Sub-Contract Procedure - 0 PDF
Sub-Contract Procedure - 0 PDF
Sub-Contract Procedure - 0 PDF
1
SUB – CONTRACT PROCEDURE
2010
CONTENT LIST
1.0 Introduction 3
2.0 Objectives 3
16.0 Tooling 26
1.0 INTRODUCTION
The procedure to be followed in sub-contract matters were laid down, interalia, in the Office Order
No. HO / 591 / 012 DT.:1.10.1996 and subsequent amendments. A review of these procedures was
made in year 2006 taking in to account existing needs of the company, the context of its multi – unit
operations and the special characteristics akin to the situation in the high technology field in which
the company is operating. Keeping in view the implementation of SAP in all units / SBU, amended
Sub – contract procedure has been revisited to incorporate suitable changes inline with processes /
activities in SAP. Based on this review the following procedures are laid down for adopting by all
the units.
2.0 OBJECTIVES
The objectives of all sub-contract activities in Bharat Electronics are to ensure that:
2.1 The required materials / services to prescribed specifications are outsourced from reliable
vendors, in right quantities, at the right times and at right prices.
2.2 Fair and consistent practices are followed in sub–contracting with a view to establish long-
term business relationships with the vendors.
2.3 The total ‘lead time’ for procurement is reduced to the minimum.
2.4 Sub – contracting should be in areas both of low / high technology to achieve the optimum
cost benefits, along with the benefits for diverting the efforts to high – technology areas.
2.6 The economics and legal interests of the company are safeguarded at all times.
3.1 The manufacturing / service facility is available in the unit but cannot be executed due to
capacity constraints in the following areas:
b) Service jobs like plating, painting, heat treatment, Screen printing, Engraving etc.
c) Electronic assembly work like cable forms, cable assembly, PCB assembly, sub – unit
/ Unit assembly, etc & electronic units testing like PCB assembly, sub – unit etc.
e) Secondary operations like moulding, spot welding, die / wire bonding, tinning,
Branding, assembly and testing of active and passive components
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f) Manufacture of PCB blanks (single-sided, double-sided and multilayer).
h) Packing cases for finished equipment and components (either carpentry or any other
type).
j) Development of product from Schematic drawings, involving the works like, Circuit
design, PCB lay-outs, first–off sample manufacturing, Testing and Software
development.
3.2 The facilities are not available in the unit for some of the operations / process, in the
manufacturing chain like:
Industrial tailoring, FRP moulding, rubber mouldings, plastic mouldings, castings, Forgings,
extrusions, springs, Nameplates etc & for some special jobs like Aluminium skinned shelters,
FRP shelters, metal forming, etc.
The indenting department is normally the production control department in the production set
up. It shall establish the need and quantum of sub – contract, taking into account the in –
house facility / capacity available by adopting the following steps:
4.1.1 Based on sale order, run the MRP in SAP using transaction code ZPP002 and check with free
stock pegging. Before running MRP production control shall maintain MRP, Accounting,
Costing, Work Scheduling, Valuation and Quality views including J1ID table for all the
manufactured parts and assemblies for the ensuing year. MRP than shall be run using SAP for
generating planned orders. Planned orders shall then be converted into Production orders and
PRs using transaction Mass / Individual conversion of planned orders to production order/
PRs.
4.1.1.1 List of manufactured parts and assemblies shall be derived from the MRP run (bill of
materials) by production control. After ascertaining the capacity available in-house items to
be out sourced (sub-contracted) are identified and consolidated list of (MRP of) items (to be
sub-contracted) is prepared. In cases where production control is not able to generate
consolidated MRP at a time, individual PR may be raised wherein production control should
certify that in-house capacity has been explored.
4.1.2 However, if for any reason the items could not be included in the MRP; individual Purchase
Request for items to be Sub-contracted (Vendor Material/ BEL Material/ Service) may be
raised.
While issuing the Purchase Requests (PRs), the indenter should ensure that, all vital
information is incorporated in PR, so that; Sub-contract Department will have all necessary
information, about the parts identified for procurement. Details of materials to be issued by
BEL on FREE OF COST basis, shall be clearly indicated in the PR.
4.2.1 IED/MS should estimate unit price, for all new items for sub-contracting.
4.2.2 Maintain Unit Cost Estimates for all manufactured parts / assemblies which consists of
i) Labour cost only, where materials are supplied free of cost by BEL.
ii) Labour cost and Material cost where no materials are supplied by BEL.
iii) Special Tool cost, if any, to be paid to supplier for design, fabrication and use for
BEL items only.
4.2.3 Negotiate with the vendor on price variations, and arrive at a consensus price fair to both the
parties up to value Rs. 25,000. For value above Rs. 25,000.00, as a member of Price
Negotiation Committee, consisting of representatives of IED/MS, Sub-Contract and Finance,
arrive at a consensus price fair to both the parties. In case of common items among divisions,
ensure common rate for subcontract.
4.2.4 Work out the standard rates per hour periodically (the periodicity shall be two years) of each
category of operations for different Category of Vendors, in concurrence with Finance. The
Sub-contracts department will use these rates for entering into Annual rate contract.
4.2.5 Assist the indenting department, in the aggregation of standard man-hours for in-house &
sub-contract items.
4.2.6 While calculating unit price, IED/MS will consider the following:
4.3.1 Take out a list of all pending PRs at regular intervals from SAP. Scrutinise the PR(s), check
the previous sub-contract details and performances by the previous supplier (s). Based on the
history of parts subcontract to decide whether to place Repeat Order as per clause 7.2 or go
for Enquiry as per clause 7.1.
