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KUWAIT OIL COMPANY

POLICIES AND REGULATIONS

OF PURCHASING

Issued by:

PURCHASING TEAMS

COMMERCIAL AFFAIRS GROUP

KUWAIT OIL COMPANY (K.S.C.)

Issue No. 3

December 2008

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KOC POLICIES AND REGULATIONS FOR PURCHASING

C & MD’s Letter Page 1 of 1

Issue No. 3 Date : December 2008

CHAIRMAN AND MANAGING DIRECTOR’S LETTER

Enclosed is a document of Kuwait Oil Company Policies & Regulations of

Purchasing. All activities undertaken should be clearly aligned with the

organization’s mission.

To explore, develop and produce, marketable quality of hydrocarbon resources, of

the State of Kuwait in accordance with the government policy, good reservoir

management practice and by using the most effective, efficient and economical

means available.

All dealings and relationships with vendors/suppliers and officials shall be

conducted in an ethical manner , meeting all relevant Kuwait Petroleum

Corporation’s Policies, Legal and State Regulative requirements. Our dealings andrelationships should always be such that Kuwait Oil Company’s high standards and

good reputation is maintained, employing high-tech means, wherever possible.

You have a duty to both, yourself and the Company, to ensure that the Kuwait Oil

Company’s Policies & Regulations of Purchasing are followed. Any matter related

thereto, which causes concern or uncertainty should be raised with Purchasing

Team, who is responsible for implementing the Company’s policy in this regard.

Communications between Kuwait Oil Company and vendors/suppliers during the

period of contractual negotiation must always be handled objectively. Unless

otherwise clearly specified, all communications on purchases should always beconducted through Purchasing Team.

Please ensure that this statement along with the Kuwait Oil Company’s Policies &Regulations of Purchasing is brought to the attention of all employees and other

relevant personnel involved in the handling and administration of Kuwait OilCompany’s Procurement.

________________________

Sami Fahed Al-Rushaid

Chairman & Managing Director

Kuwait Oil Company (K.S.C.)

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Contents Page 1 of 1


CONTENTS

•THE PURPOSE OF THIS DOCUMENT

•STANDING INSTRUCTIONS

•SECTION 1: DEFINITIONS

•SECTION 2: MATERIAL REQUEST & TERMINATION

•SECTION 3: COMPETITIVE PROCUREMENT

•SECTION 4: BLANKET PURCHASE ORDER

•SECTION 5: SINGLE SOURCE PROCUREMENT

•SECTION 6: REPAIR ORDER

•SECTION 7: EMERGENCY/MAJOR INCIDENT PROCUREMENT

•SECTION 8: VITAL PROCUREMENT

•SECTION 9: PURCHASE ORDER REVISION

•SECTION 10: CANCELING PURCHASE ORDER

•SECTION 11: LIQUIDATED DAMAGES

•SECTION 12: CLAIMS

•SECTION 13: INVOICE

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The Purpose of This Document Page 1 of 1


THE PURPOSE OF THIS DOCUMENT

1. This document details Kuwait Oil Company’s Policies and Regulations

for procurement of materials.

2. The Policies and Regulations are defined to ensure a professional

approach to procurement process.

3. A summary of the main activities involved in the Kuwait Oil Company procurement process is specified in this document. Should further

clarification be required, details may be sought from Purchasing Teams

who are responsible for implementation of the Kuwait Oil Company

Policies and Regulations of Purchasing.

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Standing Instructions Page 1 of 9


STANDING INSTRUCTIONS

1. Introduction

1.1 This document shall be the only valid set of directives and

procedures for purchasing activities. Any other previous

documents shall be treated as null and void.

1.2 Regulations specified are mandatory. Should there be a need to

deviate from any specific directives; prior authority must be

obtained from the Chairman & Managing Director.

1.3 Amendments to Policies and Regulations shall be processedthrough Manager (Commercial Affairs).

1.4 This document is designed to ensure that:

1.4.1 Kuwait Oil Company’s Procurement Policies and

Regulations are clearly stated and applied. Best interests

of Kuwait Oil Company and its personnel are served and protected.

1.4.2 Administration of procurement activity is as simple and

cost-effective as possible.

1.5 Level of authorities contained in this document is governed by

Kuwait Oil Company (KSC) “Executive Delegation of Authority”

effective and any subsequent amendment thereto.

1.6

Policies and Regulations shall be implemented in conformity withthe Public Tenders Law No. 37/1964, Resolution No. 5/79 of theCouncil of Ministers (Supreme Council for Petroleum), and as

amended by Resolution No. 1/2005, the KPC Higher Tender

Committee’s Terms of Reference, the K-Companies Tendering

Regulations and Terms of Reference and KOC’s ExecutiveDelegation of Authority and shall not be implemented in isolation

therefrom.

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2. Purchasing Objective

The objective is to procure the required material with the desired quality

and delivery date at most favourable terms, whilst observing the State

Laws and Company Regulations.

3. Material Requirement

3.1 Controlling Team is responsible for requesting the material.

3.2 The value of the materials being purchased, shall determine the level

of authorization required, and the procedures to be followed.

3.3 Catalog ID shall be described fully and clearly, with out any

ambiguity. Under no circumstances the material may be described in

a manner, which may lead to splitting into smaller quantities to by-

pass, the approvals procedures depicted within this document or to

circumvent Executive Financial Delegation Authority.

3.4 No request for procurement shall be issued unless there is a clear

intent to procure the material specified.

4 Purchasing Technical Responsibility

Purchasing Teams, wherever applicable in liaison with the Controlling

Teams, shall be responsible for the following technical aspects concerning

procurement of materials.

4.1 Review of specifications prior to RFQ processing.

4.2 Handle prospective Bidder’s technical queries (if any) raised before theclosing dates of RFQs.

4.3 Technically evaluate the Bids for Store Stock materials and vet the

Controlling Team’s evaluation for direct Charge materials.

4.4 Handle supplier’s post PO award technical queries, if any and review

technical documents (like data sheets, drawings etc) as and when

required.

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4.5 In agreement with Controlling Team and supplier amend item

description or cancel item as and when required.

4.6 As and when required to review and comment on Material Inspection

Report (MIR) issued by Warehouse Team.

4.7 Prepare / amend Scope of Inspection (SOI) as and when required.

4.8 Nominate Third Party Inspection (TPI) & review interim & finalinspection reports; and handle any technical question raised by the

TPIA.

5 Competitive Procurement

5.1 The Company’s policy is to seek competitive bids from suitable,

competent and independent vendors, unless a clear and acceptable

justification can be made for single source procurement or for directnegotiation with a single vendor.

5.2 Normal competitive procurement methods shall be applied for the

selection of vendors, except where single source procurement has

been approved. However, for those items where a list of approved

manufacturers is available, the vendors shall be restricted to submit

their quotations accordingly.

5.3 Bidders must be legal entity, trader whether a person or a company

and be fulfilling the stipulated Kuwaiti Labour Ratio at the time of

submitting the bid with regard to local companies and corporations as

well as the registered agents of foreign companies in case of

performing such works in Kuwait.

5.4 Where the bids are received by KOC, it is permissible that a foreign

corporation or company submit a bid in tender provided that it shall

be registered in the Chamber of Commerce & Industry in the country

it belongs to and perform the required tasks.

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6. Emergency/Major Incident and Vital Procurement

Under special circumstances and subject to appropriate approval, Vital or

Emergency/Major Incident material requirement may be processed on fast

track basis, where some of the normal internal procedures may be by-

passed.

7. Selecting Potential Vendors

7.1 Relevant vendors should only be given the opportunity to tender ifthere is intent to award Purchase Order to them, in the event that theiroffer is most advantages. The following factors are to be judged

adequately for the materials/services to be undertaken:

- Technical Capability- Financial Standing

- Management Competence

- Quality

- Safety- Environmental Management Capability.

7.2 Pre-selection exercise, if required, shall be carried out in conjunction

with Purchasing Teams who are responsible for ensuring that selection

of vendors is carried out objectively.

7.3 Purchasing Teams shall abide by the above directives when initiating

the procedures for sourcing or selecting potential vendors.

7.4 The number of vendors invited to tender shall be in accordance with

the number specified in the internal manual of Purchasing.

7.5 It is the Company’s policy to obtain quotations from a number of

suitable and experienced vendors. Selection of vendors shall be made

from:

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7.5.1 Those vendors with valid registrations with Kuwait Oil

Company for the current year.

7.5.2

The “product list” categorizing vendors for the requiredcommodity.

7.5.3 Due consideration shall be given for maintaining invitation by

rotation, where number of listed vendors exceeds the invitees

categorized under the commodity.

8. Contact with Vendors

8.1 All correspondence and communication related to procurement with

vendors shall be directed through Purchasing Teams. Controlling

Teams are strictly forbidden from obtaining verbal or written

quotations or clarifications related to RFQs / POs directly from thevendors under any circumstances, except for “Cash Purchases” and

Budgetary Quotations.

8.2 Under no circumstances must a vendor be given information thatwould favour or handicap him in relation to other vendors for the

Request for Quotation/Purchase Order. Generally all responses to pre-

tender queries of whatever nature from and to any vendor should besent to all vendors.

9 Records of Meetings

Kuwait Oil Company representatives shall produce minutes of all formal

meetings with vendors before and after the award of any Purchase Order.

During the operation of a Purchase Order, records of all informal meetings

shall also be kept in the form of a file note. It is also essential that minutes ofimportant formal meetings where any specific agreements of authorized

personnel are reached, instructions or clarifications given or important

technical/commercial issues discussed, shall be agreed or amended as

required at subsequent meetings. Copies of all such information shall be

forwarded to the Purchase Order file.

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10. Confidentiality

10.1

Information about vendors, quotations received, internal financialestimates and intentions to and reasons for award of a Purchase Order

are STRICTLY CONFIDENTIAL and shall only be disclosed on a

“need to know” basis.

10.2 No information about any vendor shall be disclosed to other vendors.

11. Purchase Order Award

11.1 For competitive procurement, the lowest bid, which meets the

commercial and technical specification requirements, shall always be

accepted.

11.2 Supply of material should not commence until a formal Purchase

Order has been issued, except in case of Emergency/Major incidence

as described in Section 7.

12. Blanket Purchase Order Control & Administration

12.1 Following an award of Blanket Purchase Order, the Controlling Team

shall be responsible for applying adequate controls in accordance with

sound commercial practice and the procedures outlined in this

document. Where Blanket Purchase Order requires, Adjustments or

any other Revisions, the Controlling Team shall ensure that such

changes are clearly defined and that Purchasing Teams are promptly

informed for necessary processing.

12.2 The Controlling Team shall be responsible either directly or through

its nominated and authorized representative, to ensure that the scope of

work of the Blanket Purchase Order is carried out in accordance with

the contractual requirements. This includes compliance tospecification, schedules and other aspects such as site safety and

security. It is also responsible for ensuring that adequate records are

maintained of Blanket Purchase Order usage & cost and its progress.

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12.3 Where appropriate, Controlling Team shall have regular meetings with

the supplier in order to ensure that all activities are planned and that progress is being effectively monitored and recorded.

12.4 In cases of supplier’s poor performance, the Controlling Team shall

advise Purchasing Teams without delay and provide evidence. Where

the Controlling Team is able to resolve such difficulties, the

Purchasing Teams should be advised of actions taken to remedy the

situation.

12.5 In the event of serious misconduct by the supplier, or breach of

contract terms and conditions or failure to resolve any other

difficulties, Controlling Team shall promptly inform Purchasing

Teams, who will take appropriate action and advise the ControllingTeam accordingly.

12.6 All personnel responsible for the handling and administration of

contractual relationships of whatever value must ensure that there is anadequate system of internal control in place and that measures are

instituted to ensure compliance with Company’s policies and

regulations. In particular, adequate records must be kept to justify alltransactions that take place with the supplier.

12.7 No agreement shall be let or scope changed without confirmation of

the availability of funds in accordance with company procedure.Compliance with prescribed accounting systems and rules is required

to ensure that all accounts, at all times accurately reflect, properly

describe and promptly record the contractual transactions undertaken.

13 Claims

In the event of a supplier claim, the Superintendent of the Blanket Purchase

Order shall be responsible for ensuring that a thorough and fair evaluation is

carried out prior to seeking any necessary approvals. All claims shall be

forwarded to Purchasing Teams for further review and consultation, prior to

approval for settlement, as per Executive Delegation of Authority.

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14. Contract Closure

Every contract shall be closed only with sufficient documentary evidenceindicating that all work has been carried out and that financial settlements

have been made upon completion of the work and rectification of any

defects.

15. Storage and Retention of Documents

15.1 Purchasing Teams shall be responsible for the storage of all original

Purchase Order documents. Such documents, including original of

Purchase Order, parent company guarantees, amendments etc., shall be

kept in safe storage and shall be made available for reference as and

when required.

15.2 All Requests for Quotation documentation, including documents

concerning appraisal of quotations received, shall be retained by

Purchasing Teams for a period of 10 years from the date of completionof the Purchase Order.

15.3

All documentations related to disputes shall be maintained untilrespective disputes are resolved.

16. Forms of Contracts/Purchase Order

16.1 In general, all contracts shall be made under the current version of the

relevant Kuwait Oil Company published General Conditions of

Contract for Procurement.

16.2 Purchasing Teams shall be responsible for the updating of the General

Conditions of Contracts for Procurement.

16.3 Any proposed new agreement between Kuwait Oil Company and the

supplier, due to change of status, entity, amalgamation etc. shall be

referred to Legal Affairs for review and concurrence.

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17. Responsibilities

17.1 The nominated Superintendent of Blanket Purchase Order and

Purchasing Teams shall be responsible for ensuring that the contract is

strictly administered in accordance with Kuwait Oil Company’s

Policies and Regulations. Nothing in this document shall imply that

this responsibility is shared with or partially held by any other person

or Group unless the contract has more than one Superintendent. In this

case each one shall be responsible for the part under its control. TheSuperintendent of the Blanket Purchase Order shall ensure that all

necessary advise and approvals are obtained as appropriate.

17.2 Delegation of Financial Authorities for all aspects of agreementadministration shall be strictly in accordance with Kuwait Oil

Company Executive Delegation of Authority.

18. Communication with State Authorities

All relevant communications with external authorities such as Kuwait

Petroleum Corporation and Central Tenders Committee relating to tenderand contract administration shall be carried out through Commercial Affairs

Group.

19. Custodian of Policies & Regulations

Manager (CA) is the custodian of the electronic copy and responsible for

implementing the approved amendments.

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Section 1: Definitions Page 1 of 8


SECTION 1: DEFINITIONS

1.

Central Tenders Committee (CTC)

CTC reviews and approves all procurement of value in excess of KD.5,000,000/-

2. State Legal Department

State Legal Department is the Department of Legal Advice and Legislation of

the Council of Ministers, which reviews all documents related to procurement of

material with estimated value in excess of KD.5,000,000/-.

3. Kuwait Petroleum Corporation Higher Tenders Committee (KPCHTC)

KPCHTC reviews and approves all procurement in excess of KD. 1,000,000/-.

4. Kuwait Oil Company - Tenders Committee (KOCTC)

4.1 KOCTC convenes once a week to review and endorse submissions, from

Purchasing Teams for procurements in excess of KD.30,000/-. Also

reviews and approves adjustment orders with variation of more than 5%for purchase orders in excess of KD. 30,000/-.

4.2 KOCTC shall comprise of seven members as follows:

Chairman – DMD

Deputy Chairman – Manager (Commercial Affairs)

Members (five) should include; - Legal Affairs Group Rep. (One)

- Sister K Company Rep. (Two)

- others as designated. (Two)KOCTC Secretary - Team Leader Contracts Services

4.3 KOCTC Terms of Reference:-

4.3.1 Ensure sound implementation of Kuwait Oil Company’s Policies

and Procedures for Contracts and Purchasing, as applicable to issue

and award tenders and Agreements (including those exempted from

KPCHTC and/or CTC), Approval of Purchase Order Amendments

and Adjustment Orders and other related issues.

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4.3.2 Monitor and ensure that the technical and commercial evaluation of

tenders is adequate and is in the best interest of the Company.

4.3.3 Review and, if in agreement, endorse the Controlling Team’s

recommendations for issue of tenders including approval of bidders’

list, estimated cost, method of tendering, Kuwaitization

requirements of contractor’s manpower and the like.

4.3.4 Review, and if in agreement, approve confiscating of bid bonds

4.3.5 Arbitrate on any complaints received from any tenderers/suppliers

related to Tenders, Request for Quotations or Purchase Orders.

4.3.6 Handle any other issues related to tendering as requested by C&MD.

4.4 In the event the Committee is unable to agree with the Controlling Team’s

recommendations, the case together with the Committee’s remarks shall be

referred by the Chairman of the Committee to the C&MD for ruling,

copied to the concerned DMD.

4.5 In the event the Committee is divided on particular issue/subject, then the

Chairman of the Committee’s meeting will have the casting vote.

5. Kuwait Oil Company Tenders Committee Secretary

Appointed by KOCTC to execute functions as delegated.

6. Company’s Appointed Representative

The Company’s Appointed Representative shall be any person delegated bythe Company to represent it at the KPCHTC/CTC.

7. Bids Opening Committee

7.1 The Bids Opening Committee is delegated by KOCTC and shall

convene weekly to open bids received in sealed envelopes, for

Requests For Quotations (RFQ) with estimates between KD1,000/-

and KD. 5,000,000/-. The Committee shall record the bids in the

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Schedule of Bids and forward the same to Team Leader concerned for

necessary action.

7.2 The Bids Opening Committee comprises of the following members:

Team Leader Warehouse - Chairman

Team Leader Contracts Services - Deputy Chairman

Financial Group Representative - Member

Purchasing Teams’ Representative - Member

Contract Team’s Representative - Member

8 System:

Computerized material management system used by the Company, to assist in

processing and monitoring all aspects of the material cycle in the Company.

9 Catalogue ID

A number automatically generated by the System, which identifies a particular

material.

10 AAA message

AAA stands for Action/Awareness/Alert. This is a message that appears in

System indicating that a specific action is required with regard to the procurement cycle.

11 Re-Order Notice

A notice that is generated by the System indicating that the quantity in Stores

for a store stock item has fallen below a specified limit (Re-Order Point) and

may require replenishment action. Re-order is also generated for direct charge

items.

12 Need Date

The date, the material is required to be received by Kuwait Oil Company.

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13 Controlling Team

Team administrating a project and initiating Material Request (MR) for thesame. This team is also responsible for the technical evaluations of offers

received, as applicable.

14 Supply Agreement Suprintendent

The person nominated by the Company as being responsible for all contractual

matters relating to the supply agreement (BPO). Under normal circumstances

this will be a member of Purchasing Teams during the pre-award stage and a

member of the Controlling Team after award.

15 Stores Stock Items

Items of material stocked for normal maintenance of equipment / facility. These

items are regularly replenished to ensure continuous availability.

16 Direct Charge Material

Materials required for specific job and not subject to replenishment. The cost of

which is charged to the concerned Team at the time of withdrawal from theStores.

17 Surplus

Materials considered having no immediate or foreseeable future use in Kuwait

Oil Company.

18 Company’s Executive Delegation of Authority

The Executive Delegation of Authority is level of authority approved by the

Company Board of Directors and issued by the Chairman and Managing

Director, to commit and incur expenditure on behalf of the company.

19 Financial Approval

Approval obtained by the controlling Team from Cost and Management

Accounting Team to ensure the availability of funds, prior to the procurement of

Direct Charge Material for projects.

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20 Vendor

Company/Establishment/Manufacturer participating in Request for Quotations.

21 Supplier

A Vendor who has been awarded a Purchase Order for supply of material.

22 Material Requests

Material Requests are generated in the System, by the Controlling Team where

the material requirement is specified.

23 Purchase Requisitions

Purchase Requisitions are generated by the System for further procurement

action.

24 Request For Quotation (RFQ)

Document issued to the vendors requesting them to quote their best prices,delivery, against the specified material and the conditions for the supply. RFQ

and subsequent Purchase Orders shall be governed by relevant Terms &

Conditions included in the RFQs.

25 Purchase Order

Document authorizing the supplier to supply the items listed therein. Purchase

Order shall generally be issued to the successful vendor meeting thespecification, terms and conditions of the relevant Request for Quotation.

26 Purchase Order Revision

A revised Purchase Order issued to the supplier to record any changes to

quantity, price, description, supplier’s address, payment terms, etc.

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27 Cash Purchases

These are items valued as per delegation of authority procured from the localmarket. These items are neither stores stock items nor items which are covered

by Supply Agreement. Teams may procure such items directly without the

normal documentation and without involving Purchasing Teams.

28 Repair Order

A Purchase Order to cover activity and cost related to repairing an

equipment/material.

29 Competitive Procurement

Competitive Procurement is to obtain quotations from a number of potential

vendors.

30

Single Source Procurement

Single Source Procurement arises when the Controlling Team nominates a

specific source/manufacturer for the material, justifying this requirement on

financial or compatibility grounds. Purchasing Teams shall vet justifications forsingle source procurement prior to procurement action.

31 Emergency/Major Incident Procurement

Emergency Procurement is defined as procurement required immediately when

a major catastrophe has occurred, seriously effecting the Company’s operations,

i.e. blowouts, major oil spillage, structural failure and major damage

to installations. Such procurements are intended to cover the initial requirements

at the onset of the catastrophe, and shall require the prior approval of the

Chairman and Managing Director. Once the situations are contained, further

procurement action would be classified as “Vital Procurement”.

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32

Vital Procurement

Vital procurement process is to cover Health, Safety & Environment related

items. Other materials where the time scale involved in the normal procurement

procedures would cause expense or loss to the Company or would impair its

operating efficiency or for projects, where accelerated completion thereof,

would result in achieving significant financial advantages/high revenue. Vital

procurement, with appropriate authorization, entails a fast track process

circumventing normal tendering process.

33 Supply Agreement (Blanket Purchase Order)

Blanket Purchase Orders are long-term agreements with suppliers/manufacturers

to provide specific material or materials at agreed prices, over a specified period

of time, with a not to exceed value stipulated in the Agreement. Blanket

Purchase Orders can either be for supply as and when required or for consigned(Imprest) items or any other form.

34

Schedule of Tenders/Bids

A schedule prepared by Central Tenders Committee or Bids Opening

Committee, after the receipt of Bids. This schedule shall outline the names of

vendors who have participated, and the amount of each bid.

35 Commercial Affairs Internal Purchasing Manual

Manual, which states in detail the procurement processes to be followed by

Purchasing Teams; who shall be responsible for meeting the requirements of theuser by procuring the right material with the right quantity at the right time and

right price.

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36 Vendors Evaluation Committee (VEC)

36.1

VEC comprises of the following:

Team Leader Purchasing (II) - Chairman

Team Leader Insp. & Corr. (N&W) - Member

Team Leader Projects Control - Member

Team Leader Drilling & Work Over Svcs. - Member

Team Leader Accounts Payable - Member

Team Leader Maintenance (SK) - Member

Team Leader Maintenance (WK) - Member

Team Leader Maintenance (NK) - Member

36.2 Responsibilities and Functions

36.2.1 To review/approve the procedure, questionnaires and evaluation

criteria for the Pre-Qualification of Vendors/Manufacturers.

36.2.2 To review the recommendations from various Teams and to Pre-

Qualify/ not qualify the Vendors/manufacturers for inclusionin the Approved lists.

36.2.3 To provide technical and commercial advice to various Teams

on Pre-Qualification of manufacturers.36.2.4 To review the recommendations in respect of poor performance

of already approved manufacturers and to black list/ omit

them from the KOC approved lists of manufacturers.

36.2.5 To regularly update the approved lists of manufacturers with

respect to change in address, name change/merger/take over

etc., update the product range, changes in contact details,

local agent and others.

36.3 The VEC will meet every month to review any related businessrequests received from Teams or evaluation of Manufacturer’s

application.

