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Power Economics and Management
1 PROCUREMENT, TENDERING AND CONTRACTS
2nd Term, 3rd Year (13 Batach)
B.E Electrical Engg. Program
Nayyar Hussain
Assistant Professor
Lecture 37
Department of Electrical Engineering
Mehran University of Engg. & Technology,
Jamshoro
Procurement: Introduction
 Procurement means acquiring works, goods,
and/or services from an outside source.
Procurement is the term generally used by
government, while business uses the term
purchasing and outsourcing.
CHAPTER NO. 7:
Introduction, Regulatory Bodies, Procurement Procedures
Tendering Document s
Electricity Act 1910 & rules 1937,
Power Contracts
Preparation of PCs (PC-1 to5)
Procurement Management Processes
Project procurement management includes the
following processes for acquiring goods and
services from outside the project organization:
Procurement planning: determining what to procure and when.

Solicitation planning: documenting product requirements and

identifying potential sources.
 Solicitation: obtaining quotations, bids, offers, or proposals as
appropriate.
 Source selection: choosing from among potential vendors.
 Contract administration: managing the relationship with the
vendor.
 Contract close-out: completion and settlement of the contract.
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Procurement Management Processes & Key Outputs Procurement Planning

The figure below summarises the major processes involved in Procurement planning involves identifying which project
procurement management, and identifies important milestones needs can be best met by using products or services
associated with each stage. outside the organization. It includes deciding:
For example, after procurement planning the key milestone is the  Whether to procure.
“make or buy decision”. This will determine if further procurement
 How to procure.
management processes are required.
 What to procure.
 How much to procure.
 When to procure.

It is essential to be thorough and creative when

planning procurement. Even though a company may be
viewed as a competitor, it will often be advantageous
to collaborate on some projects.

Inputs to Procurement Planning Tools and Techniques

Procurement management will often incorporate the
The inputs needed for procurement planning include:
following:
 The project scope statement.
 Make-or-buy analysis: determining whether a particular
 Product description.
product or service should be made or performed inside
 Market conditions. the organization or purchased from someone else. Often
 Constraints and assumptions. involves financial analysis.
It is important to define the scope of the project, the  Experts, both internal and external, are valuable assets in

products, market conditions, and constraints and procurement decisions.

assumptions. However, it is also essential to know exactly  Internal experts are particularly useful in providing
why you want to procure goods or services. knowledge of organisational and personnel issues.
 External experts can provide expert judgement, especially
with regard to vendors and technology issues.

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Contract Administration
Contract administration ensures that the seller’s
performance meets contractual requirements.
Contracts are legal relationships, and are subject
to the contract law in the country where the
project is conducted, and in the case of
international projects, the country of supply.
Contract Administration
Project members must be aware of the legal
problems they might cause by not understanding
a contract. In particular, most projects involve
changes, and these changes must be handled
properly for items under contract.
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Contract Administration
However, due to their complexity, many project
managers ignore contractual issues. This can result
in serious problems. Ideally, the project manager
and the project team should be actively involved
with contract law experts in the preparation and
administration of contracts.
Change Control for Contracts
Change control is an important part of the contract
administration process. The following change control
process must be applied where there are contracts:
 Changes to any part of the project need to be reviewed,
approved, and documented by the same people in the
same way that the original part of the plan was
approved.
 Evaluation of any change should include an impact
analysis. How will the change affect the scope, time, cost,
and quality of the goods or services being provided?
 Changes must be documented in writing. Project team
members should also document all important meetings and
telephone phone calls.
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Contract Close-out Definition of Government Procurement

Contract close-out is the final project procurement

 Procurement by government agencies
management process. It includes:
 Public Sector Organizations
 Product verification to determine if all work was
 With major Govt. Equity
completed correctly and satisfactorily.
 With minor Govt. Equity
 Administrative activities to update records to reflect
 Under control of Govt. (No Govt. Equity)
final results.
 Orgs with other forms of Govt. funding
 Archiving information for future use.

Procurement audits are often undertaken during contract

close-out to identify lessons learned in the procurement
process.

Objectives of Procurement Reforms Past Regulatory Environment

 Economy (Value for money)  Procurement under GFR
 Efficiency  Procurements by Corporate Sector
 Transparency  Procurements by Statutory Bodies
 Accountability  Classified Procurements
 Competitiveness
 Fairness

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Present Regulatory Framework Composition of PPRA Board

 Secretary, Finance Division: Chairman
 Enabling Legislation  Secretary, MoI &P: Member
 PPRA Ordinance 2002  Secretary, D P Division: Member
 Subsidiary Legislation  Secretary, MoW & P: Member
 Public Procurement Rules, 2004  Secretary, Mo H & W: Member
Public Procurement Regulations
Secretary, M o C: Member



 Private Member
 Private Member
 Private Member
 Managing Director (PPRA): Member

Functions of PPRA Functions (Contd.)

 Monitor application of the procurement laws, rules,
regulations, policies and procedures;
 Monitor the implementation of and evaluate laws,
rules, regulations, policies and procedures, inspections
and quality of goods, services and works and
recommend reformulation thereof;
 Recommend to the Federal Government revisions in or
formulation of new procurement laws, rules and
policies;
 Make regulations and lay down code of ethics and
procedures for public procurement;
 Monitor public procurement practices and make
recommendations to improve governance,
transparency, accountability and quality of public
procurement;
 Monitor overall performance of procuring agencies
and make recommendations for improvements;

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Functions (Contd.)
 Provide and coordinate assistance to procuring
agencies for developing their institutional framework;
 Call any functionary of procuring agencies to provide

THANKS
assistance.