4.3.2 To issue Request for Quotation (RFQ) (Annexure – 2), analyze the quotations received and
prepare comparative statements.
4.3.4 Maintain source list and prepare Purchase Orders in SAP, and release Purchase Orders, as per
release strategy in SAP issued by IS (CO) (Annexure - 3), after obtaining competent
authority’s approval, as per delegation of powers, as stipulated by Corporate office and
vetting by Finance and monitor the progress of sub-contract order.
4.3.5 Assume full responsibility for issual, accountal and collection of materials, to and from the
vendors. Fulfill all the Government formalities, in the material transactions. Ensure that all
statutory procedures and formalities as applicable, from time to time, (in respect of Excise
duty/Sales Tax, etc.) are complied with.
4.3.6 Initiate steps for a) Registration of new Vendors, b) Approval of firms for inclusion in Source
List using ZMM 007, c) Updating Source List and d) Vendor Rating.
4.3.7. Enter into Annual Rate Contract with the Vendors, including finishing process (like plating,
painting, etc.)
4.3.8 Obtain Bank Guarantee for the relevant amount from the vendors, as applicable and ensure
that, the Vendors obtain the Insurance Policy for high values, wherever applicable. This will
be done by Central Sub-Contract in case of BG Cx and respective Sub-Contract Departments
in case of other units.
4.3.9 Co-ordinate with Finance for prompt payments to the vendors, on time and for the recoveries,
if any, from the vendors and to act as a single window of the company, for the vendor-related
issues.
4.3.10 Specimen Purchase orders Vendor Material/BEL Material/ Service is shown below:
4.4.1 Ensure that the prescribed rules and procedures have been followed and the cannons of
financial propriety have been observed at the time of entering into Annual Rate Contract.
Also, vet the Purchase Orders before it is issued (applicable for orders, with value exceeding
Rs. 25,000).
4.4.2 Associate with IED/MS in finalizing standard rates per hour. Also, act as a member of Price
Negotiation Committee.
4.4.3 Make prompt payments to the vendors, as per the payment terms.
4.5.1 Follow the procedure laid down in the Quality Manual, for ensuring the Quality of the
incoming materials.
4.5.2 Rationalise the volume of inspection of incoming materials, by inspecting the same at
Vendor’s premises.
4.5.3 Associate with the Sub-contracts department for selection / evaluation/ approval/ deletion of
vendors and to audit the processes of the vendor.
4.5.4 Educate the vendors on defect-prevention and to train them on Statistical Process
Control techniques.
As Quality, Delivery and Cost are of prime importance, extreme care is to be taken in the selection
and establishment of Vendors, in each category, to have a healthy competition. The process of
establishment of vendors shall include the following steps:
5.1 Generally, once in a year during April/May and as and when required, insertions may be
made in Newspapers or any media, including e-Tendering for registration of new Vendors,
giving the description of the jobs that are intended to be Sub-contracted and asking the
interested firms, to apply for Registration. A time period of 15 days shall be given to
Vendors, to submit applications, in response to the advertisement. This activity is to be
executed by Central Sub-Contract department in case of BG Cx and respective Sub-Contract
Departments in the case of other units.
5.2 The firms, who respond to advertisements, will be given a questionnaire (Annexure-3), to fill-
in and return, along with necessary supporting documents. The questionnaire may also be
given to parties, who approach BEL on their own.
5.4 Once registered, Trial Orders (maximum of TWO) will be given, to assess the performance of
Vendor, with reference to Quality, Delivery and Price.
5.6 The assessment of performance is based on, System Generated Vendor Rating and
subsequently, the Committee shall recommend for approval to the Unit Head, only if, the
Vendor Rating is above desired benchmark (fixed by the Vendor Committee of respective
Unit/SBU), for inclusion in Source List. The process of approval will be executed by Central
Sub-Contract department in case of BG Cx and respective Sub-Contract Departments in case
of other units.
(i) Vendors approved by the SBU/Unit Head after giving trial order and assessing
the performance by the Committee, as explained above, and
(ii) Vendors continuously giving good performance in regular supplies and whose
Vendor rating is above bench mark.
5.7.1 Source List is updated, as and when, new Vendors are approved for inclusion and it is a
continuous process.
5.8 Review of Source List is to be carried out once a year during April/May.
C. DEREGISTRATION/SUSPENSION/BANNING OF VENDORS
5.9 If the performance of any Vendor in Source List, is not satisfactory, to the desired level, during the
process of procurement of parts from Vendors, there will be a need for discontinuation of services of
Vendors, based on their performance regarding quality, delivery and ethical practices. Any unethical
behavior shall call for action against the vendor of deletion from the vendor list / banning /
suspension / Encashment of Bank Guarantee as considered appropriate by GMs / SBU Heads / Unit
Heads / Functional Director in accordance with procedure ref. no 18869/IB/MS Dated:12.01.2009
(Refer to Annexure-4.)
5.10 The Approved list of Vendors is classified, according to the nature of work they can handle, such as
(1) machining, (2) special machining, (3) fabrication, (4) welding (5) assembly (6) whole assembly
etc. as well as by the capacity available. The firms will be in categories A, B & C as under:
Category ‘A2’
Large Private Sector Industries or Medium Public Sector/State sector Firms with adequate in-
house Engineering, Production and Quality Control.
Category ‘B’
Medium or Small Private Industries without much Engineering, but with adequate
Production and Quality Control.
Category ‘C’
Small Scale Industries including BEL Ancillary units with requisite Production facilities
NOTE: Qualitatively, firms coming under category A1 and A2 are deemed to require no assistance
from BEL and would undertake the job based on the order. Firms coming under Category ‘B’
may need some engineering support only. Firms coming under Category ‘C’ require not only
engineering support but also a careful check of quality.
