SUMMER INTERNSHIP REPORT

ON
PROCUREMENT, WORKS POLICY
AND AWARD OF CONTRACT
Submitted by
Students name: Ahmad Nadeem Sherwani
Roll no.
: 14 MBAK 60
Session
: 2014-16

Submitted in partial fulfillment of the requirements for qualifying

Post Graduate Master Of Business Administration
Under the guidance of

Name of External Guide:

Sumit Goyal
Deputy Manager
NTPC Limited

CERTIFICATE

This is to certify that Mr. ____________________of MBA has successfully

completed Summer Training Programme for a period of ______ weeks with______________. (Name of organization) from________ To_______. (Exact
Date)
As per our assessment he is hard working and his performance has been
excellent/satisfactory during the training programme.
We wish him all the success for his future endeavors.

Signature:
Name of the Mentor:
Designation:
Name of the Organization:

ACKNOWLEDGEMENT
This summer internship project at National Thermal Power Corporation (NTPC) has been a
great learning experience. The name of the Project is Procurement, Works Policy and awards
of contract which comes under Finance department.

I am using this opportunity to express my gratitude to everyone who supported me

throughout the course of this MBA project. I am thankful for their aspiring guidance,
invaluably constructive criticism and friendly advice during the project work. I am sincerely
grateful to them for sharing their truthful and illuminating views on a number of issues
related to the project.
I express my warm thanks to Mr SUMIT GOYAL Dy.Mgr (Finance) for their support and
guidance at NTPC LIMITED.
I also want to thanks Mr. V.V. Subramanian Mgr. (Finance), Mr A.K.bhatia Dy. Mgr.
(Finance) and to all other employees of the department who have given their valuable time &
suggestions for the completion of this project.

INDEX

1. Title Page
2. Certificate
3. Acknowledgement
4. Executive Summary (Abstract)
5.

6.
7.
8.
9.
10.
11.

Contents
Introduction
Company Overview
Review of Literature
Objectives
Research Methodology
Data Analysis, Results and Interpretation
Conclusions
Limitations of the Project
Recommendations
List of Tables
List of Figures
List of Photographs
List of Symbols, Abbreviations and Nomenclature
References
Appendices

CONTENTS:

Chapter 1
INTRODUCTION
Purpose of report
Limitation
Scope
Chapter 2
OVERVIEW OF NTPC

Company Introduction
Business
Core Values
Organization Chart
Growth
Installed Capacity
Current scenario
Future scenario

Chapter 2
RESEARCH METHODOLOGY
Sample Design
Research design
Collection of data
Secondary data
Outline of work
Performance highlight
Chapter 3
Growth
Installed Capacity
Current scenario
Future scenario
Chapter 4
VISION
THE MISSION STATEMENT
CORE VALUES
CORPORATE OBJECTIVE
SUBSIDIARIES AND JOINT VENTURE
CONTRACT PACKAGE LIST
Chapter 5
MEANING OF PROCUREMENT
Definition
Principle
Objective

Steps
Procurement process
Significance
Chapter 6
PROCUREMENT AND WORK POLICY
Introduction
Importance
Objective
Procurement policy
Work policy
Delegation of power
Canons to financial propriety
Chapter 8
WORK, SERVICE, FACILITIES TO BE PROVIDED BY THE EMPLOYER
HYPOTHETICAL EXAMPLE ON PROCUREMENT PROCEDURE
Chapter 9
Learning and findings
Limitation
Bibliography
Exhibits: NTPC annual reports

EXECUTIVE SUMMARY
The report aims at providing the realms of the Finance related operations at NTPC Ltd. The
company runs the power generation business and operates power plants. These huge power
plants involve high costs & bulk of materials for supply, installation, commissioning &

erection. For convenience, NTPC splits the requirement of plant equipment into
numerous packages and invite bids for these packages.
The Finance Concurrence division validates the cost estimates for the package and gives
necessary approvals. Later the advertisements are floated and then the bids are received on
the prescribed date of Bid Opening. The bid opening is attended by at least one
representative from each Fin-Con, Engineering & Contracts department, to keep a
track on the authenticity and transparency of the procedure.
Post bid opening, the department evaluates the bids and checks for consistency as per the
specifications and requirements of the packages. The Evaluated price after including cost
compensation, arithmetic errors & discounts are arrived at and the contract is awarded to the
evaluated lowest bidder after assessing his technical and financial competence to execute the
work.
The department also performs a thorough check of the financial status of the bidder
before awarding the contract. This ensures the financial strength of the bidder to take on
and complete the work, in case considered for award.
Another functional domain of the Finance department is to arrange for short-term funds
(Working Capital Management) for NTPC Ltd. This work comes under International
Finance & Budget Section of the Company. They Make sure that the funds are obtained at
the least cost and in compliance with the procedures laid down in the Companys policies.
The Area of work undertaken in Finance-Concurrence division, at NTPC LIMITED.

Arithmetic Error Checking

Financial Analysis

Bid Evaluation Report

Vetting of bidding documents

Preparation of Monthly Information Statements (MIS)

Letter of Awards

THE AREA OF INTERNSHIP AND LEARNING OBJECTIVES

1

DESCRIPTION OF PROJECT:
The Report, entitled Procurement, Works policy and Award of Contract at NTPC
Limited is basically a complete analysis of the purchase practices followed at NTPC.

NTPC a Maharatna company is a major power generator and also operates the power plants
to supply electricity to the various state boards which is to be distributed to the end
consumers and industries. NTPC operates multiple power plants at various locations across
the country. A power plant requires huge investments in setting up of the plant, supply of
materials, installation of related equipment etc.

NTPC divides the requirements of the

erection of such plants into several packages and invites bids from various vendors for award
of such packages. This gives NTPC a competitive advantage on the basis of optimum cost of
completion of project as the contracts are awarded to those contractors who are specialized in
a specific field e.g. electrical, mechanical and civil. An important point to be noted is that for
all procurement procedures, NTPC follows the tendering process wherein bids are invited and
the lowest quoted bid gets the package/contract.
The procurement procedure starts at indenting by the particular department that requires a
material or equipment for a package, then it goes to the cost engineering department where all
the individual costs of all the required spares of equipment, materials etc are estimated.
Historical Cost method or Market Rate method whichever is convenient is adopted for the
fair estimation of all such items in a package. The Finance Concurrence Department matches
the cost estimates with the bills of quantities (BOQ), and then the advertisements are floated
to invite bids for the package.

