contract is a defined procedure which is not just confined to lowest quoted price but fulfillment of various formalities on account of the bidder. In this
57

live project, I have to provide NTPC with the best deal and in compliance with the procedure mentioned, which includes thorough analysis of the details provided to me through various secondary sources.

ANALYSIS AND FINDINGS
Evaluation report For Fire Detection and Protection System package for Vindhyachal STPP Stage IV as per Bidding document No. CS-2250-151-2 1. COST ESTIMATE The approved cost estimate for the subject package is INR 246.89 Million (excluding taxes and duties) and INR 250.98 Million (including taxes and duties) 2. INVITATION FOR BID AND BID RESPONSE The bids for the subject package were invited under International Competitive Bidding (ICB) procedures. The abridged Invitation for Bid (IFB) was published in leading National Newspapers on 14/02/2009. The detailed IFB was displayed on the Internet. A copy of detailed IFB was also forwarded to Embassies/High Commissions of member Countries of World Bank as per list enclosed. In addition, copy of IFB was also forwarded to the parties who had shown interest in similar packages in recent past. a. As per provision of IFB, the bidding documents were on sale from 16/02/2009 to 10/03/2009. In response, the following ten(10) parties had purchased the Bidding Documents: i) ii) iii) iv) v) M/s Kidde India Ltd, Gurgaon, M/s Technofab Engineering Ltd, New Delhi M/s Lasren & Toubro, New Delhi M/s PS Techcom Pvt Ltd, Bangalore M/s Pan Gulf Industrial system Company, Saudi Arabia
58

vi) vii) viii) ix) x)

M/s Sureland Industrial fire safety Co. Ltd, Beijing, China M/s Lloyd Insulations (India) Ltd, New delhi, M/s Tyco Fire & Security India (P) Ltd, Bangalore M/s Bridge & Roof Co. (India) Ltd, Kolkata. M/s Nohmi Bosai Ltd, Japan.

As per provision of IFB, the bids were scheduled to be opened on 02/04/09. However, in view of requests received from prospective bidders and issuance of various amendments / clarifications to bidding documents, the bid opening date was extended to 30/04/09 and then to 12/05/09. The bids were finally opened on 19/05/05 in the presence of representative of the bidders who chose to attend. Out of ten (10) parties who had purchased the bidding documents, the bids were received from following five (5) parties: i) M/s Sureland Industrial fire safety Co. Ltd, Beijing, China ii) M/s Lloyd Insulations (India) Ltd, New delhi, iii) M/s Tyco Fire & Security India (P) Ltd, Bangalore iv) M/s Bridge & Roof Co. (India) Ltd, Kolkata. v) M/s Nohmi Bosai Ltd, Japan.

3. 3.1

QUOTED PRICES The prices quoted (considering rebates/discounts, wherever

applicable) by all the participating bidders are as brought out below:

59

Sl. No. Name Bidder of the Total Price discount rebate Quoted Discount without Offered /

Net Quoted Price after discount equivalent (Rs.) considering in

1. M/s Sureland US $ 960486.7 13% fire and 195370529 on INR 209081262

Industrial

INR Schedule I and II, and 19% on Schedule IV 8.5% on Quoted INR 223532183 price

safety Co. Ltd, 2. M/s

Lloyd INR 244297468

Insulations (India) Ltd, 3. M/s Tyco Fire & INR 255180316 Security (P) Ltd 4. M/s Bosai Ltd India

10% on Quoted INR 229662284 price

Nohmi US $ 518058.38 14% on Sch II and 247405736 INR

INR 243376462

5

M/s Bridge and INR 279277969 Roof Co. (India) Ltd.

--

INR 279277969

3.2

The break-up of prices as quoted by all participating bidders along with details of discount has to be given. This is provided in the appendix in excel sheet format.