5.11 On the pattern of loading, the capacities in BEL Industrial Estate is fully explored to give
maximum encouragement to the ancillaries and the preference should be in the order of
Category ‘C’, ‘B’, ‘A2’ & ‘A1’.
In case of Sub Contract matters, the delegation of Powers to various levels of executives shall
be made by Competent authority, as per the sub delegation from time to time. However, the
extent of powers delegated in respect of sub contract is mentioned below:
Sub Delegation of Powers
Sl S/C Head Divisional Unit Head/ GM/ Director (BC) /
Nature of Powers
No materials Head SBU Head Director (OU)
` ` ` * (`)
1 Approval of Sub Contract Upto ` 1 lakh Upto ` 3 Upto `100 lakhs Upto`1000 lakhs
Orders at IED Rates lakhs (single vender) (single vendor)
and ` 200 lakhs and ` 2000 lakhs
(multiple vendors) (multiple vendors)
2 Single Tender Upto `15,000 Upto`50,000 Upto `100 lakhs Upto `1000 lakhs
3 Limited Tender Upto`1,00,000 Upto Upto `200 lakhs Upto `2000 lakhs
`3,00,000
4 Cases where other than the Nil Upto `. Upto ``100 lakhs Upto ``1000 lakhs
original lowest Tenderer is 15,000
proposed to be chosen (For
reasons to be recorded)
5 Cases where orders are Nil Upto Upto`100 lakhs Upto `1000 lakhs
proposed on more than one `15,000
party at different rates (For
Reasons to be recorded)
* Functional Directors will be the competent authority to approve proposals in their respective
functional areas viz. Director (BC) for purchase proposals in respect of Bangalore Complex, Director
(OU) for purchase proposals in respect of Other Units, Director (R&D) in respect of D&E proposals
from CRL, Director (HR) for proposals from HR function, Director (Marketing) & Director
(Finance) for proposals from their respective functional areas. However in respect of BG and Other
Units, Director (BC) and Director (OU) will be the approving authority for all purchase proposals
across the various functional areas. ”
(** amended vide Office Order No. HO/591/024 dated 16.09.2011).
Purchase Orders are to be released in SAP as per guidelines issued by IS (CO). Refer
Annexure 5
After the proposal for Sub-contract has been approved as per the delegation of Powers in Para
6.1 the following level of Sub - contract Officers are authorized to sign the Sub-contract
orders.
Level of the Executives up to Rs
E – I / E –II 25,000
E – III 1,00,000
E – IV 2,00,000
E – V or Head (Sub-Contract) FULL POWERS
7.1.1 For the items up to order value of Rs. 25,000, sub-contracts department shall select proper
Vendor, out of the Approved list of vendors, and offer IED price. If the vendor is not satisfied
with the price, he shall be called for negotiation with IED, for arriving at a
consensus price, which is fair to both the parties. Finance should be associated while
negotiating the prices
7.1.2 If the order value exceeds Rs. 25,000 Tendering Process is to be followed as per Para 7.3
7.2 REPEAT ORDERS: Repeat Orders, for quantities up to 100% of original order quantity,
shall normally be placed on the same vendors who supplied them earlier, within a period of
One year. The additional quantity of 100% shall be including amendments to various orders,
SUB CONTRACT PROCEDURE 2010
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for the originally ordered part. If for some valid reasons the repeat order cannot be placed on
this vendor, the item shall be treated as a new item and Para 7.1.1 to be followed. For repeat
orders, no increase in unit price shall be allowed; instead, efforts should be made to get price
reduction from the supplier.
7.2.1 Repeat Orders against a previous order may be considered under the following circumstances,
where-in:
c. Original order is not placed, to split the required quantities, with a view to avoid
approval of the competent authority.
e. The firm is prepared to hold the same prices, terms and condition, including delivery
schedule as per the original order.
g. The original order placed, should be on the basis of lowest (negotiated) price and was
not on delivery preference.
7.3.1 When no Approved Vendors are available for a new item/job/process, the procedure for
Establishment/Registration of Vendors has to be followed as per Para 5.0. Limited Tender
Enquiries to be sent among the established Vendors only.
7.3.1.1 If Approved/Established Vendors are less than or equal to FIVE, enquiries are to be sent to
all the Vendors (minimum of THREE vendors shall be established in each category). In case
more than FIVE Approved/Established Vendors are available, a minimum of FIVE Vendors
to be sent Tender Enquiries, to encourage sufficient competition and to get fair price. Reasons
for selecting these Vendors to be specified, like, a) insufficient volume of work, b) unutilized
capacity of vendor is certified, c) past performance records and Order Book position of the
Vendors, etc. When enquiries are issued for the next time, for the same job, remaining
vendors to be given preference, in order not to promote a certain group of vendors, but to
give opportunity to all Vendor.
7.3.1.2 Prequalification / post Qualification shall be based entirely upon the capability and
resources of prospective bidders to perform the particular contract satisfactorily, taking in to
account of their,
1) Experience and past performance on similar contracts for last 2 years
2) Capabilities with respect to personnel equipment and manufacturing facilities
3) Financial standing through latest ITCC Annual report (balance sheet and profit and
loss account) of last 3 years.
The quantity, delivery and value requirement shall kept in view, while fixing the PQ criteria.
No bidder should be denied prequalification / post qualification for reasons unrelated to its
capability and resources to successfully perform the contract.
This clause is governed by corporate circulars or office orders issued from time to time.