The bids so received are opened in presence of some

nominated officials from Finance, Indentor/Engineering and Materials/Contracts Services

department on the date specified for opening of the bids to ensure authenticity and
transparency in the procedure.
As per the Works Policy followed by NTPC, once the bids are opened, they are thoroughly
examined and checked whether they are in accordance with the QR (Qualifying
Requirements). QR has two aspects namely Technical and Financial. In the technical
requirements, the previous successful projects of similar types executed by the
company/vendor are analyzed. The Finance Concurrence Department checks the price bids
submitted by the vendors for arithmetical errors. Also, a thorough check on the financial
strength of the bidder is performed by studying the annual turnover for the past three years
are calculated and then checked for consistency with the QR laid down by NTPC. The Net
Worth is also checked to ensure the smooth operation of the work to be performed by the
bidder (ideally it should be at least 25% of the paid up capital). This process is a very
stringent one as sometimes the bidders collaborate with an associate which may be a holding
company having expertise in a particular area, in that case, the financial strength of the
collaborator is also checked, also LoC (Letter Of Credit) for the unutilized funds have to be

submitted by the bidders on the letterheads of the banks and to be properly sealed and
stamped by the requisite authority. The bidders are also required to furnish a bid security
(generally 2% of the estimated cost of the contract).
The currency exchange rate also matters a lot as sometimes there is a time gap of a few
months in the submission of the bid and the completion of evaluation of such bids, so, the
exchange rate which was prevailing a week before the opening of the bid are considered and
the prices are revised as per the inflation to the present day. The bidders have to quote all the
prices as per the the schedules given out by NTPC which is called as Bid Price Schedule. In
all the schedules, all the quantities and capacities are given and the bidders have to quote
their best prices to win the contract.
NTPC follows a Debt Equity Ratio of 7:3 for the financing of all its projects, the debt portion
may be financed by external commercial borrowings (ECB) and domestic sources, and the
rest is funded by its own funds and free reserves. After the successful evaluation, the contract
is awarded to the bidder who has the lowest evaluated price bid and meets the qualifying
requirements.
For the successful award of contract to the vendor, he has to submit a techno-commercial bid
in which his compliance with the Qualifying requirements are checked and secondly he has to
submit a price bid which purely contains all the prices of items as per the format laid down by
NTPC in the ITB (Instruction To Bidders ) document. The price bids of only those bidders
are considered who satisfy the technical Qualifying Requirements of the package. After the
complete evaluation, the package is awarded to the vendor quoting the lowest prices. Also
where there is a slight deviation in the lowest bid received and the cost estimate prepared by
the cost engineering department of NTPC, then the bidder is called for a round of negotiation
to reduce the prices to acceptable levels. If the lowest bidder is varying vastly from the
NTPC estimates and the negotiation is unfruitful then the contract is cancelled altogether and
it is kept on the backburner and is opened after some time again for bidding by interested
parties. E-Tenders are being used extensively by NTPC to reduce its dependence on paper.

OBJECTIVE OF THE STUDY

This project tries to achieve the following objectives:
To study the procurement procedure in NTPC.

 To study the role of various departments especially the Finance Concurrence

department in purchasing of goods at NTPC.
To study how the orders are placed to the vendors in NTPC.
To study about the terms and conditions for purchasing of goods in NTPC.
To study how important is the role of finance concurrence department at various stages
of the procurement process.
To understand the criteria based on which he lowest quoted bidders are selected for
placing an order
Using Ratio Analysis the aspects of the profitability, solvency, liquidity and performance
are adjudged.
Using Comparison between NTPC and other Companies to know about swot analysis

INTRODUCTION
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 power supply industry has been under constant pressure to bridge the gap
between supply and demand.

Purpose of Report:
The

report

titled

PROCUREMENT, WORKS

POLICY AND

AWARD

OF

CONTRACT aims to Study the role of finance procurement management and Award of
contract, since it is one of the major departments at NTPC. As for every purchase at NTPC
proper procurement management procedures are being followed which helps to analyze the
working and even results in efficient working of the process. It basically deals with how a
bidder who quotes the best is awarded with work, through which the company is able to cut
down its costs and to study the financial position of the bidders and the management of funds

& contracts at NTPC Ltd. The report will provide an in depth study of how various types
of contracts are floated, procured and changes are implemented.
Limitations:
The original data and exact evaluation/compensation factors cannot be disclosed due to the
nature of information being confidential to the organization.
Only those techniques and information are made available which would not cause harm of
any nature (financial, social image, working etc.) to the company.
All the fact sheets & printed documents are confidential to NTPC and are for internal
circulation only, thus none can be reproduced in their actual form. The study has been
confined to period of 6 weeks and it takes 6 months to award the contract. Therefore, whole
procedure could not be attended.
Scope of study:
The scope of study stays confined to the operations of Fin-Con department. Certain activities
like Cost estimate preparation, bid evaluation reports, intersects with other departments, these
are done solely or in consultation among various departments. The report will identify the
role of Fin-Con only to avoid the complexity which may crop up by introducing other
domains. This effort is to understand the contract awarding procedure to the deserving party
among various parties.
OVERVIEW OF NTPC LIMITED:
NTPC Limited is the largest thermal power generating company of India. It is a public
sector company. It was incorporated in the year 1975 to accelerate power development
in the country as a wholly owned company of the Government of India. At present,
Government of India holds 89.5% of the total equity shares of the company and the balance
10.5% is held by FIIs, Domestic Banks, Public and others. Within a span of 31 years, NTPC
has emerged as a truly national power company, with power generating facilities in all the
major regions of the country.
NTPC is the 6th largest in terms of thermal power generation and the 2 nd most efficient
in terms of capacity utilization amongst the thermal utilities in the world. NTPC is a

company incorporated under the Companies Act 1956 and a "Government Company"
within the meaning of the act. The headquarters of the company is situated at New Delhi.
BUSINESS
NTPCs core business is engineering, construction and operation of power generating
plants. The company undertakes consultancy and turnkey project contracts that involves
Engineering, Project management, Construction management and Operation and
management of power plants. The company has also ventured into oil and gas exploration
and coal mining activities.
NTPC LIMITED has its business in Hydro Power, Nuclear Power, Thermal Power, and Solar
Power and Coal Power.

FUTURE SCENARIO
CRISIL Research expects demand for power to grow at a healthy 7% in the Eleventh Plan
and be at around 8 per cent in the Twelfth Plan (2013-2017). Capacity addition is likely to be
50 GW and 69 GW, as against the government targets of 78 GW and 82 GW, in the Eleventh
and Twelfth Plan, respectively. Concomitant additions are expected in the transmission and
distribution segments, in line with the generation capacities. In the Eleventh Plan (20082012), CRISIL Research expects investments worth Rs. 3.5 trillion, of which 43 per cent
would be contributed by states. However, a trend reversal is likely in the Twelfth Plan, as
private capacity addition would exceed that of the center and state put together.

CORE VALUES: BE COMMITTED

Business Ethics
Environmentally & Economically Sustainable
Customer Focus
Organizational & Professional Pride
Mutual Respect & Trust
Motivating Self & others

 Innovation & Speed

Total Quality for Excellence
Transparent & Respected Organization
Enterprising
Devoted

NTPC Plants and their Capacity

The installed capacity of NTPC is 44,598MW (including JVs) through its 17 coal based
(22,895 MW), 7 gas based (3,955 MW) and 8 renewable energy projects. NTPC acquired
50% equity of the SAIL Power Supply Corporation Ltd. (SPSCL). NTPC has set new
benchmarks for the power industry both in the area of power plant construction and
operations. It provides power at the cheapest average tariff in the country.
The company is engaged in the business of generation and sale of bulk power. The company
has two segments: Generation and other business. Its subsidiaries are NTPC Electric
Supply Company Ltd, NTPC Hydro Ltd, NTPC Vidyut Vyapar Nigam Ltd, Pipavav
Power Development Company Ltd, Kanti Bijlee Utpadan Nigam Ltd and Bhartiya Rail
Bijlee Company Ltd.

