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Procurement Execution Plan

CONTRACTOR EMPLOYER
REV. DATE DESCRIPTION PREPARED BY CHECKED BY
APPROVED
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CONTENTS

1. PROCUREMENT AND MATERIAL MANAGEMENT

1.1 Overall Procurement Execution Strategy
1.2 Definition
1.3 Procurement Office and Location
1.4 Organization

2. PURCHASING
2.1 Purchasing Procedure
2.2 Approved Vendors
2.3 Inquiry
2.4 Bids
2.5 Technical & Commercial Clarification with Bidder
2.6 Evaluation of Bids
2.7 Bids Opening
2.8 Negotiation with Vendor
2.9 Purchase Order

3. LONG LEAD ITEMS and CRITICAL ITEMS

3.1 Long Lead Items’ List
3.2 Critical Items’ List

4. EXPEDITING & INSPETION

4.1 Expediting Plan
4.2 Expediting Control
4.3 Expediting Activities
4.4 Vendor Drawing / Documents (Vendor Print)
4.5 Report
4.6 Inspection Plan
4.7 Responsibility of Inspection Personnel
4.8 Acceptance Criteria
4.9 OWNER Inspection
4.10 Vendor’s Pre-Inspection Meeting
4.11 Witness Inspection and Test
4.12 Vendor Invoice Verification and Payment to Vendor

5. MATERIAL CONTROL AND TRACKING

6. TRAFFIC AND LOGISTICS

6.1 Introduction
6.2 Packing and Marking
6.3 Shipping Arrangement
6.4 Shipping Documents and Notice
6.5 Customs Formalities and Inland Transportation
6.6 Oversize/Heavy Lift Equipment’s Transportation

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7. PROCUREMENT OF SPARE PARTS

7.1 The Type of Spare Parts
7.2 Spare Parts Procurement Procedure
7.3 Requirements for Spare Parts Quotations
7.4 Selection of Spare Parts
7.5 SPLIR Form

8. RECEIVING GOODS AT PROJECT JOB SITE

9. OVERAGE, SHORTAGE, INCORRECTNESS & DAMAGE (OSI&D) AND CLAIM

9.1 Confirmation of OSI&D
9.2 Survey to Damage and Shortage of Imported Materials
9.3 Preparation of OSI&D Report and Claim

10. ATTACHMENTS
Attachment 1 Procurement Team Organization
Attachment 2 Procurement Work Flow Diagram
Attachment 3 Bidder List to be invited (Format)
Attachment 4 Purchase Recommendation Sheet (Format)
Attachment 5 Vendor Documents Handling Flow Chart
Attachment 6 Procurement Status Report
Attachment 7 Expediting Follow-up Plan and Time Table (Sample)
Attachment 8 Spare Parts List and Interchangeability Record
Attachment 9 Inspection Activities Flow Diagram

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1. PROCUREMENT AND MATERIAL MANAGEMENT

1.1 Overall Procurement Execution Strategy

1.1.1 The activities for procurement service and supply of equipment and materials will be
carried out by Project Procurement Team in accordance with the project policies,
procedures and schedules and all other guidelines defined in the contract documents.

1.1.2 In order to comply with project requirements and schedule, procurement service activities
will be managed and coordinated in such a way that;
- Selecting technically qualified Vendors from recommended Vendor list.
- Expediting delivery time of selected Vendors to be consistent with the overall
schedule of the project.
- To meet requirements of contract and specifications
- Early purchasing of Long Lead Items and Critical Items
- Planning inspection activities to meet quality standard
- Effective packing and forwarding plan for safe delivery to JOBSITE
- Give priority to U/G procurement activities
- Give priority to long construction activitie

1.2 Definition

1) Vendor: : The firm, corporation or company with which the Purchase

Order is to be placed.

2) Sub-Vendor : : The person, firm or corporation which supplies Vendor with

materials, machinery, tools, equipment, articles, items, or other
work services which are used by Vendor in connection with
this Purchase Order.

3) Bidder: : The person, firm or corporation who are invited to quote for the
Goods required for the PLANT.

4) CONTRACTOR: : Chagalesh Cosulting Engineers Company

5) OWNER :

6) M.C : Management Consultant To be declared later By OWNER

7) PLANT :

8) JOBSITE : Those parts of the lands and other places where the Facility is
constructed.
9) Goods : The equipment, materials and machinery to be supplied by
Vendor as per the Purchase Order

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10) Purchaser Order : The documents and attachments which govern the Purchase
Order contemplated hereby including, but not limited to
the Material Requisition, the documents listed therein and
specifications, drawings, shipping and packing instructions,
and other descriptions or conditions contained herein and in
such documents.

11) CPMIS : Chagalesh Project Management Information System.

CONTRACTOR’s typical computer system which is an
integrated control system designed specially to be effective in
all the engineering and procurement disciplines.

1.3 Procurement Office and Location

CONTRACTOR’s Procurement Team is located in below address.

- Chagalesh Office
No.2, Majlesi St, Larestan St, Motahari Avenue.Tehran, Iran

1.4 Organization

Procurement organization consists of purchasing, expediting, inspection and logistics.

Project Speciality Leader ( PSL) is assigned to the Project as a member of the Project
Management Team and reports to Project Manager for the coordination and
supervision of all the procurement service activities covering purchasing, expediting,
inspection and logistics carried out in the overall procurement of equipment, bulk materials
and others.

The following personnel will be assigned under the Project Manager for the procurement
function and each member of the organization has the responsibilities as described below
and as Attachment 1 (Procurement Team Organization);

- Procurement PSL
- Buyer
- Expediter
- Field Expediter
- Inspection Coordinator
- Inspector
- Logistics Coordinator

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1.4.1 Procurement PSL

Procurement PSL has the responsibility of procurement service activities including

purchasing, expediting, inspection, logistics and Vendor prints. Among the responsibilities,
he establishes and implements the overall project plan, policy and procedures including
sources of supply, order, commercial terms and payment in conjunction with the Project
Manager.