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Section 2: Material Request & Termination Page 1 of 3


SECTION 2: MATERIAL REQUESTS & TERMINATION

1. Material Requests (MR)

1.1 The controlling Team shall take a stock decision based on structural

methodology and Company stocking policy. There are two distinct

stock decision processes namely;

1.1.1. The initial decision to stock and how much when a new plant or

equipment is completed or commissioned while taking into

account of what is already stocked.

1.1.2. An ongoing assessment of stock requirements for an existing plant and equipment by taking into account the rate of

consumption.

1.2 The Controlling Team shall identify their requirements of materials

whether Stores Stock or Direct Charge Material.

1.3 The Controlling Team shall raise separate Material Request (MR) in the

System for Stock Items and Direct Charge Items.

1.4

The Material Request shall indicate MR Priority and material need date

should be directly related to MR priority. Material request created withnew Cat. IDs or where procurement becomes necessary, the Need Date

should be sufficient for procurement action considering Administrative

and Vendor Lead Time. In general Administrative Lead Time required

for preparation, issuance and evaluation of Request For Quotation(RFQ) and award of Purchase Order (PO) is as follows:-

1.4.1. With estimates up to KD 30,000/ - 10 weeks.

1.4.2. With estimates from KD 30,000 to KD 5,000,000/ - 18 weeks.

1.4.3.

With estimates above KD 5,000,000/ - 26 weeks.

1.5 The Material Request shall also include the following information:

1.5.1 Accounting details.1.5.2 Delivery requirements – to be advised as Notes.

1.5.3 Project number/Work Order if applicable.

1.5.4 Justification for single source, if applicable.

1.5.5 Detailed technical specifications.

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1.5.6 Estimated price – basis of estimations such as manufacturers’

spares list, budgetary quotations.

1.6 Prior to initiating a new item, the Controlling Team shall ensure that a

similar item/Cat ID is not available in stock. A search of the inventory

may be carried out by using any of the parameters available in the

System, particularly the following

1.6.1 Category name / type.

1.6.2 Description

1.6.3 Manufacturer, Part No. / Model No.

1.7 Controlling Team shall obtain financial approvals for Direct Charge

Materials (items for a project) by routing the Material Requests through

Cost and Management Accounting Team.

1.8 Controlling Team shall provide a realistic estimate price for all new

items to be purchased whether Direct Charge or Store Stock items. In

case of Direct Charge items, when the actual award price exceeds the

original approved price, the Controlling Team shall obtain Cost andManagement Accounting Team’s re-validation in order to proceed with

further procurement action.

1.9 On receipt of Material Request, Purchasing Teams shall process thesame in adequate manner, to meet the Controlling Team’s & the

Company’s requirement.

2. Termination

2.1 Whenever a Material Request is to be terminated, the Controlling Team

shall set the status to cancel or complete. Additionally, ControllingTeam shall

2.1.1 Review the overdue material request with work Order/project

and set status as complete or cancel from the System

periodically.

2.1.2 Reserve the right to cancel all Material requests for Direct

charge items and Purchasing Team shall review the Non Work

Order and non project overdue material request with stock item

and set Status as complete or cancel from the System

periodically.

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2.2 If the request is still in Re-order notice stage, the System will adjust

quantities. If Purchase Requisition is generated, a AAA message of

Material Request Cancellation/Termination shall be forwarded toPurchasing Teams for review and appropriate action.

2.3 On receipt of Material Termination Request, Purchasing Teams shall

cancel the Request For Quotations / Purchase Order, where applicable

or negotiate with the supplier for any cancellation charges to be

incurred.

2.4 Where cancellation is possible, the System will process the Material

Termination Request. Purchasing Teams shall revert any reserved

items to free stock.

2.5 Material which cannot be cancelled from Purchase Order may betransferred, upon receipt, to surplus account under advise to

Warehouse Team.

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Section 3: Competitive Procurement Page 1 of 8


SECTION 3: COMPETITIVE PROCUREMENT

1.

PROCESSING OF REQUEST FOR QUOTATION (RFQ)

1.1 Purchasing Teams shall review the items on Purchase Requisition backlog for item description, quantity and need date. For cost-

effectiveness similar items shall be grouped together in a single RFQ.

1.2 The tender documents must include the elements and basis oftechnical and commercial evaluation.

1.3

Selection of potential vendors for participation in RFQ shall be basedon the following criteria:

1.3.1 Vendor is registered with Kuwait Oil Company for the current

year.

1.3.2 From the Product List, depicting vendors for the required

commodity. Due consideration should be given for maintaining

invitation by rotation, where number of listed vendors exceeds

the invitees categorized under the commodity.

1.3.3 Vendors with good performance and experience.

1.3.4 The number of vendors invited to participate shall be as

detailed in the Commercial Affairs Internal PurchasingManual.

1.3.5 For procurements below KD.5,000/-, requests from other

interested and registered vendors may be considered after

issuance of the RFQ.

1.3.6 For procurements with estimate between KD5,000/- and

KD5,000,000/-, the RFQ shall be advertised in Kuwait Al

Youm to facilitate registered vendor’s participation.

1.3.7 For procurements with estimate higher than KD5,000,000/-,

Central Tenders Committee shall issue the RFQ to facilitate theregistered vendor’s participation.

2. APPROVALS PRIOR TO ISSUE OF REQUEST FOR QUOTATIONS

2.1 Approvals

2.1.1 Prior to issue of the competitive RFQ, approvals shall be

obtained, as per Executive Delegation of Authority.

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2.1.2 RFQ / Tender cancellation request from the Controlling Teams

shall be routed through the appropriate delegated authority.

2.1.3 KOCTC approval must be obtained to cancel an RFQ, which

has been approved by them for issuance.

2.1.4 In case an RFQ is to be re-issued, approval is to be obtained

from the appropriate delegated authority / committee. Tender

document fee shall not be charged from those vendors who had

previously bought the original RFQ.

2.1.5 Issuance of a supplementary to the RFQ shall be approved by

the appropriate delegated authority.

2.2 Kuwait Oil Company Tenders Committee (KOCTC):

KOCTC’s approval shall be obtained for all RFQs where the estimated

value is greater than KD30,000/-.

2.3 Kuwait Petroleum Corporation Higher Tenders Committee

(KPCHTC):

KPCHTC’s approval shall be obtained for all RFQs where theestimated value is greater than KD1,000,000/-.

2.4 Central Tenders Committee (CTC):

CTC’s approval shall be obtained for all RFQs where the estimated

value is above KD5,000,000/-. Procurements of materials in excess of

KD5,000,000/- for the projects stated under Emergency/Major

Incident and Vital Procurement are exempted from CTC approvals(Only KPCHTC approval is sufficient).

2.5 State Legal department:

Where the estimated value of the RFQ is greater than KD.5,000,000/-,

the documents shall have to be reviewed by the State Legal

department.

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3. ISSUE OF REQUEST FOR QUOTATION (RFQ)

3.1

Procurements Below KD5,000,000/-

RFQ shall be signed by Purchasing Teams in accordance with

Delegation of Authority and issued to the vendors, requesting them to

collect and submit their quotations as follows;

3.1.1 RFQs with estimate of KD.1,000/- and below. The selected

vendors shall be invited by fax / e-mail to collect the RFQ.

Vendors may submit their bids by hand, fax or e-mail, by the

stipulated closing date.

3.1.2 RFQs with estimate from KD. 1,001/- to KD. 5,000/-. The

selected vendors shall be invited by fax / e-mail to collect the

RFQ. Vendors shall submit their bids, by the closing date, in

sealed envelopes to be deposited in the tender box located at a

designated area.

3.1.3 RFQs with an estimated value above KD5,000. Subsequent to

approvals as per Executive Delegation of Authority or KOCTC

(for estimates above KD30,000/-), Purchasing Teams shallrequest KOCTC Secretary to place an advertisement in Kuwait

Al Youm detailing RFQ requirements, issuing/closing date. As

deemed necessary, Team Leaders Purchasing may approve

exemption from advertising in the Kuwait Al Youm. In this

case, potential vendors may be invited directly.

3.1.4 If the estimated value is greater than KD5,000/-, the following

conditions shall be included in the RFQ.

- the vendor shall include with its offer a 2.5% bid bond or asspecified, valid for 90 days.

- in case of an award, the vendor shall be required to submit

10% deposit or as specified, performance bond in a form of a

Letter of Guarantee, valid up to delivery date plus 12 or 18months as specified in the RFQ

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3.1.5 Purchasing Teams shall forward sufficient sets of the RFQ

documents, one day prior to issuing date, to KOCTC’s Secretary

for sale to the vendors. Vendors shall submit their bids, by theclosing date, in sealed envelopes to be deposited in the tender

box located at a designated area.

3.1.6 Subsequent to the delegated authority approvals, supplementary

issuance (including change of closing date) must be advertised in

Kuwait Al-Youm. As deemed necessary, Team Leaders

Purchasing may approve exemption from advertising in the

Kuwait Al Youm. In this case, potential vendors are to be

informed directly.

3.2 Procurements Above KD5,000,000/-

3.2.1 Purchasing Teams shall arrange for forwarding sufficient sets of

the RFQ documents one week prior to issuing date, to CTC for

issuance.

3.2.2 The CTC on receipt of the copies of the RFQ and the

Advertisement Form from Kuwait Oil Company, shall advertise

in Kuwait Al Youm and issue RFQ documents to vendors.

4. OPENING OF BIDS

4.1 Purchasing Teams shall receive and open offers for RFQ with an

estimate less than KD1,000/- and all Single Source offers.

4.2 Bids Opening Committee shall open the Tender box for the sealed bids

for RFQ, issued by Purchasing Teams, with an estimate value aboveKD1,000/-.

4.3 All the received bids shall be listed on the “Schedule of Tender”.

4.4 Late bids shall be marked as “Received Late” and shall not be

considered.

4.5 The CTC shall open all Bids that were received by CTC Tender box,

and shall record them in the “Schedule of Tenders” Form.

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4.6 The CTC shall forward all bids to the Company (Purchasing Teams)

for evaluation.

4.7 If the estimated value is greater than KD5,000/-, the received bids

shall include a 2.5% bid bond or as specified. Bids received without

the stipulated bid bond may be disqualified.

5. EVALUATION OF BIDS

5.1 Purchasing Teams shall review the “schedule of Tender” and rank the

bids according to price. They shall then evaluate commercially all

received bids and may disqualify bids, if necessary, where information

such as all required prices or required documents have not been

provided.

5.2 Purchasing Teams shall carry out Technical Evaluation for all Store

Stock items and for Direct Charge items with estimates below KD

5,000/-. Whereas, Technical Evaluation of Direct Charge items with

estimates over KD 5,000/- shall be the sole responsibility ofControlling Teams. Unless otherwise stated, Controlling Teams may

delegate such an activity to Purchasing Team based on mutual

agreement.

5.3 Where the Controlling Team carries out the technical evaluation, it

shall be responsible for reviewing the technical information provided

by the vendor. Purchasing Teams shall obtain additional

information/clarification from the vendor, if required.

5.4 In the event it is necessary to extend the Price Validity of the received

bids, Purchasing Teams sha1l ensure that appropriate action is taken

directly with bidders or through CTC (for those bids received throughCTC). Request for extension shall be approved by Team Leader

Purchasing concerned and copied to Manager Commercial Affairs for

second and subsequent extensions.

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6. AWARD OF PURCHASE ORDER

6.1

Upon completion of the commercial and technical evaluation of RFQ,Purchasing Teams shall prepare Award Recommendation. Obtain

approvals through appropriate committees and as per the Executive

Delegation of Authority.

6.2 If the recommended bid for award is greater than the estimated

amount, and if the bid is for direct charge items, then financial

approval for the additional cost shall be sought by the Controlling

Team.

6.3

In the event Team Leader Purchasing is unable to agree with the

Controlling Team’s recommendation for awards below KD30,000/-,

the case together with Team Leader Purchasing’s remarks shall bereferred by Team Leader Purchasing to KOC Tenders Committee for

their ruling, copied to Group Manager concerned.

6.4 When the award is above KD30,000/-, the recommendation shall beforwarded to the Kuwait Oil Company Tenders Committee for their

approval/ruling. In case the award value is less than KD30,000/-,

where the initial estimate was over KD30,000/-; the awardrecommendation to be approved as per Executive Delegation ofAuthority for Purchasing Teams, without referring to KOCTC.

6.5 When the award value is above KD1,000,000/-, the recommendationshall be forwarded to KPCHTC for their approval. In case the award

value is less than KD1,000,000/- where the initial estimate was over

KD1,000,000/- the award recommendation to be approved by

KOCTC and notified to KPCHTC, through KOCTC Secretary.

6.6 All award recommendations above KD.5,000,000/- shall be forwarded

to the CTC for approval. If in agreement, the CTC shall inform the

Company through a letter addressed to Chairman & Managing

Director. In case the award value is less than KD5,000,000/-, where

the initial estimate was over to KD5,000,000/-, the award

recommendation to be approved by KPCHTC and notified to CTC,

through KOCTC Secretary.

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6.7 Purchasing Teams shall notify the successful vendor that he has been

awarded the Purchase Order, if the RFQ was issued by KOC.

6.8 Where the CTC issued the RFQ, they shall inform the successful

vendor that he has been awarded the Tender and forward a copy of the

notification letter to Kuwait Oil Company.

6.9 For awards above KD 5,000/-.Upon receipt of approval of Award

Recommendation as per Executive Delegation of Authority or the

concerned Committee, Purchasing Team shall invite the successfulvendor to submit the required documents, including performance bond

in a form of a Letter of Guarantee from a bank authorized to operate inKuwait, as specified in the Tender. The invitation fax shall include the

total award value and delivery date of the material, based on quotationor subsequent negotiation.

6.10 Subsequent to receipt/verification of all required documents,Purchasing Teams shall generate Purchase Order (PO). All POs with

Liquidated Damages, must clearly state the delivery date. Where bulk

material is being delivered continuously (without interruption) over a

reasonable period of time, the first day of delivery shall be consideredas actual delivery date.

6.11 Purchasing Team shall arrange for the supplier and the delegated

authority in Kuwait Oil Company to sign the Purchase Order.

6.12 In case, Third Party Inspection is required, Purchasing Teams shall

nominate a Third Party Inspection Agency, after signing of the

Purchase Order, and forward to them all the required information.

Third Party Inspection nomination will be notified to the supplieraccordingly.

6.13 After signing of the Purchase Order the original 10% Guarantee (or as

specified) shall be forwarded to Accounts Payable Team for follow up

of the performance bond. If required, Purchasing Teams or Controlling

teams shall request Accounts Payable Team to obtain extensions of

letters of guarantee from the supplier.

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6.14 Should the value of the recommended bid be greater than

KD1,000,000 and exceed the Controlling Team’s estimate,Managements approval shall be obtained by Purchasing Teams as

follows.

6.14.1 Bid value exceeds estimate more than 5%, up to 10% -

Respective DMD.

6.14.2 Bid value exceeds estimate more than 10%, - Chairman &

Managing Director

6.15 Purchasing Teams shall ensure that vendors submit Declaration Form

in accordance with Articles 2 & 3 of Law No. 25/1996 relating to the

declaration of commission with State contracts for offers above

KD100,000.

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Section 4: Blanket Purchase Order (BPO) Page 1 of 3


SECTION 4: BLANKET PURCHASE ORDER (BPO)

Blanket Purchase Orders (BPOs) are long-term agreements with

suppliers/manufacturers to provide specific material or materials at agreed prices,

over a specified period of time, with a not to exceed value stipulated in the

Agreement. BPOs can either be for supply as and when required or for consigned

(Imprest) items or any other form. Against supply, the invoice is processed for

payments as and when the material is delivered and accepted, whereas against

consigned items, the invoice is processed only when the material is withdrawn from

the Stores.

1. Controlling Team / Purchasing Teams shall select and identify items that are

required to be procured under BPO. Controlling Team shall forward the

request to Purchasing Teams along with the relevant information.

2. Upon identifying the requirement or on receipt of the request from

Controlling Team, Purchasing Teams shall;

2.1 Prepare the Tender incorporating all the relevant procurement conditions

and circulate the document to Controlling Team (if applicable), LegalGroup, Insurance Team and Accounts Payable Team for comments.

2.2 Review and incorporate the comments in the documents and process as

detailed in Section 3, up to signing the Memorandum of Agreement.

3. The Controlling Team shall advise the contract commencement date to the

supplier and notify to the Purchasing Teams, who shall input the details in theSystem and activate the BPO. Original BPO to be signed in accordance with

Executive Delegation of Authority (Chapter 9.4).

4.

The Controlling Team shall issue BPO Releases as when required. These shall be signed in accordance with Executive Delegation of Authority.

5. The Controlling Team shall follow up and expedite the delivery of items.

6. Upon accepting the delivered material or issuance of the consigned items by

stores, as the case may be, the supplier shall submit the Invoice to Accounts

Payable Team for payment.

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7 Controlling Team shall monitor the BPO to ensure the following

7.1 To ensure the annual price change, if applicable.

7.2 To initiate Adjustment Order as and when required.

7.3 To ensure that the value (not to exceed value) of the BPO is not

exceeded.

7.4 To initiate request for renewal or issue of new Tender.

8 Adjustment Orders concerning Original BPO

8.1 Incase new items are to be added to the original BPO

8.1.1 The Controlling Team shall invite at least three potential

vendors to submit their offers in a sealed envelope, with aspecified closing date. The offers are to be deposited in tender

box at a designated location in (KOCTC) Secretary’s office.

8.1.2 Controlling Team shall notify, upon issuance of the request for

quotation, Secretary of KOCTC of the closing date in order toarrange receipt of such quotations.

8.1.3 Bids Opening Committee shall open the received offers and

record the prices on the Schedule of Bids and forward the bidsto Purchasing Teams for further handling with the ControllingTeam.

8.1.4 The controlling Team shall evaluate the received offers,

negotiate wherever possible, and submit an Adjustment Orderwith their recommendations to Purchasing Teams for review

and obtaining KOCTC approval.

8.2 For extension of BPO additional period or to amend Not To Exceed

Value (NTEV), the controlling Team shall submit an AdjustmentOrder with their recommendations/justifications to Purchasing Teams

for review and obtaining KOCTC approval.

9. Adjustment Orders concerning BPO Releases (BPO Release Revisions). The

Controlling Team shall issue Adjustment Orders as and when required in

accordance with Executive Delegation of Authority, (See Section 7 –

Purchase Order Revision).

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10. Purchasing Teams shall notify Controlling Team when the maximum value

of BPO (not to exceed value) reaches 80% of the Blanket Purchase Order

value.

11. Purchasing Teams shall notify Controlling Team one year prior to expiry of

BPO for necessary renewal or issue of new Tender.

12. Controlling Team shall ensure that all the Terms and Conditions of the BPO

are adhered to i.e. liquidated damages, insurance, etc.

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Section 5: Single Source Procurement Process Page 1 of 2


SECTION 5: SINGLE SOURCE PROCUREMENT PROCESS

1.

Single source procurements for stores stock (non spares) or Direct ChargeMaterial, shall require a written valid justification from the Controlling Team

and approval, as per Executive Delegation of Authority. The detailed justification for Single Source Procurement should include:

1.1 Economic benefits.

1.2 Operational technical compatibility reasons, where applicable.1.3 The estimate price of the material, obtained either through a budgetary

quotation or a price list.

2. Upon receipt of the Single Source justification and the relevant initial request

documentation, Purchasing Teams shall;

2.1 Review the justification from a commercial, economic viewpoint

considering its reasonableness.

2.2 Consider alternative sources of supply for the material particularly,

vendors of the original equipment.

3. Irrespective of the value, Purchasing Teams shall obtain a quotation from the

Single Source specified in the item description. Purchasing Teams may alsoobtain quotation from other source of supply, where possible, provided that

the additional source invited is capable of supplying materials in full

conformity with specified specifications.

4. Purchasing Teams shall evaluate commercially and technically the bid

package. If deemed necessary eg. deviation, Purchasing Teams may liaise

with the Controlling Team for further technical evaluation.

5. Controlling Team / Purchasing Teams shall be responsible for reviewing theinformation provided by each vendor for technical evaluation. If additional

information is required, Purchasing Teams shall obtain clarification from the

vendor. Controlling Team shall then recommend a vendor and forward the

package back to Purchasing Teams.

6 Award recommendation (including Plan approval form) shall be approved in

accordance with the Executive Delegation of Authority. Additionally:-

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Section 5: Single Source Procurement Process Page 2 of 2


6.1 In the event Team Leader Purchasing is unable to agree with the

Controlling Team’s recommendation for awards below KD30,000/-,

the case together with Team Leader Purchasing’s remarks shall bereferred by Team Leader Purchasing to KOC Tenders Committee for

their ruling, copied to Group Manager concerned.

6.2 If the actual award is above KD30,000/-, Kuwait Oil Company

Tenders Committee (KOCTC) shall review and approve the single

source recommended procurement.

6.3 If the actual award is above KD1,000,000/-, KPCHTC shall review

and approve the single source recommended procurement.

6.4 If the actual award is above KD5,000,000/-, CTC shall review and

approve the single source recommended procurement.

7 Should the value of the recommended bid be greater than KD1,000,000 and

exceed the Controlling Team’s estimate, Managements approval shall be

obtained by Purchasing Teams as follows.

7.1 Bid value exceeds estimate by more than 5%, up to 10% - Respective

DMD.

7.2 Bid value exceeds estimate by more than 10%, - Chairman &

Managing Director

8. Purchasing Teams shall be responsible for checking prices and other related

costs, i.e. freight/shipping, etc. to establish the reasonableness of the

prices/charges, before submission to the appropriate Committee.

9. The Purchase Order shall be signed as per Executive Delegation ofAuthority.

10. Purchasing Teams shall be responsible for arranging Third Party Inspection,

where applicable and expediting all Purchase Orders placed.

11. Purchasing Teams shall ensure that local vendors submit Declaration Form

in accordance with Articles 2 & 3 of Law No. 25/1996 relating to the

declaration of commission with State contracts for offers above KD100,000.

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Section 6: Repair Order Page 1 of 1


SECTION 6: REPAIR ORDER

1. Local facilities or overseas manufacturers may perform repairs to anequipment/material. To cover this activity a Repair Purchase Order is issued.

2. The controlling Team shall prepare Material Request with detailed scope of

work and accordingly System will automatically generate a Purchase

Requisition.

3. Purchasing Teams shall review the Purchase Requisition and create RFQ.

4. Whilst the supplier/manufacturer is being contacted for shipping instructions,approvals shall be obtained as follows;

4.1 If repair estimate value is below KD30,000/-, as per Executive


4.2 If repair estimate value exceeds KD30,000/-, approval from KOCTC.

4.3 If repair estimate value exceeds KD1,000,000/-, approval from

KPCHTC.

4.4 If repair estimate value exceeds KD5,000,000/-, approval from CTC.

5. After obtaining appropriate approval, Purchasing Teams shall arrange the

shipment of the equipment for repairs through Warehouse Team or throughthe local supplier. Purchasing Teams shall coordinate negotiations between

the Manufacturer/Supplier and Controlling Team.

6. Once an agreement has been reached and the final repair charges are within

the approved cumulative value, Purchasing Teams shall generate a Purchase

Order as per the Executive Delegation of Authority.

7. After receipt of material, approvals as per Executive Delegation of Authority

or appropriate Committees shall be obtained for the actual repair cost andissue Purchase Order Revision, if required.

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Section 7: Emergency/Major Incident Procurement Page 1 of 2


SECTION 7: EMERGENCY/MAJOR INCIDENT

PROCUREMENTS

This special classification of procurement shall only be used for materials required

for works or services necessary for expeditiously dealing with declared

emergencies such as blow-out, major oil spillage, structural failure, major damageto an installation, or similar incidents and/or prevent the occurrence of possible

imminent loss or damage.

The incidents considered of emergency nature, as identified by KPC, are asfollows:

- Emergency Shutdown

- Repair of damages discovered during annual overhauls, which

have not been planned before hand and would reflect on the

timely completion/operation of installation as per schedule.

- Rehabilitation of damaged installations due to major incident,

explosion, and blowout.

- Repair works to oil/gas spillage.