If splitting of the requirement would be to the advantage of the Company in maintaining the
time schedule, the same should be decided before calling for tenders. In all such cases, the
same should be made clear to all the tenderers while calling for the tenders. Where it
becomes necessary to split the order, the order may be split on L1 and higher bidders in
ascending order of their quotes at L1 rates. Refer to circular No. 21326/18/07-08/CO-VIG
dated 31st May 2007 (Annexure-12).
7.3.3 RFQ (ANNEXURE-2) should indicate Tender opening date, time and place. Also, Vendors
are to be informed in the enquiry that they are welcome to be present during the Tender
opening (in respect of OPEN/LIMITED Tenders only).
7.3.3.1 It is preferred to use e-Procurement to the maximum extent, to avoid errors in the process of
Tendering. E-Procurement procedure to be implemented in toto as per the guidelines issued
by IS (CO) from time to time.
7.3.4 Estimated value shall be made before the enquiry is sent. In Units/SBUs, where Industrial
Engineering Department (IED) does not exist, estimation of cost shall be made by Production
Control Department, based on drawings.
7.3.5 Depending upon the estimated cost of the job, minimum notice period shall be given for
submitting quotation as follows:
i) upto Rs. 1.0 Lac – 1 week
ii) Rs. 1.0 Lac – Rs. 5.0 Lac – 10 days and
iii) Above Rs. 5.0 Lacs – 2 weeks
7.3.6 In normal process quotations shall be received through sealed covers only. However in case
of Quotation through Fax/e-mail, Head SC dept shall receive, sign, keep in a closed envelope
and drop in Tender box, to maintain secrecy. For this, a dedicated FAX/personalized e-mail
ID by Sub-Contract Head should be maintained.
7.3.8 When there is only a single response to the limited tender enquiries, it should normally be re-
tendered. If, on account of urgency or other reasons (to be recorded), it is proposed not to re-
tender, it may be treated as a case falling under Para 7.3.9.
7.3.9 Where, on account of urgency, the Head of the sub-contracts Department proposed to contact
only one source, or to give a notice of less than the duration indicated in Para 7.3.5, Head of
Sub-Contract Department shall obtain a certificate duly recording the reasons for the urgency
and for selecting a particular source, from the indenting Divisional Head.
7.3.10 The response received from the parties shall be referred to IED/ Indenter to examine the
reasonableness of the prices, before placing the Order.
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7.4 PRICE NEGOTIATION IN RESPECT OF TENDERED ITEMS
7.4.1 Where the lowest offer received is higher than the estimated rates, it shall be negotiated by a
Price Negotiation Committee, which shall be constituted by competent authority, with
representatives from Sub-Contract Department, Production Control, Finance, IED/MS and
Indenter (in cases other than Production Control). The committee is headed by Senior Officer
among, head of Sub-contract department, Production Control, Finance, IED and indenter (if
other than Production Control representative) as a member.
The Negotiation shall be with the lowest tenderer (L1) only. The negotiated price has to be approved
by the competent authority as per Para 6.1. If the response to the tender is considered inadequate or
the results of the negotiations are not satisfactory or a ring is suspected, the committee shall carefully
consider the merits of the re-tendering, and also finalize the list of parties to be addressed in case of
re-tendering.
7.4.2 The following guidelines, issued by CVC shall be followed while negotiating with L1:
i) Negotiation will be held with L1 only, as an exception and only in case of proprietary
items or in items with limited source of supply. Counter offer to vendor will also
amount to negotiation.
ii) Negotiation will be held after due application of mind and after recording valid,
logical reasons to justify negotiations. The Committee recommending negotiations
will be responsible, if, negotiations have unnecessarily delayed the release of order.
The Committee should also record explanations, in case of inability to obtain desired
results.
iii) Approval for award of Contract should not exceed one month from the date of
submission of recommendations. For approval at higher levels, 15 days may be added
at each level. The overall time frame should be within validity period of tender.
iv) When L1 backs out, there should be re-tendering, among the remaining Vendors and,
if sufficient time is available, include some more Vendors.
7.5.1 Government guidelines on purchase preference for Central Public Sector Enterprises (CPSEs)
are issued from time to time. It is to be noted that ban on post tender negotiation does not
mean that policy of Government of India for purchase preference for public sector should not
be implemented. In such cases CPSEs though not L1, may be considered, as per Government
guidelines in force.
7.5.2 Under no circumstances CPSEs should be used as a shield or a conduit for getting costly
inputs or for improper purchases. Justification on economic and other grounds should be
gone into before considering such proposals.
8.1 Sub-contract Purchase order shall indicate clearly, the part number, description
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/Specification, issue no. of the drawing, quantity, price, delivery schedule, Sale order no., and
the Bill of materials, including consumables, that will be provided by BEL ‘free of charge’
(Refer Fig. – 6). It shall also indicate the details of Tools, Inspection gauges, matching parts,
proto models supplied on returnable basis. In respect of materials to be provided by BEL, the
production control Department will determine the materials and the quantity needed for
executing each item and draw up a standard Bill of materials indicating the cutting and
machining allowances.
Whenever the sub-contractor requests for some consumables and other materials (although
originally meant to be procured by him), it can be issued on ‘free of charge’ basis with
suitable rate reduction keeping in view the “cost to BEL or price quoted by Vendor for that
item”, whichever is higher. The order shall be amended accordingly. Materials in BOM to be
issued on FREE OF CHARGE basis are to be part of Tender Form/Enquiry.
8.2 In respect of assembly jobs, exact quantity of materials is issued to the sub-Contractors. As
far as possible, exact materials are issued in matching quantities (Kit-launching) to avoid
delay in completing the orders.
.
