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PROCUREMENT POICY MANUAL

Kashmir Institute of National Development (KIND)

TABLE OF CONTENTS PAGE

1.

STATEMENT OF INTENT

3

2.

PURPOSE AND SCOPE

3

3.

OBJECTIVES/ APPLICATION

3

4.

DEFINITIONS AND INTERPRETATIONS

4

5.

DELEGATION OF AUTHORITY FOR THE IMPLEMENTATION OF THE GROUP

PROCUREMENT / SUPPLY CHAIN MANAGEMENT POLICY 5

6.

PROCUREMENT DEPARTMENT

7

7.

THE PROCUREMENT PROCESS

7

8.

SUPPLIER MANAGEMENT / QUALIFICATION OF SUPPLIERS

7

9.

PROCUREMENT WITHOUT PRIOR TENDERING

8

10.

COMMUNICATION WITH SUPPLIERS

9

11.

TRANSPARENCY

10

12.

THE CHIEF EXECUTIVE OFFICER

10

13.

PROCUREMENT COMMITTEE

10

14.

ETHICAL STANDARDS / CONFLICT OF INTEREST

12

15.

IMPLICATIONS FOR NON ADHERENCE TO PROCUREMENT POLICIES &

PROCEDURES 13

1. STATEMENT OF INTENT

This policy is to ensure that goods and services are procured by KIND in a manner that shall realise best value for money, minimise risk and safeguard KIND interests and shall be in accordance with;

This document supersedes KIND/PO/PRC/001

• prescribed standards and specifications;

• National procurement policy (GOP) where applicable;

• Humanitarian codes of good practice.

• KIND codes of ethics and other relevant policies and procedures

In addition KIND is intent on:

• Finding reliable and cost effective suppliers;

•Using goods and services that have Pakistani content and encouraging international supplier organisations to establish local representation in Pakistan.

•Ensuring that the procurement process is fair, equitable and comprehensive but logical, transparent, competitive and cost effective.

• Ensuring regional disparities are remedied.

2. PURPOSE AND SCOPE

The purpose of this document is to: -

• Relate the manner in which the Statement of Intent is to be effected;

• Define the rules of conduct to be observed by all officers and employees;

•Foster greater optimisation of purchasing by all directors, officers and employees of the KIND and thereby the creation of value for the KIND.

•Provide for the establishment of the Procurement Committee, its constitution, functions and authority.

•Provide for the establishment of a Supply Chain Management UNIT, its functions and authority.

3. OBJECTIVES/ APPLICATION

3.1 Objectives

This document sets out the general policy applicable to the Procurement purchasing process of organization.

3.2 Application and Responsibility

3.2.1 This policy applies to KIND directly or indirectly, including any joint ventures entered into with any third party/ies, wherein KIND confirmed as the operator. In respect of joint ventures, where KIND has a

minority interest, the joint venture agreement governs the extent to which this policy applies. However, all clauses negotiated in any joint venture agreement, which are inconsistent with the provisions of this Policy, shall be expressly approved by the Chief Executive Officer and/or the executive committee prior to the execution of the joint venture agreement.

3.2.2 It is the responsibility of the Managers of the Org and Subsidiaries to ensure that this policy is observed by introducing the appropriate processes and deploying appropriate resources thereto, in accordance with the corporate procurement procedure.

3.3 Exclusions of certain trading activities from standard procurement procedures

As a rule, this policy applies to all purchases of goods and services, including, and to all KIND activities.

4. DEFINITIONS AND INTERPRETATIONS

4.1 Definitions

For purpose of the policy, the following words and phrases shall have the meaning hereby assigned to them:

4.1.1 Confidential

Means any information or data which by its nature or content is identifiable as confidential and/or proprietary to KIND and/or any third party, and specifically refers to sensitive information relating to KIND strategic objectives and planning for both its existing and future business needs.

4.1.2 Employee

Means any person, excluding an independent contractor, who works for KIND and who receives, or is entitled to receive, any salary.

4.1.3 Emergency Purchases

Emergency purchases relate to purchases of an urgent nature that may give rise to

• threats to human life or safety

• threats to interruptions in the provision of product to customers

• the threat of major expense to KIND.

•purchases in respect of breakdowns of a serious nature that relate specifically to the continuous production and/or safety of KIND operations.

4.1.4 Fruitless and Wasteful Expenditure

Means expenditure that has been made in vain and would have been avoided had reasonable care been exercised.