1. In the event of an Emergency/Major Incident, the Group Manager responsible

shall evaluate the situation to ascertain if the materials are required

immediately.

2. The Group Manager shall advise his/her Deputy Managing Director of the

situation, who shall obtain the verbal approval of the Chairman & Managing

Director, for the necessary expenditure.

3. Verbal authorization shall be sufficient to initiate action, but must be followed

up by comprehensive Material Requests with justifications, to Manager

(Financial Services) and to Purchasing Team Leaders. Should the estimate

value of the materials exceed KD5,000,000/-, approval shall be obtained from

KPC Board of Directors for exemption from normal tendering.

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Section 7: Emergency/Major Incident Procurement Page 2 of 2


4. Once an Emergency/Major Incident is declared Purchasing Teams shall order

material on a vital basis without using the normal procedures. Formalities will

be completed later on.

5. After the emergency situation has been contained, the Group Manager shall

summarize all the expenditure incurred and submit it through his/her Deputy

Managing Director for Chairman & Managing Director’s approval.

6. Once an Emergency/Major Incident is contained, Controlling Team shall enter

the details of the items procured in the System to raise a Material Request.

7. Purchasing Teams shall complete procurement formalities and generate a

report referencing Purchase Order, Materials and Prices.

8. Commercial Affairs Group shall provide information to KOCTC forexpenditures exceeding KD30,000/-. KPCHTC for expenditure exceeding

KD1,000,000/- and to CTC for expenditure exceeding KD5,000,000/-.

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Section 8: Vital Procurement Page 1 of 2


SECTION 8: VITAL PROCUREMENT

This special classification of procurement shall only be used for materials requiredin circumstances where the urgent repair or reinstatement of an installation or

facility is vital to the Company’s interests and the works have to be executed withina time scale, which prevents the use of normal tendering procedure.

1. Controlling Team shall raise a Material Request in the System.

2. Forward a detailed technical/operational/commercial justification for vital

procurement, through the concerned Group Manager to Manager (Commercial

Affairs), with a copy to Purchasing Teams.

3. The Material Request shall cover the full list of items required, together with

full technical details, estimated value and the NEED Date.

4. Forward to Purchasing Teams copies of budgetary quotations and list of

potential vendors, if applicable.

5. Purchasing Teams shall obtain KOCTC/KPCHTC/CTC approvals and procure

the materials on fast track basis.

6. Following are the circumstances which are considered vitally urgent works and

procurement of material may be processed without CTC involvement

irrespective whether their value is in excess of KD5,000,000/-, subject to

obtaining prior approval from KPC Board of Directors for exemption from

CTC:

- Projects, where accelerated completion thereof, would result in achieving

significant financial advantages/high revenue.

-

Urgent projects related to production.- Projects involving direct potential HSE hazards to installations/individuals.

- Projects associated with other urgent ones having specified tight time

schedule.

7. Purchasing Teams shall be responsible for preparation of RFQ documents and

for processing the RFQ with appropriate level of urgency.

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Section 8: Vital Procurement Page 2 of 2


8. All contractual arrangements authorised on the above described basis shall

remain subject to KOC Tender Committee review and endorsement at allappropriate stages. They shall also be subject to the required endorsement /

approval in accordance with the Company's Delegation of Authority prior to

any commitment with a Contractor.

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Section 9: Purchase Order Revision Page 1 of 2


SECTION 9: PURCHASE ORDER REVISION

(Includes BPO Release Revision)

Purchase Order Revisions are required when there are changes to the quantity,

price, description, supplier address, payment terms, etc. This information may

come to Purchasing Teams from the supplier, (or) within the Kuwait Oil Company.

When the revision is approved, the original/previous purchase order revision issuperseded.

1. Purchase Order Value of KD. 30,000/- and below: -

1.1 Purchase Order Revision shall be submitted for approval in

accordance with the Executive Delegation of Authority.

1.2 In the event Team Leader Purchasing is unable to agree with the

Controlling Team’s recommendation for Purchase Order Revision

below KD30,000/-, the case together with Team Leader Purchasing’s

remarks shall be referred by Team Leader Purchasing to KOC Tenders

Committee for their ruling, copied to Group Manager concerned.

2. Purchase Order Value Exceeding KD. 30,000/-

2.1 KOCTC approval is required for Purchase Order Revisions where, the

original Purchase Order Value exceeds KD. 30,000/-, and the value of

the Purchase Order Revision or the cumulative value of all Revisions

would increase the original Purchase Order Value by 5%.

2.2

When a Purchase Order Revision to a Purchase Order whose valueoriginally was below KD.30,000/- but after revision the value exceeds

KD.30,000/-, the Purchase Order shall be presented to KOCTC for

their approvals.

2.3 KPCHTC approval is required for Purchase Order Revisions where,

the original Purchase Order Value exceeds KD. 1,000,000/-, and the

value of the Purchase Order Revision or the cumulative value of all

Revisions would increase the original Purchase Order Value by 10%

or KD.5,000,000/-; whichever is less.

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Section 9: Purchase Order Revision Page 2 of 2


2.4 When the Revision to a Purchase Order whose value originally was

below KD.1,000,000/- but after the revision, the value exceeds

KD.1,000,000/-, then KPCHTC approval shall be obtained.

2.5 For Purchase Orders of value more than KD. 250,000/- up to

KD.1,000,000/-, where Purchase Order Revision exceed 20% of the

total Purchase Order Value Price, Purchasing Teams shall only prepare

and provide a breakdown of all such Purchase Order Revisions to KPC

HTC in the form of a monthly report.

2.6 CTC approval is required for Purchase Order Revisions where, the

original Purchase Order Value exceeds KD5,000,000/- and the value

of the Purchase Order Revision or the cumulative value of all

Revisions would increase or decrease the original Purchase Order

Value by 10% or KD5,000,000/-; whichever is less.

2.7 When the Revision to a Purchase Order whose value originally was

below KD5,000,000/- but after the revision, the value exceeds

KD5,000,000 then CTC approval shall be obtained.

3.

Extension of Period

Purchase Order Revision for extension of delivery period shall be issued

after obtaining approval as described under Liquidated Damages, Section 11.

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Section 10: Cancelling Purchase Order Page 1 of 1


SECTION 10: CANCELLING PURCHASE ORDER

1. Purchasing Teams shall receive the cancellation request of the Purchase

Order, from within Kuwait Oil Company or the Supplier. Cancellation could

also be decided within Purchasing Teams based on specific circumstances or

other reasons.

2. Purchase Orders cancellation shall be subject to approvals in accordance

with the Executive Delegation of Authority.

3. Purchasing Teams shall be responsible for obtaining appropriate

Committee’s approval for cancellation of the Purchase Order.

4. Purchasing Teams shall arrange to forward the cancelled Purchase Order to

the supplier and obtain acknowledgement.

5. The defaulted supplier/manufacturer shall be reported to appropriate

committees for further necessary action.

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Section 11: Liquidated Damages Page 1 of 1


SECTION 11: LIQUIDATED DAMAGES

&

EXTENSION PERIOD

Liquidated Damages

1. Depending on the agreement with the supplier Purchasing Teams shall

specify in the Purchase Order special instructions, if liquidated damages is

applicable.

2. Accounts Payable Team shall receive the Supplier’s invoice. Verify ifliquidated damages conditions apply or not. If liquidated damages clause is

applicable they shall forward the invoice to Purchasing Teams for reviewand approval.

3. Purchasing Teams shall assess the case and determine if liquidated damagesis applied or waived.

4. Purchasing Teams shall calculate the liquidated damages, and obtain

appropriate approvals for application or waiving, in accordance with theExecutive Delegation of Authority.

5. If Liquidated Damages is to be applied, Purchasing Teams shall forward a

letter to the supplier notifying the liquidated damages. A copy of the letter,

along with invoice to be forwarded to Accounts Payable Team for necessary

action.

Extension of Period

Where it is agreed to extend delivery period of an already signed and issued

Purchase Order or Blanket Purchase Order Release, a Purchase Order

Revision shall be issued and approved in accordance with Executive

Delegation of Authority for waiving liquidated damages

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Section 12: Claims Page 1 of 1


SECTION 12: CLAIMS

All claims from the suppliers shall be processed promptly.

The Superintendent of the Blanket Purchase Order and/or Purchasing Teams,

wherever the case is, shall be responsible for full evaluation of the claim.

Recommendation shall be approved as per Executive Delegation of Authority and

respective committee.

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Section 13: Invoice Processing Page 1 of 1


SECTION 13: INVOICE PROCESSING

1. Approval of partial payment, per Executive Delegation of Authority should be obtained, for material received by company with minor discrepancies and

require long procedures for rectification.

2. Approval against shipping document per Executive Delegation of Authority

should be obtained.

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I

Kuwait National Petroleum Company

A subsidiary of Kuwait Petroleum Corporation

RReessoolluutt iioonn NNoo.. 77 oof f 22000099

OOf f tthhee BBooaar r dd oof f DDiir r eeccttoor r ss

On material purchase, entrusting services,

contracting, consultancy services and sale

of surplus material items

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II

In the name of God, most compassionate, most merciful

Resolution No. 7/2009 of the Board of Directors

Adopted in the meeting No. 520 (3/2009)

Having perused:

1- The resolution of the Supreme Petroleum Council No. 5/79 already

amended as per resolution No. 1/1998 and No. 1/2005 on regulating

the tenders of oil companies,

2- Law No. 37/1964 on public tenders,

3- By-law of HTC, Kuwait Petroleum Corporation and affiliates,

4- The regulatory by-law for oil companies tenders of Kuwait

Petroleum Corporation,

5- The financial regulations of Kuwait Petroleum Corporation and

affiliates already adopted on 5/9/2005,

6- The resolution of the Board of Directors No. 14/2006 issued on

7/8/2006 on the regulations amending the Financial Authorities of

the Company and both resolutions of the Board of Directors No.

24/2007 and No. 25/2007 dated 20/11/2007 on the proposed

amendments to Financial Authorities regulation, and

7- The resolution of the Chairman and Managing Director No. 35 of

2005 on material purchases, entrusting services, contracting,

Consultancy services and sale of surplus items of the Company,

It is hereby resolved:

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III

Artic le 1(Regulations for Implementing and executing purchases and

entrusting works)

The purchases and entrusting works regulations attached herewith and

all its contents, including its Articles, provisions and amendments

thereto are hereby applicable as procedural and regulatory provisions

for all affairs of material purchases, entrusting services, contracting,

Consultancy services and sale of surplus items of Kuwait National

Petroleum Company.

Art ic le 2

(Commitment and restrictions)

Those persons undertaking the affairs of material purchases, entrusting

services, works and contracts in all departments of the Company must

strictly observe the provisions of the Regulations referred to under

Article (1) of this resolution.

Art ic le 3

(Execution and initiation)

This Resolution is effective from 1st June 2009. Further, the resolution

of the Chairman and Managing Director No. 35 of 2005 and all

previous resolutions already published and contradicting with this

Resolution are hereby cancelled. Furthermore, department managers

must implement this Resolution, each within his field of concern.

(Signature)

Farooq Hussain Al Zanki

Chairman and Managing Director

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IV

KKuuwwaaii tt NNaatt iioonnaall PPeettr r oolleeuumm CCoommppaannyy ((KKSSCC))

PPuur r cchhaasseess aanndd EEnnttr r uusstt iinngg WWoor r kkss RReegguullaatt iioonn

((PPEEWWRR))

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V

A Ar r tt iicclleess aanndd PPr r oovviissiioonnss oof f tthhee RReegguullaatt iioonn

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1

Chapter I

(Regulatory Provisions)

Ar tic le 1

(Commitment to execute and implement the regulatory and

supplementary regulations)

Purchases and Entrusting Works Regulation (PEWR) have been issued

under Article 2 of the regulatory by-law applied to oil companies affiliated

to Kuwait Petroleum Corporation already implemented on 1/10/2005, and

pursuant to Article 41 of the financial regulations already adopted by

Petroleum Supreme Council in the Minutes of the Meeting Number 3/76

(4/2005) dated 5/9/2005.

The provisions of the Articles stipulated in PEWR are applicable to all

departments of Kuwait National Petroleum Company. Further, these

provisions are considered supplementary to the provisions of the

regulatory by-law that applied to oil companies affiliated to Kuwait

Petroleum Corporation.

In addition, Kuwait National Petroleum Company hereby abides by the

regulations of the Higher Tendering Committee (HTC) of Kuwait

Petroleum Corporation and Petroleum Companies and all other related

regulations and laws.

Art ic le 2

(Definitions)

In addition to the definitions already described under Article 4 of the

aforesaid regulatory by-law, the following definitions are applicable:

Company : Kuwait National Petroleum Company

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Regulatory by-law : The regulations organizing the tenders of the oil

companies of Kuwait Petroleum CorporationHTC by-law : Business regulations of the higher tendering

committee of Kuwait Petroleum Corporation

tenders.

Approved List : A record containing the names of suppliers,

contractors, Consultancy companies and offices

approved by the Company through CEC/VEC

according to its business process.

Concerned Party : The concerned section of the Commercial

Department, each according to its function

(Contracts, Purchases, Commercial Support,

External Co-ordination)

Requesting Party : Different departments of the Company or

affiliated sections that request materials or

services.

Pre-qualification : The acts and procedures of evaluating and pre-

qualifying companies via special pre-

qualification committee regarding works,

Consultancy services, contracting, purchases

and projects of specialist nature.

Limited list(Short list)

: A list contains names of companies orestablishments to whom the tender/offer is

restricted. However, limited list may be prepared

pursuant to the Approved Lists.

Limited

tender/momarasah

/auction

: Tender/momarasah/auction restricted to specific

tenderers/bidders/auction participants, whether

this restriction is based on pre-qualification (for

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the three types) or limited lists/approved lists

(with regard to tenders and momarasah only)Public

tender/momarasah

/auction

: Tender/momarasah/auction that is not restricted

to specific tenderers/bidders/auction

participants, rather it is offered to all those who

would like to take part in the process.

MAXIMO : The integrated system for managing Company’s

internal business process electronically by the

computer.

Model documents : Documents used to prepare Contracts with third

parties. It is an integral part of the required

documents for preparing purchase or service

requests.

Consultancy

works/services

: Preliminary or preparatory services or activities

that do not include execution of works, rather its

scope of activity is restricted to undertaking

technical, economic, administrative,

organizational or legal studies or preparing

software programs along with its different

applications or laying out designs, compiling

and analysing data and information or preparing

statistics. Further, Consultancy services includeprovision of advices, proposals and/or

recommendations.

Material/Purchase

Service Request

: A request raised by the Requesting Party

(according to the applicable business process)

To the Concerned Party to procure materials or

services.

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Opening Bid

Committee

: A Committee formed and authorized by ITC to

prepare opening bid statements of bids (sealedenvelopes) received via tender box of ITC,

according to the applicable business process

and within the scope of the financial approvals

of ITC.

Material Purchase

Order

: An order issued by the Concerned Party to the

supplier to supply material.

Service Contract : A contract signed by the Company with a

contractor entrusting him to provide services or

to undertake works.

Supplier : The party, firm or factory that will supply material

to the Company.

Contractor : The organization or firm with whom the

Company signs a contract to provide services or

undertake works.

Prohibited list : List maintained and updated by CEC/VEC. It

contains the names of manufacturers, suppliers

and/or contractors with whom business is

prohibited due to faulty performance or lack of

cooperation with the Company.

CEC/VEC : Vendors, manufacturers and contractorsevaluation (pre-qualification) committee in the

Company.

Cancellation of

tender issuance

: Complete and final cancellation, including

Service Request within MAXIMO system.

RE-float (partial

refloat)

: Soliciting bids once again at a new closing date

without cancellation of Service Request within

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MAXIMO system or changing tender/offer

number or title.Re-tender (total re-

tender)

: Complete cancellation of Service Request within

MAXIMO system and issuing new Service

Request at a new tendering cycle.

Necessary

approvals

: The approvals required from ITC, HTC, CTC or

Legal Advice and Legislation department, each

according to its field of concern, to consider

different subjects such as issuing, awarding

tender, negotiation or other procedures/actions

related to material or service tenders and

contracts, via ITC Secretariat or External

Coordination section.

Single source : The party which is considered as a sole party in

providing the required materials or services

(works). It may be a contractor, consultant,

manufacturer or material supplier etc.

Approved bidders : The bidders that are already approved in the

VEC/CEC lists or in limited lists.

HTC : Higher Tendering Committee of Kuwait

Petroleum Corporation and its subsidiaries. The

Committee considers and decides on Purchase,Service and entrusting works Requests at an

estimated value of more than KD 1 Million.

CTC : Central Tendering Committee. The Committee

considers and decides on Purchase, Service

and entrusting works Requests at an estimated

value of more than KD 5 Millions.

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ITC : Internal Tenders Committee of the Company.

The Committee considers and decidesPurchase, Service and entrusting works

Requests at an estimated value of more than

KD 30,000.

Legal advice and

Legislation

department

: The Legal Department of the Council of

Ministers that reviews tender documents of

purchase and service requests of an estimated

value of more than KD 5 Millions.

DMD (VEC/CEC) : Deputy Managing Director presiding over

CEC/VEC.

Chairman : Chairman and Managing Director of Kuwait

National Petroleum Company.

Financial Authority : The authorized person according to the

Financial Authorities’ regulation of the Company.

KD : Kuwaiti Dinars

Letter Of Intent

(LOI)

: An official letter disclosing the Company’s intent

to contract with the successful contractor. In this

respect, it serves as an introduction for signing

the contract. However, it is not used unless

signature of contract is anticipated to be

delayed.Electronic Tendering

System (ETS)

: A system that interacts with MAXIMO business

process in launching tenders via internet. In this

way bidders can download tender documents

and upload their bids via a special website.

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Chapter II

ITC formation and functions

Artic le 3

(ITC formation)

A Company Internal Tendering Committee called ITC, is formed as per

a resolution issued by the Chairman. The Committee’s Secretary (a

person other than the members) shall be appointed by the Chairmanin accordance with Article 8 of the regulatory by-law. It is provided,

however, that the Committee must be formed comprising of 7

members as hereunder described and each principal member will

have an alternative member:

- Committee Chairman: any deputy of the Managing Director.

- Three specialized members from the Company, including ITC

Chairman’s deputy.

- One member representing Legal Department.

- Two members from subsidiary oil companies.

All departments of the Company are required to observe, follow and

execute the resolutions and/or recommendations issued by ITC.

Artic le 4

(Additional functions of ITC)

In addition to the contents of Article 9 of the regulatory by-law, ITC is

concerned with the following:

1- Considering and deciding on auctions pertaining to the sale of

surplus materials.

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2- Considering and deciding on issuing/soliciting Pre-qualification

applications and approving its results. Any party within the Company may ask ITC to reconsider its

resolutions. However, the resolution of ITC after reconsideration shall

be considered final and enforceable against all parties.

Art ic le 5

(Presenting tendering requests to ITC)

The Concerned Party shall submit requests accompanied with all

required data and documents to the Secretariat General before ITC

meeting in sufficient time. The Requesting Party, however, in

coordination with the Concerned Party shall provide all information and

data that enables ITC to conclude appropriate resolutions. In case of

urgent requests, the Chairman of ITC may, after clarifying the justifying

reasons, call for an urgent meeting or may request the members to

approve separately and individually (i.e. one at a time) provided the

decision is unanimous.

Artic le 6

(Functions of the Secretariat General)

1- The Secretariat General is responsible for all administrative

arrangements, procedures and issues supporting all ITC works.The Secretariat General will facilitate and follow up the

administrative works pertaining to the functions of issuing tenders,

momarasahs, auctions, soliciting bids, opening envelopes,

awarding, forwarding bids to the concerned authorities, advertising

via different means, obtaining the necessary approvals and other

issues related to ITC with respect to tenders and momarasahs of

values up to KD 5 Millions as well as auctions.

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2- In case of applying electronic tendering system (ETS) for issuing

and collecting bids etc, all procedures already referred to under this Article will be made by the Concerned Party that will coordinate

with the Secretariat General matters relate to the role of ITC in this

system already referred to under Article 13 of this regulation.

3- The Secretariat General will be responsible for documentation of all

activities carried out by ITC, keeping all ITC files and documents as

well as carrying out other functions that ITC may assign to it.4- The Secretariat General is entrusted with the authentication, follow

up of initial bank guarantees (bid bonds) of all types of tenders,

momarasahs or auctions along with extending the validity hereof as

deemed necessary, after coordination (by the concerned party) with

the authority concerned with bid evaluation until the Concerned

Party receives final guarantee from the successful bidder.

Artic le 7

(External Commit tee Resolutions)

All resolutions or recommendations issued by CTC or HTC regarding

the tenders that fall within their jurisdiction are applicable and have the

precedence over ITC resolutions, even if they differ with ITC

resolutions.

Artic le 8

(Interpreting or amending the provisions of this regulation)

ITC can interpret the contents of this regulation without amendment,

addition or contradiction with its contents. If necessary ITC may submit

recommendation to the Company’s Board of Directors to amend the

provisions of this regulation in the light of any resolutions that may be

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subsequently issued or that may be required by actual practice of this

regulation without contradicting the laws or regulations issued byhigher external authorities.

Artic le 9

(Acting contrary to regulations)

ITC Chairman will advise the Chairman of the violations that may be

committed against the provisions of this regulation. Further, he/she

shall advise the Chairman of the Party responsible for these violations

along with the necessary supporting documents and information.

Ar ticle 10

(Bidders Participation Conditions)

Without prejudice to Articles 13, 14 and 15 of the regulatory by-law, all

companies are allowed to take part in the public tenders or

momarasahs. Further, they may submit their bids, provided they fulfil

all conditions in the related regulating laws and by-laws. However,

limited tenders or momarasahs are restricted to approved bidders or

those that are pre-qualified via pre-qualification procedures or

mentioned in limited lists.

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Chapter III

Provisions related to purchases, services, auct ions and pre-qualification procedures as well as sale of surplus material

Ar ticle 11

(Preparing the documents and requests of Material and service

procurement and forwarding the same to the Concerned Party by

the Requesting Party)

1- Tendering is the rule for procurement of material and services/works.

Its procedure shall be in the manner set forth in this regulation and the

regulatory by-law. However, momarasah or direct order principles

(single source) may be adopted. The approval of ITC on the

momarasah principle shall be obtained.

2- If the tender or momarasah are required to be issued at an estimated

value of more than KD 30,000 based on pre-qualification lists, limited

lists or single source, the Requesting Party shall include in the

request for procurement of material or services the justifications for the

same approved by DMD (VEC/CEC). However if the single source is

the original manufacturer (only in case of spare part or repair services)

then it will be approved by the department manager of the Requesting

Party.

3- The material/service request may not be divided into sub-requests that

the estimated value of each is about KD 30,000. If a need is repeated

for the materials or services, the time period between two successive

requests shall be at least one month (30 calendar days).

4- While preparing the requests for Internal or External Concerned

Committees, it must be observed that it must have accurate

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information, taking into account the requirements of these Committees

including confirmation of the necessity of the required material orservice to avoid any amendments after obtaining approvals in a way it

enables these committees to consider the presented subjects.

Requests shall be prepared through MAXIMO system after being

approved in accordance with the Financial Authorities of the

Requesting Party.

5- Suppliers and contractors registered under the Company’s list ofprohibited suppliers/contractors shall be excluded.

6- In case of addition/deletion/amendment/amalgamation exercise done

to approved bidders list, the Requesting Party must obtain the

approval of DMD (VEC/CEC) before obtaining necessary approvals to

issue the tender (or) the like. The resultant list is considered as a

limited list.

If the number of the local suppliers or contractors in the approved lists is

reasonable (not less than 8 suppliers/contractors), then the tender will be

restricted to them unless the same results in a monopoly conduct, then

the tender/momarasah will be re-floated to all approved bidders.

Approved supplier/contractor lists that are based on pre-qualification shall

be considered as limited lists that may be amended either by addition or

deletion after the elapse of suitable period (determined by ITC) from

being approved.