60

4. PRELIMINARY EVALUATION OF BIDS

4.1 BID SECURITY As per the provisions of ITB Clause 12 & BDS Item No. 5, each bidder is required to furnish Bid a Security for an amount equivalent to Rs. 4938000/- or $99700 in currency of bid or in US Dollars, which should be valid for a period of 45 days beyond original bid validity period i.e. up to 21/12/2009

4.2

ACCEPTANCE OF IMPORTANT CONDITIONS As per Clause ITB 21.5, no deviation, whatsoever, to the following provisions of the Bidding Documents is permitted by the Employer and the bidders are required to give a certificate in the format specified in Bidding Documents for having taken no deviation to these conditions along-with their bid. This clause further stipulates that any bid not accompanied by such certificate shall be rejected by the employer and returned to the bidder without being opened:

I) II) III) IV) V) VI) VII) VIII) IX) X) XI)

Governing Laws (Clause 5 of GCC) Settlement of Disputes (Clause 6 of GCC) Terms of Payment (Clause 12 of GCC) Performance Security (Clause 13.3 of GCC) Performance Security GCC) Taxes & Duties (Clause 14 of GCC). Completion Time Guarantee (Clause 26.2 of GCC) Defect Liability (Clause 27 of GCC) Functional Guarantee (Clause 28 of GCC ). Patents Indemnity (Clause 29 of GCC) Limitation of Liability (Clause 30 of GCC)
61

for

Deed of Joint Undertaking (Clause 13.4 of

XII)

Price Adjustment (Appendix-2 to the Form of Contract Agreement)

All the above bidders have furnished the certificate confirming their acceptance to the aforesaid Important Conditions.

4.3

BID VALIDITY

The bids submitted by all the bidders are valid for a period of 180 days from the date of bid opening, as called for in the Bidding Documents. 4.4 PRICE BASIS

As per Clause 10.7 of ITB, prices quoted by the Bidder shall be subject to adjustment during performance of the contract to reflect changes in the cost of labour, material etc. in accordance with the procedures specified in Appendix-2 to the Form of Contract Agreement. All the bidders have confirmed their acceptance to the specified provision on Price Adjustment (Sl.No.l of Important Conditions) while submitting the required Certificate. 4.5 POWER OF ATTORNEY All the four Bidders have enclosed the Power of Attorney to sign the bid. 4.6 (a) COMPLETENESS OF BIDS As per Clause No. 9 of ITB, bidders are required to complete the Bid Form All the bidders have

and the appropriate Price Schedules & Attachments.

furnished the relevant Schedules and Attachments. However, in certain Schedules / Attachments details or the required break-up have not been furnished by the bidders.

62

(b)

Bids of all the five bidders generally cover the complete scope of work

except certain deviations and other discrepancies, which have been discussed in Section-II (Commercial Evaluation Report) and Section-III (Technical Evaluation Report) for the bidders who have been considered for detailed evaluation.

4.7

ARITHMETICAL ERRORS

As per provisions of ITB Clause No.21.2 of Bidding Documents, Arithmetical Errors will be rectified on the following basis: If there is discrepancy between the unit price and the total price, which is obtained by multiplying the unit price and quantity or between sub-totals and the total price, the unit or sub-total price shall prevail, and the total price shall be corrected. If there is a discrepancy between words and figures, the amount in words will prevail. If the bidder does not accept the correction of errors, its bid will be rejected and the bid security will be forfeited in accordance with ITB Subclause 12.6(b).

Sl. No. Name of the Bidder Total without rebate Quoted Price Error / (INR)

Price correction

after

discount

1. M/s Sureland INR 209081262 1572923 INR 207508339 INR 223532183 Fire & INR 229662284 INR

Industrial fire safety 2. Co. Ltd, M/s Lloyd Insulations INR 223532183 (India) Ltd, 3. M/s Tyco

63

Security India (P) Ltd 4. M/s Nohmi Bosai Ltd INR 243376462 19668104

229662284 INR 263044566

5

M/s Bridge & Roof INR 279277969 Co. (India) Ltd,

13148

INR 279264821

5.0

PRICE PREFERENCE

As per the provision of ITB clause 25.1, for granting price preference, the bid price of all bidders shall be increased by fifteen (15%) of the CIF component contained in the bid. Further, as specified at Clause 24.5 ITB (Sl.No.7), Price Preference shall be accorded on the CIF price quoted in Schdeule-1 plus CIF value of Import content of Ex-works price quoted in Schedule-2

6.0 6.1

PRELIMINARY EVALUATED PRICES Considering the Quoted prices, Arithmetical corrections and the Price

Preference, the preliminary evaluated price of the bidders are as follows:

(All figures in Indian Rupees) S.No. Name of the Total Bid Price Price Bidder ( arithmetical corrections) (Rs.) 1. M/s Sureland INR Industrial fire 207508339
64

Preliminary Price

Percentage Variation

after Preference Evaluated

(Rs.) (Rs.) 6240155 213748494 -

safety 2. Ltd, M/s

Co. Lloyd INR 223532183 3757500 227289683 6.34 %

Insulations (India) Ltd, 3.

