Lecture 2

Procurement
Acquisition of goods/services.
Procurement (& contracting)
is a Process that involves
-Two Parties with:
Different objectives
Who Interact in
a given market segment.
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Environment in which Procurement Take Place is
Critical factor.
There are two environments:
1. Macro &
2. Micro.
Macro environment includes General external
variables that can Influence “How & When”
we do Procurement and it Includes:
– Recessions,
– Inflation,
– Cost of borrowing money,
– Unemployment.

2
Micro environment is the internal to Firm Include
“Procurement /Contract System” five cycles:
Requirement Cycle: Defines boundaries of Project
Requisition Cycle: analysis of sources
Solicitation Cycle: Bidding process
Award cycle: Contractor selection & Contract
Award
Contract Admin Cycle: Managing contractor until
Completion of the Contract.

3
1. Requirement Cycle
First Step in Procurement
Process “Definition of
Project Specifically
‘Requirements”

4
 Requirement Cycle Includes
1. Defining the need for the project
2. Development of the statement of work,
specifications, and work breakdown structure
3. Performing a make or buy analysis
4. Laying out the major milestones and the
timing/schedule
5. Cost estimating, including life-cycle costing
6. Obtaining authorization and approval to
proceed
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 2. Requisition Cycle

Once the “Requisition

identification”, ‘Requisition
form’ sent to Procurement
to begin “Requisition
Process”.

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Requisition cycle Include:
1. Evaluation confirming specification.
2. Confirming sources
3. Reviewing past performance of sources
4. Producing Specification Package (S/P)

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Specification Package Includes:
1. Bid documents (usually standardized)
2. Listing of qualified contractors (expected to
bid)
3. Proposal evaluation criteria
4. Bidder conferences
5. How change requests will be managed
6. Payment plan

8
3. Solicitation Cycle
Selection of “Procurement (Acquisition)
Method” is the Critical Element in
“Solicitation Cycle”.
Two Procurement Methods :
• Bidding
• Negotiation

9
Negotiation is when the price is determined
through a bargaining process. In such a
situation, the customer may go out for a:
– Request For Information (RFI)
– Request For Quotation (RFQ)
– Request For Proposal (RFP)
The request for Proposal (RFP) is the most
costly endeavor for the contractor.

10
Large proposals contains:
separate volumes for cost, technical
Performance, Management History,
Quality, facilities, subcontractor
Management, & Others.

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On Large contracts the Negotiation
Process may Also Includes Price,
Quantity, Quality & Timing.
Contractor Relations are critical during
contract negotiations.
Can Shorten Process due to:
1. Integrity of relationship &
2. Previous history
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 Enlistment or Registration of
Contractors
Since construction works are of several types like
buildings, highways, bridges, dams, canals, airports, etc.,
value of work will vary from some million rupees to
billion rupees, contractors of varying experience and
financial capabilities are required for different jobs and of
different values.
Contractors are therefore classified according to the cost
of works for different type of works.

Enlistment is done to have a ready list of suitable and

competent contractors for various type of works so as to
minimize requirement of verification of credentials of
contractors at the time of individual tenders by clients.
 PEC Registration Procedure for
Constructors and Operators
To obtain registration with PEC as constructor / operator one must
meet the registration criteria for the category in which registration
is applied for. Both Pakistani & Foreign Constructors / Operators can
obtain PEC Registration by applying on the Prescribed Forms
available from all PEC offices. Before filling in this form, it is
recommended to see Engineering Works Bye Law 4 and Bye Law 8 .
After filling in this Form according to the instructions given at the
end of Form, it should be submitted at one of the PEC offices along
with the documents required and the prescribed fee for the
category applied for.
The application cases are then scrutinized and information given by
the applicant is verified by PEC. If no discrepancies are found, the
Enrolment Committee makes decision to register the applicant.
Thus, a License /Enlistment Certificate is issued to the Pakistani /
Foreign Constructor / Operator.
 Documents Required With
Constructors/Operators Applications
The condition of providing affidavit of
engineers for employment with
contractor/operator firm by the
constructors/operators be abolished
henceforth. An information by a
constructor/operator on his letter head and
on plain paper duly signed by the concerned
engineer will be considered sufficient.
 Documents Required With
Constructors/Operators Applications
Application for enlistment or renewal of constructors or operators
in any category must contain the following documents:-

• A financial certificate in favour of the firm from any scheduled bank;

• A list of works executed by the company or chief executive or proof

of sufficient experience of his engineers in previous years indicating
value of projects, name of employers and certificates of satisfactory
completion by the respective employers;
• List of works in progress including cost of work and copy of letter of
intent or agreement of each project (for C-1 and C-2 categories
only);
• Organization chart of the firm showing chain of command;
• List of technical and other staff members;
 Documents Required With
Constructors/Operators Applications
• Curriculum vitaes of technical staff along with National
Identity Card number and National Tax number, if any;
• Statement showing employment by the constructor or
operator of at least two professional engineers having
minimum experience of fifteen years and ten years
respectively in same disciplines in which the
constructor or operator desires to be entitled (for C-1
and C-2 category only); and
• List of plants and equipment along with the make and
year of procurement.
• Undertaking by C6-constructor incase of no engineer
 Construction/Operation
• "Construction" of an engineering work includes
surveys, sub-soil and other investigations, erection,
installation, testing and commissioning and execution
of any other activities required to achieve the desired
final shape of an engineering work, and also include
extension remodeling, rebuilding and repair works.
• "Operation" means the supervision and management
of running, operation and execution of all activities
required to efficiently operate a project after it is
constructed by a constructor in order to achieve the
aims and objectives of the project.
 PEC Registration Categories
Table of Re-categorization of Revised Financial
Limits, Professional Credit Points (PCPs)
Requirements & Applicable Fees
Constructo Limit(million Fee
r’s rupees)
Pakistani Foreign
Category
applicant applicant
(Rupees) (Rupees)
PCPs
Minimum Requirement of Engineers
Required