4.1.5 Goods

"Goods" are the raw materials or commodities that are available for general sale.

4.1.11 Executive Manager

Means any Project Manager who reports directly to the Chief

Executive Officer.

4.1.12 Head of Procurement

Means the official responsible for the strategic and operational management of the procurement or supply chain management department/ unit of the KIND. Procurement Manager or Group Supply Chain Manager shall have a corresponding meaning.

4.1.13Irregular Expenditure

In relation to KIND, means – (a) expenditure incurred by KIND in contravention of, or that is not in accordance with a requirement of this policy.

4.1.14LoA

Level of Authority

4.1.15Local

In the case of ’s , local means the local market. In the case of subsidiaries and joint ventures operating outside the state, local refers to the country or province in which they operate.

4.1.18 Procurement Committee

Is the custodian of the procurement process and is responsible for facilitating the implementation thereof in accordance with this policy and for regularly reviewing such policy.

4.1.19 Services

Services are the provision of labour only, labour and goods or labour and equipment combined and knowledge based on expertise.

4.1.21Subsidiary Executive Manager

Means any General Manager or an Executive Officer who reports directly to the Board of Directors of a subsidiary company of KIND

4.1.22 Supplier

A "supplier" is an existing or potential vendor, contractor or service provider. A

supplier may be either a natural person, a legal entity or any other similar entity.

5. DELEGATION OF AUTHORITY FOR THE IMPLEMENTATION OF THE GROUP PROCUREMENT / SUPPLY CHAIN MANAGEMENT POLICY

5.1 Delegation

The Board of Directors hereby delegates the following powers and duties (in writing) to the Chief Executive Officer of KIND

6.1.1. To discharge the Supply Chain Management responsibilities in terms of:

• The Procurement / Supply Chain Management Policy of

KIND

• Any other relevant country legislation

6.1.2. To maximize administrative and operational efficiency in the implementation of the Policy;

6.1.3. To enforce reasonable and cost-effective measures for the prevention of fraud, corruption, favouritism and unfair and irregular practices in the implementation of the Policy.

6.2 Sub Delegations

The Chief Executive Officer of KIND, hereby sub-delegates in writing, the following Supply Chain Management powers and duties to maximize administration and operational efficiency and provide adequate checks and balances in financial administration to:-

6.2.1 The Chief Financial Officer

The Chief Financial Officer for the implementation of Supply Chain Management policies and processes in terms of this Policy and applicable legislation;

6.2.2 The Procurement Committee

The Procurement Committee the power to procure goods and services for KIND and to arrange the hiring or letting of anything or the acquisition or granting of any right for or on behalf of KIND, and to dispose of movable KIND property.

6.2.3 The Head of Procurement

The Head of the Procurement / Supply Chain Management Unit the power to implement and administer the procedures and processes in terms of this Policy. This includes inter alia the administration of quotations and tenders, drafting of tenders and procurement contracts, pre-qualification of Suppliers, negotiation of contracts with Suppliers, conduction of due diligence audits on high risk Suppliers and Contractors, drafting and approval of work practices, drafting and approval of purchasing documents and letters of invitation and engagement, the power to procure goods and services within LoA, issuing of purchase orders, documentation and reporting requirements in terms of the procurement policies and procedures.

6.3 Procurement management systems

The Org makes use of a committee and a procurement management system to ensure that the adjudication process for goods and services is open, fair and transparent. The system ensures that objectivity, value for money and cost effective principles are espoused in all phases of the adjudication process. The Company will make use of the following:

Committee /

management system

Function

Composition

Delegation of

Authority (*) – Rand Value

Evaluation

Committee

/Team

Review of specifications, evaluation of bids, compilation of reports & making recommendations

User department; Any assigned Procurement Official and/or external specialist advisors

Makes recommendation s to the Head of Procurement, CEO, and Procurement Committee for the award of any contract.

Any value

Procurement

Department

Consideration of the recommendations and final award of contracts

Head of Procurement and or the Procurement/Supply Chain Officials

PKR 1 M

Procurement

Committee

Consideration of the recommendations and final award of contracts

Chaired by an Executive Manager Executive

Above PKR 5m

Executive

Committee

Consideration of the recommendations and final award of contracts

Executive Committee chaired by the President & CEO.

10 million and above

(*) Which amounts may change from time to time.