- Coordination of all procurement activities among engineering, construction, purchasing,

expediting and inspection
- Keeping the Project Manager informed of overall procurement status.
- Maintaining the contact with his related parties in CONTRACTOR’s organization
- Developing and maintaining procurement performance to support the aimed
completion date.

- Ensuring the correct quality control related to the supply of equipment and materials.

1.4.2 Buyer

Purchasing service of equipment and materials shall be executed by the qualified buyer
under the direction of Procurement PSL. Buyer shares the responsibilities for the
following categories of equipment and materials;

- Mechanical (Rotating) and packaged equipment

- Fixed equipment and fabricated products
- Piping materials
- Electrical and instrument items
- Fire Fighting and HVAC equipment
- Others

Buyer shall coordinate with each discipline’s lead engineer regarding;

- Preparation of Material Requisition (MR)

- Evaluation and clarification for the Vendor’s quotation.
- Commercial discussions and negotiations with Vendors
- Preparation of Commercial Bid Analysis Report with recommendation
- Preparation of Purchase Order (PO)
- Communication with Vendors

1.4.3 Expediter / Field Expediter

1) Upon placing the Purchase Order, Expediter will be responsible for the expediting of
Vendor’s manufacturing, delivery of equipment and spare parts including Vendor
documents by the various expediting methods.
They will also implement the role of coordinator between field Expediter and Project
team under the control of Procurement PSL.
2) Field Expediter will carry out the expediting works in the area of his own responsibility
after placing the Purchase Order. He will also report the progress status for the
respective items to Procurement PSL.

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3) Their responsibilities will be;

- Ensuring order acknowledgement from Vendors.

- Communicating with the concerned person for the reason of Vendor’s inability to
accept the order, if that is the case
- Reporting the progress status of various orders
- Reporting the possible serious delay or Vendor’s inabilities to meet the delivery
schedule and suggesting action plan
- Liaison with inspection coordinator for timely inspection
- Inspection/statutory inspection as required or specified
- Liaison with lead engineer for approval of drawing, acceptance of deviation, etc.
- Liaison with logistics coordinator for dispatch of equipment and materials

1.4.4 Inspection Coordinator

1) Inspection Coordinator will assign the Inspector, who has sufficient experience and
capability.
2) Every inspection will be concentrated on confirmation and/or accomplishment of the
following;
- Vendor has a clear understanding of all required specifications, codes and
standards, and is familiar with specific inspection requirements.
- Vendor has prepared and received an Approval of fabrication drawing,
procedure/plans, required by Purchaser’s requisition prior to commencement of
fabrication.
- Vendor is fully aware of fabrication and/or assembly which will be subject to
inspection of CONTRACTOR’s and/or OWNER’s Inspector.
- Identification of “hold point” that requires the verification by Inspector.
- Vendor is responsible for conducting tests, honoring hold points, and providing
support to CONTRACTOR’s and/or OWNER’s Inspector.

1.4.5 Inspector

Inspector’s main responsibilities are to ensure compliance with the Quality Assurance
System and shall include:

- Performing inspection and testing

- Review and endorsement of test records prepared by Vendor
- Review of Manufacturer’s Data Records (MDR)
- Preparation and issuance of Inspection Release Note (IRN)
- Reporting non-conformities to Inspection Coordinator

1.4.6 Logistics Coordinator

1) Logistics Coordinator takes the responsibility of shipping arrangement, transportation

by sea and/or air from exit countries over the world to Iran, customs clearance and in-
land transportation from entry ports and/or airport to project JOBSITE for the off-shore
equipment and materials.
2) His responsibilities include;

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- Shipping arrangement with Forwarder

- Preparation and/or check of shipping documents for customs clearance in Iran
- Shipping notice to CONTRACTOR’s Construction Management and to
OWNER, if required
- Maintaining and updating of overall shipping and delivery status
- Settlement of cargo insurance claim, where applicable
- Customs clearance in Iran
- Arrangement of in-land transportation from entry ports to project job Site

2. PURCHASING

2.1 Purchasing Procedure

The procurement will be implemented in accordance with the procedures and guidelines
defined in contract documents.

2.2 Approved Vendors

2.2.1Approved Vendor List shall be referred to as attached to contract documents.

During the project execution, additional Vendors will be required for existing or new
commodities due to technical, schedule or commercial reasons. For these additional

Vendors, CONTRACTOR shall obtain the written approval of OWNER before the
placement of a Purchase Order.

2.2.2 Additional Vendors shall be considered as qualified provided that:

- The Vendors h a v e s u p p l i e d c o m p a r a b l e equipment, m a t e r i a l s or services

To CONTRACTOR with a positive track record, or

- The Vendors have supplied comparable equipment, materials or services to other

international engineering or production companies and their QA/QC system have been
positively evaluated by the CONTRACTOR.

2.3 Inquiry

2.3.1 Inquiry Preparation

Buyer will prepare inquiry document including:

- Material Requisition issued by engineering team
- Procurement Specifications including General Inspection Requirement

2.3.2 Bidder Selection

1) Buyer will select Bidders from Approved Vendor List and new additional Bidders and
prepare Bidder list to be invited for OWNER’s review and approval.
2) Detailed procedure is as below:

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- CONTRACTOR shall prepare Bidder list to be invited for each Material Requisition
as per attached form.
- CONTRACTOR shall inform OWNER of Bidder list and issue inquiry package to
selected Bidders.
- CONTRACTOR shall submit to OWNER additional proposed Bidders’ pre-
qualification material, reference list and annual report for OWNER’s parallel
approval.

2.3.3 Inquiry Issue

1) Buyer will issue the inquiry only to Approved Bidders for each item upon receipt of
OWNER’s approval on Bidder list.
2) Buyer will also instruct the Bidder:

- To prepare quotation as per requirements

- To submit bids by due date
- To state any deviations from the inquiry requirements
- To specify delivery dates and commercial terms and conditions
- To follow the bids submission channels

2.4 Bids
2.4.1 Submission of Bids

Buyer will expedite submission of bids and let Bidder follow The Bids Submission Channels.