No recommendation shall be made to approve a limited list except for the

provisions under this Article. If a genuine justifying need arises, the

request will be offered to DMD (VEC/CEC) to consider the justifications

before approving the list. This approval shall be valid for one time only.

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7- In case of requests, either for addition or deletion from an approved list

during tendering, the approval of DMD (VEC/CEC) is sufficient if theestimated value is more than KD 30,000 and up to KD 1 Million without

obtaining the approval of ITC. However, greater value should be

presented to ITC to decide either addition or rejection. Consequently

the approval of HTC and CTC shall be obtained, as the case might be.

8- Documents shall be made, according to the practical execution

mechanism proposed by the legal department of Kuwait PetroleumCorporation to deal with the Ministerial Resolution No. 2 of 2004

issued on 24/2/2004 pertinent to making texts of contracts in Arabic.

Article 12

(Special Evaluation criteria of Requests of estimated values of more

than KD 30,000)

1- The approval of ITC shall be obtained should the tender or

momarasah documents (including consultancy services) include

additional or special evaluation criteria or requirements that have not

been mentioned in the model documents of the tender or momarasah.

2- If a need arises to adopt special evaluation criteria and not to include

the same in the tendering documents mentioned under item 1, the

consent of DMD of the Requesting Party shall be obtained as well as

the consent of ITC before receipt of bids.

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Article 13

(Tendering procedures of Requests having estimated value of morethan KD 30,000) (Issuing/bid evaluation/awarding)

1- The Requesting Party shall prepare purchase or service/request in

accordance with Article 11 of this regulation and send the same to the

Concerned Party that will prepare tender documents after checking its

remarks with the Requesting Party. In this respect, Finance and Legal

Departments must be consulted in case of any amendment to themodel tender documents. Subsequently, the Concerned Party shall

send final documents to ITC Secretariat General.

2- ITC Secretariat and then External Coordination division shall obtain

the necessary approvals to issue the tender. Moreover External

Coordination division shall present tendering documents to Legal

Advice and Legislation Department of Council of Ministers, for

requests of estimated values of more than KD 5 Millions.

3- ITC (via the secretariat) shall solicit bids accompanied with initial

guarantees, provided that final guarantees must be provided as

stipulated in the tendering documents.

4- In case of electronic tendering system, the Concerned Party shall

undertake all procedures, including extending both the closing and

pre-tender meeting dates, electronic publishing and awarding after

obtaining the necessary approvals. However, issuing requests or

subjects concerning reply to bidders that may influence the

competitive situation of bidders or any act/procedure that may

constitute a change in the original tender (or momarasah), its

conditions or number of bidders, must be presented to ITC for

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approval. Further, ITC can form a committee to open and prepare bids

opening statements of the electronic offers (or those submitted insealed envelopes as the case might be and according to the

applicable business process) and review the required bank guarantees

and prepare a report on submitted bids.

5- Replies to clarifications from bidders shall be made according to the

provisions of the tender documents. Further, applications for ITC

tender participation shall be only entertained from willing companies ifreceived within two weeks from the date of issuing, (i.e. to enable

enough time) to consider the possibility of deciding the same (i.e.

accepting or rejecting) according to procedures, conditions and

regulations.

6- Bids and offers shall be evaluated as follows:

A- The Requesting Party shall study and evaluate bids technically and

submit recommendation to the Concerned Party which in turn shall

check the recommendation from the commercial aspect (financial

and contractual), then it shall submit final recommendation to the

Secretariat General of ITC or External Coordination division for all

tender/requests, including single source material purchase request.

B- The Concerned Party for tenders related to the stock shall evaluate

the bids technically and commercially and submit recommendation

to the Secretariat General of ITC or External Coordination division.

C- The Concerned Party may obtain explanations from bidders directly

without making any amendments to bids as to conditions,

specifications, total prices or competitive situation of bidders.

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the contract is the acceptance of the final guarantee (performance

guarantee) by the Company. Under all circumstances the RequestingParty shall not issue the Commencement letter unless the final

acceptance of Company’s Finance department regarding insurance

policies is obtained.

9- The Concerned Party will present tender documents (for material or

service procurement requests) to the Legal and Finance Departments

for approval before awarding the tender if any amendment is made inany form that may change the conditions of contract from those set

forth in the Model tender documents unless similar previous approval

was obtained.

10- The Concerned Party may present any disagreement between them,

the Requesting Party, the Finance or Legal Departments with respect

to tender document to ITC whose decision shall be final and

enforceable.

11- The Concerned Party will advise the Secretariat General of

ITC/External Coordination section to release initial guarantees via

ECS systems, MAXIMO systems or any other agreed upon

mechanism or system.

Artic le 14

(Momarasah Procedures for tenders of estimated value of more than

KD 30,000)

1- All procedures provided under Articles 11, 12 and 13 of this Regulation

are applicable except those provided under the following sub-articles.

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2- Without prejudice to the contents of Article 63 of the regulatory by-law,

a tender may be issued as a Momarasah due to the following reasons:

A- If materials, works or services cannot be determined under

acceptable relative quantities or standard specification, such as

new works or materials that the Company had not obtained

anything similar to before.

B- These works or materials are urgently required.

C- The reasonable estimated value of works, materials orspecifications is not clear.

D- In case of consultancy services.

E- To obtain reasonable prices if overestimated quotations are

received (when works/materials procurement requests were issued

as a tender).

3- The Secretariat General of ITC or External Coordination division shall

obtain necessary approvals to issue the momarasah, initial offers of

which will be received in sealed envelopes or via ETS. Further, the

approval of ITC will be obtained to select a negotiation approach.

However, ITC may give its consent to convene more than one meeting

for negotiation at specific time and as the need arises. Further

negotiation meeting may be convened, after obtaining ITC consent, via

modern means of communication (audio & video) as the need arises

and according to the circumstances.

4- Negotiations shall be made by one of the following approaches:

A- Public negotiations or momarasah:

All bidders (all of them or those who submitted the three lowest

priced bids) will be invited to the meeting publicly with the special

negotiation committee to conclude the best bid.

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soliciting prices from it directly or from its local agent. In this case, the

Company may provide in the tender documents that the price list of theoriginal Manufacturer must be attached:

A- The original Manufacturer of materials and spare parts.

B- Consolidated suppliers of materials and spare parts with which the

Company has a business.

C- Local Agent (if any).

5- If no quotation is received from the single source, the tender shall be

issued under public (or limited) tender in accordance with the

procedures to obtain the required materials. In this respect, tender

documents must include the specifications of the material or

equipment of the single source or alternative acceptable specifications

without affecting the quality and performance of the subject materials

or equipment.

6- Based upon a recommendation by the Requesting Party, the

Concerned Party shall submit final recommendation to the Secretariat

General of ITC/External Coordination division to obtain the necessary

approvals.

Artic le 16

(Contracting procedure of the consul tancy services having

estimated value of more than KD 30,000)

1- The tender related to consultancy services shall be issued as a

momarasah in accordance with the procedures set forth in the Article

14 or as single source contracting in accordance with Article 15 of this

regulation.

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2- The Requesting Party, under a resolution from its DMD, may form a

special committee, if the need arises, such as urgency related tospecific time table interrelated with external authority, etc. This

committee will undertake all procedural activities entrusted to the

Concerned Party. The committee’s assignment will be automatically

terminated after signing the contract by the Financial Authority.

Ar ticle 17

(Procedures for tendering services and materials purchase having

an estimated value of not more than KD 30,000)

Section 1: Up to KD 5,000

A- Prepar ing documents and requests :

The Requesting Party shall prepare materials or service procurement

requests in accordance with Article 11 of this regulation and send the

same to the Concerned Party who shall prepare tender documents via

MAXIMO system after finalizing its remarks, if any, with the

Requesting Party. Further, it will obtain the opinion/approval of the

Finance and Legal Departments if the request includes deviation from

model documents.

B- Issue of Tender documents:

1- The Concerned Party shall undertake all necessary actions to issue

tenders, fix closing date and solicit offers from the approved

bidders via ETS (or as sealed envelopes via closed box through

special committee to be formed by Commercial Department

Manager should ETS fail).

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Section 4: Single Source

All procedures of the single source are applicable in accordance with Article 15 of this regulation except those already provided under item 4 of

that Article.

Required approvals for single source pertaining to Article 17:

1- The approval of the department manager of the Requesting Party shall

be obtained to procure from a single source up to KD 5,000 of an

estimated value.

2- The approval of the respective Deputy Managing Director of the

Requesting Party shall be obtained to purchase from the single source

with respect to procurement requests of estimated value of more than

KD 5,000 up to KD 30,000.

Section 5: General Procedures related to Article 17:

1- The approval of the authority authorized to sign the contract

(according to the Financial Authorities) shall be obtained regarding

Recommendation to Award tender.

2- The Concerned Party shall present the differences of points of view

with the Finance or Legal departments regarding the procedures or

conditions of concluding a contract to DMD (who presides the

Concerned Party) whose decision shall be final.

Artic le 18

(Material quotations on the websites for materials having estimated

value up to KD one million)

1- Without prejudice to Article 11 on obtaining the approval of DMD–

MAA, the Concerned Party shall obtain the consent of ITC on the lists

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B- HTC approvals:

1- Variation orders that render contract/purchase order value to bemore than KD 1 Million with regard to contracts/purchase order

of a value up to KD 1 Million.

2- Variation orders of total value more than 10% of original

contract/purchase order value or more than KD 5 Millions,

whichever is less with respect to contracts/purchase orders of a

value more than KD 1 Million and up to KD 5 Millions.

C- CTC approvals:

Variation orders of total value more than 10% of original

contract/purchase order value or up to KD 5 Millions, whichever is

less with respect to contracts/purchase orders of a value more than

KD 5 Millions.

3- The Concerned Party shall provide HTC, via external coordination

division, with monthly report regarding variation orders that exceed

20% or more of contracts of value of KD 250,000 or more and up to

KD 1 Million as subsequent control measure.

4- To determine the level of Approving Authority (i.e. internal/external

committee) for the variation order, the calculation of all added or

deleted works as well as the compensation for extension of contract

period must be done as if all were in excess of the original

contract/purchase order value, regardless of the reduced impact of

value resulting from the deletion, based on the fact that each deletion

or addition is considered as a variation. However, upon calculating

contract/purchase order value after variation order, net arithmetical

result is to be considered as a final variation value. Furthermore, the

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30

Article 21

(Contracting procedures in case of emergency)1- The Concerned Party (External Coordination section), pursuant to the

request of the Requesting Party and in case of emergency declared

and approved by the respective DMD according to the procedures of

the Company, shall expedite obtaining the necessary approval (from

the Board of Kuwait Petroleum Corporation) to obtain an exemption

from ordinary contracting procedures. Further, it will advise Internal

and External Committees thereof. These cases include urgent projects

that can be exempted from CTC procedures already stated in the

resolution of Kuwait Petroleum Corporation No. 61/2005 dated

17/10/2005.

2- The Concerned Party may issue the tender to an approved list of

contractors/suppliers or single source without obtaining ordinary

approvals (for such a procedural activity). Further, it may solicit offers

by fax, e-mail, telephone or ordinary method (i.e. sealed envelope) as

follows:

Cell Leader: Approves issuing and awarding tender up to Kuwaiti

Dinars 30,000.

Team Leader: Approves issuing and awarding tender more than

KD 30,000 and up to KD 1 Million.

Commercial Department Manager: Approves issuing and awarding

a tender of more than KD 1 Million and up to KD 5 Millions.

3- Supply/delivery period is the most essential criteria for evaluating bids

and approving award of tender.

4- Contract signatory from the Company will be the same authority

according to the Financial Authorities.

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33

D- Subsequently at a later stage, the appraisal committee shall study

bids and make recommendation for awarding, cancelling orrefloating (partially or totally) to ITC.

3- The Concerned Party shall send final auction documents accompanied

with the proposed time table to ITC for the approval of issuing of the

same.

4- The auction shall be awarded to the auction participant who conforms

to auction conditions and who offered the highest price (and

conforming to the conditions stipulated in auction documents) that is

more than or at least equivalent to the approved estimated amount.

5- If no participant comes forward with an offer or the highest price

offered did not reach the approved estimated amount, ITC, pursuant to

a recommendation by the appraisal committee, may refloat the tender

(totally or partially) or it may approve the sale to the highest price

conforming to the specifications, even though it is less than the

approved estimated amount.

6- The Concerned Party shall advise the successful auction winner and

complete all procedures for signing the sale agreement, including

coordination with the Finance department to review final guarantees,

insurance policies and signing the sale agreement by the Financial

Authority. Further, it will contact the Secretariat General of ITC to

release the initial guarantees submitted by unsuccessful auction

participants.

7- The Concerned Party (Commercial Support division) will send the sale

agreement to the Requesting Party that shall supervise all executive

and administrative works related to the agreement. In this respect, the

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34

Requesting Party may coordinate with the appraisal committee if

necessary.

8- The sale (auction) of surplus items (material) shall be approved in

accordance with the Financial Authority and shall be made public with

sealed envelopes. However, sale may be done by direct contracting or

offering the auction to a limited list of parties after obtaining the

consent of the Chairman pursuant to a recommendation by the

appraisal committee and explaining the reasons justifying the same.

Article 24

(Pre-qualification procedures)

1- In due consideration of item 6 of Article 11 on Pre-qualification, the

Requesting Party shall obtain the go ahead approval of ITC regarding

conducting pre-qualification for contractors that provide consultancy

services or projects that are of a special nature or which are not

available in approved lists as well as in the case of comprehensive

maintenance services. It is provided, however, that this should be

made via special committee called ‘Pre-qualification Committee’ for

which the request for formation shall be approved by DMD

(VEC/CEC), provided that the request must include:

Description of the works for which pre-qualification is required.

Estimated value of these special works.

Justifications for resorting to pre-qualification.

Recommendations or remarks of CEC/VEC.

2- Upon the formation of Pre-qualification Committee, it is to be observed

that the number of its members must not be less than four members

from the relevant parties, such as Commercial and Finance

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37

Chapter IV

(General Provisions)

Article 25

1- The Company will maintain unified record of approved contractors and

suppliers. CEC/VEC will be entrusted with preparation of the said

record (based on its approved business process) and to make

amendments thereto in the electronic filing system (or other standingsystems) and MAXIMO system periodically to enable all departments

to review and peruse the same.

2- The limits of the financial levels should be observed while obtaining

necessary approvals with respect to the difference between the

awarding and estimated values, so that tendering procedures may be

continued till issuing the final approval to award without necessity tore-float the tender (totally or partially) as follows:

A- Final approval from ITC: Upon receipt of bids of more than KD

30,000.

B- Final approval from HTC: Upon receipt of bids of more than KD

1,000,000 and as well as for more than KD 5,000,000.

Provided however, that all above mentioned bids must be technically

and commercially (financially and contractually) compliant.

3- No effecting amendments may be made to tenders (after issuance)

that may result in an unacceptable change of the estimated value,

either with increase or decrease. DMD of the Requesting Party will

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38

have the authority to assess the situation in general and approve

making such amendments.

4- The materials purchased under necessity will be exempted from all

procedures already mentioned in this regulation in accordance with

the rules and expenditure procedures of the cash deposits (petty cash)

of the departments.

5- ITC may decide (it may seek the opinion of the Requesting Party)

finalize or re-float the tender (totally or partially) in case of sole bid or

in case no bids are received.

6- The Requesting Party must submit detailed explanation of its

recommendations for termination of contract to obtain the opinion of

the Concerned Party and Legal Department (and Finance Department,

if necessary), then it will obtain the approval of the Financial

Authorities and advise ITC thereof.

7- In case of final cancellation of the tender, the Requesting Party must

due to reasons of cancellation attributed to it obtain the approval of its

DMD. However, if the reasons of cancellation are related to the

Concerned Party, it should obtain its DMD’s approval after obtaining

the opinion of the Requesting Party, before obtaining the necessary

approvals.

8- Any bid containing essential differences of the scope of work,

specifications, financial conditions or legal conditions that affect the

competitive positions of the remaining bids should not be considered.

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39

9- All letters and requests must be addressed to the Chairman of the

Committee, provided that Secretary of the committee will have anassistant coordinating role.

10- The regulations and procedures of the Commercial Department

related to electronic tendering must be observed.

11- Tender or tenderers wherever they are mentioned shall include

Momarasah and Momaraseen and not the vice versa.

Art ic le (26)

(Precedence of applying the provisions)

Precedence of applying the provisions, related texts of laws, regulations

and rules issued by senior authorities, such as General Tendering Law,

the HTC regulatory by-law, etc in case of any contradiction between its

provisions and those of this regulation shall be maintained.

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Chapter 10

Article (1)

The Committee’s Headquarters

The Committee Head Office is in The Company's Headquarters in the

south of Soubahya.

Article (2)

Date and Time of the Committee Meeting

The Committee shall hold its regular meeting on (Wednesday) eachweek at 09:00 am at the Committee’s Head Office, each member shall

notify his substitute in case of his absence and to notify the Secretary in

writing sufficiently in advance in case of their absence.

Article (3)

Minutes

The Committee meetings shall be recorded in minutes to be approved inthe first following meeting, and shall be sent to the members of the

Committee with the agenda of the next meeting.

Article (4)

Requests for presentation to the Committee

The Company's concerned departments and divisions shall send the

topics desirous to be presented to the Committee at least two days prior

to the Committee’s session in the name of the Secretary.

Article (5)

The Representative of the Department Relevant to the Request

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The Committee shall be entitled to invite any experienced personal from

the Company's staff to express his opinion; also the Committee shall be

entitled to invite the representative of the requesting party or the

concerned party to provide clarifications or documents to meet the

purposes of the Committee.

Article (6)

Tender Box

1 – A box holding all bids and practices shall be kept at the Campany's

main office southern Soubahya.

2- Bids, tender envelops or practices shall only be entertained within

the tender box within the set time.

3 - The box shall be sealed wax following the specified time for

closing the tender by the Secretary, also the box shall be moved to

the Committee Head Office and be kept until the seal is broken by

the Tendering Committee during the next meeting.

4 - The tender box shall have two locks and the key of the first lock

shall be kept by the Secretary, the Chairman of the Committee or

his Deputy shall keep the key of the second lock, in the event of

the absence of the Secretary or the Chairman or his Deputy, the

keys of the locks shall be handed over to their substitutes.

Article (7)

Announcement of the Tender Results and Awarding

The place for making the invitation for the tender, announcing the

tender’s results and awarding shall be at the entrance of the Company'sHeadquarters.

Article (8)

Launching and Closing Times

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Launching the Company's tenders shall be on " Sunday " in the Official

Gazette " Kuwait Today " and Closing shall be on " Tuesday " at one

o'clock p.m.

Article (9)

Validity of Prices Submitted in Bids

The requesting party shall take into account the validity of prices

presented in the tenders or consider the time required for presenting to

the Committee without affecting the validity of the presented prices.

Article (10)

Increases occurring on Operations making them subject to theCommittee's competences

Purchase operations, commissioning to provide services, work

contracting and consultancy services originally less than the limit of the

Committee's competences, and amendments or changing orders or

claims of the other party to the contract occur therein, or their

durations have been extended so that lead to increasing their total value

to the limit of the Committee's competences, consequently, they are

presented to the Committee with full details.

Article (11)

Issues approved by the Committee and objected to by the

Committee of the Corporation or the Central Tenders

Committee

In the event of approval of the Committee on any of the topics presented

to it, and objection by the Corporation's Committee or by the Central

Tenders Committee emerge, resulting in a change to the Committee's

decision, then, upon completion of the procedures of the requesting

committee that raised objection, they shall have to be represented to the

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Committee prior returning to the Corporation's Committee or the

Central Tenders Committee.

Article (12)

Irregularities

The Chairman of the Committee shall have to notify the Chairman and

Managing Director in the event of non-observance of the provisions of

this regulation by the relevant authorities,

Article (13)

Methods of Presenting Details

The required details shall be presented to the Committee as per the

attached Forms for requesting issue presentation.

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Regulation of the Higher Tenders Committee of the

Kuwait Petroleum Corporation and Petroleum Companies

(Chapter 1)

General Provisions

Article (1)

This regulation has been issued in implementation of Resolution

number (5) for the year 1979 issued by the Supreme Petroleum

Council as amended by Resolution number (1) of the year 1998 and. .

Resolution number 1 of 2005, and in compliance with Article 40 of

the Kuwait Petroleum Corporation's Financial Regulation.

This regulation shall be implemented in conformity with the

provisions of Laws and Regulations in force, and without prejudice

to the powers delegated to State bodies charged with purchasing

and contracting activities.

Provisions of this Regulations shall be complied with by Kuwait

Petroleum Corporation ( KPC ) and its owned companies which

are registered and operating in the State of Kuwait ("Companies"

or in singular "Company"). No exemption from these provisions

shall be effected unless upon a decision taken by KPC's Board of

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Directors and provided that such exemption does not conflict with

the Resolutions of the Supreme Petroleum Council.

KPC shall, in addition to the afore-mentioned, comply with the

provisions of the Regulation governing contracting for provision of

consultancy services for KPC as well as the Regulation governing

KPC s purchasing, contracting and auctions. In the event of

conflict, the application of this Regulation shall prevail.

K-Companies shall, in addition to the aforementioned, comply with

the provisions of the Unified Companies Tendering Regulations

attached herewith (Appendix No. 1). In the event of conflict, the

application of this Regulation shall prevail.

Article (2)

KPC and Companies shall issue executive resolutions for

implementation of this Regulation within two months from its

issuance.

Article (3)

The Chief Executive Officer ("CEO") of KPC is authorized to

amend this Regulation through issuing an ordinance pursuant to

.

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any resolution taken in future by either the Supreme Petroleum

Council or KPC's Board of Directors.

KPC s CEO is also authorized to issue a binding ruling on

interpretation of any provision of this Regulation should there be

different opinions concerning its interpretation.

Article (4)

a. A committee shall be established to supervise KPC and

Companies' purchasing and contracting for provision of

services and constructions. The committee shall be called the

Higher Tenders Committee for the Kuwait Petroleum

Corporation and the Petroleum Companies (hereinafter

referred to as "the Committee" and shall comprise seven (7)

original members representing the following entities:

Kuwait Petroleum Corporation Chairman

Kuwait Petroleum Corporation-

Deputy Chairman

Kuwait National Petroleum Company - Member

Kuwait Oil Company Member

Petrochemical Industries Company - Member

Kuwait Oil Tankers Company Member

Ministry of Oil Member

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With the exception of Kuwait Petroleum Corporation, an

alternate representative of each of the abovementioned

entities shall be appointed and shall attend during absence of

the original member.

The Committee members shall be selected from among

employees of respective bodies they represent, or from other

non-employee personnel who have special expertise. In any

event, the member shall not be a potential tenderer. In

application of the provision of this Article, the term

"tenderer" shall include the partner, agent, client, and the

employee, or the board member of a company or

establishment who may submit a bid in whatever form falling

within the Committee's jurisdiction.

b. The CEO of KP shall issue a resolution appointing the

Committee members (both original and alternate) in liaison

and agreement with the respective chairmen of the above

mentioned Companies and the Undersecretary of Ministry of

Oil, for a period to be specified in the resolution. The CEOof KP shall determine their remuneration. The appointment

resolution shall include the nomination of the Committee

chairman and a deputy who will preside the meetings during

chairman's absence, both of them shall be from amongst the

original members. However, the respective alternate

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members for chairman and deputy chairman shall not acquire

this capacity.

c. The Committee shall, pursuant to a proposal by its Chairman,

appoint a secretary who shall attend and record minutes of its

meetings with no right to vote. The Committee shall submit

recommendation in this respect to the CEO for endorsement

of appointment and determination of remuneration of thesecretary. The Committee Chairman shall set out the

secretary's duties and functions.

d. KPC shall provide quarters for the Committee comprising

furnished office and a conference room and shall attach to the

Committee staff suitable for the nature and volume of the

Committee's activities.