6. PROCUREMENT DEPARTMENT

Procurement Department shall endeavour to increase return on capital employed and maximise initiatives by employing the following purchasing strategies:

7.1 Local /country specific purchases/contracting

These are managed by the local/subsidiary procurement departments in the case of subsidiaries and joint ventures controlled directly or indirectly by KIND. The Corporate Procurement Department shall assist subsidiaries and joint ventures with the identification of goods and services that should be procured locally/country specific.

7. THE PROCUREMENT PROCESS

8. SUPPLIER MANAGEMENT / QUALIFICATION OF SUPPLIERS

11.1 PetroSA shall maintain a comprehensive register of qualified suppliers.

Qualification criteria shall, inter alia, include on defined criteria.

11.2 Compliance with a material condition of a KIND contract and as such implementation of programmes and initiatives by suppliers shall be monitored and audited for compliance.

11.3 KIND may, at its discretion on approval by the Executive, Procurement Committee or Head of Procurement remove a supplier from the register if the supplier:-

has been proved on a balance of probabilities to be a front

gives false declarations in order to gain some advantage

does not fulfil his promises of transferring skills to the satisfaction of KIND

becomes insolvent

behaves unethically from a business perspective in its operations or to the detriment of KIND

does not perform in respect of contracts awarded

Is found to have been practicing unfair labour practices

the supplier is an employee of KIND or a close relative (i.e. parent, spouse, lifelong partner and child) of a KIND employee, as defined in paragraph 17.

Is blacklisted by an organ of the state

has unfairly influenced the process of award and have been found guilty of improper conduct, on a balance of probability;

has been convicted for fraud or corruption during the past 5 years;

has neglected, reneged on or failed to comply with any government, municipal or other public sector contract during the past five years;

11.4 The guilty Supplier and or any of its members in the above cases will be blacklisted and KIND may refuse to register any new companies in which they are involved.

11.5 If a supplier is to be removed from the list such supplier shall be given written notice of the proposed removal together with reasons thereof. Such supplier may, at the sole discretion of KIND, be given an opportunity to justify its actions before such removal is effected.

11.6 Where an application for qualification is refused, the reasons for the refusal and the action required in order to qualify will be given to the supplier in writing.

11.8 Should a supplier with whom orders have been placed employ sub-

contractors, that supplier shall comply with PetroSA's BBBEE guidelines in respect of the appointment of such sub-contractors who in turn must conform in like manner.

9. PROCUREMENT WITHOUT PRIOR TENDERING

12.1 The tendering process referred to in KIND Procurement Procedure will be effected prior to orders for goods or services are placed except in the circumstances referred to in paragraph 12.4 below.

12.2 A mandate may be obtained from the Chief Executive, Procurement Committee or Head of Procurement that permits negotiation with a supplier or suppliers without first calling for tenders (see 12.4 below).

12.3 Negotiation may not be effected without tendering in order to: -

avoid competition

discriminate among suppliers, or

give unwarranted assistance to particular suppliers

12.4 May procure without tenders being invited with the consent of the President

& Chief Executive, Procurement Committee or the Head of Procurement , where: -

12.4.1 Procurement is for immovable property, proprietary items and specific expertise which, needs to be justified on a performance basis, as to why only the special goods or services are required.

12.4.2 No suitable responses are received in respect of an advertisement or enquiry.

12.4.3 An emergency purchase, as defined, arises.

12.4.4 Additional work is to be undertaken in respect of a particular contract, which work is within the objectives of the original enquiry and tender documents and the cost of which can be reasonably negotiated and reduced to writing. The total value of such negotiated contract extensions may not exceed 10% of the amount of the original contract without the prior approval of the President & Chief Executive/Procurement Committee.

12.4.5 Goods or services that are required are available on exceptionally favourable terms only in the very short term.

12.4.6 Goods or services are procured from another organ of state, which was (a) secured by that other organ of state by means of

a competitive bidding process applicable to that organ of state; and (b) there is no reason to believe that such contract was not validly procured; and (c) there are demonstrable discounts or benefits to do so; and (d) the other organ of state and the Supplier has consented to such procurement in writing; and (e) the goods or services required by the Company are similar to those on contract.

12.4.7 Only one supplier manufactures or renders goods and services due to the unique nature of the requirements;

In all instances, the final contract award shall be subject to the normal approved delegation of authority, listed in paragraph 6 above.

10. COMMUNICATION WITH SUPPLIERS

KIND shall notify unsuccessful tenderers.