8.3 The Sub-contract Purchase order shall clearly spell out either that the scrap generated be
returned by the vendor or where it is decided that the scrap material need not be returned, it is
enough if scrap value, estimated by IED/MS, at current price is deducted in labour charges
from the Vendor.
Sub-contract department shall obtain General Bank Guarantee from Scheduled Banks as
detailed below (ANNEXURE-6) from the established Vendors, on yearly renewable basis.
NOTE:
The value of the materials includes the basic cost and the material overhead. Cost of tools and
proto models supplied on returnable basis should also be included with material value for the
purpose of fixing the value for Bank Guarantee.
If the value of materials supplied free of cost to the vendor is more than 2,00,000 / - at any
point of time, the sub-contract department should ensure that the vendor obtains Insurance
coverage in the joint names of BEL and the vendor for risks like Fire, Theft & Burglary,
Flood, Earthquake, Explosion, Riots, Strike, Malice Damage, Impact Damage, Lightning,
infidelity of the Sub-Contractor, etc. The premium shall be reimbursed by BEL to the vendor
after the finished items are delivered by the vendor.
NOTE: Ancillary Units of BG Cx need not furnish Bank Guarantee in respect of Para
9.1; however necessary Bank Guarantees/insurance is to be obtained from
them in respect of Para 9.2 & 9.3.
10.1 Pull List for issue of materials to the sub-contractors will be taken from SAP (ZMM010), by
the sub-contracts Department. The materials shall be issued in exact quantities indicated in
the Bill of materials. This system of drawl of materials is applicable in the following cases:-
b) For all the purchased components issued for electronic assembly jobs including cable
forms, PCB assembly, sub-assembly and equipment. It is preferable to issue the
materials in matching quantities for receipt of finished items without delay.
Note: - In case the materials already drawn against a Sale order for in-house manufacturing
jobs, which are to be sub-contracted because of load conditions in the shop floor, such
materials will be first store returned and then drawn against Pull List and issued to the
sub-contractor. In such cases, a consolidated store Return Note and a consolidated
Pull List may be used.
10.2 For jobs like plating, painting, Heat Treatment, Galvanising and any type of intermediate
operations, General Purchase order will be placed. In case of General Purchase orders, the
semi-finished items are routed to sub-contractor from the shop floor. In order to reconcile
between items sent from shop floor and received back from the sub-contractors, an up-to-date
register has to be maintained by the sub-contracts department, which should be available for
verification, at any time.
10.3 For the finished items received back from the sub-contractor, Purchase Order history as
shown below for an item can be seen from SAP against any Purchase Order
10.4 Performa accounts for the movements of materials to sub-contractors and their receipt back in
BEL will be maintained by sub-contracts department as per prevailing Central Excise and
CENVAT rules.
The sub-contracts department shall arrange the delivery of the materials to the sub-
contractors along with Excise Material Gate Pass generated using ZIGP001 and ZIGP007.
Acknowledgement should be obtained from the sub-contractors accordingly.
The sub-contracts department shall forward the released materials issued against pull list
along with Excise Material Gate Pass generated using ZIGP001 and ZIGP007.to Shipping/
Transit Section of MM Division for onward transmission. Shipping/ Transit section shall
forward a copy of the packing – cum – delivery advice note with the supplier’s
acknowledgement to the sub-contract department. The sub-contracts department will
maintain the records pertaining to Excise documents.
12.1 The sub-contracts Department, shall review and control quarterly, the quantities of materials
issued, materials lying with the sub-contractors, quantities returned / yet to be returned using
SAP transaction code MBLB and ME2O or ZIPP011 or ZMM040. A report on these shall be
submitted to the production Head of the indenting division once in six months (as on 30th
September & 31st March)
12.2 Sub-contracts Department will also obtain a certificate (ANNEXURE-8), from each Vendor,
acknowledging the extent of materials lying in his possession, order-wise Once in a year as
on 31st March
Note: In SAP scenario, the FREE ISSUE materials issued against Orders, will be moved to
VENDOR STOCK using ZMM090/ZMM008 (Vendor location is considered as storage
location for RM). As and when the supplies are received and Goods Receipt (GR) is made the
FREE ISSUE materials stock will be accounted against that GR to the extent of supplies
received and balance outstanding with vendor can be monitored on daily basis using ME2O/
MBLB transaction for a vendor. Based on this report Sub - contract department will obtain a
certificate from each vendor, acknowledging the extent of materials lying in their possession,
order-wise once in a year as on 31st March
Supplies received from sub-contractors will be delivered to the respective SBU I.G. Stores. The
divisional I.G. Stores will prepare necessary GR (Use MIGO) and arrange for further inspection.
After inspection and acceptance, these items will be delivered to the Divisional / Departmental
stores. Further
b) Items accepted against General Purchase Orders, Service Entry sheet will be prepared
by IG using ML81N transaction to the extent of Service job quantity accepted.
Whenever, raw – materials, manufactured parts, components and consumables are issued to sub-
contractors on free of cost basis, the Head, Sub-Contracts will review all cases where materials have
not been returned either as finished product or as materials themselves at the time of closure of
orders. The cases will be categorized with recovery action as follows:
Any short closure of Purchase orders, with proper justifications, to be put–up to Unit
Head/SBU Head for Approval.
In this case, no recovery will be made but on advice from Head of sub-contracts department
in consultation with the Head of production control with Finance concurrence, the value will
be adjusted against the concerned production work order after obtaining approval of Unit
Head/SBU Head. An internal enquiry should be conducted in case of issual of faulty
materials and wrong instructions to fix responsibility for appropriate action.
In this case, the current purchase price of the material plus 5% will be recovered from the
sub-contractor on advice to Material Account, in addition to forfeiting the Bank Guarantee.