Article (5 )

a. The Committee may seek assistance from technical experts or

others as necessary from employees of KP and Companies,

in liaison with their respective employers, without

participation in voting.

b. The Committee may seek legal opinion of the KPC General

Counse! on legal matters encountered by the Committee. The

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Committee Chairman may request his attendance at a defined

session. In the event the Gen. Counsel is unable to attend, he

may delegate another person whom he deems suitable to

attend the meeting so as to produce a legal opinion on the

presented matter.

In the event the clmmittee requires assistance of an expert other

than employees of KP or Companies, the Chairman of the

Committee shall take the matter with theDMD

Financial Affairs ofKPC, so as to contract him and determine his remuneration.

Article (6)

a. To constitute a quorum, the Committee session shall be

attended by the Chairman or his deputy in addition to three

(3) other members. In the event of absence of both the

Chairman and his deputy, the present Committee members

shall elect a chairman from amongst them provided that the

number of attendees shall not be less than four (4) members.

b. In case of absence of both the Chairman and his deputy for

two (2) consecutive meetings for whatever reason, the CEO

may appoint a Chairman and a Deputy Chairman to preside

the Committee on temporary basis throughout the absence

period of the original Committee Chairman and his deputy.

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c. In the event that both the original and substitute members

representing an entity of those represented in the Committee

for two (2) consecutive meetings, such entity shall have to

appoint a temporary representative throughout their absence

period and shall notify the same to the CEO and the

Committee Chairman well in advance of the meeting

following these two (2) meetings. In case the CEO does not

object to the nomination of that representative, then he may

attend the Committee meetings during the absence period in

the capacity of an alternate member.

d. All decisions and recommendations of the Committee can be

taken with the simple majority of the votes cast. In case of

equal voting, then the side including the Chairman is

considered majority.

Article (7)

The Committee shall hold its regular meeting once a week duringthe official working hours at the Committee's headquarters. A

meeting may comprise more than one session. The Committee may

hold additional extraordinary meetings or hold a meeting outside

the Committee's headquarters by invitation of the Committee

Chairman or his deputy (in the event the Chairman is absent), as

and when the need arises.

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State of Kuwait, in addition to variation orders which are

issued on any of such Contracts. TheKP I ompany

shall

not proceed with any procedures, for purchasing materials or

contracting on workslservices, or advertising or seeking

permission for the same from the Central Tenders Committee,

except after obtaining the Committee's approval, all as

detailed and within limits prescribed in the following

Articles.

b. The Committee's scope of authority shall include review of

the procedures of tenders launching tosupplierslcontractors

so as to verify their veracity and appropriateness, and also to

decide upon award of such tenders. It shall also include

issuance of variation orders which may be necessary

including those which contain amicable settlements, all of

which shall be as detailed hereunder in the following Articles.

c. K P

and the Companies shall comply with the data forms

contained in Chapter 5 hereof with respect to subjects and

requests submitted to the Committee. The Committee shall

have the right to introduce amendments or additions to such

forms, and also to specify the nature, type and extent of detail

of information required for each type of subjects falling

within its scope of authority. Issuance of any new data form

or amendment to an existing data form shall be made vide a

decision bythe

Committee. The new or revised form shall be

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considered as integral part to Chapter 5 of this regulation and

shall be circulated as such to all concerned for compliance

therewith.

Article l o )

a. In respect of KPC, the Committee shall be assigned with

approval of procedures for all purchasing andworks1

servicescontracting activities of estimated value exceeding K.D.

250,0001-. The Committee shall also be charged with

approval of procedures for tenders which exceed this value

limit upon award as a condition precedent to submission to

the CTC for tenders that should be processed through CTC in

accordance with the provisions of Public Tenders Law No.

3711937 and Amendments thereof including prequalification

of vendors and contractors. No procedures shall be processed

unless the Committee's prior approval is obtained.

The Committee shall solely be assigned with all contracting

procedures related to provision of Consultancy Services

including prequalification of consultants, issuance of

respective request for proposals documents and award, all if

the Contract value exceedsKD

250,0001-. The Committee

shall also be solely assigned with settlement of disputes and

Claims submitted by consultants. For consultancy contracts

of value less than the above limit, the concerned party i nKPC

~

~ .~

.

.

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may proceed with the necessary procedures, with notification

of the same to the Committee, together with a copy of the

signed contract.

b. In respect of purchasing and contracting activities for the

Companies addressed by the Supreme Petroleum Council

Resolutions as stated in Article (1) of this regulation, the

Committee shall have the competence to approveprequalified Contractors lists produced by concerned party

vide a prequalification exercise, whether general or specified

for a certain type of works. The Committee shall also be

competent with reviewing and endorsing all launch of tender

procedures for purchasing, works/services and consultancy

services activities, whether by way of tender, auction or direct

contracting which the Companies need for their operations

and projects within the State of Kuwait and which have an

estimated value in excess of KD one (1) million. The

Committee shall further be competent with approval of

procedures for award of tenders at a value in excess of this

limit. In specifying this amount, the total value of items or

works or services included in the tender, auction or direct

contract shall be considered.

The Committee shall have the authority to decide the award

of tenders, auctionand

direct -contracts which have been

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issued with estimated value not exceeding five million

Kuwaiti Dinar (K.D.5,000,000/-)

each, even if the award

value would exceed this amount. It shall also have the same

competence for tenders, auctions, and direct contracts of

estimated value of more than five million Kuwaiti Dinar

K.D. 5,000,000/-) if so assigned by the KPC Board of

Directors. If no such assignment has been issued by the KPC

Board to the Committee, then the role of the Committee shall

be confined to issuing a recommendation or preliminary

approval therefore, while the decision for issuance and award

shall rest with the Central Tenders Committee. Such

recommendation or preliminary approval shall become a final

decision in the event the Central Tenders Committee decides

that a certain issue being presented to it by one of the

Companies is outside its jurisdiction, or if it abstains from

issuing a decision thereon.

c. The Committee's authority for issuance and award of tenders

for other companies which are not addressed in the SupremePetroleum Council Resolutions as stated in Article

1)

hereof,

shall be as determined by the KPC Board of Directors.

d. The following activities shall be exempted from the

Committee's scope of functions, and may be processed

~

independently by the Company concerned-b ro v id e d

that the

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Committee is notified as soon as possible of what had taken

place concerning these operations); the Committee may opine

on the same or may take the matter up to the CEO of KPC.

(1) Operations which have been exempted with prior

approval from the KPC Board of Directors or from a

person authorized by KPC Board of Directors to do so.

(2) Operations which the Company need to carry out as part

of dealing with cases of emergency such as fire,

explosions, oil and gas spill.

(3) Direct contracting entered between any two parties from

KPC and its subsidiary companies. No subsequent

notification is required to be served to the Committee

for such contracts as stated at the beginning of this

clause (d).

(4) Contracts entered into between KPC or the Companyand any other tate Body or Authority owned entirely

by the Government, provided that such Authority has

the qualification and specialization to enter into

contract, and provided that it shall not assign or transfer

the contract to a third party in whole or in part or to

conclude a subcontract in this respect.

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Article (11)

a. In respect of KPC, the Committee shall have the competence

to review and approve variations orders on Contracts which it

had previously approved. It shall also be assigned with

variation orders on contracts which have not previously been

processed through the Committee if the sum of values of boththe original contract and the variation order becomes in

excess of KD. 250,0001- and provided that the variation order

value is in excess ofKD.

50,0001- or5

of the contract

value.

b. In respect of the K-Companies addressed in the Supreme

Petroleum Council Resolutions as stated in Article (1) hereof,

and for all purchasing and workslservices contracting

activities of value in excess of one million Kuwaiti Dinar

(K.D. 1,000,0001-), the Company or entity concerned shall

not effect any amendments or variation orders on contracts

related to these activities, or accept clairns from the other

party of the contract or extend the contract period resulting in

an increase by a cumulative amount of ratio of 10% of the

original contract value or five million Kuwaiti Dinar (K.D.

5,000,0001-), whichever is less, unless submitted to the

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Committee with relevant justifications for the proposed

amendments and its approval obtained therefore.

The company may issue variation orders without prior

approval from the Committee if the revised contract value,

after adding the variation order, does not exceed one million

Kuwaiti Dinar (K.D.1,000,000/- . The Company may also

issue variation orders on contracts of value in excess of onemillion Kuwaiti Dinar (K.D. 1,000,000/- , if the value of the

variation order does not exceed 10% of the original contract

value or five million Kuwaiti Dinar (K.D.5,000,000/-

whichever is less, provided that, for contracts of value

ranging betweenKD.

250,000 andKD.

one (1) million, the

Company shall submit a monthly report of all variation orders

of value in excess of 20% of the respective contract values.

Such report shall be considered as subsequent audit as per the

details set forth in the following schedule table:-

Contract Value before

Variation Order

250,000 contract reaches the amount of

Limit of Company's~ u t h o r i

for Variation Order IssuanceI

KD 250,000/-

From KD. 30,000 to KD.

From -KD; ~250,900 to KD:*-,I Until the revised value of -the. .

.

Until the revised value of the

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e. In calculating the value of variation order so as to determine

the Committee's involvement, the value of additional works,

the deleted works and the compensation for extension shall be

added altogether numerically regardless of the fm nci l

impact, considering that every addition or deletion is

construed as an occurring change, whereas in calculation of

the contract value consequent to the variation order, the net

product of the variation order shall be considered.

Consideration shall also be given to the rules prohibiting

division of a single transaction.

f. If a variation order, amendment or settlement is issued on a

contract originally processed independently by KPC or the

Company pursuant to the rules of authorities stated in the

preceding paragraphs, in such manner that such change would

increase the total value of the contract to a limit which, after

the increase, would make it fall within the Committee's

jurisdiction, then the concerned entity shall have to present

the proposed change to the Committee for approval, alongwith whatever contract information required.

Article (12)

Upon reviewing the subjects submitted to the Committee for

consideration, it shall perform whatever it deems appropriate to

verify the following: . .

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a. that the technical specifications, standards and conditions

have been set out to obtain most favorable bids, and that the

contractual, supply, methodology of inspection and

commissioning, and penalty terms and conditions are

appropriate.

b. that there is an adequate number of prequalified suppliers or

contractors to ensure a good competitive environment for

each tender or auction subject to launching, and that the

prequalification has been conducted according to procedures

which would guarantee addressing potential

supplierslcontractors and evaluating their prequalification

submittals, in addition to reviewing and verifying their

contents.

c. discuss whether there are other alternative means for

obtaining the required services, materials or works at a lesser

cost.d. that the evaluation of bids and the submitted recommendation

for award have been conducted in a sound manner and in

accordance with the established rules and regulations adopted

by KPCICompany concerned.

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For requests submitted f or ' review and consideration by the

Committee, the concerned entity shall ensure renewal of validity of

bids and bid bonds of the tenderers prior to their expiry.

Upon obtaining Committee's approval the concerned entity shall

proceed with the normal procedures for such activities.

Article (14)

The Chairman of the Committee shall notify the entity concerned at

KP I ompany

with details related to the timings and method for

receipt of requests, the place for delivery of same to the Committee

as well as the means of communication with the Chairman and the

Secretary of the Committee. Any other amendments which may

take place on any of these details in future shall also be notified by

the Committee Chairman.

Article (15)

Personnel concerned fromKP I ompany

presenting a request,

shall attend the Committee meeting during discussion of such

request without any right to vote. Their attendance shall only be

for the purpose of providing clarificationsandlor

additional

information to the Committee as necessary in order to facilitate its

-business and-

decision making, and shall be confined to the period .

~ ~ ~

~

~

~~

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of discussion of the concerned party's subjects only. Such

attendance shall be recorded as well as their statements in the

minutes of the meeting. The person concerned shall be considered

as present if arrangements can be made to hear his views through

using communication devices as agreed with the Committee.

Article (16)

a. The Committee shall decide upon the submitted subjects

submitted during its meetings, taking into consideration the

provisions of the law pertaining to public funds as well as the

general procurement rules ensuring competitiveness,

transparency and equality in dealing with all bidders. The

Committee shall also refer to the Public Tenders Law No. 37

for the year 1964 and amendments thereto as well as its

previous decisions for guidance. Before deciding upon a

presented case, the Committee may seek legal opinion on

such case or a specified related to that case. Such request

shall be made by way of a letter directed from the Committee

Chairman to KPC s General Counsel.

The Committee shall notify by fax the KPCICompany

concerned of its decisions regarding its submission

immediately after issuance. The Secretary shall edit the

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decisions which shall be approved by the person chairing the

respective Committee meeting.

b. For subjects which the Committee has no final authority to

decide upon, the Committee issues its respective ruling in the

form of a recommendation or a preliminary approval. It may

also issue articles of views or research as necessary or as

assigned. As regards recommendations submitted to theCommittee, it is empowered to endorse as is, amend, or

decide otherwise. It is also empowered to request hrther

information it may deem necessary for its purposes, and also

to request certain clarifications from the entity concerned in

order to assist the Committee in taking a decision.

c. The Committee shall ensure that submitted bids are in

compliance with tender documents, however, the Committee

may consider a bid containing minor technical deviations if

the concerned entity submits a recommendation for award on

same, giving a list of such deviations with justifications for

each one, and clarifications on its impact, provided that the

rest of terms and conditions and specifications of the bid are

in conformity with those of the tender, and provided that

acceptance of such minor technical deviations will not lead to

any change whatsoever in the bidders' competitive legal

-- rackings

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previous stand point, to amend its ruling, or to issue a further

decision, as it deems appropriate.

b. KPC or the Company concerned may object to a Committee's

decision, in which case it shall take the matter up to the CEO

of KPC for an irrevocable ruling on the subject matter. The

objecting entity shall notify the Committee of the objection

made and of the ruling issued in this respect.

c. Any other concerned third party may complain against a

Committee's decision. Such complaint shall be referred to

the Committee which shall convene urgently to discuss the

complaint. The Committee Chairman will invite the KPC s

General Counsel to attend the meeting so as to opine on the

matter. The Committee shall take its final decision on the

subject and shall convey such decision to the concerned

parties.

d. Where the Committee has agreed upon any subject while

thereafter objected thereto by the Central Tenders Committee,

KPC or Company concerned shall in such event provide its

complete response to whatever objections made by CTC and

shall notify the Committee of the outcome in this respect.

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Article (18)

a. Submission of a purchasing or contracting subject to the

Committee shall not prevent the Company from

communicating with the bidders directly without the

Committee's involvement for the purpose of requesting

further additional information or clarifications which the

Company concerned deems necessary for proper evaluationof bids, provided that such communication shall have no

impact whatsoever on the competitive ranking positions of

the bidders.

b. In all cases, KP or the Company concerned shall refrain

from notifying the concerned parties of any recommendation

issued by it or by the Committee until the award is approved

by the concerned authority.

Article (19)

In the event of violation of the provisions of this regulation by KPC

or the Company concerned, the Committee Chairman shall notify

the CEO of KPC of such violation in order to take the necessary

action as he deems appropriate.

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27

(Chapter 5)

Information to be provided byKP

and Subsidiary Companies

in respect of the ir Submissions to the Committee

Article (20)

Model Data Form - Purchasing

a. Tender Issue

a- Required items of products and theirresl~ective

Usage

a-2 Technical Specifications, Standards and Technical Terms

a-3 Method of Tendering

(Public Tender - Restricted Tender-Auction)

Provide justification for the selected method of

tendering if other than a public Tender.

a-4 SuppliersLisWendor s

Names

a-5 Brief details on last similar purchasing transaction

(A list showing Supplier's name, date of purchase, Item

price)

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a-6 Tender Estimate

a-

7 Availability of allocated h n d s in the budget.

Award Data

Schedule of Bids' Prices

Expiry Date of Bids

Justifications for Award

Availability of Adequate Funds

Direct Contracting Data

Scope of Work

Justification for Direct ontractingISingle Source Approach

Actual Award Value

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29

Article (21)

Data Form-

Service Contracts

a. Prequalification Information (ifany

a- Prequalification Terms and Criteria

a-2 Prospective Contractor's Evaluation Report

a-3 Justifications and Recommendations

b. Tender Issue

b- Type of ServiceIServices Required

b-2 Scope of Work

b-3 Required Plant

b-4 Manpower Required

b-5 Method of Tendering:

(Public Tender-Restricted Tender -Auction)

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- Provide justification for the selected method of

tendering if not a public tender.

b-6 Bidders List1 Names

b-7 Brief historical information on previous Service Contract

(A list showing contractor's name, type of service, scope of

work, plant and manpower, contract value and contractperiod)

b-8 Contract Period

b-9 Tender Estimated Value

b-10 Availability of Financial Allocation in the budget

c. Award Data

c 1 Schedule of Bids' Prices

c-2 Expiry Date of Bids

c-3 Justification for Award Recommendation

c-4 Availability of Adequate Funds for Payment

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3

d. Direct Contractine Data

d-1 Scope of Work

d-2 Justifications for Single SourceDirect Contracting Approach

d-3 Actual Award Value

Article (22)

Data Form - Works Construction Contracts

a. Prequalification Information (if any)

a-1 Prequalification Terms and Criteria

a-2 Contractors Evaluation Report

a-3 Justifications and Recommendations

b, Tender Issue

b-l Scope of Work

b-2 Contract Type e.g. Lump SumlCost-Plus)

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b-3 Method of Tendering

(Public Tender - Restricted Tender -Auction)

-Provide justification for the selected method of

tendering if not a public tender.

b-4 Bidders.List1

Names

b-

5 Completion Period

b-6 Tender Estimated Value

b-7 Availability of Financial Allocation in Budget

c. Award Data

c 1 Schedule of Bids' Prices

c-2 Expiry Date of Bids

c-3 Justification for Award

c-4 Availability of Adequate Funds for Payment

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10) Duration

11) Justification for Variation Order Issuance

12) Justification for not issuing the Works under the required

Variation order in a separate tender.

13) Expenditure Amount so far under the Contract

14) Value of Remaining Balance

15) Details of Required Amount for VO

16) Availability of Allocated Funds in the Budget

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APPENDIX No.1

KP 's Subsidiary on~panies

Tendering Regulations

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Direct Order Contracting

Means purchasing or assigning execution of works or services

(including consultancy services) to onesupplier/contractor

only

and directly without tendering or auction to more than one

Supplier/Contractor

This includes contracting with single source

that is classified by the Company as a sole prequalified provider for

the required material or services being the sole manufacturer or

sole contractor for requiredgoods/services

Company Committee: It is the Internal Tender Committee formed

by the Company under the provisions of this Regulation to perform

the duties assigned to it in accordance with the authorities and

powers stipulated herein.

KPC Committee (KPC HTC): It is theKPC

Higher Tenders

Committee.

Central Tenders Committee. (CTC): It is the Committee established

by the Public Tenders Law No. 3411964.

Company: it is one of the Kuwait Petroleum Corporation's

subsidiary companies, which are governed by this Regulation.

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Concerned Body: It is the company's group or department

responsible for contracts and purchasing activities within the

Company which is assigned the responsibilities of tender issuance

quotation seeking, as well as other related duties.

Requesting Body: It is the company's group or department which

requests the goods,services

or works to be provided.

Article (5)

In all its purchasing and contracting..- activities, the Company shall

take into consideration the principles of equality, transparency,

fairness, competitiveness, non-discrimination and respecting the

legal status of those dealing with it, as well as compliance with

confidentiality practices in its internal procedures.

Article (6)

The Company shall lay out in its supplementary rules suitable

procedures for the nature of the Company's activities as related to

contracting for works and purchasing goods which are of value less

than KD. 30 000/-. In such procedures, it shall stipulate proper

controls to ensure soundness of procedures including the

prohibition of dividing the single transaction into two ormore

.

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transactions, in a manner that each of them becomes less than the

value of KD. 30,0001-.

The Company Committee shall solely be responsible for all

procedures related to commissioning contractors with works,

services, conduct consultancy studies or for purchasing goods of

value exceeding KD. 30,0001- as required by the Company.

Article (7)

Tendering shall be the general rule in all purchasing or assigning

works or services activities. Its procedures shall be as stipulated in

this Regulation. Other methods of solicitation such as Auction and

Direct Order Contracting may be pursued only after obtaining

approval from the Company's Committee.

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Chapter 2

Company Tenders Committee-

Formation Authority

Article (8)

A Tender Committee for the Company shall be formed by way of a

decision issued by the Chairman of the Company called"

The

Company's Internal Tenders Committee", and comprising seven

(7) members who are a Deputy Managing Director as Chairman, a

Deputy Chairman and five other members to be selected mostly

from among the managers of Company's departments representing

various activities of the Company. The formation decision shall

include the appointment of an alternate member for each original

permanent member of the Company Committee so as to replace

him during his absence. Members from outside the Company may

be included.

The Company Committee shall have a Secretary or more who are

non Committee members. The Secretary shall be appointed by the

Company's Chairman Managing Director. The Secretary shall

be responsible for recording all proceedings performed by the

Committee as well as maintaining its files, documents and

correspondence and any other duties assigned to him by theCommittee. ....... . .. . .

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Article (9)

The Company Committee shall be assigned with the following:

- Reviewing, approving tender documents for issuance and

following up relevant procedures for all purchasing and

contracting Tenders, Auctions, Purchase Orders, andDirect Order Contracting which are of value exceeding

KD. 30 000/-.

- Reviewing, approving award of Tenders, Purchase Orders,

Auctions and Direct Order Contracting which are of value

exceeding KD. 30 000/- but less than KD. One (1) million.

Where such limit is reached, the Company Committee role

shall be limited to submission of its recommendation to the

KPC HTC.

- Approving issuance of variation orders on contracts which

are the sole discretion of the Company. For Variation

orders requiring approval ofKPC

HTC and CTC as the

case may be, the Company Committee shall submit a

recommendation for award.

Opening bid envelopes.

.

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- Cancellation of tenders together with related procedures

and actions that may arise therefrom.

Approval of the list of bidders to be invited for

participation, as well as approval of any amendment

thereto.

-Investigate bidders' complaints received by the Company.

- Approval of liquidation of a bid bonds in cases warranting

such action.

- Implementing any other directives related to contracts and

purchasing as assigned by the Company Chairman at any

point in time.

Article (10)

The Committee may delegate part of its authorities to a sub-

committee which it may form from among its members or from

others. The Committee may assign the Concerned Body to carry

out certain specified tasks within the scope of implementing the

provisions of this Regulation.

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Article (11)

The quorum for the Company Committee meeting shall be four

members present from original and alternate members, one of

whom shall be the hairman or his Deputy. However, in the

event there is a reason leading to non-attendance of both of them

at the same time, the members present at the meeting shall electone of them to chair the meeting until the Chairman or his

Deputy becomes available.

Article (12)

The Company Committee shall hold a weekly ordinary meeting

depending on the volume of its business and as decided by its

chairman. Adhocmeetings

may be called upon by the

Committee Chairman or his Deputy. The Chairman may cancel

the ordinary meeting in the: event there is no adequate business

on the agenda warranting holding the meeting.

The meetings shall be attended by the Secretary who shall

record all the minutes of the meeting and shall draft its

decisions. He shall not participate in the discussions and shall

have no voting right.

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The Committee may invite any Company employee of expertise

to opine on a certain matter. It may also invite a representative

from the Requesting Body or the Concerned Body to submit

clarifications or documentation that may serve the Company

Committee's purposes without any voting rights.

All decisions and recommendations of the Committee . can be

taken with the simple majority of the votes cast, unless stated

otherwise in this regulation. In case of equal'voting, then the

side including the Chairman is considered majority.

Chapter3)

Bidders' Provisions

Article (13)

A tenderer participating in a tender shall have to be a merchant -

whether an individual or afirm- and to fulfill the stipulated Kuwaiti

Labor ratio at the time of submitting its bid. This shall be

applicable to local companies, establishments and registered local

agents in the event the works shall be carried out within the State of

Kuwait.

A Foreign company or establishment may submit a bid providedthat it is registered in the Chamber of Commerce of its home

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country and shall have the capability and resources toc ny

out the

required works.

In all cases, a bidder shall show its address in its bid. All

correspondence and notices addressed to that address shall be

considered as true and legally effective. The bidder shall notify the

Company of any address change, and the same shall be stated in the

tender documents.