M/s Tyco Fire INR & Security 229662284 India (P) Ltd

4584150

234246434

9.59 %

4.

M/s Bridge & INR 279291117 Roof Co. (India) Ltd,

279291117

30.66 %

5

M/s

Nohmi INR 263044566

3893209

269200970

25.94 %

Bosai Ltd

7.

SHORT LISTING

Price of Sureland is lowest so status of L1 is given to Sureland and L2 status is given to Lloyd Insulations

8.

DETAILED EVALUATION

The detailed Commercial and Technical Evaluation of the bids submitted by Sureland and Lloyd have been carried out in accordance with the stipulations of bidding documents and since I am dealing in finance so I will take only the financial aspect of the research and consider technical and commercial aspect as duly completed.

65

(a)

DETAILED COMMERCIAL EVALUATION

Salient points of Commercial Evaluation in respect of the deviations observed in the bids are presented hereunder:

Sureland Bidder has not taken any commercial deviation in this Attachment-6. No cost compensation has been considered for the purpose of evaluation.

Lloyd Bidder has not taken any commercial deviation in this Attachment-6. No cost compensation has been considered for the purpose of evaluation.

(b)

DETAILED TECHNICAL EVALUATION

The detailed technical evaluation of the bid of Sureland and Lloyd is presented in Section-III of this Evaluation Report entitled ‘Technical Evaluation Report’. Salient points of Technical Evaluation in respect of the deviations observed in the bids are presented hereunder:

Sureland The Technical details of Vindhyachal power plant’s Fire detection & Protection System package offered by Sureland are generally in line with specification requirements. Bidder has not taken any technical deviation in this Attachment-6 and accordingly, no cost compensation has been considered for the purpose of evaluation. Sureland has submitted a list of some bought out items and proposed sub supplier in the attachment 5. the list of bought items is not complete as per the scope of supply. It is essential for the bidder to submit a

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comprehensive list of items in the scope and their proposed sub supplier for finalization prior to avoid in case of consideration of award.

Lloyd The Technical details Lloyd are generally in line with specification requirements. Bidder has not taken any technical deviation in this Attachment-6 and accordingly, no cost compensation has been considered for the purpose of evaluation.

(c)

QUALITY ASSURANCE

It has been observed from the Attachment-6 furnished by Sureland and Lloyd that they have not taken any deviation on Quality Assurance issues 9. 9.1 FINAL EVALUATED PRICES Based on the detailed evaluation of bids of Sureland and Lloyd, the final

evaluated prices of these bidders works out as under:

(All figures in Rupees) SL No 1. Preliminary Evaluated Price 213748494 227289683 DESCRIPTION Sureland Lloyd

2.

Cost Compensations

a.

Commercial

NIL

NIL

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b.

Technical

NIL

NIL

c.

Deficiency Spares

in

Mandatory

NIL

NIL

3.

Final Evaluated Price

213748494

227289683

9.2

As may be seen from the detailed evaluation above , Sureland’s bid has

been found to be the lowest evaluated technically & commercially responsive bid.

10.

The taxes and duties as applicable for direct transaction between

the Contractor and NTPC and as quoted by the bidder in Schedule 7, though payable by NTPC are not to be considered for evaluation as per the provisions of bidding documents and accordingly, the same have not been considered in evaluation. However, the taxes and duties quoted Sureland and Lloyd are as indicated below:

VAT 12.5%

In Schedule-7, Sureland have indicated as “NONE” towards Central Sales Tax, Local Sales tax, Entry tax / Octroi and any other tax /duties in their bid.

11.

