King Fahd University of Petroleum and Minerals

College of Environmental Design

Construction Engineering & Management Department

Procurement Process In
Construction Industrial Project

CEM 515

Done by: Abdulkarim Sulais

1
 Outline

1. Definition
2. Objective
3. Procurement process
4. Performance indictor
5. Improvement
6. Benefits
7. Conclusion

2
 Procurement Process

 Definition
It is the process required to supply
equipment , material , service and other
resources needed to carry out a project
that satisfy customer

3
 Industrial Project Cost Distribution

Item Description Weight

1 Engineering 5%

2 Equipment / Material 65%

3 Construction 15%

4 Testing and Commissioning 10%

4
 Objective

1-Setting procurement process required to

supply equipment , materials and other
resources to carry out in constructing
industrial project right the first time and
every time.

2- Monitoring performance indictor to help

manager to prevent and reduce problem that
can affect the procurement process.
5
 Procurement Process :

1. Planning
2. Documentation
3. Product Evaluation
4. Awarded
5. Administration
6. Inspection
7. Delivery

6
 Begin

Planning

Documentation

Product Evaluation

Awarded

Inspection

7 Delivery
 1- Procurement planning

 Input
1. Scope of work
2. Specification and drawings
3. Company resource
4. Signature mandate
5. Product estimated value

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 1- Procurement planning

 Output
1. Product list
2. Product supplier list
3. Type of procurement contract
1. Sole source
2. Single source
3. Competitive bids
4. Estimated product value
5. Approval to proceed with procurement

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 2-Documentation

 Tender documents
 Standardized forms
– Inquiry
– Invitation letter
– Purchase order
– General terms and condition
– Filing system

10
 3-Product Evaluation

1. Price
2. Delivery time
3. Financial capability of supplier
4. Type of product
5. Historical of supplier
6. Supplier approaches
7. Workload existing and anticipated
8. Customer feedback
 Reference
 Approval

11
 4-Contrcat Award

1. Notify successful tender and unsuccessfully

tender of outcome
2. Compile contract documents
3. Formally accepted tender offer

12
 5-Contract Administration

 Monitor supplier progress

 Inspection
 Shipment and delivery
 Payment
 Check compliance with quality

13
 Performance indicators of PP
1. Cycle times
– The different activities within PP
2. Milestone events
– Issuing R.Q - PO
– Approval of drawings
– Inspection
– Customs clearance
– Delivery
3. Management
– Project police
– Project Organization

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 Performance indicators for PP

4. Cost Indicator
– No of days in warehouse
– No of days in customs
– No of days correction / repair
– No of changes to air transportation
– Time from arrival till installation

5. Referential values
– Amount of PO
– No and amount of change orders
– Delivery / invoicing

15
 1- Cause – Effect for long cycle times

16
 Materials Non conformity Report

1. Shortage of materials
2. Out of specification
3. Incomplete delivery
4. Excess of materials
5. Damage and defective

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 Materials Non conformity Report

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 Evaluation of the Procurement Process

– Whether the procurement satisfied the stated

objective
– Whether needs and expectation have be meets
– Whether the procurement process should be
improve
– How external factors such regulation , standard
component have change
– Whether the process improve cost saving

19
 Evaluate of procurement process

 Review of performance indicator

 Review pf non conformity report
 Effect analysis regarding delays
 Costs and time cycles

20
 Evaluation and Improvement (QFD)

21
 Benefits of Procurement process
Quality management

1. Improve company and project reputation name

2. Achieving customer satisfaction and increase
market share
3. Reduce rework and mistake
4. Standardized forms
5. Reduce warranty period
6. Increase profit
7. Lower insurance cost
8. Improve cash follow

22
 Finding and Conclusion

The problem present on procurement are of different types and origins. The
most detected problem :

Planning

– Delay on issuing specification for quotation

– Delay on informing supplier
Supplier

– To many obstacles and clauses delay negotiations

– Poor explanation about items
– Later purchase makes system expensive , air freight
and urgent

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 Finding and Conclusion

1. Delay at delivery
2. Delay on ordering
3. Delay on engineering drawings ( errors)
4. Repair and replacement at job site
5. Poorly planned inspection
6. Lack of information on site about arrival for some supplier
7. Changes to air transportation to make faster delivery

Using PP indicator and periodical report is tools to monitor and

prevent delays

Using IT ( email , scheduling etc ) will help in reducing delay and

closely monitor the product progress for necessary action .

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