Article (14)

Not one person, or a joint group of persons, shall be permitted to

submit more than one bid per tender, except in case of alternative

bids where the tender conditions so permit.

In a high value tender, the Company Committee may permit more

than one legal entity to submit a joint bid, provided that the

obligations and liabilities of each of them shall be clearly defined

or that the bid submission includes their acceptance of

responsibility jointly and severally.

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Article (15)

A tenderer shall neither be a member of the Company's Board of

Directors, the Company Committee nor an employee of the

Company.

In applying the provisions of this Article the term "tenderer" shall

include the partner, the agent, the representative, the employee andthe member of the board of directors of the tendering company.

Chapter 4

Tender Launching Procedures

Article (16)

Prior to launching a tender for goods purchase or for works, the

Requesting Body concerned shall prepare the specifications of each

item of purchase or works giving due consideration that such

specifications provide for competitiveness and allow for obtaining

most favorable alternatives at the least cost. It shall also draft the

necessary instructions to bidders, drawings, bill of quantities, the

procedure to be followed in executing the Contract, and the

liquidated damages which may be applied in the event of breach or

delays in execution of the Contract, in addition to the form of

tender and attachments thereto, as well as the contract's general and

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particular conditions. All these shall be prepared in full so as to

acquaint the bidders with the works or goods in a manner that

negates ignorance of the same.

Article (17)

The tender documents must include the elements and criteria for

technical and commercial evaluation of bids, as appropriate,together with stipulations representing the minimum standards for

bid acceptance, in addition to all other terms that safeguard the

Company's interests.

Article (18)

For a tender of estimated value exceeding KD. One (1) million, the

Company shall obtain the KPC Higher Tender Committee's

approval prior to issuance, and shall comply with whatever relevant

directives or procedures which KPC HTC may decide.

Article (19)

Issuance of tenders of an estimated value exceeding KD Five (5)

million shall be subject to the Central Tenders Committee's

procedures, except those which have been exempted by W C s

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Board of Directors as well as those which are exempted by the

Central Tender Committee.

Article (20)

The Company shall advertise the tender in the Official Gazette or

through other suitable means of publication. It may only notify the

invited bidders of tender issuance in case of a restricted tender.Advertisements shall be placed at the Company's premises,

including a suitable bidding period from the date of advertisement.

The advert shall show the issuance and closing dates of the tender,

the bid validity period (as specified in the tender document), the

goods works required, the fee amount for tender document copy

collection and thepartyllocation

where the bids shall be submitted

thereto.

. .

Article (21)

The tender documents should be prepared well in advance to

publication of the tender advertisement, including all relevant

general and particular conditions, specifications, bill of quantities

with respective appendices, as well as other details, in such a

manner that it shall be issued upon request after payment of the

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particular conditions. All these shall be prepared in full so as to

acquaint the bidders with the works or goods in a manner that

negates ignorance of the same.

Article (17)

The tender docun~entsmust include the elements and criteria for

technical and commercial evaluation of bids, as appropriate,together with stipulations representing the minimum standards for

bid acceptance, in addition to all other terms that safeguard the

Company's interests.

Article (18)

For a tender of estimated value exceeding KD. One (1) million, the

Company shall obtain the KPC Higher Tender Committee's

approval prior to issuance, and shall comply with whatever relevant

directives or procedures which KF C HTC may decide.

Article (19)

Issuance of tenders of an estimated value exceeding KD Five (5)

million shall be subject to the Central Tenders Committee's

procedures, except those which have been exempted byKPC s

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specified collection fees to the Company specified office as

determined by the Company.

Article (22)

In a restricted tender, the Concerned Body shall consider inviting

suppliers and contractors who are registered in the Company's pre-

qualification. lists matching their respective business activities or

who are registered on suitable approved lists of other entity .

In case of an activity that no list of prequalified contrac -tors or

suppliers can serve purpose, the Requesting Body shall submit to

the Company Committee a list of the bidders whom the tender shall

be launched thereto for approval. Any addition to this list shall

also be submitted to the Committee for approval.

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Chapter 5

Bid Submission Procedures

Article (23)

Bids shall be submitted in the official tender documents issued tothe bidders. All tender documents shall be considered personal by

the tenderers who obtained them and shall not be transferred to

others. The same shall be stated in the tender documents.

Article (24)

It shall be stated in the tender documents that bids must be

returned, completed in all aspects, duly filled-in in accordance

with the terms and conditions stated in the tender documents, and

in exact conformity with the tender provisions. A bidder shall not

effect any alteration in the tender documents.

Article (25)

Any bid violating these provisions shall be rejected unless the

Company Committee decides to accept it for considerations related

to the Company's interests.

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Article (28)

Pricing of all bids shall be in the official currency as per the tender

terms and conditions as well the Form of Tender and attachments

thereto, unless it is otherwise specified in the tender documents. A

bidder shall not be permitted to introduce any change in such bid

price after submission.

Article (29)

Bidders shall return the tender documents on the closing date and

time specified therefore and in the manner prescribed therein.

Article (30)

The bidder shall have to deposit with his bid (attachedtoth

Form

of Tender) the initial guarantee (Bid Bond) in the form of a

certified cheque or a letter of guarantee -from a bank licensed bythe Central Bank of Kuwait- in a form acceptable to the Company.

The bid bond shall remain valid throughout the duration of bid

validity. Neither cash deposits nor uncertified cheques shall be

entertained.

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57

Chapter (6 )

Bid Opening Procedures

Article (34)

If the tender conditions stipulate that bids shall be submitted in the

Company Committee's tender box, the box shall not be opened

unless the Committee is in session.

Article (35)

The Company Committee or the assigned subsidiary Committee

shall open the bids when in session, and shall record in its minutes

of meeting the bidders' n mes and their respective bid prices.

Article (36)

After opening bid envelopes, the Company Committee shall

publish the bids' prices schedule on the designated notice board.

Article (37)

Any bid unaccompanied by the initial guarantee (Bid Bond) shall.

? . - '....

..

1 2

L ~ l t

i c u

uvu

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Article (38)

If the bid shows any anomaly or discrepancy, the Company

Committee shall decide on whether to accept or reject it.

Article (39)

The Company Committee shall refer the submitted bids to the

Concerned Body for evaluation and submission of

recommendations in respect thereof within the period specified by

the Committee.

Chapter 7)

Tender Award Procedures

Article (40)

On scrutiny of the bid, if the bidder has committed an arithmetical

error exceeding 5% of the total bid price, the bid shall be

disqualified, unless the Company's Committee decides to accept it

for considerations related to the Company's interests.

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Article (41)

Without prejudice to the provisions of Article (40) hereof, if it is

revealed upon scrutiny of the bid that individual item prices and

details do not tally with the total bid price, the latter shall always

prevail, unless it is erroneously calculated in excess of the total of

individual rates and details, in which case the correct total shall

prevail.

Article (42)

If it is revealed upon scrutiny of the bid that some of the individual

rates are unreasonable, the Company Committee or other technical

personnel as delegated by it shall adjust such rates with the

successful bidder before the tender award is made within the total

price of the tender, provided that such adjustment shall not lead to a

change in the bidders' ranking.

Article (43)

Where there is a discrepancy between the numerical amount and

the amount in words the Company Committee shall consider the

least of the two amounts.

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Article (44)

The Concerned Body may communicate with a bidder directly for

clarification of certain matters related to its bid without referring to

the Company Committee, provided that such clarification shall not

lead to any change in the bid prices.

Article (45)

The Company Committee will award the tender to the bidder who

submits a bid most complying with the award criteria. In the event

no award criteria are mentioned, the award shall then be made to

the bidder who offered the lowest price provided that his offer

conforms to the requirements of the tender documents.

Article (46)

If the Company Committee establishes that there is a strong

justification for preferring a bidder with higher bid price, or, if theprovisions of the preceding article are not applicable, the decision

of award of tender shall be made by majority of two thirds of the

votes cast provided that the Chairman or his deputy votes in favor

of such award.

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Article (47)

The Committee may award the tender to a bidder who submitted a

higher price if the lowest price is unreasonably low to the extent

that it does not provide assurance that works/services would run as

required.

Article (48)

As regards tenders for procurement ofgoods/materials

the

Committee shall give priority for award to the bid offering local

products provided that such goods/materials are in conformity with

the tender requirements and are not higher in price than similar

products imported from abroad by more than 10%. Preference

limit shall be calculated in light of the material quantities included

in the tender and their respective prices.

Article (49)

The Company shall have the right to cancel the tender at any time

prior to signing the Contract with the successful bidder. This right

shall be clearly highlighted in the tender documents. In the event

of exercising such right, the bidder shall not be entitled to claim

any damages or compensation of whatever kind.

...

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The Company shall notify the successful bidder in writing of its bid

acceptance and that he is awarded the tender.

Prior to notifying the successful bidder, the Company shall obtain

the approvalfor

award from the KPC Higher Tenders Committeefor tenders of value exceeding the amount of K One (1) million.

Article (54)

The Company shall obtain the approval of the Central Tenders

Committee if the award value of the tender exceeds KD five (5)

million unless the tender had been exempted from CTC by the KP

Board of Directors or by the Central Tenders Committee.

Article (55)

The oncerneti Body shall ensure the availability of funds for the

tender prior to notifying the successful bidder of the tender award.

Article (56)

Awarding the tender and notifying the successful bidder of tender

award shall not entitle the bidder. to any rights against the Company

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Managing Director disapproves such retraction, then the

Committee's original decision shall prevail.

Article (62)

Upon submission of the final guarantee (Performance Bond) by the

successful bidder and after Contract signature, the initial guarantees

shall be returned to the unsuccessful bidders upon their request

during the period of their validity. The same shall be highlighted in

the tender documents.

Chapter 9)

Auction Direct Order contract in Procedures

Article (63)

The Company Committee may give permission to the Concerned

Body to purchase goods or assign works by way of a auction if the

subject goods or works cannot be specified with exact

specifications, or they are urgently needed or otherwise as

determined by the Committee.

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All procedures/actions taken for issuance as well as award of the

auction shall be made through the Company Committee and shall

be handled in the same manner followed in tenders.,

Article (64)

The Concerned Body shall obtain the Company Committee's

approval prior to initiating procedures for direct contracting with

any party and within the authorities granted to the Committee.

Procedures/actions taken for direct contracting shall be referred to

the Company Committee.

Chapter 10)

Variation Orders

Article (65)

The Company may issue variation orders on contracts that it

concluded independently, provided that the contract value after

amendment shall not exceed the amount of KD one (1) million, and

also provided that the Company shall furnish the K P C Higher

Tenders Committee O PC HTC) with a monthly report of all

variation orders of values exceeding 20% of contract value forr n n t r ~ r t

nf ~ r l i i ~

P ~ I P P ~

n m i a r t e r

mill inn Dinar3 and n nne

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(1) million. If after amendments, the Contract value exceeds KD

one (1) million, the Company shall then obtain prior approval from

the KP C Higher Tenders Committee.

For contracts which the Company has concluded throughKF C

HTC, prior approval shall also be obtained from KPC HTC if the

value of variations on the contract exceed 10% of the original

contract value or the amount ofKD

five (5) million whichever isless.

Article (66)

For contracts which the Company has concluded through the

Central Tenders Committee (CTC), approval shall be obtained

from CTC for variations to contracts exceeding the lesser of 10%

of contract value or an amount KD. Five (5) million.

Chapter 11)

Concluding Provisions

Article (67)

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Article (69)

In the event there is a complaint received from a concerned party

regarding purchasing and contracting activities of the Company,

the same shall be referred to the Committee for consideration and

ruling. The Committee shall have the right to call upon the

complainant to hearhis

statements, as well as to investigate any

presented documents.

Article (70)

The Resolution of the Supreme Petroleum Council No. 511979 and

amendments thereto shall be applied in regulating processing of

tenders and contracts of value in excess of K five (5) million

except for contracting works which are exempted from the

procedures of the Central Tenders Committee including those

pertaining to urgent capital projects. Such exemption may be

granted by virtue of a decision by theKPC s

Board of Directors or

by arrangement with the Central Tenders Committee.

Article (71)

OperationsIWorks needed by various Company sectors in cases of

emergency such as fire, explosions orgasloil

leakage, shall be

excluded from the provisions of this Regulation.

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COMMERCIAL AFFAIRS GROUP CONTRACTS TEAMS

ISSUE : 4

February, 2006

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KOC POLICIES AND REGULATIONS FOR CONTRACTS

C & MD’s Letter Page 1 of 1

Issue No. 4 Date: February, 2006

CHAIRMAN AND MANAGING DIRECTOR’S LETTER

KOC’s policy for the handling and administration of contracts must be complied with at all

times by all those employed by or acting on behalf of KOC. All activities undertaken should

be clearly aligned with the or ganisation’s mission and strategic objectives.

Our dealings and relationships should always be such that KOC’s high standards and good

reputation are maintained, employing hi-tech means wherever possible.

You have a duty to both yourself and the Company to ensure that the following KOC Policies

and Regulations for Contracts are followed, and to raise any matter related thereto whichcauses concern or uncertainty with your management or Contracts Teams who are

responsible for implementing the Company’s policy on my behalf.

All dealings and relationships with contractors and officials shall be conducted in an ethical

manner and meet all relevant Legal and State Regulative requirements.

Communications between KOC and a contractor during periods of contractual negotiation

must always be handled objectively. As such, there must be a single point of contact for

contractual communications with contractors, unless otherwise specified.

Please ensure that this statement along with the following KOC Policies and Regulations are brought to the attention of all employees, contractor staff and other relevant personnel

involved in the handling and administration of KOC’s Contracts.

_____________________________

FAROUK HUSSAIN AL-ZANKIChairman & Managing Director

Kuwait Oil Company (K.S.C.)

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STANDING INSTRUCTIONS

1. INTRODUCTION

1.1 This document applies to all contracting activities of KOC.

1.2 Regulations specified in this document are mandatory. Should there be a need todeviate from any specific requirement, prior authority must be obtained from the C &MD.

1.3 These Regulations are designed to ensure that:

- KOC’s contracting policies and procedures are clearly stated and applied.- The best interests of KOC served, protected and safeguarded.- Administration of contract activity is as simple and cost-effective as possible.

1.4 The responsibility for selecting works or services to be performed by contractors lieswith the team normally undertaking or performing similar activities. This isreferred to as the “Controlling Team” throughout this Document.

1.5 All contracts should be written in such a way as to reflect the full scope of workrequired and should in no way be split into smaller packages in order to by-pass the

approvals procedures described within this Document or circumvent FinancialDelegated Authorities.

1.6 Manager (Commercial Affairs) shall be the custodian of this Document.

2. CONTRACTING OBJECTIVE

2.1 KOC’s aim is to ensure that works, goods, services and the use of third parties ’ facilities are performed or acquired at the most favourable terms compatible with thedesired quality and delivery requirements within State and Company regulations.

3. COMPETITIVE TENDERING

3.1 KOC’s policy is to seek competitive tenders from suitable, competent andindependent contractors unless clear and acceptable justification can be made forsingle tender action or for direct negotiation with a single contractor.

In all cases before issue of tenders, the Controlling Team must satisfy itself that alltenderers have the technical capabilities to undertake the works. Contracts Teamsshould always be contacted where further information is required in order to satisfythis requirement.

3.2 No tender shall be issued unless there is clear intent to carry out the works specified.

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3.3 A contractor must not be invited to tender unless there is intent to award the contractto the contractor in the event that the evaluation of tenderers indicates that his tenderis most advantageous.

3.4 The number of tenderers invited to tender must be sufficient to maintain

competitiveness but where possible numbers should be restricted to a manageable

number in order to minimize costs incurred by both KOC and the contractors.

4. CONTRACTOR PRE-SELECTION

4.1 Where relevant, contractors should only be given the opportunity to tender if they are

adequately capable to undertake works/services.

4.2 Where pre-selection exercises are required these should be carried out in conjunction

with Contracts Team concerned who is responsible for ensuring that selection of

contractors is carried out and that a data-base of information about contractors is kept

up to date.

5. JOINT VENTURES, CONSORTIA, ASSOCIATIONS AND PARTNERSHIPS

5.1 No such bodies will be eligible to participate in the Company’s tenders unless a single

Corporate Entity is nominated as representing all parties involved in such anundertaking. This single entity must take responsibility for keeping a full set of

consolidated accounts on behalf of such joint venture, consortium, association or

partnership.

5.2 Where such an association cannot independently demonstrate sufficient and

acceptable financial status to undertake the works tendered for, Parent Company

Guarantees may be required as for subsidiary companies described in Paragraph 6.

5.3 Exceptions to the rule stated in 5.1 above may be effected after obtaining C & MD’s

approval. However, any agreements between joint ventures, consortia etc. shall be

forwarded to Legal Affairs Group for review prior to Contract award.

6. SUBSIDIARY COMPANIES

6.1 Subsidiary companies shall be eligible to participate in the Company’s tenders only

where they maintain a separate and acceptable set of consolidated accounts or with a

Parent Company Guarantee where the parent is a properly constituted Corporate

Entity.

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7. CONTACT WITH TENDERERS

7.1 All communications with tenderers whether they be single tenderers or in competition

must be recorded in writing. Such communications should always be handled by a

member of the Contracts Teams who shall be delegated by the Team Leader

Contracts concerned and shall act as the Company’s representative throughout the

Tendering process.

7.2 Under no circumstances must a tenderer be given information that would favour or

handicap him in relation to other tenderers for the contract. Generally all responses to

pre-tender queries of whatever nature from and to any tenderer should be sent to alltenderers.

8. RECORDS OF MEETINGS

KOC representatives shall produce minutes of all meetings with tenderers/contractors

both before and after the award of any contract. During operation of a contract,

records of all informal meetings shall also be kept in the form of a file note and/or

diary statement. Only if authorized, it is also essential that minutes of important

formal meetings where any specific agreements are reached, instructions or

clarifications given or important technical/commercial issues discussed, shall be

agreed or amended as required at subsequent meetings. Copies of all suchinformation should be forwarded to the Contracts Team.

9. CONFIDENTIALITY

9.1 Information about tenderers, tenders received, internal financial estimates and

intentions to and reasons for award of a contract are STRICTLY CONFIDENTIAL and

shall only be disclosed on a “need to know” basis.

9.2 No information about any tenderer will be disclosed to other tenderers.

10. CONTRACT AWARD

10.1 Contract works shall not commence until a clear “Instruction to Commence” is issued

unless otherwise specified in the Contract. Under very exceptional circumstances a

Letter of Intent may be issued prior to the contract being signed. Under these

circumstances, the respective Contracts Team is responsible for drawing up the

necessary document and obtaining approval in accordance with these KOC Policies

and Regulations for Contracts

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11. POST CONTRACT AWARD CONTROL AND ADMINISTRATION

11.1 Following award of the contract, it is the responsibility of the Controlling Team toensure that adequate control is in place in accordance with sound commercial practiceand in line with the policies and procedures outlined in this document. In particular,the Controlling Team should ensure that the Specification and Scope of Work areaccurately defined and monitored, Where a contract requires Work Orders,Adjustment or any other amendments, the Controlling Team shall ensure that suchchanges are clearly defined and that Contracts Team is promptly informed for allnecessary processing.

11.2 It is the Controlling Team’s responsibility either directly or through its nominatedand authorized representative, to ensure that the contract works are carried out inaccordance with the requirements of the contract. Compliance includes compliancewith the specification, programme and other aspects such as HSE of the Site. TheControlling Team is responsible for ensuring that adequate records are maintained ofcontract cost, programme and progress, Quality Assurance, etc.., and, where work isexecuted on a daywork basis, for receipt and approval of the contractor ’s time sheet.

11.3 Regular meetings should take place with the contractor in order to ensure that allactivities are planned and that progress is being effectively monitored and recorded.

11.4 In the event of poor performance, misconduct, or breach of Contract terms andconditions, the Controlling Team shall communicate with the Contractor in writingwith supporting evidence. Contracts Teams shall be advised of actions taken or to betaken (depending on the Controlling Team’s ability to resolve such difficulties) toremedy the situation.

12. PROPER ACCOUNTING AND CONTROL

12.1 All personnel responsible for the handling and administration of contractualrelationships of whatever value must ensure that there is an adequate system ofinternal control in place and that measures are instituted to ensure compliance withCompany policy. In particular, adequate records must be kept to justify alltransactions that take place with a contractor.

12.2 No contract shall be let or scope changed without confirmation of the availability offunds in accordance with Company procedure. Compliance with prescribedaccounting systems and rules is required to ensure that all accounts at all timesaccurately reflect, properly describe and promptly record the contractual transactionsundertaken.

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13. CLAIMS

In the event of a contractor ’s claim, the Superintendent of the Contract is responsiblefor ensuring that a thorough and fair evaluation is carried out prior to seeking anynecessary approvals. All claims shall be forwarded to Contracts Services Team forfurther handling in accordance with the provisions set out in Section 17 hereof.

14. CONTRACT CLOSURE

Every contract should be closed only with sufficient documentary evidence indicating

that all work has been carried out and that financial settlements have been made upon

completion of the work and rectification of any defects.

15. STORAGE AND RETENTION OF DOCUMENTS

15.1 Contract Teams are responsible for the storage of all original contract documents.

Such documents including original of contracts, parent company guarantees,

amendments etc. shall be kept in safe storage and will be made available for

reference purpose.

15.2 All pre-contract documentation including documents concerning appraisal of tenders

received as well as contract documentation shall also be retained by Contracts Teamsfor a period of 15 years from the date of completion of the contract.

15.3 All documentations related to disputes shall be maintained until respective disputes

are resolved.

16. FORMS OF CONTRACT

16.1 In general, all contracts shall be made under the current version of the relevant KOC

published General Conditions of Contract.

16.2 Contracts Teams shall be responsible for the updating of these General Conditionsand in addition shall maintain a data-base of model clauses and forms of contract for

reference. Such updated models shall be made available through the Company’s

Intranet pages for guidance.

16.3 Where an amendment to contract terms is necessary, these will be checked by

Contracts Teams who shall ensure such clauses are reviewed by other appropriate

areas of expertise such as the Legal Affairs Group prior to issue.

16.4 Any new agreement entered between KOC and the Contractor due to change of status,

entity, amalgamation etc. shall be referred to Legal Affairs Group for review and

advice prior to effecting such Agreement.

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17. RESPONSIBILITIES

17.1 The nominated Superintendent of a Contract is responsible for ensuring that the

contract is administered strictly in accordance with KOC’s policies and procedures

and nothing in this document shall imply that this responsibility is shared with or

partially held by any other person or Group unless the Contract has more than one

Superintendent where each one is responsible for the part under his Team’s control.

In particular, the Superintendent of the Contract shall ensure that all necessary advice

and approvals are obtained as appropriate.

17.2 Delegation of Financial Authorities for all aspects of contracts administration shall be

strictly in accordance with the KOC’s Executive Delegation of Authority .

18. COMMUNICATIONS WITH STATE AUTHORITIES

All relevant communications with external authorities such as KPC and CTC relating

to tender and contract administration shall be issued by the Commercial Affairs

Group.

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Section : 1 Page 1 of 7


SECTION 1 - DEFINITION

1.1 Contract Classifications

The main types of Contracts are:-

1.1.1 Type "A" Contracts

Type "A" Contracts are defined as contract agreements which are normally negotiated

and signed on a "Direct Contracting"/"single source" basis for specialist services or

works such as specialised services related to Drilling and Production Operations,

maintenance of medical equipment, specialist computer equipment and software,

lease agreements, or agreements for services which, due to their nature, are onlyavailable through direct negotiation/contracting.

1.1.2 Type "B" Contracts

1.1.2.1 Type "B" Contracts are defined as those Contracts for which Request for Proposals

(RFPs) are issued, received and awarded by the Company.

1.1.2.2 Type B (1)

Normal competitive terms and Bid prices NOT negotiable, RFP. Estimated Contract

value greater than KD. 30,000 and up to KD. 5 million.