Growth of NTPC installed capacity and generation

Growth in Installed Capacity: NTPC,NTPC Group & All India

300000
250000
200000
150000
100000
50000
0

28902
2009-10
37193
159398 30892
2010-11
34283
173626 32712
2011-12
37103
199877 35882
2012-13
41273
223344 37107
2013-14
43108
243029
Installed Capacity - NTPC

Installed Capacity - NTPC group

All India Capacity

Fig 2.0

Growth in generation NTPC, NTPC Group and All India

1200

1000
877
811

772

800

967

912

600

400
219 230

222 240

221 237

232 250

233 251

200

2009-10

2010-11

Generation- NTPC

Fig 2.1

2011-12

Generation-(NTPC Group)

2012-13

2013-14

All India Generation

The total installed capacity of the company (as seen in fig 2.0) is 44,598 MW (including JVs)
with 17 coal based and 7 gas based stations. 7 Joint Venture stations are coal based and 8
renewable energy projects. The company has set a target to have an installed power
generating capacity of 1, 28,000 MW by the year 2032. The capacity will have a
diversified fuel mix comprising 56% coal, 16% Gas, 11% Nuclear and 17% Renewable
Energy Sources including hydro. By 2032, non-fossil fuel based generation capacity shall
make up nearly 28% of NTPCs portfolio.
NTPC has been operating its plants at high efficiency levels. Although the company has
17.73% of the total national capacity, it contributes 25.91% of total power generation (fig 2.1)
due to its focus on high efficiency (comparing contributions as per Fig 2.0 and fig 2.1).

VISION
"A world class integrated power major, powering Indias 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 eco-friendly technologies and
contribute to society.

FIG2.2 ORGANISATIONAL CHART NTPC

Fig 2.2 shows the organizational chart of NTPC. Organizational structure includes
three levels of management, that is, corporate level (top management), regional level
and planning level.

GROWTH OVER YEARS:

Power or electricity is critical infrastructural component for multidimensional growth and
basic human need. Reliability and quality power at competitive rates to Indian industry is
important for global competition.

CURRENT SCENARIO

Capacity addition -Targets and Achievements

11th(2007-12); 78000

Target (MW)
11th(2007-12); 54964
Achievement(MW)
9th(1997-02); 40245 10th(2002-07); 41110
8th(1992-97); 30533
8th(1992-97); 16423

9th(1997-02); 19015 10th(2002-07); 21130

FUTURE SCENARIO
CRISIL Research expects demand for power to grow at a healthy 7% in the Eleventh Plan
and be at around 8 per cent in the Twelfth Plan (2013-2017). Capacity addition is likely to
be 50 GW and 69 GW, as against the government targets of 78 GW and 82 GW, in the
Eleventh and Twelfth Plan, respectively. Concomitant additions are expected in the
transmission and distribution segments, in line with the generation capacities. In the Eleventh
Plan (2008-2012), CRISIL Research expects investments worth Rs. 3.5 trillion, of which 43
per cent would be contributed by states. However, a trend reversal is likely in the Twelfth
Plan, as private capacity addition would exceed that of the center and state put together.

Review of Literature
This Project basically focuses on the Topic Procurement, Works Policy and Award of
Contract at NTPC LIMITED. Procurement refers to acquisition of equipment,

materials and services for the organization. It is favorable that goods, services and
works are procured at the best possible cost to meet the needs of the acquirer in
terms of quality, quantity, time and location.
As discussed before, NTPC has a Procurement and Works Policy for the same.
The policy has been formulated to permit centralized policy making and
decentralized execution and administration with the view to achieving the
organizational goals in the most efficient and effective manner.
The objective of this policy as part of the Materials and Works Management
functions in the organization is to make available the needed equipment,
material, works and services in the right quality and quantity, at the right
time and at the right price after giving fair and equal chance to tenderers,
subject to the policy guidelines laid, so as to obtain optimum value for each
unit of expenditure.

RESEARCH METHODOLOGY
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 given objectives I have done Descriptive Research Design. Because the
subject of the project provides an insight into the procurement procedures followed at the
NTPC. Thus, it is a fact-finding investigation about the procedures, practices and guidelines,
which are adhered to respectively along with the adequate interpretation about the pitfalls in
the procedures. Thus, the appropriate variables have been identified as per the requirements
of the chosen research design.
The duration of completing the study was 6 weeks.
UNIVERSE OF STUDY
The universe are the employees who are working in all the branches of NTPC at various parts
of the India, who are associated and responsible for carrying out the procurement function at

their respective branches along with the employees of all the departments which supplement
the procurement process at the given branch of NTPC.
SAMPLE SIZE
The sample size for the given topic are all the employees of NTPC NOIDA who have been
delegated authority to undertake the procurement activities including the associated
departments like Cost Engineering department who assist the procurement process by
providing the cost estimates.

COLLECTION OF DATA
The data and information for the project is collected by studying various handbooks, assistbooks, bidding documents and internal circulars. The evaluation criteria and steps are based
on the study of the Bid Evaluation Reports of various projects.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

Outline of the work:

The work primarily aimed at understanding the working of the division and then finding any
alterations or suggestions (if any) to improve the current procedures. The study aimed at
finding ways to reduce huge paperwork and remove the unnecessary steps in tender awarding
procedure. Steps were taken to identify similarities in documentation of various kinds of
packages and clubbing of documents together. Feasibility study is being carried out, in

consultation with the company employees associated in the paperwork, to get better
understanding and arrive on proper solution.

Performance Highlights of NTPC during fiscal year 2014-15

Particulars
Net sales
Gross revenue
PAT

2014-2015
72,018.93cr
74,707.82cr
10,974.74cr

2013-2014
65,673.93cr
70,459.62cr
12,619.39cr

RES (renewable energy source)* 11.8 12%

Nuclear 2.6 3%
Hydro (Renewable) 15.5 16%

Coal 61.5 62%

Gas 8.6 9%

CORPORATE OBJECTIVES
To realise the vision and mission, eight key objectives have been identified by the company.
Business Portfolio Growth
To consolidate NTPCs position as the leading thermal power generation company and
establish a presence in hydro power segment.
Customer Focus

To expand the relationship with existing customers by offering a bouquet of services in

addition to supply of power.

Agile Corporation
To ensure effectiveness in business decisions and responsiveness to change in the business
environment.

Performance Leadership
To run and maintain NTPC station at par with the best-run utilities in the world.
Human Resource Development
To enhance organizational performance by institutionalizing an objective and open
performance management system.
Financial Soundness
To continuously strive to reduce the cost of capital through prudent management of deployed
funds.

Sustainable Power Development

To lead the sector in the areas of resettlement and rehabilitation and environment protection
including effective ash-utilization, peripheral development and energy conservation practice.

Research and Development

To pioneer the adoption of reliable, efficient and cost-effective technologies by carrying out
fundamental and applied research in alternate fuels and technologies.

PROCUREMENT AND WORKS POLICY

INTRODUCTION
This policy lays down broad guidelines to be followed in the acquisition of equipment,
materials and services for the organization. The policy has been formulated to permit
centralized policy making and decentralized execution and administration with a view to
achieving organizational goals efficiently and effectively.