2.5 Technical & Commercial Clarification with Bidder

2.5.1 Technical Clarification

The lead engineer of respective engineering discipline will clarify technical matters of
quotations and if there are some matters to be clarified with Bidder, the technical
clarification record shall be issued to Bidder through letter prepared by buyer.

2.5.2 Commercial Clarification

Buyer will clarify commercial matters of quotations and if there are some matters to be
clarified with Bidder, the commercial clarification record shall be issued to Bidder through
letter prepared by buyer.

2.6 Evaluation of Bids

2.6.1 Distribution of Quotations

After receipt of Bidder’s un-priced commercial quotation including full technical quotation by
buyer, it will be forwarded to the lead engineer of respective engineering discipline and
other engineering support discipline with a request for the technical analysis and
commercial analysis.
Bidder will submit the sealed priced commercial quotation including full technical quotation
as per the Bids Submission Channels as stated above.
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2.6.2 Technical Evaluation

Lead engineer of respective engineering discipline will prepare the technical bid analysis
sheet based on the result of clarification with each Bidder and it shall be issued to OWNErR
for approval.

2.7 Commercial Bids Opening

Based on technical bid evaluation submitted by CONTRACTOR and after full finalization of
all technical issues and approval by OWNER, CONTRACTOR will open commercial bids.

2.8 Negotiation with Vendor

Based on technical and commercial bid analysis CONTRACTOR will negotiate with Vendor.
2.9 Purchase Order

Upon Vendor approval by OWNER, Buyer will prepare the individual Purchase Order for
the selected Vendor and issue to Vendor.

2.9.1 Purchase Order shall satisfy the following

- All technical issues are closed and agreed.

- All commercial issues are closed and agreed.
- Only Qualified Bidder shall receive Purchase Order.

2.9.2 Purchase Order will contain the following, but not limited to:

- Letter of Intent (LOI) details, if issued for earlier commitment of the order or
advance proceeding of any works agreed.
- Agreed delivery date for each item
- Date of order
- List of all commercial and technical documents with revision number
- Item, quantity, unit price, total price, and delivery terms
- Currency of payment
- Payment terms
- Liquidated damages and/or bonus clause (if applicable)
- Location where goods are to be delivered
- Guarantee
- Test and Inspection
- Documentation and Drawing
- Performance bond / Guarantee bond / Advance payment bond / Progress payment
bond (If applicable)
- Packing & marking specifications
- Shipping instructions
- Required commissioning and operation spare parts lists (if applicable)
- Storage recommendations (if applicable)
- Required operation and maintenance instructions (if applicable)

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3. LONG LEAD ITEMS and CRITICAL ITEMS

3.1 Long Lead Items’ List

C- Gas Compressor
C-
E-
E-
H-

3.2 Critical Items’ List

V-
V-
V-
E-
E-
E-
P-

4. EXPEDITING & INSPECTION

4.1 Expediting Plan

Expediting will be implemented in accordance with “Expediting Procedure”. It is necessary

to monitor the manufacturing progress in order to find at an earlier stage any potential
problems such as late receipt of raw materials from Sub-Vendor, delayed manufacturing
progress, poor quality control, extended shipping dates, late shipment, go slows, and other
matters in suppliers' works which may affect delivery, and to take adequate counter
measures and all expediting efforts required for improving on or keeping the contractual
delivery date. Expediting work will be accomplished by letter, telephone, email, facsimile
and personal contact by visits to Vendor shop.

4.2 Expediting Control

CONTRACTOR provides expediting activities for each Purchase Order in order to meet the
contractual delivery date.

4.2.1 Methods of Expediting

Three types of method will be used for expediting equipment and materials: desk
expediting, shop visit and meeting. Expediter can use all of these expediting methods from
the beginning of fabrication to completion of delivery.

Desk Expediting

CONTRACTOR Shop Visit Vendor

Meeting

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4.2.2 Desk Expediting

Desk Expediting is to confirm by telephone, facsimile, email or letter the following status:

- Vendor data submission

- Sub-ordered and ex-stock materials
- Fabrication progress
- Inspection
- Documents for shipment
- Delivery

4.2.3 Shop Visit

The purpose of shop visit is to survey the actual progress of the production at Vendor’s
shop or office and to check the actual production consistent with Vendor’s overall
production schedule. Shop visit will be the most effective method of expediting because
Expediter can check the physical production progress.

In addition, if any delay in production is found, Expediter can immediately request Vendor
to take corrective action(s) to remedy or minimize delivery impacts / delays.
Number and type of interventions may be subject to variations considering the status and
criticality of equipment and materials.

4.2.4 Meeting

In case any problem arises in course of works, Expediter will hold a meeting with
concerned personnel of CONTRACTOR and Vendor at convenient place to solve the
problem.
During the meeting, Expediter will report the results of the meeting in writing and distribute
copies to Procurement Manager, Vendor and OWNER.

4.2.5 Expediting Reports

Expediting reports shall be produced after each shop visit. Such reports shall be forwarded
to OWNER after receipt of report from Expediter.

4.3 Expediting Activities

4.3.1 General

1) Expediter will make every effort to detect and address any potential problem at the early
stage in order to prevent any delays in delivery as soon as the Purchase Order was
committed or placed to Vendor.

2) Expediter will:

- Confirm the order issuance and registration

- Understand the details of Purchase Order
- Attend kick-off meeting, if required
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- Obtain Vendor’s organization chart, communication channel, overall production

schedule and drawing / data schedule
- Confirm that Vendor understands the requirements of the requisition / specifications
and other documents attached to Purchase Order
- Obtain sub-order list
- Expedite preparation and submission of documentation
- Expedite delivery of critical sub-order(s) through Vendor and/or by his own visit
- Expedite fabrication progress
- Confirm current delivery date
- Expedite inspection schedule in advance
- Expedite pro-forma packing list / supply list
- Expedite shipping documents
- Expedite final drawings / data for record

4.3.2 Trouble Shooting

1) If any delay is anticipated or discovered by Expediter, suitable corrective action shall

be established between Expediter and Vendor’s representative.