1.1.2.3 Type B (2)

Normal competitive Terms and Bid prices negotiable (Mumarasa), RFP estimated

Contract value greater than KD. 30,000 upto KD 5 million.

1.1.2.4 Type B (3)

B(3) Contracts for Remedial Works or Specialized Services of an Emergency Naturewhich may be issued as Type "B3" Contracts, with the authorisation as follows:

Estimated Contract Value KD.30,000 – KD.250,000 : DMD concerned

Estimated Contract Value greater than KD. 250,000 Unlimited : C & MD

Estimated Contract Value greater than KD. 5,000,000 : KPC Board of Directors

1.1.2.5 Type B (4)

B(4) Contracts for "Vitally Urgent Works", including HSE related Works of estimated

value greater than KD. 30,000 which involve competitive bidding without having to

go through the normal tendering procedures, subject to the prior approval of the KOCTender Committee, KPC HTC, KPC Board of Directors, as applicable.

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1.1.2.6 Type B (5)

B(5) Contracts for Consultancy Services and Specialised Services which involve

competitive bidding.

1.1.3 Type "C" Contract

1.1.3.1 Type "C" Contracts are defined as those contracts for which the authority to issue and

receive RFPs and award of contract remains with the Central Tenders Committee.

1.1.3.2 Normally Type "C" Contracts are those for which the estimated value at RFP stage

exceeds KD. 5,000,000/-.

1.1.4 Low Value Contracts (Type "L" Contracts)

Contracts for Works or Services of estimated value greater than KD. 1,000 but not

exceeding KD. 30,000 are termed as "Low Value Contracts" (Type "L" Contracts).

1.1.5 Minor Works

Works and/or Services not exceeding KD. 1,000/- in value are classified as Minor

Works and are not handled on a Contracts basis i.e. not processed thru’ Contracts

Teams or KOC Tender Committee.

1.2 General

The following terms shall have the meanings assigned to them:-

1.2.1 State Legal Department

State Legal Department is the Department of Legal Advice and Legislation of the

Council of Ministers, which reviews all RFPs issued thru’ CTC.

1.2.2 Central Tenders Committee (CTC)

The Central Tenders Committee is the official body established under Law to control

the issue and award of public tenders of estimated value greater than KD.5,000,000/-.

1.2.3 KPC Higher Tenders Committee (HTC)

The Kuwait Petroleum Corporation Higher Tenders Committee (KPC HTC) is the

committee appointed by the Chairman of KPC to review and approve all purchasing

and contracting activities for tenders of value exceeding KD. 1,000,000/- each.

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1.2.4 KOC Tender Committee

KOC Tender Committee shall comprise the following:

DMD (TS) - Chairman

Manager (Commercial Affairs) – Member & Deputy Chairman

Admin.& Fin. Directorate Representative - Member

North Kuwait Directorate Representative - Member

South & East Directorate Representative - Member

West Directorate Representative - Member

Oil Services Directorate Representative - Member

Team Leader Contracts Services - Secretary

The Terms of Reference of KOCTC shall be as follows:.

1.2.4.1 Ensure sound implementation of KOC’s Policies and Regulations for Contracts and

Purchasing, as applicable to issue and award tenders and Agreements (including those

exempted from KPC HTC and/or CTC), Approval of Purchase Order Amendments

and Adjustment Orders and other related issues.

1.2.4.2 Monitor and ensure that the technical and commercial evaluation of tenders is

adequate and is in the best interest of the Company.

1.2.4.3 Review and, if in agreement, endorse the Controlling Team’s recommendations forissue of tenders including approval of bidders’ list, estimated cost, method of

tendering, Kuwaitization requirements of Contractor’s manpower and the like.

1.2.4.4 Review, and if in agreement, approve confiscation of bid bonds.

1.2.4.5 Arbitrate on any complaints received from any tenderer/supplier related to tenders,

Requests for Quotation or purchase orders.

1.2.4.6 Handle any other issues related to tendering as requested by C & MD.

1.2.5 Bids Opening Committee

Bids Opening Committee is delegated by KOC Tender Committee and shall convene

weekly to open bids received in sealed envelopes, for tenders with estimates between

KD. 1,000 and KD 5 Million. The Committee shall record the bids in the Schedule of

Bids, publish the same on the designated Notice Board and forward the bids to

Purchasing/Contracts Teams concerned for necessary action.

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1.2.5 Bids Opening Committee (Cont’d)

The Bids Opening Committee comprises the following members:

Team Leader Warehouse - Chairman

Team Leader Contracts Services - Deputy Chairman

Financial Group Representative - Member

Purchasing Teams I & II Representative - Member

Contracts Teams I & II Representative - Member

1.2.6 Controlling Teams

The Controlling Team is the Company Team responsible for initiating the

Contract Requisition (CR) and for the technical aspects of a Request for

Proposal (RFP)/ contract.

1.2.7 Contract Requisition (CR)

The duly approved request from a Controlling Team to Contracts Team, for

initiating a contract action is defined as a Contract Requisition (CR).

1.2.8 Request for Amendment

The duly approved request from a Controlling Team to Contracts Team for

initiating any form of amendment to a contract.

1.2.9 Company’s Executive Delegation of Authority

The Executive Delegation of Authority shall be that approved by the Board of

Directors and issued by the Chairman & Managing Director, with respect to

the level of authority within the Company to commit and incur expenditure on

behalf of the Company.

1.2.10 Company’s Appointed Representative

The Company’s Appointed Representative shall be any person delegated by

the Company to represent it at the KPC HTC/CTC.

1.2.11 Contract Superintendent

The person nominated by the Company as being responsible for all contractual

matters relating to the contract. Under normal circumstances this will be a

member of Contracts Teams during the pre-award phase and a member of the

Controlling Team after award.

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1.2.12 Ad Hoc Committee

For Requests for Proposal (RFP) having more than one Superintendent, a

Committee comprising representatives nominated by the Teams of all

Controlling Teams shall be formed. This committee shall be the Ad HocCommittee for the RFP and shall be chaired by the representative of the

Controlling Team having the greatest utilization of the Contract on a monetary

basis and shall be named in the RFP as the leading Superintendent.

It shall be responsible for preparation and review of RFP requirements,

evaluation of bids and for the joint recommendation for award. Where such

committee is required, the Chairman of such committee shall act as the

nominated contract Superintendent.

1.2.13 Re-tendering

Re-tendering shall mean the re-issue of a RFP due to its cancellation for any

reason.

1.2.14 Notice of Expiry

A Notice of Expiry shall be the notice issued by Contracts Teams to

Controlling Teams sufficiently in advance of the expiry date of a Service

Contract seeking their intention subsequent to the said expiry.

1.2.15 Authorisation for Financial Expenditure (AFE)

An AFE is a statement issued by Budget & Cost Team to a Controlling Team

confirming the authorisation of the allocation of funds for expenditure on a

particular project.

1.2.16 Contract Financial Approval (CFA)

A CFA is a statement issued by Budget & Cost Team with respect to a

Contract which confirms the availability of funds to cover the specifiedWorks.

1.2.17 Schedule of Bids

The Schedule of Bids shall be as follows:-

1.2.17.1 For Type `C' Requests for Proposals (RFPs)

The Schedule of Bids shall be as prepared by CTC recording the names of all

Tenderers who submitted their bids to the CTC, indicating the closing date and

the amount of each accepted bid.

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1.2.17.2 For Type `B' RFPs

The Schedule of Bids shall be as prepared by Bids Opening Committee

recording accepted bids, the names of Tenderers, the amount of each bid andthe closing date.

1.2.18 Bid Summary Sheet

The schedule prepared by Contracts Teams, after receipt of bids and the

Schedule of Bids, stating details of closing date, expiry date of Bid Bond,

names and ranking of the Tenderers and the commercial evaluation.

1.2.19 Live Contracts

This expression is intended to indicate that a Contract remains in force until

the issue of a Final Statement of Account for Construction Contracts or

signature of the designated Disclaimer Form by the Contractor for Service

type Contracts.

1.2.20 Dead Contracts

This expression indicates that a Contract is termed as closed following the

issue of a Final Statement of Account for Construction type Contracts orsigning the designated Disclaimer Form by the Contractor for Service type

Contracts.

1.2.21 Local Contractor ’s Evaluation Committee (LCEC)

1.2.21.1 Membership

The Local Contractor ’s Evaluation Committee comprises the following

permanent members:

Chairman:- Team Leader Contracts Services(Deputy Chairman – Snr. Contracts Officer Prequalification Unit)

Members: one (1) Representative from each of the following:

Industrial Services Group

Support Services Groups (North, West, South & East Kuwait)

Engineering Group

Financial Services Group

HSE Group

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1.2.21.2 Responsibilities and Functions

The LCEC shall be responsible for the following:-

• Review of the minimum requirements for each Category of Work,

following which any recommendations for changes shall be submitted with

the necessary justifications by the LCEC Chairman to Manager

(Commercial Affairs) approval.

• Evaluation of Local Contractor ’s applications for inclusion in the various

lists of Approved Contractors, in accordance with the procedure set out in

Section 26 hereof.

1.2.21.3 LCEC Meetings

The LCEC Chairman will call for meetings as and when required to review

any business related to consideration of minimum requirements or evaluation

of Contractor ’s applications.

1.2.21.4 The LCEC’s Committee overall recommendations shall be based on the

majority of votes. In the event the LCEC is divided on a particular issue, then

the LCEC Chairman will have the casting vote.

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SECTION 2 – CONTRACT REQUISITION

2.1 Controlling Teams shall initiate formal tender and contract action by preparing and

submitting to Contracts Team concerned a Contract Requisition (hereinafter "CR").

2.2 The CR shall be comprehensive, and shall include, as a minimum, the following

information, in hard copy or electronic:-

2.2.1 brief title of the Works or Services to be executed.

2.2.2 number of the AFE(s) / Oracle No./Top Task in the case of Capital work (if already

available)

2.2.3 detailed specifications for the Works or Services, and any specific requirements for

inclusion in the Contract Agreement.

2.2.4 detailed HSE requirements for Works or Services to be executed.

2.2.5 a list of the drawings, as applicable, together with one updated copy of each drawing

in hard copy or electronic.

2.2.6 proposed target date for release of the signed Contract.

2.2.7 proposed reasonable and realistic completion period for the Contract or required

duration of Service Contract. Contracts Team shall be consulted in order to concur

with this proposal.

2.2.8 proposed reasonable and realistic level of Liquidated Damages. Contracts Teams

shall be consulted in order to concur with this proposal.

Note: Liquidated damages are a contractually agreed sum which shall be paid by the

contractor in the event of delay in providing work / services specified withinthe contract.

Any such sum should be derived from a genuine pre-estimate of such delay. This pre-

estimate should be passed to Contracts Team for safe keeping in case of dispute.

2.2.9 proposed Defects Liability Period, if different from that stated in the General

Conditions of Contract.

2.2.10 any specific requirements for the pre-tender meeting and/or site visit where

appropriate.

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3.3.2 Where Contracts Team considers that certain comments and proposed

amendments are inappropriate for incorporation in the final RFP documents in

the form proposed, it shall take the matter up with the Team concerned in

writing.

3.3.3 Following incorporation of the agreed amendments and comments as

described above, no further changes/amendments shall be permitted except as

follows:-

3.3.3.1 Minor changes which do not significantly affect the scope of work oranticipated RFP prices shall be forwarded by user/controlling team in writing

to Contracts Team with details of the reasons for such changes.

3.3.3.2 Major changes to scope of work shall be forwarded to Contracts Team in

writing complete with full justification through the Group Manager of the

Controlling Team.

3.3.4 All changes must reach Contracts Team at least two (2) clear working days

prior to the date of the pre-tender meeting.

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4.5 Service Contracts / Contracts based on Rates/Blanket Contracts

For all contracts where a fully built up lump sum cannot be derived, a " not to

exceed" value must be clearly specified within the contract document. This

value may be based on either estimated requirements or an amount budgeted

for expenditure during the Contract Period and shall form the basis for all

necessary approvals in accordance with KOC's Executive

Financial

Delegation of Authorities. Under no circumstances should a contractor be

reimbursed in excess of the "not to exceed value" without a formal amendment

to the contract being issued in accordance with the procedures specified within

this document.

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SECTION 5 – ISSUE OF REQUEST FOR PROPOSAL

5.1 Contracts Teams shall prepare the final Request for Proposal (RFP) documents for

advertisement and issuance to the tenderers either directly by the KOC Tender

Committee (thru’ its Secretariat) or thru CTC as a pplicable.

5.2 The Controlling Team shall be responsible for the timely supply of sufficient sets of

clear copies of the RFP Drawings and other special documents (standards, project ’s

specifications, etc.) to be incorporated into the RFP documents in hard copy or

electronically.

5.3 For Type C RFPs, Contracts Teams shall forward copies of RFP documents to the

Ministry of Energy.

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SECTION 6 – COMMUNICATIONS

6.1 Communications with State Authorities

All communications between the Company and State Legal Department, KPC HTC,

Ministry of Energy and the CTC on matters relating to Request for Proposals (RFPs)

shall be through the Company's Appointed Representative.

6.2 Communications with Tenderers

6.2.1 Prior to award of a Contract, all communications with the Tenderers/Vendors must bemade through Contracts Teams.

6.2.2 Neither the Controlling Team nor any other involved Team, shall in any

circumstances contact, verbally or otherwise, any of the Tenderers/Vendors either

formally or informally. Such Teams must redirect to Contracts Team concerned any

approaches made to them by Tenderers.

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SECTION 7 – PRE-TENDER MEETING

7.1 A Pre-Tender Meeting shall be held for every Company Request for Proposal (RFP),

except as may be otherwise agreed in writing between Controlling and Contracts

Teams.

7.2 Contracts Team shall arrange and chair the Pre-Tender Meeting and, in liaison with

Controlling Team, make the required provisions for any related site visit(s), should

such visit(s) be appropriate.

7.3 Contracts Services Team shall arrange all necessary transportation for site visit(s).

7.4 Contracts Services Team shall obtain all necessary restricted area passes for

Bidders/Vendors personnel for site visit(s).

7.5 Controlling Team, where the Supplementary Letter involves revision to the Scope of

Work and/or technical specifications, shall provide the Contracts Team thru’ its

Group Manager with relevant details, sufficient sets of drawings and other special

documents to be incorporated in the Supplementary Letter. Contracts Team

concerned shall accordingly arrange for the finalisation and issuance of the necessary

Supplementary Letter to the Bidders/Vendors.

7.6 Supplementary Letters must be issued in sufficient time to enable tenderers to submit

proper bids. Contracts Teams shall issue the Supplementary Letter not later than two

weeks prior to the tender ’s Closing Date, unless otherwise agreed with Contracts

Teams, depending on the merit of each case taking into consideration the size and

complexity of each Supplementary Letter.

7.7 Where a postponement of closing date is necessary, the Contracts Team shall obtain

the Controlling Team’s consent for the same.

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SECTION 8 –

EVALUATION OF BIDS AND AWARD OF CONTRACTS

8.1 In the case of bids delivered directly at KOC premises, the Bids Opening Committee

(as delegated by the KOC Tender Committee) shall open bids received in sealedenvelopes, and shall record the bids in the designated Schedule of Bids and forward

them to Contracts Team concerned for necessary action.

8.2 Contracts Team shall be responsible for review of the bids and shall check for full

compliance with the Instructions to Bidders and shall obtain CFA from Budget & Cost

Team based on the first lowest bid received.

8.3 The Controlling Team/Adhoc Committee (for RFPs having more than onesuperintendent) shall carry out detailed technical and commercial evaluation with the

assistance of Contracts Team as appropriate and shall make the formal recommendation

for award. Initial evaluation of Request for Proposal (RFP) and submission of

queries/clarification required (if any) shall be completed within the shortest possible

period by the parties concerned within Company Organisation.

Note: This period shall be no longer than two weeks unless otherwise agreed with

Contracts Team, depending on the merit of each case taking into consideration

the size and complexity of each RFP.

8.4 Clarifications which do not in any way alter the RFP price or its originalspecifications may be obtained from bidders through Contracts Team. However, for

B(2) Type RFPs, should any discussions/negotiations with tenderers be deemed

necessary, prior approval from the KOC Tender Committee through Manager

(Commercial Affairs) must be obtained and Contracts Team shall be represented at all

such discussions/negotiations. Such meetings with tenderers shall also be

documented.

8.5 Final Recommendations for award from Controlling Team, which shall be forwarded

to Contracts Team as soon as practicable, shall be endorsed by the Group Manager of

the Controlling Team and shall be submitted to Contracts Team for review/vetting and

endorsement. The Recommendation for award shall specifically state that:-

8.5.1 the recommended bid meets the Company's technical requirements, and;

8.5.2 the cost has been examined and is commercially acceptable and justifiable for the

works/services/ materials etc. covered by the Contract.

8.6 Recommendations for award to other than the lowest bidder, shall be accompanied by

full justifications for the rejection of lower bids.

8.7 All recommendations for award, following review and endorsement by Contracts

Team, shall be submitted to the KOC Tender Committee for its review and approval.

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SECTION 9 – LETTER OF INTENT

9.1 Letters of Intent will only be issued upon C&MD approval and only in cases where it

is imperative that mobilisation for the Works or Services commences immediately.

Letters of Intent shall not be issued until all material matters relating to the subject

Contract have been agreed with the Contractor and the Letter of Intent must contain

reference to all such matters. In cases where a Letter of Intent is authorised, a formal

Contract must be concluded soonest possible.

9.2 Together with the request for the issue of a Letter of Intent, the Manager of the

Controlling Team shall forward to Contracts Team a report which must detail:-

9.2.1 steps taken in preparation of the Contract for signature,

9.2.2 reasons why the Contract cannot be immediately finalised and prepared for signature,

and

9.2.3 reasons why commencement of the Works or Services cannot be delayed pending

final preparation of the Contract for signature.

9.3 Contracts Team shall review and, where appropriate, endorse the request.

9.4 Approval to issue a Letter of Intent shall be obtained from the C&MD by Contracts

Team through M (CA) and DMD (TS).

9.5 Proposed Letters of Intent will be circulated by Contracts Team to Legal Affairs

Group, Controlling and Accounts Payable Teams for comments before being passed

to the C&MD for signature.

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SECTION 10 – FORMALIZATION OF CONTRACT DOCUMENT

10.1 Contracts Team shall prepare two originals of the formal Contract Document for

signature. Both originals shall be initialed on each page thereof by representatives

from Contracts and Controlling Teams

10.2 Subject to submission of the necessary Performance Bond as applicable, the

Contractor shall be invited to sign both Contract Documents.

10.3 The Company's signatory representative shall be decided in accordance with the

Company's Executive Delegation of Authority.

10.4 Contracts Services Team shall hold the Company's original copy of all signed

Contracts and other related documents.

10.5 The Performance Bond shall be held by Accounts Payable Team

10.6 The Contract documents may be released by Contracts Services Team after signature

by both parties, however, works under the Contract shall not be commenced until the

appropriate insurance policies have been approved by Team Leader Insurance .

Insurance policies and certificates shall be held in the Contract File in Contracts

Teams premises.

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SECTION 11 – ADVANCE PAYMENT

11.1 Advance Payments

No forms of advance, consultant's fee, retainer or similar payments shall be made

without the prior approval of the C&MD. Once the C&MD's approval is obtained for

such Advance Payments, it must be clearly incorporated into the relevant Contract.

Advance payment shall be only effected against submission by the Contractor of an

irrevocable unconditional payable on sight bank guarantee issued or endorsed by a

bank operative in the State of Kuwait.

11.2 Mobilisation Payments

Payments for mobilisation shall not be permissible except in the case of certain

specialised Contracts where payments may be made for mobilisation of heavy

equipment such as drilling rigs, floating plant and the like.

11.2.1 Such mobilisation payments must have been incorporated into the original RFP

Documents and the payments must be commensurate with actual mobilisation costs

incurred.

11.2.2 Mobilisation Payments must be paid after the relevant mobilisation.

11.2.3 Mobilisation Payments must be invoiced for and certified in accordance with Section

15 hereof (Contract Payments).

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SECTION 12 – COMMENCEMENT

12.1 Where it is stated in the Contract that the Commencement Date shall be notified in

writing to the Contractor, the Superintendent of the Contract shall not instruct the

Contractor to commence the Works until an original Contract Document has been

released to the Contractor and a notification is issued by Contracts Team that the

Contractor has fulfilled all insurance requirements

12.2 The notice specifying the date for commencement as issued by the Superintendent of

the Contract shall be copied to both Contracts and Financial Accounts Payable Teams.

12.3 Prior to commencement of the Works, the Controlling Team shall be responsible for:-

12.3.1 Ensuring the availability in KOC's Stores of materials to be supplied by the Company.

12.3.2 The delineation of the site and any associated working area.

12.3.3 The approval of Contractor's personnel.

12.3.4 The inspection of Contractor's equipment.

12.3.5. Assisting the Contractor in obtaining access passes.

The Controlling Team shall also be responsible for ensuring that all existing services

within the site area have been re-routed as necessary, ensuring compliance with HSE

regulations and requirements, and that there is no impediment which may prevent the

Contractor from commencing work on the date specified.

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SECTION 14 – EXECUTION OF CONTRACT WORKS OR SERVICES

14.1 The Superintendent of the Contract shall be responsible for ensuring the proper

implementation of the Works/Services and for ensuring the Contractor's compliance

with all the terms and conditions of the Contract, in particular Contractor ’s

compliance with HSE regulations and requirements. Such responsibility shall be

extended until after the Defects Liability Period. The day-to-day supervision of the

Works may be delegated to a Superintendent's Representative whose name and/or

designation, together with the extent of the delegation of such authority, shall be

notified to the Contractor in writing by the Superintendent if not already specified in

the Contract.

14.2 All formal meetings with the Contractor, shall be chaired and minuted by the

Superintendent's Representative. Minutes of Meetings shall be signed by the

Contractor and the Superintendent's Representative. Copies of all such minutes shall

be placed in the Contract file and copied to the Contracts Team.

14.3 Contracts Team shall remain responsible for and shall communicate directly with the

Contractor in the event of:-

14.3.1 Signature and issue of Amendments to the Contract.

14.3.2 Expiry and extension of Performance Bonds and Insurance Policies.

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15.2.2 Accounts Payable Team shall be responsible for making all certified payments within

the period specified in the Contract, .

15.2.3 Prior to release of the Final Payment, Accounts Payable Team shall obtain the

following from the Contractor in accordance with the conditions of the Contract:-

a) Tax clearance certificate.

b) Labour release certificate, where appropriate.

c) Final Disclaimer.

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Issue No. 5 Date: May, 2007

SECTION 16 –

AMENDMENTS TO THE CONTRACT

16.1 No variation shall be made to the Contract, without the issue of a formal

Amendment.

16.2 Under no circumstances shall a Request for Amendment be processed:

i) on expired Contracts.

ii) on retroactive basis, except only for emergencies or as outlined in clause 23

hereof, or in extraordinary situations when works/services under the

Amendment need to be carried out promptly to avoid incurring substantialadditional costs by the Company and/or claims by respective contractors, in

which case the following shall apply:

a) The Controlling Team shall obtain a written approval from the DMD

concerned before commitment whatsoever.

b) Subject to DMD’s approval as stated in (a) above , the Controlling

Team shall immediately proceed with the preparation of the necessary

Request for Amendment for submission simultaneously while

proceeding with the works/services covered thereunder, for

processing through the KOC Tender Committee.

All Amendments on retroactive basis shall be subject to verification by Contracts

Team and shall be processed as Amendment with subsequent reporting to C&MD

copied to DMDs.

16.3 Controlling Teams shall make every endeavour to restrict the number of Amendments

to the bare minimum, and only when the issuance of Contract Amendment is the sole

or best option. For Service Contracts, the Controlling Teams shall ensure that all

relevant requirements from the old Contract are incorporated in the replacement

Contract, so as to avoid raising Amendment Requests for the same requirements

under the replacement Contract.