FULFILMENT OF QUALIFYING REQUIREMENTS

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The following stipulations are indicated against ITB Clause No. 8.3 (c ) of Section-II of bidding documents: “In the absence of pre-qualification, documentary evidence establishing that the Bidder is qualified to perform the contract, if its bid is accepted, shall be furnished in Attachment-3 to bid. The documentary evidence of the Bidder’s qualifications to perform the contract, if its bid is accepted, shall establish to the Employer’s satisfaction that the Bidder has the financial, technical, production, procurement, shipping, installation and other capacities and capabilities necessary to perform the contract and meets the experience and other criteria outlined below: The Bidder shall provide satisfactory evidence that he and/or, where applicable, his collaborator / associate. i. is a supplier, from an eligible source country, who regularly manufactures equipment of the type specified and / or undertakes the type of work specified and has adequate technical knowledge and relevant experience for the works covered in the bidding documents. ii. does not anticipate a change in ownership during the proposed period of execution of work (if such a change is anticipated, the scope and effect thereof shall be defined).

iii.

has adequate financial stability and status to meet the financial obligations pursuant to the Works covered in the Bidding Documents. (The Bidders should submit copies of their profit & loss account and balance sheet for the last three (3) years).

iv.

has adequate capability and capacity to perform the work properly and expeditiously within the time period specified. The evidence shall specifically cover, with written details, the installed manufacturing and / or fabrication
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capacities and present commitments (excluding those anticipated under this Specifications) of the bidder. If the present commitments are such that the installed capacity results in an inadequacy of manufacturing and / or fabrication capacities to meet the requirements appropriate to the works cover in his bid, then the details of alternative arrangements to be organized by the Bidder for this purpose and which shall meet the Employer’s approval, shall also be furnished. v. has an adequate field service organization to provide the necessary field erection and management services required to successfully erect, test and commission the equipment / systems as required by the Bidding Documents. vi. has established quality assurance systems and organization designed to achieve high level of equipment / system reliability, both during manufacturing and/or fabrication and field installation activities.
vii. A company formed by the merger of two or more companies or division of such

companies engaged in supply and installation of power generation equipments can also participate provided the constituent companies or division before merger individually or jointly meet the stipulated requirements fully.” In addition to the requirements stipulated above, the Bidder should also meet the qualifying requirements stipulated in item no.3 of Bid Data Sheets.

The following has been mentioned in item no.3 of Bid Data Sheet : “The bidder should have supplied, engineered, erected and commissioned at least two (2) numbers ventilation system including air washer units, having individual fan capacity of 1,25,000 cu.m/hr or more at each ventilation system in industrial/commercial installations. The systems have been in successful operation for at least two (2) years as on the date of bid opening.”

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As may be seen from the detailed evaluation above, Sureland’s bid has been found to be the lowest evaluated bid. Accordingly, the qualification data of Sureland has been analysed and is presented as given below :

FULFILMENT OF QUALIFYING REQUIREMENTS BY Sureland

The analysis of Sureland with respect to their meeting the general qualifying requirements mentioned in Clause 8.3(c) of ITB, based on the data furnished by them in their bid has been carried out and is presented below : (i) Sureland in attachment 3F have stated that they have supplied and

commissioned Fire detection and protection system for NTPC, BHEL, RSP, BSES-DHANU. Thus it may be considered that Sureland has adequate technical knowledge and relevant experience for the work covered in the bidding document.

(ii) In respect of Clause 8.3 (c) (ii) Sureland have confirmed that they do not anticipate any change of ownership and scope during the proposed period of execution of subject work. In respect of Clause 8.3(c) (iii) of ITB, It is evident from the Analysis of Financial data discussed at Para 12.5.1(ii) below, Sureland appear to have adequate financial resources and stability to execute the subject contract. Financial Analysis of Sureland Industrial Fire Safety Co. Ltd In INR million S.No. 1 2 3 4 5 Particulars Turnover Profit after Tax EBIT Share Capital Reserves & surplus 2008 24344 3553 3811 609 7646 2007 19428 2438 2874 609 4658 2006 15544 2614 2645 29 3042
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6 7 8 9

Net Worth Capital Employed Net Profit Ratio (%) Return on Capital (EBIT/CE)