2) Expediter will confirm the following major items with Vendor prior to determining the
most feasible corrective actions:

- Availability of special work shifts

- Obtaining details if interference of other orders causes problems
- Whether substitution will be possible
- Obtaining full details if a policy decision by top management of Vendor is required
to solve the problem
- If Expediter still anticipates delay, he shall immediately report to Procurement
PSL the details of the delay along with names, address, and telephone and
facsimile numbers of Vendor’s management. Procurement PSL shall notify to
OWNER and implement whatever action is necessary to minimize the impact of
delay, including request involvement of Project Control Manager
- Coordination for Inspection

3) To implement smooth test and inspection, Inspection Coordinator and Expediter shall
correspond with Inspectors, Vendor and OWNER.
Vendor will submit the written application for inspection to Expediter.

4.3.3 Coordination for Shipping

Expediter’s scope of work may deeply depend on the delivery terms of the Purchase Order.
For an effective shipping arrangement, expediting activities must be done in close
coordination with Logistics Coordinator.

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4.4 Vendor Drawing / Documents (Vendor Print)

4.4.1 Vendor Print Controller in CONTRACTOR’s project management team maintains Vendor’s
drawing/data and is responsible for listing and distributing all documents for comment and
for approval. Upon receipt of approved or amended Vendor drawing from engineering
division reflecting OWNER’s comments, if any, any modification and comments are
passed to Vendor for proper action.

4.4.2 Vendor Print Controller liaisons with expediting section in matters of Vendor expediting to
ensure receipt of all necessary contract documentation.
Vendor drawings/documents handling with CONTRACTOR & OWNER
Involvement/inputs is shown in the related flow chart.

4.5 Report

4.5.1 Expeditor’s report is made for each visit and sent to home office as soon as possible. They
are checked, logged and taken with the necessary actions, followed by distribution to the
requiring engineer and other nominated recipients.
Should a major problem be indicated, this is reported immediately by telephone, email or
tele-fax with recommendations for corrective action.

4.5.2 Expediting report is screened by home office for possible follow-up such items as
submitting status of Vendor drawings for CONTRACTOR’s review, data of drawings

returned Vendor engineering or material problems, revised delivery dates, etc.

4.5.3 In accordance with the requirement of the Purchase Order, Vendor submits a Progress
Report to CONTRACTOR periodically and Expeditor will check the progress and expedite,
if necessary.

4.6 Inspection Plan

Inspection, test and examination shall be implemented to assure that equipment and
material conform to the contract, project requirements, specifications and applicable codes
and standards.

4.7 Responsibility of Inspection Personnel

Inspector's responsibility is to check and verify that equipment and materials conform to
the approved Vendor Quality Plans, specifications and order. A timely inspection and
quality tracking activity shall be made to prevent any abnormal conditions that may occur
during welding or fabrication process which will adversely affect the required quality and
level of specification. He shall also check good workmanship throughout the
manufacturing period in accordance with all technical requirements.
However, he shall avoid making unreasonable demands to Vendor for efforts beyond
those requirements to meet the Purchase Order, specifications and codes.

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4.8 Acceptance Criteria

The acceptance criteria for inspection activities shall be defined by the following
documents in order of preference (e.g. Purchase Order requirements may over-rule the
requirements of a general specification). Any conflict in the documents shall be brought to
the attention of Procurement Manager for resolution with lead engineer.

- Purchase Orders
- Equipment specifications and drawings
- General project specifications
- Approved Vendor drawings & Vendor Quality Plan

4.9 OWNER Inspection

4.9.1 In addition to CONTRACTOR’s own inspection, OWNER may independently arrange their
own inspection of any equipment or materials at Vendors or Sub-Vendors works.

4.9.2 In case that third party inspector is nominated on behalf of OWNER, OWNER will notify
the details of such third party inspection assignments to CONTRACTOR.

4.9.3 OWNER’s representative and/or its nominated third party inspector shall have the right at all
times in coordination with CONTRACTOR to inspect or witness the testing of the
equipment and materials at the place of production or fabrication.

4.9.4 CONTRACTOR will provide notice for inspection to OWNER in writing or through letter, fax
or e-mail so as to reach OWNER at least 10 working days in advance in case of overseas
inspection.

4.9.5 If no representative of OWNER appears at the time and place notified, the inspection or test
may be carried out as planned by CONTRACTOR. Work on “Hold Points” marked shall
proceed only in receipt of a written clearance.

4.10 Vendor’s Pre-Inspection Meeting

4.10.1 Purpose

The purpose of pre-inspection meeting is primarily to ensure that the quality requirements
of the Purchase Order are being handled satisfactorily and that all requirements in the
Purchase Order and the applicable specifications, standards, and drawings are fully
understood by all concerned.
Pre-inspection meeting is normally held at the manufacturer's premises with
CONTRACTOR's Inspection Coordinator and/or Inspector, Vendor and OWNER (when
necessary) as per the requirements finalized in the Project Pre-Inspection Meeting.
Inspection Coordinator will decide the necessity and schedule of the meeting with
OWNER.

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4.10.2 Discussion at Pre-inspection Meeting

1) Vendor's quality control system

Vendor's quality control program, including details of the manufacturing and
production sequences, hold points / witness points for inspection, and the quality
control system shall be studied.

2) Vendor's quality control and inspection organization shall be checked and reviewed
for its ability to retain the required quality of workmanship.

3) Each inspection item of the Purchase Order, procedures and methods,including

inspection measures, should be discussed in detail. Acceptance standards for the
inspection should be clearly established at this meeting so that the inspector can judge
conformance during inspection.