14.4 Where the material has been lost, the case should be treated as issue of materials on sale basis
and recovery should be effected accordingly.
14.5 Where materials have been misappropriated by sub-contractor and where the sub-contractor
has failed even to attempt to fulfill the orders and not returning the material issued:
These cases should be treated as issue of materials on sale basis and recovery effected
accordingly. In addition the following actions to be taken against the Vendor:
14.6 In all the above cases, sub-contracts department should furnish the quantity of raw –
materials outstanding with the sub-contractor for which the recovery value is to be worked
out. Finance will work out the value to be recovered from sub-contractors on the lines
indicated in the respective clauses. Finance will send monthly consolidated advice for
recovery to Bills Payable along with the Journal Entry passed, debiting code Head 584
(Materials issued to sub-contractors – Recoverable) and crediting to code Head 507)
Materials issued to sub-contractors free of cost ) to clear respective outstanding amounts
remaining in sub-contracts ledger. A copy of this advice should be endorsed to sub-contracts
department.
Advance payments, along with the Purchase Order or at intermediate points, should not be
entertained. In exceptional cases, where supplier insists upon such advance payment, can be
released against Bank Guarantee, as per ANNEXURE-7, from Scheduled Banks and the
same may be followed as per management guidelines issued vide circular Nos. 18281/99/010-001
dated 28-02-2007, 18281/99/010-009 dated 17th July 2008, 18281/99/010-006 dated 22nd April
2009 (Annexure-7a), and amended from time to time.
15.2 FINAL PAYMENT: 100% payment shall be made for the accepted quantity within 30 days
from the date of receipt of materials. The time duration of 30 days includes activities like, GR
preparation, Inspection, UD (Usage Decision) and payment. Final payment is for accepted
quantity, only after delivery and inspection, but, not against mere delivery.
15.4 MICRO, SMALL AND MEDIUM ENTERPRISES. These vendors are to be classified accordingly in
the BEL vendor master. The request received from the vendors to be scrutinised and classified by
Standards Department and suitably flagged in the vendor master list. The stores division to inspect and
accept the materials within stipulated time. The delay in acceptance and payment attracts interest and
penalties. In case of rejection, stores division has to inform the vendors promptly in time. Finance has to
ensure that payments are made within the due dates.
15.5 Sub-contracts Department will prepare the list of GRs cleared during the first week every month and
forward the same for further verification by finance and arranging payment. (USE QA33 for report).
Finance to review the bills cleared status using Fbl1n / Zfim023 reports for updating payments not
effected with in 30 days of receipt of materials. The final report of bills not paid within 30 days of
receipt of material may be sent to Unit/SBU Head, in the first week of every month for review and
action, indicating the status and reasons for pendency of bills.
16.0 TOOLING
16.1 Special Tools, wherever cost is paid by BEL, shall become the property of BEL. These tools
will be used by the sub-contractor only on BEL orders.
16.2 A statistical register be maintained & updated regularly in respect of the tools that are
available with various sub-contractors where the tooling costs have been paid by BEL. This
directory shall be circulated amongst other divisions / units once in quarter to avoid
duplication if any.
17.1 Sub-Contracts Department will review, in the last week of every month, the status of
manufacture of sub-contract items and the issues and receipts of items at sub-contractor’s end
using transaction codes ME2L/ ME2N/ ME2M/ ME2J.
NOTE: A single report consisting of PO No., Material, Item No, Short Text, Vendor, PO Date, PO
Release Date, Qty., Qty. To Be Delivered, Qty. To Be Invoiced, GR No, UD Code, Lot Size,
Invoiced Amount, Invoice Date, Invoice No, Miro Text, Vendor Advance, What Amount,
Amount Paid, Currency, Check No, C/E Date shall be used for monitoring the status of PO
item.
17.2 A quarterly review shall be made by a senior executive nominated by Unit/SBU Head, along
with sub-contracts and production control departments to review the status and issues
affecting the performance of sub-contracting activities and to take remedial measures to
address the issues.
17.3 Once a production / Assembly sale order is closed, all the sub-contract orders relating to that
sale order should be specially reviewed and action taken to finalize accounting of materials.
18.1 The sub-contracts department is the agency to provide all the needed technical assistance to
the sub-contractors with the support of production control and quality control departments.
18.2 In case any sub-contractor needs assistance by way of special tools / gauges etc., sub-
contracts department may arrange to lend them on “RETURNABLE GATE PASS” using
transaction code ZIGP001 and ZIGP007. wherever possible, for execution of specific jobs.
These tools / gauges should be watched for prompt return within two weeks of the order
completion. Where the jobs are repetitive, efforts should be made to persuade the sub-
contractor to acquire the special tools / gauges.
18.3 When the tools / gauges are returned by the sub-contractor, as per the terms, with an
inspection certificate the sub-contract department shall hand it over to the divisional tool
stores. In case of damages / loss of tool, the cost has to be recovered as per “IED estimate/
Divisional Tool Crib Advice”
Amendments to Sub-contract Orders are the changes made in any content of the original order, to
reflect a changed situation pertaining to the execution of the original order.
Modification in specifications may be requested by the Indenting officer only, who had
originally approved the sub-contract with the concurrence of the indenting department,
subject to the condition that the quality of the material and price are not affected thereby. If
the manufacturing cost of the material is likely to change due to the modification, suitable
reduction in the price should be negotiated with the supplier. Concurrence of the Finance /
IED should be obtained before any modification / amendments to Purchase orders, where
financial concurrence has been obtained earlier.
NOTE:
1. If, modifications are being made even before the beginning of work with the Vendor, it
shall be treated as a new item and re-tendering shall be done as per Para 7.3
2. If, modifications are made after the progress of work with the Vendor, the same shall be
treated as Amendment to the original order.