C-A No Limit Two P.Es with 20 years of Experience each + RE 150 100,000/- 300,000/-

C-B Up to 2000 Two P.Es with 15 years of Experience each + RE 100 30,000/- 200,000/-

C-1 Up to 1000 Two P.Es with 10 year of Experience each + RE 75 20,000/- 165,000/-

C-2 Up to 500 One P.E + R.Es 30 15,000/- 60,000/-

C-3 Up to 250 One P.E + R.E 20 13,000/- 40,000/-

C-4 Up to 100 One P.E + R.E 15 8,000/- 25,000/-

C-5 Up to 30 One R.E 5 5,000/- 15,000/-

C-6 Up to 15 One R.E 5 4,000/- 10,000/-

Operator’s Category Limit of Operational cost of project Fee

(million rupees) Pakistani applicant Foreign applicant

(Rupees) (Rupees)
PCPs Required

O-A No Limit 120 100,000/- 300,000/-

O-B Up to 500 75 30,000/- 200,000/-

O-1 Up to 200 50 20,000/- 165,000/-

O-2 Up to 100 30 15,000/- 60,000/-

O-3 Up to 40 15 13,000/- 40,000/-

O-4 Up to 20 10 8,000/- 25,000/-

O-5 Up to 10 5 5,000/- 15,000/-

O-6 Up to 5 5 4,000/- 10,000/-

 PEC Application Form
Application Form For Issuance of License to a
Constructor / Operator
 Computation of Professional Credit
Points (PCPs)
1. Five pcps shall be earned by each “registered engineer”,
one pcp shall be allowed for each year of experience to
professional engineers engaged in the construction and
operation of engineering works from the date of passing
B.Sc Engg or B.E. degree subject to minimum of 10 pcps
and maximum of 30 pcps. However, pcps beyond 65 years
of age be reduced at following scale:-

(i) 65 – 75 years .. .. .. .. 1 pcp/year;

(ii) 75 – 80 years .. .. .. .. 2 pcp/year; and

(iii) above 80 years .. .. .. .. 5 pcp/year

 Computation of Professional Credit Points (PCPs)
(Continued)
2. Those applicants/licensees who have in their permanent
employment professional engineers registered with PEC other
than partners and shareholders having more than 15 percent
share, who have continuity of service in the applicant's
organisation of more than 10 years will be entitled to bonus
professional credit points as follows:-

• For every professional engineer employed without break for Bonus

pcp credit.

10-14 years .. .. .. .. 2
15-19 years .. .. .. .. 4
20-24 years .. .. .. .. 8
25 years and over .. .. .. .. 12
 Computation of Professional Credit Points (PCPs)
(Continued)

2(a) Extra points for postgraduate engineers and

those who have paid membership fee for life
shall also be allowed as under:-

(a) MS / ME .. .. .. .. 2 points.
(b) Ph.D. / D.E. .. .. .. .. 4 points.
(c) Fee paid for life. .. .. .. .. 1 point.
 Computation of Professional Credit Points (PCPs)
(Continued)
3. Applicants having professional engineers as their owners, partners
or shareholders shall be entitled to extra bonus professional credit
points as follows:

Equity of professional engineers Extra bonus pcp credit

10-19% .. .. .. .. 05
20-49% .. .. .. .. 10
50-74% .. .. .. .. 15
75% and over .. .. .. .. 20

• Provided that extra bonus professional credit points shall not

exceed the pcp earned for the year of experience as per clause (1).
 Computation of Professional Credit Points (PCPs)
(Continued)
4. Regardless of the category, the licence granted by the Council
obliges every licensee to maintain such professional engineering
strength to manage the projects at hand that he has at all times a
pcp credit of:-

(i) in the case of constructor, one point for every twenty million rupees
construction cost of projects in hand at any time, or the minimum
requirement of pcp credit prescribed for the category of his licence,
whichever is more; and

(ii) in the case of an operator, one point for every twenty million
rupees cost of projects in hand at any time or the minimum
requirement of pcp credit prescribed for the category of his licence,
whichever is more.
 Computation of Professional Credit Points (PCPs)
(Continued)
5. For computation of pcp credit as per bye-law (4) above, the
aggregate professional experience in terms of full years of all
professional engineers employed by the licensee on full time
basis shall be counted as professional credit points to the
credit of the licensee at the time. Part timers shall be omitted
from the computation. For the purpose of computing the
construction and capital cost of projects, the total costs of all
the projects in the hands of the licensee shall be added. These
costs shall be based on signed construction contracts,
proposals, tenders or estimates. The licensee shall ensure that
the actual professional credit points including bonus and extra
bonus points at any time in his organisation shall not be lower
by more than 20 percent for a period not exceeding twelve
weeks at any one time.
PEC Registration of Contractors
REGISTRATION CATEGORIES AND
SPECIALIZATION OF CONSTRUCTIONS/
OPERATORS
PEC Registration of Consultants
Application Form

Main Disciplines

Service Codes