4) Other matters
Coordination procedures, such as communication channels between the parties
concerned and submissions, records, etc., should be clearly understood by Vendors
at this meeting.

4.11 Witness Inspection and Test

4.11.1 Before starting production, CONTRACTOR’s inspector shall check that all measures will be
taken to meet the inspection and testing requirements and approval of the following
documents relating to inspection has been obtained.
- Fabrication drawings
- Vendor’s Quality Plan
- Welding procedures / Welder’s qualification records
- Non-destructive examination procedures
- Heat treatment procedures
- All forming operations whether hot or cold on materials other that plain carbon steel
- Any fabrication procedure required by the Purchase Order

4.11.2 Inspection
Upon receipt of Vendor’s inspection notice, Inspector shall perform the inspection as per

The approved Vendor’s quality plan under the instruction of Inspection Coordinator.
Equipment or materials satisfying the following acceptance criteria will be released for
further processing or delivery from the Vendor's shop.

- Equipment or material is manufactured in accordance with the requirements of

Purchase Order including specifications and drawings.
- Equipment or material does not have any irremediable or injurious defect.
- The workmanship for the equipment or material is good.
- Necessary documentation has been completed.

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4.11.3 Inspection Record

After each visit, inspection report shall be made describing the detail activities of visits and
the results of the inspection, wherein all agreements, acceptances, rejections, releases and
inspection activities shall be documented and the results shall be recorded by Inspector.
These reports shall be sent to the CONTRACTOR’s head office.

4.12 Vendor Invoice Verification and Payment to Vendor

4.12.1 General

CONTRACTOR, upon receipt of such Invoices, shall audit and verify them taking into
account the conditions stated in the relevant Purchase Order and its amendments.
In case of inconsistency between the Invoices and the Purchase Order’s conditions shall
resolve all queries with Vendor until the Invoices are completely in line with agreed terms
and conditions,

4.12.2 Vendor Invoices

Vendor’s Invoices (Billing Invoices) shall be made on Vendor’s own form and shall
contain the following information.
- Name and complete address of Vendor
- P.O Number and P.O. Description
- Vendor reference number
- Invoice Number
- Bank name, address and account number for payment
- Country of origin
- Item numbers, quantity of each item and description of materials exactly as appearing
on the P.O.
- Unit prices and total price of the Invoice
- Payment terms of the Invoice

All other applicable supporting documents to the billing Invoices which shall include
applicable documents of the following:

- Invoicing / Payment status to date

- Packing list
- Forwarder’s receipt
- Bill of lading
- Material receipt
- Vouchers

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4.12.3 Receipt and Verification of Invoice by CONTRACTOR

Upon receipt of the billing Invoice and supporting documents from Vendor, CONTRACTOR
shall:
- Immediately verify the Invoices to the effect that each invoice is made in accordance
with terms and conditions specified in Purchase Order, agreements, exemption list and
related procedures.

- In case of errors or inconsistency between the invoices and the relevant documents as
noted above, then CONTRACTOR will ask Vendor to provide corrected invoice. In
such case payment due date will be modified with respect to the date of receipt of
corrected invoice.

4.12.4 Payment

- Upon receipt of invoices, CONTRACTOR shall make the payment to Vendors directly
to their designated bank accounts according to the agreed terms and conditions of
payment.

- In case of down payment, the amount of invoice shall be reduced with the amount
corresponding to the amortization of down payment.

- Vendor shall acknowledge to the CONTRACTOR receipt of payment.

5. MATERIAL AND DOCUMENT CONTROL AND TRACKING

For the control of materials and document, CONTRACTOR will utilize its computerized
control system.

CONTRACTOR’s typical computer system called as Chagalesh Project Management

Information System (CPMIS) is an integrated control system designed specially to be
effective in all the engineering and procurement disciplines.

6 TRAFFIC AND LOGISTICS

6.1 Introduction
This plan describes about the shipping arrangement, transportation, customs clearance and
documentation for all offshore materials and equipment as followings, but not limited to;

- Packing and marking

- Shipping arrangement
- Shipping documents and notice
- Customs formalities & in-land transportation
- Master list of equipment to be imported into IRAN
- Oversize/heavy lift equipment’s transportation

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6.2 Packing and Marking

- All offshore materials and equipment shall be packed securely. The nature of the
product, conditions at sea ports of exit and entry and transit to and from the inland
points determine the type of packing needed.

- Other factors are the hazards of loading and unloading, stevedoring handling,
warehousing and shipment. Protection from damage due to salt water, condensation,
rain, snow, heat or contamination during transportation shall be considered.

- Proper shipping marks in accordance with project requirements will be clearly marked
on the surface of each package, in order to easily recognize and identify the project
cargoes during transportation.

6.3 Shipping Arrangement

- Logistics Coordinator shall closely monitor cargo readiness of Vendors by

communication with Expeditor, Inspector and Forwarder.

- Preliminary packing list will be received from Vendor in order to book the space of

vessel at least two weeks before actually cargo readiness for shipment.

- Forwarder, under CONTRACTOR’s control and direction, will book the space of the
vessel and conduct overall shipping arrangement for project cargoes from the place of
cargoes receipt in Vendor’s countries up to ports of entry in IRAN, and give a detail
schedule to CONTRACTOR.

6.4 Shipping Documents and Notice

- Documents for shipping and customs clearance shall be provided and/or collected by
Logistics Coordinator. The basic documents are Bills of Lading, Commercial Invoice,
Packing List and Certificate of Origin.
- Logistics Coordinator in head office shall distribute those original documents to the
relevant parties, i.e., Site Management or Local Forwarder in IRAN.

- The shipping notice containing details about the consignment including copies of
shipping documents shall be given to relevant parties, i.e., CONTRACTOR’s Site
Management, Local Forwarder and OWNER, if required, by fax or e-mail upon
each shipment effected, at least one week before ship’s arrival in IRAN, in case of
transportation by sea.