13.1 Notification

The award of the contract shall be communicated to the successful tenderer in writing by an authorised KIND Procurement Official. No verbal or telephonic awards shall be valid. Unsuccessful tenderers shall be notified in writing by the relevant KIND Procurement official

13.2 Complaints

If a supplier complains that KIND has not acted in accordance with its procurement and/or related policies the supplier must communicate the details of the complaint to the Head of the Procurement Department or the Chief Financial Officer, in writing.

The complainant shall be advised in writing of the outcome of the complaint after it has been fully investigated.

Should a complainant feel that his/her complaint is not being satisfactorily resolved, the complainant may report the issue to the KIND fraud prevention hotline.

11. TRANSPARENCY

KIND procurement and related policies shall be made available to suppliers and any other interested parties upon request. Other relevant information may also be made available if the business interests of KIND and/or other parties concerned will not be adversely affected thereby.

12. THE CHIEF EXECUTIVE OFFICER

The Chief Executive Officer shall be accorded the power to enact and enforce decisions in accordance with the provisions as detailed in this Policy. The Chief Executive Officer may use the Executive Committee (EXCO) to assist him in this regard.

13. PROCUREMENT COMMITTEE

The Procurement Committee shall be responsible for the rules and practices for the adjudication of tenders in respect of the award of contracts.

14.1 Authority

The Committee is empowered in terms of the Procurement Policy

14.1.1. To independently manage, regulate, and control the procurement of goods and services for KIND on behalf of the Chief Executive Officer and the Excom.

14.1.2. Investigate, review, accept, reject and approve matters concerning

the procurement of goods and services within its scope of responsibilities.

14.1.3. To review and present all recommendations on any tender matters

14.1.4. To delegate certain responsibilities to the Head of Procurement.

14.2 Proceedings of the Procurement Committee

14.2.1 Details of Procurement Committee proceedings, decisions and relevant documentation and minutes will be regarded as strictly confidential and will be disclosed to non-members of that committee on a need-to-know basis only.

14.2.2 Should any members of the Procurement Committee be placed in a conflict of interest situation,they must excuse themselves from the relevant Procurement Committee proceedings and their alternates attend in their stead, at the discretion of the Chairperson.

14.3 Membership

The Membership shall be representative and members shall be appointed by the Chief Executive Officer/Executive Committee from time-to-time.

14.4 Independence

To provide for the independence of the Procurement Committee, the Committee shall be accountable to the Chief Executive Officer and/or the Executive Committee (EXCO).

14.5 Decisions / Quorum

14.5.1Formal Meetings

In principle, Committees shall endeavour to operate by consensus. All decisions of the Committee shall be on a majority basis of members present at the meeting.

14.5.2 Quorum

Any four members present, one of whom shall be an Executive Manager shall form a quorum. Any member may, with the approval of the Chairperson, appoint an alternate, not already on the Committee, to attend Committee meetings in his/her stead.

14.5.3 Round Robin

The Committee may take decisions on a round robin basis. A decision taken by round robin is valid if all (100%) members or their nominees approve.

14. ETHICAL STANDARDS / CONFLICT OF INTEREST

The purpose of this ethical code of conduct is to ensure that all business transactions take place in an environment of honesty, integrity, fair competition and respect for South African Laws. This code outlines KIND expectations from all its employees and suppliers who participate, directly or indirectly, in procurement activities.

15.1. Suppliers

Supplier’s interest in relation to KIND must be included with the quotation/tender documents. A quotation/tender shall be excluded from further evaluation if a supplier fails to declare any interest or potential conflict of interest.

15.2. KIND personnel

All employees have a duty to promote the reputation and business of KIND and not to make any personal gain at the expense of or as a result of their employment by KIND. Decisions and functions carried out in the course and scope of employment must be directed at what is in the best interests of the KIND. Personal interests must not conflict with those of KIND.

An employee of KIND (including long term contract workers) and their immediate family (i.e. spouse, life long partners, parents and children) may not participate in or benefit directly or indirectly (i.e. through shareholding, profit sharing etc) from tenders / contracts with KIND.

Where a possible conflict of interest (other than the above) arises, the interest must be declared in writing to the Procurement Committee as soon as it arises and the employee must recuse him/herself from participating in any way in related business dealings. Written disclosure is effected by the employee making an appropriate entry in a register kept for this purpose in the office of the Head of Procurement.

15.3. Non Executive Board Members of KIND

In respect of non executive board members, the provisions of the companies act in respect of declaration of interest shall be strictly observed.

15. IMPLICATIONS FOR NON ADHERENCE TO PROCUREMENT POLICIES & PROCEDURES