MEANING OF PROCUREMENT
Procurement is the acquisition of goods and services for the direct benefit or use of the
governments, corporations or individuals. A key question in procurement is what to buy,
given a limited budget. Procurement involves a bidding process to purchase a given product
or service. The contract services/materials management services receive the requisition/indent
for procurement of materials/equipment/services duly approved by the competent authority
and then plan and organize the procurement action.

WORKS POLICY
Works such as acquisition of land/buildings, construction of buildings, their maintenance
& repairs, development of land, structural and mechanical, fabrication, electrical
installation, plant and equipment completely installed (composite contracts) and all such
works which are other than supply contracts may be regarded as works contracts.
KEY PRINCIPLES

The resources utilized are usually funded by donors

The transparency contributes to the establishment of sound and reliable business

relations with suppliers. And,

Efficiency and cost effectiveness has a direct impact on operations and ultimately on
beneficiaries.

The Procurement function must guard and mitigate against risk, understand the market, build
relationships with suppliers, meet needs in a timely manner and constantly monitor
performance to improve service provision. Hence the need for an organization to have clearly
defined policies that are well understood.
OBJECTIVE:
The aim and objective of procurement is to carry out activities related to procurement in such
a way that the goods and services so procured are of the right quality, from the right source,
are at the right cost and can be delivered in the right quantities, to the right place, at the right
time.

IMPORTANCE OF THE PROCUREMENT

1

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 any 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
Interest charges
Higher godown charges
Deterioration in quality

 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 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.

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.

Other importance : To stoppage the wastage of materials.

To maintain the flow of production.
To stoppage the theft of material.

 To reduce the cost of storage.

Wastage during the process of manufacture should be the minimum
possible.

PROCUREMENT STEPS:
Purchasing at NTPC is not a very simple process. The purchasing process is not same for all
kind of materials and equipments.
Tendering procedure can be divided on various basis i.e. on the basis Parties or on the
basis of mode of tendering.
On the Basis of Parties
1 Single Tender
2 Limited Tender
3 Open Tender
On the basis of mode of tendering
1 Single Stage Single Envelope
2 Single Stage Two Envelope
3 Two Stage Bidding
4 Purchase Committee
The above mentioned Points are explained belowSingle Tender
Where procurement is made by contacting only single source on grounds that item to be
procured is of proprietary nature or on account of standardization or on grounds of urgency of
requirement it will be treated as a single tender.
Limited Tender
In Limited Tenders, only pre-qualified or known bidders are allowed to participate. Limited Tenders are not
advertised in newspapers, as a result other bidder generally do not come to know that such tender is floated. The
Lowest Bidder or L1 generally wins the contract

OPEN TENDER
Open tender is an arrangement where an advertisement in local newspapers or trade journals invites contractors
to apply for tender documents. Open Tender is a transparent process which ensures that only the contractor with
the best price and meeting all the technical requirements will win the tender

On the basis of tendering

SINGLE STAGE SINGLE ENVELOPE

Under Single Envelope bidding both the Price Proposal and the Technical Proposal are
Submitted in a same Envelope. The Contract is awarded to the Bidder whos Bid has been determined to
be the lowest evaluated substantially responsive Bid.

SINGLE STAGE TWO ENVELOPES

Bidders submit two sealed envelopes simultaneously, one containing the Technical Proposal
and the other the Price Proposal, enclosed together in an outer single envelope. Both
Envelopes are then put in a Big Envelope, is sealed & submitted. First Technical bid is
opened & price bid of only those bidder who are found technically qualified are opened
subsequently at a later date.

TWO STAGE BIDDING

In such Tender, EMD is submitted in 1st Envelope, Technical Bid is submitted in 2nd
Envelope & Price Bid is submitted in 3rd envelope. On the basis of requirement bid can be
submitted in separate envelope. First EMD envelope & pre-Qualification envelope is opened.
Technical envelope of only those bidders who pre-qualify is opened and at last those who are
found technically qualified, their price bid is opened.

PROCEDURE OF PROCUREMENT AT NTPC

Feasibility
Report
Preparation

Contract
Packaging

Cost Estimate
Preparation

Bid Opening

Notice
Inviting
Tender

Bid
Documents
Preparation

Bid
Evaluation

Award of
Contract

Flow Chart: The task of Contract management comprises of various stages

FEASIBILITY REPORT PREPARATION: The responsibility of preparing Feasibility

Report rests with the Engineering Services. Project Engineering builds up a data bank of
various specification and BOQs on the basis of feedback received from Sites, Engineering
Services division and Cost Engineering Group to ensure realistic provisions while preparing
FR. It is contemplated that FR cost estimate shall be the basis for cost control.

CONTRACT PACKAGING
Contract packaging
In Contract packaging the total project work is broken into smaller well-defined packages.
This is done with the view to optimize the number of contracts to be handled for the better
planning, co-ordination and implementation of the whole project and at the same time to
execute the project at an optimum cost to the owner.
Development of packages

First of all feasibility report for any project is prepared which contains the details of the
various

equipment systems and services required for a particular project.

Subsequently, as the conceptual design progresses, a detailed project description emerges as

design intent memorandum (DIM) incorporating station schematics like thermal schematics,
electrical signal line diagrams, and station water flow systems, coal and ash handling systems
etc. these schematics provide the inter linkage between the various equipments and services.
The engineering function is responsible for development of such schematics. Taking into
consideration the requirement of the project master network (PMNW) schedule, grouping of
equipment and services is done to arrive at contract packages. Each package as developed
above normally forms an independent contract.
The development of contract package list for a project is done jointly by engineering,
contracts, and corporate planning and finance functions. The contract package being
extremely vital to a successful project implementation is approved for implementation by the
highest corporate level authority.

2COST ESTIMATION
Preparation of Bills of Quantity (BOQ)
Depending on the scope of work required for a package, a BOQ is prepared by the Contracts
dept. A BOQ is a statement giving the list of all the items/materials required for the project
with the quantities of each item against it. The quantities of different categories of items are
given by respective depts. For example, electrical dept. will give quantities of electrical items
and civil dept. will give quantities of civil items. A BOQ is necessary for the preparation of
cost estimate.

Cost estimation:
Cost estimation process is the most important financial activity in the process of budgeting
and procurement. Whenever NTPC procures some material, it is either financed from the
budget allocated to the particular department requesting for the material or it will be financed
from the central fund. The procurement of the second kind requires financial clearance from
the finance concurrence department. For the purpose, cost estimation is done before
forwarding the indent document to the finance department. There are various methods of cost

estimation, which are used at NTPC. Some of the methods use very technical details and
procedures whereas some are simple to implement and uses market rate to prepare a cost
estimate.
a

Historical cost method: In this method of cost estimation. The cost engineering
department at NTPC uses the latest cost incurred for similar kind of project. For
example, if the cost estimate has to be prepared for a new thermal power plant, the
latest executed thermal power plant rates will be used not any other. Hence the rates
thus obtained are very near to the actual rates that might be prevalent in the market at
that point of time. But to smoothen the effect of inflation and various other financial
components in the prices at the time of the execution of that project, an escalation
factor is used. All the prices of the previous projects are multiplied by this factor and a
very close estimation of market rare is thus obtained. This escalation factor calculation
is discussed separately in the report.