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6.5 Customs Formalities and Inland Transportation

- In accordance with customs law, CONTRACTOR will carry out customs clearance
works.

- CONTRACTOR will conduct all necessary work after ship’s arrival, such as safe
handling of Goods at ports of entry, Delivery Order collection from the carrier’s
agent, providing customs declaration form and payment to relevant parties at ports of
entry on behalf of CONTRACTOR in advance.

- CONTRACTOR, after completion of customs clearance, shall carry out transfer of all
Goods from customs area at ports of entry up to project Job Site, giving information to
CONTRACTOR about delivered Goods.

6.6 Oversize/Heavy Lift Equipment’s Transportation

- CONTRACTOR together with Forwarder, according to instructions and relevant

shipping drawing provided by Vendor, shall be responsible for the preparation and
issue of transportation plan, describing all movement of oversize/heavy lift equipment’s
transportation from the place of cargo receipt from Vendors up to project job Site.

- CONTRACTOR shall plan the complete route from the ports of entry up to project job
Site. These activities should require permission from various authorities and third
parties for removal and replacement of some street/road obstacles and/or other
possible obstacles along the authorized route.

- CONTRACTOR will assure the presence of Forwarder’s and Local Forwarder’s

transport specialist during the transportation execution at ports of exit and entry
respectively.
- Logistics Coordinator and/or Local Forwarder will conduct a survey at due time local
roads, bridges, etc. and will apply to local Authorities to carry out any necessary

arrangements for the obstacles removal.

- CONTRACTOR and Local Forwarder shall arrange local transportation, including

coordination activities with local authorities and any other involved party, with the
supervision of Forwarder.

- CONTRACTOR shall also assure cooperation to custom clearance agent to smoothly

perform clearance activities for oversize/heavy-lift equipment in order to avoid any
standing time or demurrage.

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7. PROCUREMENT OF SPARE PARTS

7.1 The Type of Spare Parts

OWNER’s Lists of Spare Parts shall be considered as a “Guide Line”.

7.1.1 Commissioning Spare Parts

They should be provided as part of the initial orders for machinery and equipment based
on Vendor’s recommendation subject to OWNER’s approval.
They are required by CONTRACTOR in the performance of the work to achieve plant
completion and commissioning activities.

7.1.2 Two (2) years Operation Spare Parts

They are items required to maintain equipment in satisfactory working order, after
commissioning, to assure two(2) years of continuous operation of the plant.

They shall be approved by OWNER through VENDOR’s/CONTRACTOR’s

recommendation.

7.1.3 Capital Spare Parts

They are parts of equipment, equipment assemblies or complete items of equipment that
are of high capital value and that are required to be held in stock to safeguard continued
and safe operation of the equipment or plant.

They shall be approved by OWNER considering VENDOR’s current condition.

7.2 Spare Parts Procurement Procedure

CONTRACTOR shall accomplish the following tasks:

7.2.1 Review equipment inquiries for complete coverage of spare parts, to ensure adequate

quotations from Vendors.

7.2.2 Expedite Vendors for early receipt of recommended spare parts lists including break down
prices and delivery times.
7.2.3 Promptly provide spare parts recommendations to OWNER for its review.

7.2.4 Maintain a control log of the status of the spare parts procurement work.

7.2.5 Expedite and receive ordered mandatory and other spare parts.

7.2.6 Maintain the same standards of quality control for spare parts as for other materials and
equipment ordered for the project.

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7.3 Requirements for Spare Parts Quotations

CONTRACTOR instruction to Vendors for recommended spare parts quotations shall be

clearly stated in the inquiry and purchase order documents. These instructions shall
include the following:

7.3.1 Spare parts quotations should be obtained as soon as possible to permit early order
placement. Mandatory spares shall be developed with and ordered when the original
equipment purchases are committed. Minimum spare parts requirements and all
supplemental spare parts recommendations shall be developed and submitted for
OWNER review.

7.3.2 Original equipment item and description of that item for which part is recommended;

7.3.3 The serial or part number for each part;

7.3.4 Reference assembly drawing or complete parts list for each piece of equipment;

7.3.5 Unit price and total price;

7.3.6 Delivery date; CONTRACTOR desires delivery concurrent with the original equipment
order. In any event, the target scheduled delivery date shall be no later than six weeks
before Completion of the affected part of Plant.

7.4 Selection of Spare Parts

CONTRACTOR shall establish total recommendation for identical parts through Vendor

recommendations and CONTRACTOR’s past experience.

They are then to be presented to OWNER for review and final selection for purchasing.

7.5 SPLIR Form

All spare parts recommendation shall be made on a Spare Parts List Inter-Changeability
Record (SPLIR) in an electronic form to be submitted to OWNER’s review and approval.

8 RECEIVING GOODS AT PROJECT JOB SITE

8.1 Material controller, according to the information received by Local forwarder,

shall schedule the unloading operations from the trucks, following the specific handling
symbols shown on each package.

Material controller, when the Goods arrive at project job Site, shall check the quantity,
according to the transport document and verify the good order and conditions of the
packing and/or the equipment which are not protected by package, due to transport
requirements.

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8.2 Matrial controller, in case of receipt of Goods without any note regarding their conditions
and quantity, shall indicate on the transport document the following remark:
"Packages received in apparent good order and conditions except for the inspection of the
contents".

For the Goods not protected by package the remark will be:
"Goods received in external good order and conditions".

8.3 Material controller, in the event of loss or damage, shall detail on transport document the
relevant remarks, explaining the actual conditions of the Goods received.

8.4 Material controller shall give notice of loss or damage notice immediately to local agent of
Insurance company, carrier and/or Local Forwarder (copy to CONTRACTOR) and obtain
an acknowledgment of receipt.