19.2.1 Change in the date of delivery, if requested by the supplier, may be considered and agreed to
by the officer approving the sub-contract in consultation with the indenting department
provided the reasons for requesting extension in delivery date put forward by the supplier are
justifiable and the order was not placed on TIME PREFERENCE basis. It should, however,
be ensured that there would be no extra financial commitment for the company due to the
extension of the delivery date (due to such development as increases in statutory levies, etc.)
and the same should be made very clear to the supplier while extending the delivery date.
19.2.2 Requests for extension of delivery date in cases where the order had been placed on time
preference basis should be rejected if alternate supplies can be arranged at the risk and cost of
the supplier. If this is not possible, extension of date subject to levy of liquidated damages
may be granted by the divisional Head/Unit Head not less than the rank of EVII, with
concurrence from Finance Department.
19.2.3 Requests for advancing the delivery date should be carefully examined and not normally be
accepted unless it is in the company’s interest to do so. Where they involve earlier payment
to the supplier as well, the concurrence of finance should be taken before acceding to the
request.
19.2.4. If material is not available for issue to sub-contractor as per BOM, Sub-Contract Head, in
consultation with Production Control, can amend the delivery schedule
In Bangalore Complex, there shall be a Central Sub-contracts Department which shall be responsible
for the following functions, in co-ordination with the various SBU Sub-contract departments:
• Looking after the interests of the ancillary Units and to deal with the Government regarding
the same.
• Preparation of Annual Summary of the Sub-contract activities in the complex for submitting
to Management.
• Bringing out the Standard rates directory in association with Industrial Engineering &
Finance once in two years.
• Establishment of new Vendors / Exclusion of vendors in case of poor performance.
Preparation of vendor directory and its periodic updation.
Sub-contract / Service Orders released by BEL should accompany the ‘”GENERAL TERMS &
CONDITIONS TO SUB-CONTRACT / SERVICE ORDER” as per ANNEXURE – 9 for orders
with vendor material and ANNEXURE – 10 for orders with BOM from BEL.
Based on the National Specification JSG: 015-1995, methodology for Vendor Rating procedure for
Sub-Contract parts has been arrived with quality, delivery (use transaction code ZQM053). The
details of the methodology are furnished at ANNEXURE – 11.)
A committee formed by SBU / units will review the vendor rating generated by SAP.
DATE : ___________________
a) Name :
:
b) Postal Address :
:
c) Factory Address :
:
d) Category of Industry :
(Indicate Large / Medium / SSI/Others)
2. STATUS
a) Land :
b) Building and Power Connection :
7. CAPABILITY OF INDUSTRY
a) SSI :
b) DGS & D :
c) BIS :
d) Govt. Departments :
e) PSU’s :
17. Banker :
a) Representative of PC
b) Representative of Fabrication
c) Representative of Assembly
d) Representative of Quality
e) Representative of IED
f) Representative of SC
Signature
For ………….. (Banks Name)
(Banks Seal)
(A) Here indicate no. of months sufficient to cover the last installment of delivery under the order
(B) Here indicate (date) last day of the month completing the period in (A).
It is certified that all the Material, Qty and Value listed in enclosure, which are received by us against
various orders placed by you, are lying with us and is available in the stock of our Company as on 31st
MAR’
SIGN.:
NAME:
OUT PUT LIST OF ME2O (Copied to Excel Sheet) is the enclosure for vendor to confirm. / MBLB report
can also be used.
04. SUPPLIER HAS TO FABRICATE/ MILL/ TURN/ MOULD/ WELD/ BEND/ DRILL/ TAPP/ GRIND,
ETC.AS PER DRG.
05. IN CASE OF THE SUPPLY BEING REJECTED, THE SAME SHOULD BE REPLACED ON FREE
OF COST.
06. FIRST ARTICAL APPROVAL TO BE SOUGHT FROM BEL- QA BEFORE BULK SUPPLY.
10. PLEASE SEND COPIES OF DELIVERY CHALLENS TO MANAGER, SC/ MR WITHOUT FAIL.
The time for and the date of delivery of the stores stipulated in the Purchase Order shall be deemed to be the
essence of the contract, and delivery must be completed not later than the dates specified therein. Should the
supplier fail to deliver the stores or any consignment thereof within the period prescribed for such delivery,
BEL shall be entitled at their option:
a) To recover from the supplier agreed liquidated damages, and not by way of penalty of sum of 0.5 %
(2.5% in case of purchase orders placed on time preference basis) of the value of any stores not
supplied in time for each week of delay or part of a week with a ceiling of 10 % (25% in case of
purchase orders placed on time preference basis), or
b) To purchase elsewhere, at the risk and cost of the supplier, the stores not delivered, or
c) To cancel the Purchase Order.
In the event of action being taken under b) & c) the supplier shall be liable for any loss which BEL may
sustain but the supplier shall not be entitled to any gain on repurchase made against default.
13. PAYMENT TERMS: 100% PAYMENT WITHIN 30 DAYS AFTER THE ACCEPTANCE OF THE
ITEMS BY BEL QA.