Market rate method: market rate method is used for the procurement that are not in
very large numbers and value. In this method once an indent is prepared, some of the
vendors registered at NTPC or listed in trade journals are sent a request for quoting the
prices of a particular good. This enquiry is not tender and the rates provided by the
vendors are not part of the bid. After the information is received, the rates quoted by
various vendors are compared and the lowest quoted price is taken as base rate for
calculations. However if the difference in the price quoted by two vendors are
reasonably high an average of the two may be taken as the base. However for civil
works component of the contract, the wages rates are taken from the government
gazettes and similarly for some homogenous products like cement, steel etc. a standard
market prevailing rate is used.

Bidding Documents
Every time when an open tender is invited, the bidders are provided with a set of
documents, which provides various required information and terms and condition of
the contract The documents also contains the various contract forms which the bidder is
expected to sign and return to NTPC to acknowledge the acceptance of the terms and

condition of the contract. The document also contains the guidelines for bidders for
d

bank guarantee.
Earnest money document is issued for a cost that is decided on the basis of the total
estimated value of the indent the costs of the documents are as follows:

1.
2.
3.
4.
5.
6.

ESTIMATED VALUE OF
INDENT
Up to Rs. 10 lakhs

COST OF TENDER
DOCUMENT
200

Above Rs 10 lakhs and up to

25 lakhs
Above Rs 25 lakhs and up to
Rs 50 lakhs
Above Rs 50 lakhs and up to
Rs 100 lakhs
Above Rs 100 lakhs and up
to Rs 500 lakhs
Above Rs 500 lakhs

300
500
750
1500
3000

NOTICE INVITING TENDER

The next step is to invite various bidders to bid for the required package. The Notice inviting
tender (NIT) is published in various leading national newspapers as per guidelines and
procedures. In case of procurements funded by external funding agencies following
international competitive bidding procedures, the NIT is also published in the Indian trade
journal and a copy of NIT is sent to each of the embassies/ high commissions of members
countries of the funding agency.
In the NIT, time, date and venue of bid opening, amount of bid security etc. is mentioned and
only a specific part of Qualifying Requirements (QR*) is published (QR will be discussed in
detailed later). NIT also involves scope of work, benefits and exemptions related to the
project, qualifying requirements, and the financial criteria to be fulfilled by the bidders. In the
financial criteria the average turnover of the fast 5 years is checked to verify the stated level
of net worth and paid up share capital, for this audited financial statements are required.
In the case of bidders which are subsidiary of another company, If the bidder does not satisfy
the financial criteria, then the holding company should meet the qualifying requirement and

the bidder would be required to furnish along with its bid, a letter of undertaking from the
holding company supported by board resolution, as per the format enclosed in the bid
document.
NTPC invites sealed bids in two stages:
Stage- I: Techno Commercial Bid and
Stage- II: Price Bid or both simultaneously.
a.) Technical portion of bidding documents is prepared by Eng. Department .It comprises of
Technical Specifications, Drawings, and 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.

Invitation of bids is based on the various packages. In most of the cases bids are invited
simultaneously. And in some cases, bids are invited in separate stages. All bids must be
accompanied by Bid Security (EMD) of a particular amount in a separate sealed envelope.
Any bid not accompanied by an acceptable bid security in a separate sealed envelope, it shall
be rejected by NTPC as being non-responsive and returned to the bidders without being
opened.

4BID OPENING
BID OPENING STATEMENT (CONFIDENTIAL)
Package Name

: HT Power cables
NABINAGAR, STAGE-I (3X660 MW)

Spec No.
BOD

: CS: 4610-131-2-PRA
: 22.07.2008

Estimated Cost

: Rs.205.91 ml excluding taxes

Rs.214.83 ml inclusive of taxes
: ECB/Own resources

Mode of Financing
Mode of Tendering
Bid response
TC Member

: ICB
: 2/7
: 1. Sh Ashok Kumar SM (CS)
2. Sh N K Thukral DGM (Fin)
3. Sh S Chakraborty DGM (PE-Mech)

Member Present

: 1. Sh. Ashok Kumar SM (CS)

: 2. Sh. Y R Dhingra (Fin)
: 3. Sh. Navneet Kumar DCDE (CE)

The following are price quoted by parties:

SI.NO.

Name of Party

Quoted Price
Inclusive of taxes

Quoted Price after

Discount in INR

Discount offered

ABC

INR 284,702,276

240,288,720.94

15.6%

XYZ

INR 319,000,000

283,910,000.00

11%

For Information to Senior Office

1

QUALIFYING REQUIREMENTS & ITS ANALYSIS

The Qualifying Requirements are the pre requisites which all the bidders must satisfy in order
to successfully bid for the contract. I, with my fellow trainee was assigned mainly this task
of scrutinizing the Qualifying Requirements and checking them with the documents
submitted by the bidders in support of their claims. QR is basically of two types namely
Technical QR and Financial QR.
Technical Criteria:
The bidder should have manufactured & supplied at least two numbers(one each at two
different installations) of 16 MVA, 11KV or higher rating oil filled transformers which
should have been in successful operation for a period of at least two (2) years prior to the
date of Techno-Commercial bid opening.
Bidder should have his own facilities for conducting all routine and type tests as per IS:
2026 (except short circuit test).
16 MVA, 11KV or higher rated oil filled transformer manufactured by bidder should have
been successfully short circuit tested.
The Technical QR basically deals with the checking of the prior experience of the bidder
in the same field, verifying the previous work done and checking the acknowledgement
for the same through the completion certificates.

Financial Criteria modified as on 19th may 2015

Average Annual Turnover requirement be reduced from 150% to 100% of the Annualized
estimate for ash dye Package for Kudgi STPP-I(3*800 MW) as a test case and reverse
auction shall be adopted for the same on trial basis.

 Outcome of the trial be reported to the Committee on management Controls in its next
meeting to enable the Committee to decide upon the Average Annual Turnover
requirement for future civil Packages.
Where Joint Ventures/Consortiums are allowed to bid, all the Partners of the joint
Venture/Consortium shall be collectively required to meet the turnover criteria.
For tenders where work schedule is less than 12 months, the Average annual turnover
requirement shall be specified as an amount equivalent to Cost estimate for that work
Net worth requirement to be specified as not being less than 100% of the bidders paid up
share Capital as on the last day of the Preceding Financial year.
However individually, their net worth should not be less than 75% of their respective paid
share Capitals. For Consortium/Joint venture members in combined manner should not be
less than 100% of their paid up share capitals.In cases where audited results for the last
financial year as on the date of Techno commercial bidopening are not available, the financial
results certified by a particing Chartered Accountant shall be Considered acceptable.
In case bidder is not able to subit the Certificate from practicing C.A. certifying its financial
Paameters , the audited results of three consecutive Financial years preceding the last
financial years shall be considered for evaluating the Financial Parameters.
The requirement of unutilized line of Credit shall be deleted from the Financial QR.
For Solar Projects, the average annual turnover requirement in Financial QR for higher block
sizes (of 50 MW and above) shall be kept as equivalent to 100% of Cost Estimate of one
Power block of 50MW size solar Power Plant.