8.5 According to the common rules, the following documentation, where applicable, shall be
sent by the Site Management to CONTRACTOR, for the adjustment of claims:

- Copies of commercial invoice along with the packing list

- Transportation document (truck way bill)
- Average, short and damage report
- Survey report or other documentary evidence, showing the extent of the loss or
damage
- Landing account and weight notes at final destination
- Correspondence with the carriers and others, regarding their liability for the loss or
damage.

9 OVERAGE, SHORTAGE, INCORRECTNESS & DAMAGE (OSI&D) AND CLAIM

9.1 Confirmation of OSI&D

9.1.1 Material controller shall make OSI&D report immediately with evidencing documents upon
discovery of any defects after inspection of delivered materials and report to Coordinator
concerned (Buyer, Inspection Coordinator and/or Logistics Coordinator).

9.1.2 Material controller shall find out correct defective contents, quantity and degree of the
defect and, if necessary, arrange to conduct a joint survey in the presence of the
concerned companies (Vendor, Ship Company and/or Underwriter).

9.1.3 The Logistics Coordinator shall send OSI&D statement describing CONTRACTOR’s claim
intention to the party who is responsible for the defect when it is necessary to file claim in
consideration of the extent and quantity of damage and shortage.

9.1.4 The defect notice of the above article shall be made at once after discovery of OSI&D state
and it will be an important evidence for some dispute which may arise hereafter.

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9.2 Survey to Damage and Shortage of Imported Materials

9.2.1 The Logistics Coordinator may, if necessary, request to the marine surveyor and measurer
corporation authorized under harbour transportation business law and recognized as an
agency having a good and worldwide qualification and ability to survey the imported
materials.

9.2.2 The Logistics Coordinator will arrange if requested by insurance company, the materials to
be inspected by a marine surveyor who is designated by the insurance company.

9.2.3 The Logistics Coordinator will check up the survey report submitted by marine surveyor’s
company to confirm whether it is accorded with the purpose of survey and the facts of
defect.

9.3 Preparation of OSI&D Report and Claim

9.3.1 Survey and inspection for damaged and shorted materials shall be completed at earliest
time possible and the Logistics Coordinator also files claim with evidencing documents to
the party who is responsible for the defect or the insurance company.

9.3.2 The claim shall be made to the responsible party after obtaining proper documents in
accordance with OSI&D report specifying item, quantity and cause of damage and
shortage.

9.3.3 Claim documents must include following documents;

- Notice of Defect stipulated in article here above

- Cargo Boat Note of Shipmaster
- Survey Report

- Outturn report of Tally Company, if necessary

- Receipt statement of warehouse/or stevedoring company, if necessary
- Bill of Lading
- Invoice and Packing List
- Additional supporting papers

9.3.4 The Logistics Coordinator will make and keep claim index listing all descriptions for claim
and settlement of it.

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10. Attachments
Attachment 1 Procurement Team Organization
Attachment 2 Procurement Work Flow Diagram
Attachment 3 Bidder List to be invited (Format)
Attachment 4 Purchase Recommendation Sheet (Format)
Attachment 5 Procurement Status Report
Attachment 6 Expediting Follow-up Plan and Time Table (Sample)
Attachment 7 Spare Parts List and Interchangeability Record
Attachment 8 Inspection Activities Flow Digram

3607/32-PRC-9503
 Attachment 1

PROCUREMENT TEAM ORGANIZATION

Procurement Manager/
PSL
Mr.

Tel:88804770-7

Fax:88804778

Purchasing Expediting Inspection Traffic / Logistic

Mr. Mr. Mr. Mr.

Tel:88804770-7 Tel:88804770-7 Tel:88804770-7 Tel:88804770-7

Fax: 88804778 Fax: 88804778 Fax: 88804778 Fax: 88804778

Email:Purchase@chagalesh.com Email:Comm-plan@chagalesh.com Email:Inspector@chagalesh.com Email:Comm-plan@chagalesh.com
 Procurement Work Flow Diagram
Attachment 2

VENDOR CONTRACTOR EMPLOYER REMARK

PRE-QUALIFICATION MATERIAL REQUISITION

MATERIALS & BIDDER LIST
(NOT-APPROVED VENDOR)

APPROVAL WITHIN 10 WORKING DAYS

YES NO
EMPLOYER HAS RIGHT TO
CHANGE THE VENDORS
CHOSEN BY CONTRACTOR

INQUIRY ISSUE

PREPARATION OF VENDOR RECEIPT OF VENDOR NOTIFICATION OF ( 5 ) WORKING DAYS

QUOTATION (COMMERCIAL QUOTATION (COMMERICAL TECHNICAL BID OPEN PRIOR TO TECHNICAL BID
& TECHNICAL) & TECHNICAL) OPEN

TECHNICAL BID OPEN

NOTIFICATION OF NOTIFICATION OF ( ) WORKING DAYS

TECHNICAL CLARIFICATION TECHNICAL CLARIFICATION PRIOR TO TECHNICAL
MEETING MEETING WITH VENDOR CLARIFICATION MEETING

TECHNICAL CLARIFICATION
MEETING WITH VENDOR

DEVIATION & EXCEPTION APPROVAL OF DEVIATION

& EXCEPTION
WITHIN ( ) WORKING
LIST DAYS

TBA REPORT

WITHIN ( ) WORKING DAYS

APPROVAL

NOTIFICATION OF ( ) WORKING DAYS PRIOR

COMMERCIAL BID OEPN TO COMMERCIAL BID OPEN

COMMERCIAL BID OPEN

( ) WORKING DAYS
NOTIFICATION OF NOTIFICATION OF PRIOR TO COMMERCIAL
COMMERCIAL NEGOTIATION COMMERCIAL NEGOTIATION MEETING
MEETING NEGOTIATION MEETING
WITH VENDOR