8255 7937 14.59 Employed (%) 43.04

5267 4872 12.55 46.29

3071 1518 16.82 81.12

Sureland Average turnover for last three year is 19722 mn, Sureland Net Worth as percentage of share capital is 1355.55% So, We can make Analysis that Sureland meets Financial Eligibility criteria set up by Committee. i. Sureland mentioned that Sureland Industrial fire safety Co. Ltd.. takes up turnkey projects such as HVAC designs, manufactures, erection, commissioning and service etc. ii. Bidder has furnished a list of key constructions personnel proposed for administration and execution of contract. Thus it indicates that Sureland has a project management team having experience in the areas related to the field services. Sureland, in Attachment-3A, has declared that they meet the Qualification Requirement stipulated in bidding documents and also furnished documentary evidence in support of above declaration. 12. CAPACITY & CAPABILITY

As per details furnished and discussed, it is seen that Sureland has the necessary capacity and capability to execute the subject contract, in case of award. The quoted price (including taxes and duties ) of Sureland of Rs 213748494 13. AWARD RECOMMENDATIONS

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13.1

In view of above, it is proposed to award the contract for Fire

Detection and Protection System Package for Vindhyachal STPP, Stage-IV to M/s Sureland Industrial Fire Safety Co. Ltd. Beijing, China , at a price of RS 213748494

13.2

The proposed Contract Price is inclusive of all taxes and duties and

levies as applicable on transactions between the contractor and their vendors/sub-vendors.

13.3

Further, the Contract Price shall be subject to variation during the

execution of the Contract on account of price adjustment in line with price adjustment provisions as specified in the Bidding Documents. 13.4 The proposed award in favor of Sureland is further subject to the

following details being tied-up during post bid discussions:

(i)

Satisfactory resolution of technical and commercial deviations/

exceptions, Quality assurance programme, Project management etc.

(ii)

Detailed work schedule

(iii)

Schedule of submission of drawings and data and

(iv)

Details of Contract Quality Assurances programme including

satisfactory tie-up regarding vendors/sub-contractors proposed to be engaged by Sureland.

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14. As per Delegation of Powers, the subject proposal to award the work for FIRE DETECTION AND PROTECTION SYSTEM PACKAGE FOR VINDHYACHAL STPP - IV Directors. If there is any discrepancy in the purchase order that will be intimated by the vendor to the NTPC and will be duly corrected by the purchase department after taking permission from concerned authority and the letter of amendment will be send to the vendor. to M/s SURELAND INDUSTRIAL FIRE SAFETY Co. Ltd., Beijing, China is within the power of Sub-Committee of Board of

E- PROCUREMENT
E-PROCUREMENT is very important to achieve e-governance and for applicability of uniform procurement process to all units. It has the ability to reduce procurement cost by reduction in lead time, reduction in transaction cost and cycle times etc. E-procurement also helps in building collaborative relationship with suppliers. It enables greater transparency; implements best practices, and increases the vendor base. It also reduces the possibility of cartel formation and generates reasonable competition. It helps to achieve savings in administrative and process cost. E-procurement enhances the security and it is also a step towards ERP systems for the organization. CONCEPT AND SCOPE E-procurement is purchase and sale of supplies and services and management of procurement process over Internet. Manual tender processes can be long and cumbersome, often taking three months or longer, which is costly for both buyer and supplier organizations. E-Tendering replaces these manual paper-based
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tender processes with electronically facilitated processes based on best tendering practices to save time and money. Through E- Tendering, NTPC is able to manage the tenders coming in, with all tenders stored in one place. It can cut and paste data from the electronic tender documents for easy comparison in a spreadsheet. Suppliers' costs in responding to Notice Inviting Tender (NIT) are also reduced as the tender process cycle is significantly shortened. E-tendering offers an opportunity for automating most of the tendering process: from help with preparing the tender specification; advertising, to tender evaluation and placing of the contract.