Notes:
a) Net Worth means the sum total of the paid up share capital and free reserves. Free
reserves means all reserves credited out of the profits and share premium account but do not

include reserves credited out of the re-valuation of assets, write back of depreciation
provisions and amalgamation.
b) Other income shall not be considered for arriving at annual turnover.
c) For unutilized BG limits, Cash Credit Limits and Turnover indicated in foreign currency,
the exchange rate as on 7 days prior to the date of Bid opening shall be used.
In the notice for Inviting tenders/ invitation for bids only the specific part of 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 QRs 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 (technical). Such qualification criteria inter-alia includes the status of a bidder i.e.
manufacturer or project executing agency, financial status, technical requirements to be
fulfilled etc. in case of post qualification procedure the analyses of bidder qualification data is
carried out during the bid evaluation process. Conformity by the lowest evaluated bidder
to be 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 newspapers.

Once we are satisfied with the bidder meeting the Qualifying Requirements then we have to
prepare a comprehensive summary of all the participating bidders wherein we used to specify
that a bidder is qualified in all aspects and then the next step was to open the price bids of
those successfully qualified bidders.
In case where the financial statements of the bidder were not in the departments archived
files then we had to prepare a standalone financial Statement using the Balance Sheets,
Income Statement and schedules to these financial statements.
Following is the Financial Criteria which is used as a Parameter to evaluate the Bidding
Companys Financial Performance and all the necessary details needed in this regard which
can lead to Correct and accurate judging of respective ratios-

Financial Analysis of Knowledge Infrastructure Systems Pvt. Ltd

Below attached is the link of the format of Financial Analysis of the bidder Knowledge Infrastructure Systems Pvt Ltd.xls
Financial Analysis of Knowledge Infrastructure Systems Pvt Ltd.

S.No.
1
2
3
4
5
6
7
8
9
10
S.No.

Particulars
Turnover
Profit After Tax
EBIT
Share Capital
Reserves & Surplus
Net Worth
Capital Employed
Net Profit Ratio (%)
RONW (%) (PAT / NW)
ROCE (%) (EBIT / CE)

Fig. in Crores (INR).

2012-13
2013-14
1160.77
1475.13
2.50
14.22
11.91
25.15
19.25
19.25
223.53
233.87
242.78
253.12
242.78
253.11
0.22
0.96
1.03
5.62
4.91
9.94

Particulars

Actual

Average Annual Turnover for financial years

2011-12 2013-14 & 2014-15 (Rs. in Crores)

Net worth as % of share capital as on

31.03.2015

2014-15
2579.08
6.67
13.06
19.25
240.54
259.79
259.79
0.26
2.57
5.03
QR

1738.33
1349.56%

100.00%

TURNOVER
S.No.
Particulars
1 Sales & Services
2 Total Turnover

2012-13
1160.77
1160.77

2013-14
1475.13
1475.13

2014-15
2579.08
2579.08

SHARE CAPITAL
S.No.
Particulars
1 Share Capital

2012-13
19.25

2013-14
19.25

2014-15
19.25

2012-13
38.95
0.00
184.58

2013-14
38.95
0.00
194.92

2014-15
38.95
0.00
201.59

223.53

233.87

240.54

RESERVES & SURPLUS

S.No.
Particulars
1 General Reserve
2 Share Premium
3 Surplus
4 Less Misc. Exp.
5 Total Reserves & Surplus

CAPITAL EMPLOYED
S.No.
Particulars
1 Net Worth
2 LT Borrowing & O LT liab.
3 Total Capital Employed

2012-13
242.78
0.00
242.78

2013-14
253.11
0.00
253.11

2014-15
259.79
0.00
259.79

PAT & EBIT

S.No.
1
2
3
4

2012-13
2.50
9.25
0.16
11.91

2013-14
14.22
7.33
3.60
25.15

2014-15
6.67
3.61
2.78
13.06

Particulars
PAT (Adj for Exceptional item)
Provision for Taxation
Interest (net )
EBIT

ANALYSIS OF THE BIDDER

First Net worth should be at least 100% of Share Capital which is specifying the
criteria.
As we can see that Turnover is increasing in spite of that ROCE is decreasing the
reason may be Company is not able to utilize its assets efficiently.
As Companys Average Annual Turnover requirement should be 100% of the
Annualized estimate which is true according to the above Analysis.
Net worth requirement to be specified as not being less than 100% of the bidders paid
up share Capital as on the last day of the Preceding Financial year.
Unutilized line of Credit is not given Primary Consideration.
Because of decreasing Profit and Net profit PAT and EBIT is decreasing.
Financial Analysis is done by taking in to Consideration the some important formulas used in
the excel sheet are: (All Figures in Rs. crores)
1
2
3
4
5
6
7
8

Average Turnover for the last 3 financial years

(Sum of the turnovers of the last 3 years)/3
Net Worth as a % of share capital
(Net Worth/Share Capital) X 100
Net Worth
Share Capital+ Free Reserves and Surplus
Total Capital Employed
Net Worth + Long Term Borrowings
EBIT
Profit After Tax + Provision For Taxation + Interest
Net Profit Ratio
(Profit After Tax/Turnover) x 100 {Rounded Off to the nearest 2 decimal places}
Return on Net worth (%)
(Profit After Tax/ Net Worth) x 100 {Rounded Off to the nearest 2 decimal places}
Return on Capital Employed
(EBIT/ Capital Employed) x 100 {Rounded Off to the nearest 2 decimal places}
In case of foreign currency, we use an exchange rate of 7 days prior to the technocommercial bid opening date and convert the amounts given into Rs. Crores. Through

this, we check the two out of three important and basic financial qualifying requirements
of a bidder.
The 3rd important qualifying requirement is the unutilized line of credit letter from
bidders bank which shows the credit worthiness of the bidder and assures the capability
of the bidder to accomplish such capital-intense projects.

Some examples of bidders whose financials I prepared are :

Knowledge Infrastructure Systems Private Limited.
Wipro enterprises Limited.
Driplex Private Limited

EVALUATION OF BIDS
After the Financial criteria the bids received and opened are evaluated by the Tender
Committee. The process of evaluation of bids begins with an examination of the bids in order
to determine:
1

Acceptance of all Qualifying Requirements.

Acceptability of bid security furnished by the bidder.

Completeness of bid and correctness of signature.

Computation of arithmetical errors in the bid price schedules.

Stated or unstated deviations from the bidding conditions, which might reflect on the
substantial responsiveness of the bid and justify its rejection.

Arithmetical Error
The arithmetical error, if any will be rectified on the following basis:
If there is a 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 accordingly. 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 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. In case of procurement under international competitive bidding
procedures, the bid price is converted into a single currency i.e. in the Indian National Rupees
(INR). If the bidder wishes to pay a combination of amounts in different currencies, it may
quote its price accordingly, but use not more than three foreign currencies. The foreign
currencies in which the bid prices are quoted should be converted into INR by applying SBI
bill selling rate on bid opening date.
The bid evaluation procedure consists of the following steps:
Unit price

quantity

total price

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
1

Bid price as per scope

Taxes and duties

Domestic, Price or other preferences

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 deviations

Declared Deviation
The declared deviations are analyzed and suitable cost compensation is done for the purpose
of evaluation.
Undeclared Deviation
Usually certain undeclared deviations, exceptions, variations are observed elsewhere in the
bid with respect to bidding documents, which are discussed in the evaluation report.
No cost compensations are considered for these deviations, in line with the provision of the
bidding document. These undeclared deviations are discussed and suitably resolved with the
party considered successful in the evaluation, without any cost implication to NTPC.
Short Listing
The bidders are short listed on the basis of preliminary evaluation. Based on the preliminary
evaluated price, the bidders who quote L-1 and L-2 prices after preliminary evaluation are
taken up for detailed evaluation.
Detailed Technical Evaluation
A detailed technical evaluation is prepared by Engineering. 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.