COMMERCIAL
CLARIFICATION MEETING

COST IMPACT BASED ON

TECHNICAL / COMMERCIAL
CALRIFICATION

CBA REPORT & SELECTION APPROVAL & PAYMENT

OF VENDOR WITHIN ( ) WORKING DAYS
SECURITIES

EMPLOYER SHOULD DECIDE

YES NO SELECTED VENDOR AMONG
THE QUALIFIED BIDS

WITHIN ( ) DAYS AFTER

PURCHASE ORDER P/O PLACEMENT APPROVAL & PAYMENT
SECURITIES
 Attachment 3

BIDDER LIST TO BE INVITED FOR BID

INQUIRY No. :

DESCRIPTION:

CLOSING
DATE: CLOSING TIME:

3.
OWNER DATE

2.
CONTRACTOR PROC. MANAGER DATE

1.
BUYER DATE

BIDDER`S NAME COUNTRY BIDDER SOURCE REMARKS

AVL ADDITIONAL
 1BHF
PG
 Attachment 4

PURCHASE RECOMMENDATION SHEET DESCRIPTION

P/O No.:

PO DETAILS
TECHNICAL RECOMMENDATION COMMERCIAL RECOMMENDATION OWNER SELECTED OPTION
ACTION
SUMMARY SUMMARY
BIDDER NAME
ISSUE DATE PO AMOUNT DELIVERY
/COUNTRY
Attachment 5
 JOB TITLE JOB NO. :
CLIENT DOC. NO. : '.

Procurement Status Report

APP'D & DATE

REV DATE DESCRIPTION PREP'D BY CHK'D BY CHK'D BY APP'D BY
CLIENT
 Procurement Status Summary
Status as of

Issue Date:
Total Inquiry Issued Bids Received TBE Issued LOI Issued Pos Issued Inspection ETD ETA
S. No

Code

Category Remarks
Reqs. Nos. % Nos. % Nos. % Nos. % Nos. % Nos. % Nos. % Nos. %
Plan
1 SM Static Equipment
Actual

Rotating Plan
2 MR
Equipment Actual

Plan
3 PK Packages
Actual

Plan
4 SS Steel Structural
Actual

Plan
5 PP Piping
Actual

Plan
6 EL Electrical
Actual

Plan
7 IC Instrumentation
Actual

Plan
8 ZM Others
Actual

Total Plan -
Actual -
NOTES:
 Attachment 6

EXPEDITING FOLLOW-UP PLAN AND TIME TABLE

AS OF
2007 2008 2009
VENDOR MANUFACTURER DELIVERY
PO No ITEM PO DELIVERY CRITICALITY REMARK
/ COUNTRY / COUNTRY CONDITION
JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN

* ABBREVIATION : MR - Monthly Report, BWR - Bi-Weekly Report, SV - Shop Visit

 Attachment 7

NATIONAL IRANIANOIL ENGEERING AND CONSTRUCTION COMPANY

SPARE PARTS LIST AND INTERCHANGEABILITY

RECORD
21 Equipment Class SPARE PARTS LIST AND INTERCHANGEABILITY RECORD Spare parts (order no.) :

NOTES : 1) All equipment having interchangeable items to be stated on same form.

Subject :

Equipment reg. No. or

2) Quote in column 10 part numbers showing interchangeability within equipment manufacturer's organization.
3) Quote in column 20 original identification numbers for all items of third party manufacture ("bought-out" items) such as ball bearings, mechanical seals, couplings, fuses, auxiliaries. Manufacturer :
tag. No.
4) Quote in column 11 name and type of material, ex. bronze, cast iron, st. steel 304, rubber, Buns, viton, etc. 5) Column 14a is the addtional commissioning spares, and 14b is the total quantity of commissioning spares
1 (14+14a), based on the meeting result with Owner. Address :

pair, set)
Required on site date : Approved for purchase by: Date :

Total number of identical parts installed

Additional Commissioning spares (5)

Total Commissioning spares (5)

UNIT (Kg, No.,

Approximate total price in US$

Approximate unit price in US$
REMINDER : ATTACH TO THIS FORM ALL PARTS LISTS AND DRAWINGS AS LISTED IN COLUMN 9 AND 10 Operational spare parts
Manufacturer'

Quantity to be supplied
s model

Commissioning spares

Classification of parts
2

Item No.
MANUFACTURERS DATA Remarks (see note 3

Recommended by

Recommended by
MESC. No.

manufacturer
above)

Contractor
Reference/Serial

Material (see not

Country of

4 above)
Origin
DESCRIPTION OF PARTS: to include all parts recommended to be kept for Manufacturers Real part No. (see note

Size
No.

3 Model No. Drawing/Ref.No.

normal operation and slow wearing parts 2 above)

4 No. of Units 6a 7 8 8a 9 10 10a 10b 11 12 13 14 14a 14b 15 16 17 18 19 20 22

NUMBER OF PARTS PER UNIT

5
order No.

PROJECT / Rev. letter

Equipment Purchase

PLANT : Date

6 CONSIGNEE : Sign.

Approximate total value : Delivery time : Sheet No. of

Requisition No.
 Attachment 8

INSPECTION ACTIVITIES FLOW

DIAGRAM

PROJECT INSPECTION
LEVEL

↓
PREPARATION OF INSPECTION & TEST PLAN

↓
RECEIPT OF
PURCHASE ORDER

↓
INSPECTION ORDER
ASSIGNMENT

↓
REVIEW OF
PURCHASE ORDER

↓
REVIEW OF VENDOR PROJECT
PRINT
APPLICATION FOR
INSPECTION ↓
PROCUREMENT
VENDOR
DEPARTMENT

↓
INSPECTION OF
OWNER / TP
RAW MATERIALS
(WHEN REQUIRED)
(WHEN REQUIRED)

↓ ↑
PRE-INSPECTION MEETING
INSPECITON PROJECT
(WHEN REQUIRED) REPORT
↓
IN-PROCESS INSPECTION

↓
COMPLETION OF
FABRICATION

↓
ATTENDANCE BY
FINAL INSPECTION OWNER / TP
(WHEN REQUIRED)
↓
DELIVERY TO SITE