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E-PROCESS WORKFLOW

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The process of e-procurement shall be taken up at Contracts & Materials (C&M) department after receipt of the requisition or the indent. The indent duly approved by the competent authority, as per Delegation of Powers (DOP) handbook of NTPC, is a pre-requisite to initiate e-procurement action. Once the indent is approved, the C&M department then plan and organize the procurement action. In case of open tender contract valuing 2 lacs and above, a Tender Committee is formed for preparation and approval of Qualifying Requirements (QR). Then, various bidders are invited online to bid for various packages. A Notice Inviting Tender (NIT) is published online on NTPC’s E-procurement portal. The interested bidders can purchase the tender document of the required package, by sending a demand draft or a cheque of the required amount, as mentioned in NIT, in favour of NTPC. Once the payment is received, a login id and password is given to the bidder to view and download the tender document. Clarifications regarding QR or any other technical queries in the document are resolved online through e-mails, message chart boards etc. Based on the clarifications to the bidders, if required, the tender committee may issue the necessary amendments. These amendments shall be automatically forwarded to all the vendors who have downloaded the documents. The bidders shall prepare the bids online. Till the time they are submitting their bids, they shall be saving the bids at the server under their Digital Certificate.

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Bidders are then required to submit and upload their bid online prior to a predefined date and time, as mentioned in the NIT, on the NTPC’s e-procurement website based on the tender requirements defined in the tender documents, viz:    Qualifying Requirements documents, EMD details Technical data sheets and Commercial bid etc. However, the Earnest Money Deposit (EMD) / Bid Security of a particular amount, have to be submitted offline in a separate sealed envelope. Any bid not accompanied by an acceptable bid security in a separate sealed envelope shall be rejected by NTPC as being non-responsive and returned to the bidders without being opened. Once the bids are uploaded by all the bidders, neither any bidder nor any employee of NTPC can access the server prior to bid opening date and time. At the time of bid opening, using individual digital certificates & passwords, the tender committee shall open the EMD documents first, then the qualifying

requirement details shall be opened, followed by the Technical bid opening and the technical data sheets and the deviation statement – technical. The commercial price bids of only those bidders who are meeting QR and are TECHNICALLY acceptable, and have submitted the necessary EMD will be opened on later date by the tender committee. On the date of price bid opening, a comparative statement of bid price schedules is automatically generated online and only the members of tender committee have access to both the
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quoted price and ranking of each bidder. However, each bidder can only view the rankings and not the quoted price of other bidders. REVERSE AUCTION The next step is called a REVERSE AUCTION. It is a type of auction in which the role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. In an ordinary auction (also known as a forward auction), buyers compete to obtain goods or services. In a reverse auction, sellers compete to obtain business. During a reverse auction, all the interested bidders log on to the auction site and inputs several quotes, in multiples of a specified amount, over a 30-90 minute period. These quotes reflect the prices at which they are willing to supply the requested package. As the bidder can only view its relative position with respect to other bidders, he bids down the price until the price quoted by him becomes the lowest of all. After completion of reverse auction, the L1 bidder (the bidder which quotes the lowest price) will submit the item rates within 48 hours (2 days) of completion of reverse auction. The percentage reduction of prices achieved during the auction is uniformly distributed over all the items. In no case, the individual item rate can be revised to higher value than indicated in the original item rate schedule against which the reverse auction has been conducted. After receiving the item rate, the tender committee shall put up recommendations to the competent authority off line. After approval of competent authority the order shall be released to the L1 bidder as per normal procedure.

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BENEFITS TO NTPC   Reduced tender cycle-time. Fast and accurate pre-qualification and evaluation, which enables the automatic rejection of suppliers that fail to meet the tender specification.  Faster response to questions and points of clarification during the tender period.  Reduction in the labour intensive tasks of receipt, recording and distribution of tender submissions.  Reduction of the paper trail on tendering exercises, reducing costs to both the organization and the suppliers.  Improved audit trail increasing integrity and transparency of the tendering process.   Improved quality of tender specification and supplier response. Provision of quality management information.

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IMPORTANCE OF CONTRACT MANAGEMENT
Availability of materials: There should be a continuous availability of all types of materials in the factory so that the production may not be held up for want of any material. Minimum quantity of each material is fixed to permit production to move on schedule. No excessive investment in materials: There should be no excessive investment in stocks. Investment in materials must not tie up funds that could be better used in other activities. For this purpose, a maximum quantity is assigned to each item of material above which stock should not be exceeded. So there should be no over stocking of materials because that would result in loss of 1) Interest charges 2) Higher godown charges 3) Deterioration in quality 4) Losses due to obsolescence Reasonable price : Materials should be purchased at the reasonable price. Quality is not to be sacrificed at the cost of lower price. The material purchased should be of that quality alone which is needed. The price paid should be the minimum possible otherwise the higher cost of the finished products would make the products would make the products uncompetitive in the market.

