34 - Procurement

Abstract

Procurement is the term given to the process of acquiring goods or services. The main functions involved in the procurement process are: procurement strategy; approved tender list; pre-tender survey; bidder selection; request for quotation (RfQ); tender evaluation; purchase order; capital, expediting, monitoring and inspection; shipping and storage; erection and installation; and commissioning and handover. Contracts consist of three main types: lump sum contracts; remeasured contracts; and reimbursable contracts. It is possible to have a sub-contract that is a combination of two or even all three types. Normally a purchaser–contractor requires his goods to be fully insured from the point of manufacture up to the stage when the client has taken over the whole project. In practice, this insurance is affected in a number of stages, which vary with the terms of the main contract between the contractor and his client. During the pre-order discussions with the prospective supplier, the buyer must try to reduce the price as much as possible. This can be achieved by asking the supplier to give a price reduction in the form of a discount. In the case of international business, counter-trade refers to the payment for goods or services by something other than money. In other words, it is akin to good old-fashioned barter. For efficient international trade, better transport, and delivery cost INCOTERMS was developed.