14. EXCISE DUTY EXEMPTION: THE ITEMS ORDERED AGAINST THIS ORDER IS EXCLUSIVELY
MEANT FOR THE DEFENCE PRODUCTION. THEREFORE, AS PER THE CENTRAL EXCISE
EXEMPTION NOTIFICATION NO. 63/95 DATED 16.03.1995 AND SUBSEQUENT CENTRAL
EXCISE CLARIFICATIONS, THE ITEM SUPPLIED TO BHARAT ELECTRONICS LTD FOR
DEFENCE PRODUCTION IS EXEMPTED FROM PAYMENT OF CENTRAL EXCISE
DUTY.THEREFORE NO CED IS APPLICABLE AGAINST THIS ORDER
16. SUPPLIER SHOULD INFORM BEL TO TAKE NECESSARY ACTION WHILE / AFTER
EXECUTING THE ORDER IN CASE OF ANY NON-CONFORMITY FOUND IN THE PRODUCT
NOTIFIED.
18. SUPPIER FURNISH PROCESS DETAILS AND OTHER APPLICABLE RECORD INCLUDING
SUB-TIER SUPPLIER INFORMATION WHEREEVER APPLICABLE.
19. PLEASE FURNISH A LETTER OF COMMITMENT FOR SAFETY, HEALTH AND PERIOD OF
FIVE YEARS.
22. FOR CLARIFICTION PLEASE CONTACT: CONCERNED SUB - CONTRACT HEADS/ PERSON
ON THEIR PHONE NO. / EMAIL ADDRESS.
ANNEXURE 10
04. SUPPLIER HAS TO FABRICATE/ MILL/ TURN/ MOULD/ WELD/ BEND/ DRILL/ TAPP/ GRIND,
ETC.AS PER DRG
05. IN CASE OF THE DELIVERED SUPPLY BEING REJECTED, THE SAME SHOULD BE
REPLACED ON FREE OF COST.
06. FIRST ARTICAL APPROVAL TO BE SOUGHT FROM BEL BEFORE BULK SUPPLY.
The time for and the date of delivery of the stores stipulated in the Purchase Order shall be deemed
to be the essence of the contract, and delivery must be completed not later than the dates specified
therein. Should the supplier fail to deliver the stores or any consignment thereof within the period
prescribed for such delivery, BEL shall be entitled at their option:
a) To recover from the supplier agreed liquidated damages, and not by way of penalty of sum of 0.5
% (2.5% in case of purchase orders placed on time preference basis) of the value of any stores
not supplied in time for each week of delay or part of a week with a ceiling of 10 % (25% in
case of purchase orders placed on time preference basis), or
b) To purchase elsewhere, at the risk and cost of the supplier, the stores not delivered, or
c) To cancel the Purchase Order.
In the event of action being taken under b) & c) the supplier shall be liable for any loss which BEL
may sustain but the supplier shall not be entitled to any gain on repurchase made against default.
13. PAYMENT TERMS: 100% PAYMENT WITHIN 30 DAYS AFTER THE ACCEPTANCE OF THE
ITEMS BY BEL QA.
14. EXCISE DUTY EXEMPTION : THE ITEMS ORDERED AGAINST THIS ORDER IS
EXCLUSIVELY MEANT FOR THE DEFENCE PRODUCTION. THEREFORE, AS PER THE
CENTRAL EXCISE EXEMPTION NOTIFICATION NO. 63/95 DATED 16.03.1995 AND
SUBSEQUENT CENTRAL EXCISE CLARIFICATIONS, THE ITEM SUPPLIED TO BHARAT
ELECTRONICS LTD FOR DEFENCE PRODUCTION IS EXEMPTED FROM PAYMENT OF
CENTRAL EXCISE DUTY.THEREFORE NO CED IS APPLICABLE AGAINST THIS ORDER
15. PRIOR APPROVAL HAS TO BE TAKEN FROM BEL FOR ITEMS WITH DEVIATIONS.
16. SUPPLIER SHOULD INFORM BEL TO TAKE NECESSARY ACTION WHILE / AFTER
EXECUTING THE ORDER IN CASE OF ANY NON-CONFORMITY FOUND IN THE PRODUCT
NOTIFIED.
18. SUPPIER FURNISH PROCESS DETAILS AND OTHER APPLICABLE RECORD INCLUDING
SUB-TIER SUPPLIER INFORMATION WHEREEVER APPLICABLE.
19. PLEASE FURNISH A LETTER OF COMMITMENT FOR SAFETY, HEALTH AND PERIOD OF
FIVE YEARS.
23. FOR CLARIFICTION PLEASE CONTACT: CONCERNED SUB - CONTRACT HEADS/ PERSON
ON THEIR PHONE NO. / EMAIL ADDRESS.
2. Input :
a. Purchasing Organisation (Options: BEPO, NYPO, SIPO) - Mandatory
b. Plant (E.g. If the report has to be run for an entire company code - say BG complex, then type
11*. Similarly 13* for Ghaziabad etc)
c. Period (All GRs made during the period will be considered) - Mandatory
d. Vendor (Report can be run for a vendor, a list of vendors, or for all vendors)
e. Radio button group1: Option to run report for Purchase parts or Sub-contract parts. (Quality
rating and delivery rating calculations are different for Purchase parts and Sub-contract parts)
f. Radio button group2: Option to choose either a summary report (Ranking list) or Detail
report (with GR line items).
g. Check-boxes: Option to run report either for foreign vendors only, for local vendors only, or
for both.
4. Output:
a. Summary Report (Same for Purchase and Sub-contract parts)
Summary report has the following fields:
¾ Vendor Code,
¾ Vendor Name,
¾ Country key,
¾ Quality Rating,
¾ Delivery Rating
¾ Vendor rating
When the report is run for both foreign and local vendors, users can filter the output based on
the field “Country Key”. For example, filtering on Country Key = IN will give local vendors;
whereas filtering on Country key ≠ IN will give all foreign vendors. The report can
also be sorted on any field.
Quality, Delivery
and Vendor ratings
for the vendor are
displayed on the
green band. Ignore
the zeros printed in