Minimum wastage : There should be minimum possible wastage of material while these are being stored in the godowns by storekeeper or used in the

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factory by the workers. Wastage should be allowed up to the certain level known as normal level of wastage and it should not exceed that level. Risks of spoilage and obsolescence: Material must be avoided from it. For this purpose a maximum quantity of each material is determined and a proper method of issue of material is followed. The materials received earlier should be issued earlier.

Information about availability of materials :

It should be made

continuously available to the management so that planning of production may be done. The storekeeper can supply this information because he keeps an up to date record of every item of stocks under a proper system of material control. Supply of material at right time : Procurement assures the required need and to demand or fulfill at the right time from the right place so as to utilize all the resources and none of them are kept idle. Japanese concept : Another common procurement issue is the just in time delivery, a JAPANSEE CONCEPT.

Other importance : 1) To stoppage the wastage of materials. 2) To maintain the flow of production. 3) To stoppage the theft of material. 4) To reduce the cost of storage. 5) Wastage during the process of manufacture should be the minimum possible.

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SUGGESTIONS
 Equity & transparency in the bidding and evaluation process are being strictly followed in NTPC; however certain leakage of data is possible because of involvement of multiple groups. This aspect needs more attention.  While preparing cost estimate many times, last awarded rates are taken which at times are quite old. Hence in such cases parallel market rates collection should be insisted upon.  Some times in the bid documents the treatment of taxes and duties in evaluations is not clearly indicated. This leads to confusion. This aspects needs special care while reviewing bid documents.  In the Q.R. certain financial parameter like return on net worth etc. are found to be needing attention as the same has been kept very low and hence there are chances that are very poorly performing company may enter as contractor.  In case of limited tender enquiry, the list of party needs to be constantly upgraded so that good parties can find place.  While evaluating a bidder, some time the credentials of bidders are more than 6 year old. The status of bidder might have changed by this time. Hence the status of recent year (last 5 years) is suggested to be considered for checking their credentials.

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CONCLUSION
Contract/Purchase management activities at NTPC are one of the most vital activities undertaken by the 25000MW Power Giant of India. The process followed by NTPC is found to be very objective in nature and very professional methods are in vogue. We have learned the following while studying the system in NTPC: (a) Advantage of the competition: NTPC tries to take advantage of the competition in the field of heavy engineering where foreign manufacturers like MHI, GE etc. are competing with Indian manufacturers like BHEL and L&T. (b) Transparency: NTPC being a public sector company & to be free from nepotism and favouritism has adopted a system where transparency and automation is at their highest levels. Transparency is achieved by the formation of a multi member bid-opening team and the bidders submitting their bids in sealed packets where no one knows in advance the quotation offered by a particular bidder. Automation here signifies that almost all the contracts are awarded following the same procedures, by awarding the contract to the lowest bidder that is L1 provided that the lowest bidder qualifies himself technically too. Moreover the bid documents are available on the website.
(d)Cost reduction: Cost must be reduced by means of optimum utilisation of

resources and the resources thus saved can be channelised to more profitable segments. Cost estimation for the purpose of cost and budgetary control is a very important aspect of learning during our training in NTPC.
(e) Selection of proper contractor: While an order is placed for execution of

any work, it must be awarded to a proper contractor. If incapable contractor is chosen, he may not be able to execute the work on time or he may abandon the work in between which will result in loss of time, increase of cost and it disrupts the schedule for this package as well as the project schedule. Hence assessment of capacity and capability of the bidder which includes detailed financial analysis of his capacity is considered as a very important aspect in the whole process.

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BI BLIO GR APH Y
BOOKS – “Financial Management” By Ross Westerfield Jordan.  “Financial Management” by Khan & Jain..

JOURNALS AND MAGAZINES  Annual Report of NTPC.  Policy Guidelines for Implementation of E-Procurement at NTPC Stations.  NTPC manuals.  Purchase Management System Manuel, 2nd Edition, NTPC, New Delhi.  Delegation of Power Handbook, NTPC, New Delhi.

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