The Evaluation Report also contains the analysis of Qualification 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
+
Differential Price Preference

Once the lowest evaluated bidder is selected as above the next step is to determine
whether the qualification requirement as stipulated in bidding documents are met and
whether the bidder in question is capable to successfully execute the contract.
An affirmative determination of the above is pre-requisite for award of contract to the bidder.
In case the lowest evaluated bidder does not meet the above requirement, the similar
determination is done for the next lowest bidder. If the bidder also fails, the process is
continued, until the lowest evaluated and qualified bidder is chosen.

POST AWARD ACTIVITIES

Vendor Evaluation:

Once a vendor has supplied some material to NTPC, the vendor is registered with the NTPC
and it is given a performance rating which may be used in future to award of contracts in
case of limited tender and single tender.
This rating system is not very complex but some Procedure is used-.
The rating System for 1 to 5 are used which is based on specific Parameters which will
tell us that after we have awarded the Contract to the Contractor than whats the
different Parameters of his Work done based on the ratings described belowParameter

Measure

Weightage

A) Quality Performance

Rejection

Ratio of contractual delivery

B) Delivery Performance
1.Time schedule delivery

to actual in a week.
2. Quantity schedule delivery

Deviation in qty.

C) commercial and contractual

Pre-post award performance

Performance
Calculation of vendor ratings will be done as follows:

a) Quality performance =

Rejected Quantity
* Weightage
1Supplied Quantity

b) 1. Time Schedule =

Contract delivery in week

1-

* Weightage
Actual delivery in week

QTY received (acceptable)

2. Quantity Schedule = 1-

* Weightage

QTY. ordered

Parameter

Min % Score
70%

Quality

Delivery

50%

Commercial Contractual Terms

50%

Post award follow up is performed to Ensure timely deliveries of all equipments and supplies to site
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 Eng. 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.
Eng. 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.

Contractors Progress Reporting System

The contractor is required to submit monthly contract progress reports covering all the
aspects of contracts such as Eng. Manufacturing and placement of order for sub
delivery items. The reporting is done at the activity level as discussed and agreed during preaward 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
Eng., Contracts, project site and CMG. The Eng., 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)

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 authority.

FINDINGS OF THE STUDY

Arithmetical errors are usually noticed as the bidders have to submit the bid without
getting adequate time for proper verification of the data submitted by them. To
resolve the errors there should be clear guidelines

There are various taxes and duties whose cost impact is to be considered so that the
bidders are properly compared

The concept of declared deviation in separate annexure helps quick resolution of the
deviations taken otherwise stray mentions of some points at some portion of the bid
may be taken as disputes

In a competitive bidding the lowest price is the consideration for the award of the
work. But if a very low price is given by an unqualified bidder, it is worthless as he
cannot execute the work. For a finance executive the following financial QR are
essential:

Average annual turnover gives the idea whether the bidder will be able to complete
the work within the work schedule

Analysis of financial strength through ratios gives idea about the present ability of the
bidder to perform.

Bid currencies should be as per the bidding documents else there shall be problem
during the execution of the contract.

The bid should be signed by the person having the power of attorney or else the
bidders may like to back out indicating no commitment from the management.

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.

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, sometime the credentials of bidders are more than 7 year
old. The status of bidder might have changed by this time. Hence the status of recent
year (last 3 years) is suggested to be considered for checking their credentials.

LEARNINGS FROM SIP

The SIP was a very fruitful learning process. I learnt the following while studying the system
in NTPC:
I learned about the functioning of the Finance Concurrence Department of the countrys
largest power generating company NTPC Ltd. I got to experience firsthand how a company
and a department in particular function. I went through some of the very important process

of the company like bid opening and bid evaluation. I also learned the importance of the
financial analysis and why a company does this tedious task.
Initially I learnt about the tendering process, by going through all the documents and
NTPCs guidelines, over the course of training I gradually learnt the intricacies involved
in the evaluation of bids submitted for award of contract.
Being a fresher, without any prior experience of working in a company, I learnt the basic
know-how of corporate culture firsthand on a practical basis during my summer
internship tenure.
I was able to maximize my potential by working on all the projects that were assigned to
me.
In spite of the tremendous competitive scenario which is prevalent, I worked as a team
throughout my Internship tenure and it greatly improved my team-working skills.
Apart from the financial aspects, I also learnt about the importance of other important
aspects by interacting with the contracts and materials department.
The practical exposure I got was immense and by attending various bid-openings, bid
conferences, I realized how every crucial detail matters and how work is accomplished
efficiently.
I prepared financials for the bidders for the year 2014-15 which will be used by NTPCs
finance and contracts department throughout the year.
Overall, it was a great exposure working with one of the biggest Maharatna PSU
NTPC Limited. It made my practical learnings innumerable.

CONCLUSION
Purchase management activities at NTPC are one of the most vital activities undertaken by
the Rs.18000 Cr power giant of India. The process followed by NTPC is very objective in
nature and employs a very short term relationship with its supplier. The system 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. NTPC being
a public sector company, to be free from nepotism and favouritism has adopted a system
where transparency and automation is at its utmost level. Transparency was achieved by a

multi member team and sealed tenders where no one knows in advance the quotation
offered by a particular bidder.
Together they constitute a very reliable and corruption free system. At times it seems that the
system is capable of saving lots of money of NTPC but in most of the cases the cost of
maintaining the system itself combined with the poor responsiveness amounts to a lower
level of efficiency. In todays world of cutthroat competition only those firm are going to
survive who are committed to efficiency, as it were their core competency. Cost must be
reduced by means of optimum utilisation of resources and channelled into more profitable
segments. It is an established fact that on operational level NTPC is one of the worlds most
efficiently run organisation.
Benefits can not be evaluated in isolation as there are certain features very unique to the
kind of domain NTPC is into. As we have discussed earlier that most of the item except coal
and gas have a very infrequent and unpredictable demand. This means that NTPC can not
anticipate its demand in advance and hence going into a long term supply contract is very
difficult. For some procurement which actually constitutes more than 70% of non fuel
procurement, the items are manufactured to order. In these cases even the manufacturer is
not sure of the future price and availability of the equipment and hence going into a longterm contract based on current prices may do more harm than benefits. Another factor which
must be understood is that there are very few companies which are into manufacturing of the
kind of equipments or material required by NTPC. And since the fixed capital employed by
these firms are huge, many a times they offer huge discounts just to acquire a particular
order so that they can fulfil some of their targets. NTPC has witnessed one such offer in past
where a substantial discount was offered by a vendor on the condition that the contract
should be awarded to him in a specific time period mentioned by the manufacturer. These
benefits could not have been availed by NTPC had it been in a long-term relationship with a
particular manufacturer.

The overlooked aspects of equity and transparency in processing of a tender are also
the important aspects and should not be overlooked at the sake of technical suitability
and commercial viability.

While preparing the estimates enough care should be taken to ensure that quantities of
items are neither on the higher side nor on the lower side. This will help in checking the
quantity deviation, erratic rates, legal disputes and other difficulties.

Enough care should be taken while preparing the bid documents. It must be ensured
that technical specifications do not contradict the items in the Bill of Quantity (BOQ) to
avoid confusions, delays, favors etc. during the execution apart from the long drawn
legal disputes, arbitrations.

The QR should be clearly mentioned and should not be made unnecessarily stringent
suiting a particular agency. To avoid complications, the QR should be prepared by a
committee comprising a member each from the Indenting, Finance and Contracts
Department.

While issuing the Tender documents against the open tender advertisement the
credential of the bidders, in original, should be checked invariably in respect to the QR.
A photocopy of the credentials should be kept for record purposes.

OVER ALL EXPREIENCE

During my training period of Six weeks, I closely monitored the functioning and various role
of the finance department during my summer. I was allotted to the

Finance Concurrence Department. By the look of it, it seemed

great but it also brought with it a fair share of challenges and
expectations.

My work was aimed at understanding the working of the Finance division and then finding
any alterations or suggestions (if any) to improve the current procedures. The study aimed at
finding ways to reduce huge paperwork and remove the unnecessary steps in tender awarding

procedure. Steps were taken to identify similarities in documentation of various kinds of

packages and clubbing of documents together.
One phrase will hold reverence for me throughout my life is to do things differently. I
literally spent hours at work just thinking of different ways and means in which I could
increase the scope of my project.

KEY LEARNINGS
I learned about the functioning of the Finance Concurrence Department of the
countrys largest power generating company NTPC Ltd. I got to experience firsthand
how a company and a department in particular function. I went through some of the
very important process of the company like bid opening and bid evaluation. I also
learned the importance of the financial analysis and why a company does this
tedious task.
I got exposure to what is a tender. How it is prepared. The various rules and
regulations of the company as well as the legal obligations the Company as well as
the bidder have to oblige. The bid opening process is extremely critical process, as
the contracts can worth upto hundreds of Crores and any mistake, or overlooking of
the rules can land you up in legal trouble. The Company painstakingly does this job
in presence of three different department members and records the happening of the
process. As any bidder can accuse the Company for any foul play thus, all rules and
regulations are made to follow very strictly.
Bid evaluation is another very important task of the department. I learned how some
little mistakes can cost the contract. The Department has to do arithmetic checks
because bidders sometime do mistakes in calculations. The Company have many

checks and measures in to handle any discrepancy and to avoid any legal problems
later on due to these discrepancies.
Apart from these, while doing my training I got to do lot of financial analysis, which
helped me a lot in preparing this report. I learned what all is to be analyzed, how to
find why a particular ratio is going up or down and most importantly is that good or
bad for the company. I also realized that it is very important the bidder is financially
sound to undertake the contract if given to him, so that the Company does not have
to suffer later on.

BILIOGRAPHY
List of Books Referred
Financial Management by Khan & Jain
Financial analysis techniques by Helfred
Annual Report of NTPC
Delegation of Powers Manual of NTPC
Purchase Management Manual of NTPC
Websites Referred
Official website of company www.ntpc.co.in
www.indiainfoline.com
www.moneycontrol.com
www.powermin.nic.in
www.ntpctender.com
www.ntpctender.com
www.pfc.com
www.teriin.org
www.worldenergy.com
www.ntpceoc.com
ISSUE
MATERIAL

OF

ANNEXURES
ANNEXURE I
(ALLOCATION OF POWER)
The Centre has approved a policy for allocation of electricity from new thermal power
projects being set up by public sector firms such as NTPC Ltd. Under this, the
companies will have to allocate a much higher share of electricity to States where
future plants are located.
The new policy, cleared by the Union Cabinet on Thursday, earmarks 50 per cent of
the electricity generated from these stations to the home State for 10 years starting
April 2012, up from a maximum of just over 30 per cent currently.
The move will come as a big boost to the coal-bearing States of Orissa,
Chhattisgarh, Madhya Pradesh and Jharkhand, where a number of projects are
slated to come up in the near future.
The Government move is in line with NTPC's demand to get higher allocation for
home States, citing it as an incentive to motivate the States to allocate land and
water and secure their cooperation in bagging other statutory clearances.
At present, power is allocated under the Gadgil formula, which offers 10 per cent
power as preferential allocation to home State, and reserves 75 per cent for
constituent States in that region (including the home State) with the balance 15 per
cent remaining unallocated and retained at the Centre's disposal. Under the current
formula, the allocation for the home State can go up to a maximum of 33 per cent.

The new proposal will straightaway impact the allocation of power from 14 NTPC
projects, most of which are in Madhya Pradesh and Orissa. For instance, NTPC's
proposed 3,960-MW Barethi project in the Bundelkhand region of Madhya Pradesh
will be allocating 50 per cent of power from the project to the Home State, with the
remaining power, besides the Centre's unallocated quota, being earmarked for Uttar
Pradesh. Under the Gadgil formula, the share of Madhya Pradesh would not have
been more than a third of the total generated power at the maximum.

ANNEXURE II
GLOSSARY OF TERMS

Contract: Means the agreement entered in to between the purchaser and the
supplier, as recorded in the Contract Form signed by the parties, including all
attachments and appendices thereto and all documents incorporated by the
reference therein.
Contract Price: means the price payable to the supplier under the Contract for the
full and proper performance of its contractual obligations.
Goods: Means all of the equipment, machinery, and/or other materials, which the
supplier is required to supply to the Purchaser under the contract.
Service: Means those services ancillary to the supply of the Goods, such as
transportation and insurance, and any other incidental services such as installation,
commissioning, and provision of technical assistance, training, and other such
obligations of the supplier covered under the contract.
Purchaser: Means the organization purchasing the goods, as names in SCC.
Supplier: Means the individual/firm supplying the Goods/Services under the
contract.

Letter of Award (LOA): Specifying the agreement letter between the Employer and
the successful Bidder.

LIST OF ACRONYMS
ACRONYM
BG

FULL FORM
Bank Guarantee

PSU

Public

Sector

Undertaking
JV

Joint Venture

FI

Financial Institute

FII

Foreign Institutional

Investor
OCB

Overseas

Corporate

Body
RES

Renewable Energy

Source
PPP
Parity

Purchasing Power

GDP

Gross

Domestic

Product
SEB

State Electricity Board

MW

Mega Watt

BU

Billion Units

UMPP

Ultra

Mega

Power

Projects
GW

Giga Watt

kWh

Kilo Watt Hour

MMT

Million Metric Tons

PLF

Plant Load Factor

LTA

Long Term Agreement

GM

General Manager

EMD

Earliest Money Deposit

PO

Pay Order

DD

Demand Draft

FDR

Fixed Deposit Receipt

CPG

Contract Performance

Guarantee
BOQ

Bill of Quantities

FR

Feasibility Report

NIT

Notice Inviting Tender

LTE

Limited Tender

QR

Qualifying

Requirements
FY

Financial Year

ITB

Information to Bidders

BDS
Schedule

Bid Document