16.4 All Amendment Requests shall be prepared and completed by the Controlling Team

and endorsed by the Group Manager, and shall be subject to endorsement of the KOC

Tender Committee. CFA from Cost & Management Accounting Team shall also be

obtained by the Controlling Team prior to submission to Contracts Team. Except as

stated in 16.2 above. Amendment Requests must be timely planned, prepared and

submitted to Contracts Teams well in advance of the proposed commencement date

giving due allowance for processing same by Contracts Team, as well as any period

required by Contractor for mobilisation under the terms of the Contract.

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16.5 Whenever applicable, in the event of any addition to a Contract’s Scope ofWork involving additional cost, the Controlling Team shall, prior to raising an

Amendment Request, arrange for obtaining at least 3 quotations from Contractors by

sealed envelope delivered to the KOC’s Tenders Box by the closing date stated in theinvitation for quotation.

Controlling Team shall, upon issuance of the Request for Quotation notify the

Secretary of KOC Tenders Committee of the closing date in order to arrange for

receipt of such quotations. Bids Opening Committee shall be responsible for opening

quotation envelopes and forwarding them to Contracts Services Team for further

handling by the Controlling Team.

16.6 Contracts Team shall be responsible for preparation and handling of all Amendments.

16.7 Contracts Team shall obtain the approval of the Controlling Team on the text of the

draft Amendment.

16.8 Upon receiving Controlling Team’s approval on the text of the draft Amendment, the

Contracts Services Team shall obtain the approvals as appropriate in accordance with

the K-Companies Tendering Regulations as follows:-

16.8.1 KOC Tender Committee’s approval is required for all Contract amendments.

16.8.2 KPC HTC approval is required for

i) Contract Amendment of any value where it raises the total Contract Price to

more than KD. 1 million.

ii) For Contracts of value more than KD. 250,000/- upto KD 1 Million, where

Amendments exceed 20% of the total Contract Price, the Contracts Services

Team shall only prepare and provide a breakdown of all such Amendments to

KPC HTC in the form of a monthly report.

iii) For Contract Amendments, where the original Contract Price exceeds KD. 1

million, and the cumulative value of Amendments increase the original

Contract Price by 10% or KD. 5 million whichever is less.

Where there is an Amendment involving increase and decrease of the Contract value

resulting from additions and deletions of items of work at the same time, the

cumulative value of the Amendment requiring KPC HTC’s approval shall be

calculated by way of adding numerically the two values of the additional and the

deleted items of work together, irrespective of the financial impact on the overall

Contract value. The revised total Contract value shall however be calculated on the

basis of the net product of the Amendment .value. Regulations prohibiting splitting

the transaction shall be taken into consideration in such cases.

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16.8.3 CTC approval is required for Amendments, where the Contract was originally

awarded thru’ CTC and the cumulative value of Amendments increases or decreasesthe original Contract Price by 10% or KD 5 million (whichever is less).

16.9 Contracts Services Team shall ensure that all necessary comments and approvals have

been obtained prior to signature by the Contractor and the Company’s delegated

signatory and issue of the Amendment.

16.10 The Company's signatory shall be selected in accordance with the Company's

Executive Delegation of Authority.

16.11 Issue of the signed Amendment shall be on the same basis as for the original Contract

and Contracts Team shall retain the Company's original of the Amendments for

safekeeping, along with the original Contract.

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Issue No. 5 Date: December 2008

SECTION 17 – CONTRACTOR’S CLAIMS

17.1 “Claim” is a written demand submitted to the Company by the Contractor seeking

additional payment, time, or other adjustment to the Contract, the entitlement or

impact of which is disputed by the Company.

All Claims from the Contractor shall be processed promptly in accordance with this

document and in compliance with the Standard Procedure for Handling, Processing

and Settling of Contractor’s Claims contained herein.

17.2 Upon receipt of a notice of Claim from Contractor, the Contract Superintendent

shall inform the Contracts Services Team of the notice and shall gather necessary

documentations, collect facts and all other information and records as necessary forevaluation of the Claim.

17.3 Correspondence with Contractor

At all stages of the Claim processing, all correspondence with the Contractor must

be:

17.3.1 for Live Contracts, through the Contract Superintendent.

17.3.2 for Dead Contracts, through Team Leader Contracts Services.

17.4 Claims Evaluation and Settlements

Upon receipt of the Claim, the Controlling Team shall:-

17.4.1 Complete the Claim File including a description of the Claim, a reference to

pertinent contract provisions, a statement of factual areas of agreement or

disagreement and a statement of his opinion and evaluation with supporting

rationale.

17.4.2 Produce Evaluation and Recommendation Report in a tabular format containing as a

minimum the requirements stated in the detailed Procedure for Contracts Claims.

17.4.3 Under no circumstances shall the Contract Superintendent make an offer for

settlement of a Claim directly to the Contractor unless prior approval is obtained

from KOC Management, as appropriate.

17.4.4 Forward Claim File to Team Leader Contracts Services through the Group Manager

concerned upon completion of Evaluation & Recommendation Report.

17.4.5 Contracts Services Team shall keep custody of the Claim File and keep record of

all correspondence related to the Claim. Contracts Services Team shall forward

Claim File to the respective Contracts Teams for review and further handling.

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17.4.6 The Contracts Team shall:-

i) Review the Contractor’s Claim vis a vis evaluation and recommendation from

the Contract Superintendent from contractual/commercial perspectives.

ii) Assess whether the recommendation from the Contract Superintendent

conforms to the Contract provision or otherwise.

iii) Obtain clarifications from the Contract Superintendent if recommendation is

not adequately supported by evidence or documentation or valid reasons.

17.4.7 The Contracts Services Team shall:-

i) Cooperate with Contracts Teams in reviewing the Claim and putting their

views along with the Controlling Team’s views in the form of tabulation.

ii) Obtain any clarifications and supporting documents from the Controlling

Team or in respect of Dead Contracts directly from the Contractor.

iii) Obtain review and opinion in respect of legal aspects underlying the Claim

iv) Convene clarification and review meetings between the Contracts Team,

Controlling Team and Projects & Claims Team - to discuss and reach

v) Chair and head any joint reviews and evaluation meetings involving other

teams.

vi) Fix up a Claim review and conclusion schedule after the Claim Evaluation and

Recommendation Report is received from the Controlling Team. Such period

shall be agreed on case to case basis with the other teams participating in the

process and shall depend on the complexities, value of the Claim and the

Contract provisions in this context.

vii) Seek further review/ evaluation from the Controlling Team if considered

necessary due to above review meetings.

viii) Recording consensus of all - Controlling Team, Contracts Team and Team

Leader & Senior Counsel (Projects & Claims) - on the recommendations prior

to submission to the Manager (Commercial Affairs) for onward processing.

17.4.8 The Reviewing Team comprising Controlling Team, Contracts Team, Contracts

Services Team and Legal Affairs Group shall:-

i) Hold periodical meetings among themselves and agree on the regularity of

those meetings as to the time and venue. Those meetings shall be chaired by

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up to KD 500,000/- by C & MD

over KD 500,000/- by Company’s Board 17.6 On receipt of such approval from the line Management, the Team Leader Contracts

Services shall:-

17.6.1 For Live Contracts, advise the Contract Superintendent of outcome and

request him to notify the Contractor of rejection of the Claim or the

proposed settlement as the case may be. If Contractor confirms, in

writing, acceptance of the proposed settlement the Contract

Superintendent shall raise a request for an Amendment to the Contract

for processing in accordance with Section 16 of KOC Policies and

Regulations for Contracts.

17.6.2 For Dead Contracts, prepare a Deed of Settlement to be signed by the

Contractor for processing for payment through Accounts Payable

Team, to effect the payment of the Contractor.

17.7 Team Leader Contracts Services shall furnish to reviewing teams a monthly report

illustrating outstanding, concluded and under review claims.

17.8 The claim settlement shall be incorporated into the Contract and paid to Contractor

either by an Amendment when the Contract is still valid in accordance with the

procedures as outlined in Section 16 hereof, or, after the expiry date, by a Deed of

Settlement prepared by Contracts Services Team.

17.9 Requests submitted by Contractor for waiver to part or all of deducted liquidated

damages, no matter its value, shall not be entertained as Claim and such requests

shall be evaluated by the Controlling Team and the recommendations with

adequate justifications may only be submitted to C&MD for approval directly by

the Controlling Team in accordance with the Delegation of Authority.

.

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SECTION 18 – LIQUIDATED DAMAGES

18.1 The Superintendent of the Contract shall be responsible for application of Liquidated

Damages in accordance with the terms of the Contract.

18.2 It is the responsibility of the Controlling Team to inform the Contractor accordingly, and

to make proper adjustments to Certified Payments Authorisation (CPA) as appropriate.

18.3 In the event that Liquidated Damages are applied, the Superintendent of the Contract

shall ensure that Contracts Team is informed.

18.4 Any objections by the Contractor to such application shall be handled on the basis of a

Contractor's claim.

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SECTION 19 –

TERMINATION OF CONTRACT

19.1 Terminations of Contracts shall be initiated by the Superintendent of the Contract,

who shall be responsible for preparation of a proposal which shall comprise therecommended method of termination (Optional or Default), and all necessary

supporting documentation including full justifications and financial and background

information. The method of achieving completion of outstanding work must also be

attached to the proposal. Such complete proposal shall be approved by Group

Manager prior to forwarding to Contracts Teams.

19.2 Contracts Team shall be responsible for preparation of all termination notices.

19.3 The opinion of Legal Affairs Group shall be obtained by Contracts Team concerning:-

19.3.1 The merits/necessity of the proposed termination including the method (Optional or

Default),

19.3.2 The text of all notices, and

19.3.3 The necessity or otherwise of drawing down the Performance Bond.

19.4 The specific approval to the proposed termination, its terms and, if appropriate, drawing

down on the Performance Bond shall be obtained from the appropriate authority inaccordance with the Delegation of Authorities prior to issue of any termination notice.

19.5 All communications with the Contractor relating to termination shall be through the

Superintendent of the Contract.

19.6 Termination Letters shall be signed by the original signatory of the Contract.

19.7 Contracts Team shall be responsible for:-

19.7.1 Ensuring that all terminations are fully in accordance with the terms and conditions of

the Contract,

19.7.2 Ascertaining the extent of damages to be recovered,

19.7.3 Issue of the appropriate notice to Accounts Payable Team for action under Item 19.8

hereof, and

19.7.4 Advise Controlling Team regarding dispatch and/or delivery of the Termination

Notice.

19.7.5 Preparation in due course of the Final Statement of Account and Contract closure.

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19.8 Accounts Payable Team shall, when necessary, be responsible for drawing down thePerformance Bond.

19.9 The Superintendent of the Contract shall be responsible for:-

19.9.1 Delivery of Termination Notice,

19.9.2 Preparation of Final Accounts in accordance with the terms of termination.

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SECTION 20 – SERVICE/BLANKET CONTRACT EXPIRY NOTICE

20.1 In the case of current Service Contracts, Contracts Team shall notify the Controlling

Team that in the event of a continuous service being required a Contract Requisition

(CR) must be prepared and submitted to Contracts Team. Such notification shall be

made at least twelve (12) months prior to the expiry date of Single Source

Agreements and eighteen (18) months prior to the expiry date of all other Service

Contracts.

20.2 The Controlling Team shall forward to Contracts Team the fully detailed CR including

the scope and any proposed amendments to the conditions of the current Contract withinone month of the date of receipt of the Notice of Expiry from Contracts Team.

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SECTION 21 – MULTI-SUPERINTENDENT CONTRACTS

21.1 For Request for Proposals (RFPs) having more than one Superintendent, the

responsibility for preparation of the CR, evaluation of bids and recommendation for

award shall rest with an Ad Hoc Committee set up for this purpose.

21.2 Each Controlling Team shall nominate a representative and the Chairman shall be the

representative of the Controlling Team which has the greatest utilisation (on a monetary

basis).

21.3 Recommendations for award must be endorsed by the head of each Controlling Team prior to processing in accordance with Item 8.5 of Section 8 hereof.

21.4 Where there is more than one Superintendent specified in the contract, clear coordination

procedures must be developed to ensure overall control and consistency.

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SECTION 22 – LOW VALUE CONTRACTS

22.1 Low Value Contracts may only be used for the implementation of works, or the

provision of services, which are of a non-recurring nature. Under no

circumstances shall major works be carried out using a series of Low Value

Contracts.

22.2 The provision of Article 1 of the Supreme Council for Petroleum No. 1/2005

dated 7.9.2005 prohibits the making of contractual arrangements for the

execution of low value works of a similar nature more than once in a period of

one month. Controlling Team therefore has a responsibility to ensure that suchregulation is complied with at all times. In accordance with the provisions of

Resolution No. 1/2005 of the Supreme Council for Petroleum, Contracts

Services Team shall prepare a monthly return of all Contracts let directly by

the Company i.e. upto KD. 1 Million (including Low Value Contracts) and

shall submit this to the Minister of Energy.

22.3 Low Value Contracts (L Type) shall not exceed KD. 30,000/- in value. Any

works or services performed whose value does not exceed KD. 1000/- may be

handled on an “approved invoice” basis with no formal contract for such

works/services being required, in line with the Company’s Executive


22.4 The Controlling Team shall be responsible for the preparation of Request for

Proposal (RFP) documents, bidders’ list and invitation to bid.

22.5 The Team Leader of the Controlling Team shall have the authority to invite

quotations for and to award Low Value Contracts, subject to Team Leader

Contracts’ endorsement.

22.6 The Controlling Team shall ensure that all Low Value Contracts are handled in

accordance with the following procedures:

22.6.1 All Invitations to RFP for Low Value Contracts must contain a statement that it

is a “minor work/material contract.

22.6.2 The Controlling Team shall ensure that a reasonable number of registered

contractors/ vendors are given the opportunity to compete. Unless there is

specific justification for limiting the number, this should not normally be less

than five (5). It should be noted that past performance or Company experience

with a particular contractor/vendor should not be considered as the sole

criteria for selection. In all cases, the originator of a Low Value Contract shall

act in such a way as to give potential contractors/vendors fair and equal

opportunity to compete for works/services required by the Company.

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22.6.3 The Controlling Team shall forward the LVC draft, the proposed bidder’s list

and the Invitation to Tender to the Contracts Team for vetting and shall

incorporate the Contracts Team’s comments. The Controlling Team shall

forward the LVC documents to the Contracts Team as soon as practicable. If

the Contracts Team has any comments, these shall be brought to the

Controlling Team’s attention without delay.

22.6.4 Tenderers/vendors shall submit their bids by the closing date and time specified

in the RFP through sealed envelopes to be deposited in the tender box located in

Commercial Affairs Group’s premises.

22.6.5 Other than in emergency circumstances, all bids should be received in sealed

envelopes and not opened until the designated time of opening. In this regard,

faxed bids shall not be acceptable other than where specifically approved by the

Team Leader concerned. In any event, the tenderer shall furnish a hard copy of

the bid as soon as possible thereafter.

22.6.6 Bids Opening Committee shall open the Tender box for the sealed bids for the

RFP. Received bids shall be recorded in the “Schedule of Bids” and forwarded

to the Controlling Team for necessary action.

22.6.7 The Controlling Team shall carry out a complete and comprehensivetechnical and commercial evaluation of all bids received as appropriate.

22.6.8 Following the evaluation and its approval by the Team Leader of the Controlling

Team, he shall present the recommendation for award of the Contract to his

Group Manager for approval prior to forwarding the same to Team Leader

Contracts for review and endorsement.

22.6.9 Following the Team Leader Contracts endorsement, the Controlling Team shall

prepare the Contract together with any other documents that may be appropriate.

22.6.10 The Company’s signatory shall be the Controlling Team Leader.

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22.6.11 Where appropriate, the Controlling Team shall ensure that all necessary

insurance coverage is in place for the duration of the contract and any extension

thereto. .

22.6.12 The Controlling Team shall maintain detailed records of all Low Value

Contracts including the tendering details. In particular, records shall contain

clear justification for award, especially where a Contract has been let to a

contractor other than the lowest bidder. Progress reports must also be maintained

in order to monitor completion of the Works and, in particular to justify any

extension or variations that may be necessary during the term of the Contract.

22.6.13 All Amendments to Low Value Contract shall be handled by the Controlling

Team subject to approval by its Group Manager and agreement by Team

Leader Contracts.

22.6.14 In the event Team Leader Contracts is unable to agree with the Controlling

Team’s recommendation for awards and Amendments to Low Value

Contracts, the case, together with the Team Leader Contracts’ remarks shall be

referred by Team Leader Contracts to the KOC Tender Committee for ruling,

copied to the Group Manager concerned.

22.6.15 KOC Tender Committee approval is required if the cumulative value ofAmendments raises the total Contract Price to more than KD. 30,000/-.

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SECTION 23 – REMEDIAL WORKS OF AN EMERGENCY NATURE

23.1 This special classification of Contracts, shall only be used for Works or

Services necessary for expeditiously dealing with declared emergencies such

as a blow-out, major oil spillage, structural failure, major damage to an

installation , or similar incident where immediate contract action is necessary

to contain the situation and/or prevent the occurrence of possible imminent

loss or damage.

23.2 Projects which are considered of emergency nature as identified by KPC are as

follows:

- Emergency Shutdown

- Repair of damages discovered during annual overhauls which have not

been planned before-hand and would reflect on the timely

completion/operation of installation as per schedule.

- Rehabilitation of damaged installations due to major incident,

explosion, or blowout.

- Repair works to oil/gas spillage

23.3 The Group Manager, under whose sphere of responsibility the emergency has

arisen shall be responsible for:-

23.3.1 Initiation of necessary Contract Requisition either verbally or by e-mail and

confirmed later in writing.

23.3.2 Obtaining Management approval as appropriate for the necessary expenditure

in accordance with the following:

Value KD. 30,000/- – KD. 250,000 : DMD concerned

Value more than above : C & MD

Although initially such requests and approval may be verbal, they shall be

confirmed in writing and copied to Manager (Financial Services) and

Contracts Team as soon as possible, and

Should the estimated value of the works/services involved be in excess of KD.

5 Million, approval shall be obtained from KPC Board of Directors for

exemption from normal tendering procedures.

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23.3.3 Preparation of Scope of Work and other appropriate documents for any

proposed RFP/Contract.

23.3.4 Consultation with Contracts Team as to the most appropriate method of

contracting out the work/service.

23.4 In many instances a "Low Value Contract" format may be used, which in such

circumstances may be issued without the formal procedures.

23.5 The Contracts Team shall co-operate with the Controlling Team to produce a

Contract for execution at the earliest practicable time.

23.6 While this special classification of Contracts is exempted from the use of

normal tendering procedure in view of their nature, however, should the value

of works/services involved be in excess of KD 1 Million, the Contracts Teams

shall at a later stage notify KPC HTC of all related contracting actions taken in

this respect.

23.7 Pending the availability of such Contract, the Work or Services may

commence on the basis of a Letter of Intent (issued on the basis of the

C&MD's approval as in 23.2.2 above without the formal procedures).

23.8 The Group Manager shall maintain fully documented records of all

expenditure. Upon completion of the Works or Services, he shall forward to

the C&MD, through his DMD, a consolidated return detailing all expenditure.

This return, which shall be copied to Manager (Financial Services) and

Contracts Team, shall include a brief description of the Works or Services

provided by the Contractor and the type of contractual arrangements made in

each case.

23.9 Contracts Team shall obtain all necessary formal approvals based on and subject

to the consolidated return, as approved by the C&MD.

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SECTION 24 – VITALLY URGENT WORKS

24.1 This special classification of Contracts, shall only be used in circumstances

where the urgent repair or reinstatement of an installation or facility is vital to

the Company's interests and the Works have to be executed within a time scale

which prevents the use of normal tendering procedures.

24.2 Controlling Team shall forward to Contracts Team the following:-

24.2.1 A detailed technical/operational/commercial justification for the course of

action requested.

24.2.2 The Scope of the Works or Services contemplated.

24.2.3 An estimate of the costs involved.

24.2.4 The proposed bidder ’s list endorsed by the concerned Group Manager.

24.2.5 The anticipated Date for Commencement and Date for Completion.

24.3 Contracts Team shall obtain:-

24.3.1 KOC Tender Committee/KPC HTC/CTC approvals as appropriate

24.4 Following are the categories of projects which are considered vitally Urgent

Works, and may be processed without CTC involvement irrespective whether

their value is in excess of KD. 5 Million, subject to obtaining prior approval

from the KPC Board of Directors for exemption from CTC:-

- Projects which accelerated completion thereof would result in

achieving significant financial advantages/high revenues.

- Urgent projects related to production.

- Projects involving direct potential HSE hazards toinstallations/individuals.

- Projects associated with other urgent ones having specified tight time

schedule.

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24.5 Contracts Team shall be responsible for preparation of RFP Documents and for

processing the RFP with the appropriate level of urgency.

24.6 Generally, subject to the appropriate approvals, Urgent Works RFPs shall be

treated as Type “B (4)”

24.7 All contractual arrangements authorised on the above described basis shall

remain subject to KOC Tender Committee review and endorsement at all

appropriate stages. They shall also be subject to the required endorsement /

approval in accordance with the Company's Delegation of Authority prior to any

commitment with a Contractor.

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SECTION 25 – INVITATION FOR PROPOSAL (IFPs)

25.1 An Invitation for Proposal (IFP) is issued to either single source or selected

companies to assess the technical feasibility and the estimated cost based on

the information contained in the document. It is issued to enable the Company

to determine whether or not it is reasonable to proceed with a project when the

nature of the work is different from the Company's usual work such that it is

not possible to prepare an estimate with any accuracy.

25.2 Such a request shall state that it is not an Invitation to Tender, that it is not a

request for offers to perform work or services and it does not bind the companiesconcerned to do work or enter into a contract based on their budgetary

proposals.

25.3 IFPs shall be issued through Contracts Team without Management or other

approvals.

25.4 Controlling Team through their Group Manager, shall initiate action by

preparing and submitting to Contracts Team, an Invitation for Proposal (IFP).

This document shall be comprehensive and similar to the (CR) (Section 2 of this

document) excluding only the AFE information.

25.5 Contracts Team shall prepare a simplified document for issue similar in format

to a RFP document, and shall return it to the Controlling Team for review and

comments prior to issue to the selected companies/vendors

25.6 The Controlling Team shall prepare the AFE based on the received IFP

responses

25.7 Submittals by companies invited to submit an Invitation for Proposal (IFPs) shall

be forwarded to Controlling Teams as they are received for handling.

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SECTION 26 – PREQUALIFICATION OF CONTRACTORS

26A. Prequalification of Local Contractors for Inclusion in the KOC Lists of

Approved Contractors

26A.1 All new applicants shall be evaluated.

26A.2 Contractors already included in the various lists of approved Contractors may

also be subject to re-evaluation as and when needed.

26A.3 When reviewing a Contractor ’s application for inclusion in the List ofApproved Contractors for a particular Category of Work, the LCEC will study

the details submitted, compare them with the minimum requirements and

arrange to visit the Contractor ’s offices and Facilities and interview his

personnel.

26A.4 During the evaluation it may become clear that a Contractor cannot meet the

minimum requirements. In such event there would be no point in carrying out

an inspection of his premises, equipment and documentation. If, however the

application indicates that the Contractor may have the resources to meet the

minimum requirements, the LCEC Chairman will arrange an inspection visit

to the Contractor ’s workshop and offices. Inspection shall includeContractor ’s records, adequacy of facilities and equipment and qualifications

and experience of personnel.

26A.5 The Contractor ’s most recent annual audited financial statements duly

certified by a recognized auditing firm shall also be checked.

26A.6 When assessing Contractor ’s experience it is important to confirm that he

actually did carry out the work on a contract awarded to him while

disregarding any works that had been sub-contracted by him to others.

26A.7 Procedure

26A.7.1 Contractors will obtain a copy of the Pre-qualification application & minimum

requirements either in hard copy from the KOC Contracts Services Team or

electronically through the Company’s web site.

26A.7.2 Contractors will submit applications addressed to Team Leader Contracts

Services.

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26A.7.3 LCEC will scrutinize the application(s). Depending on the

adequacy/completeness of the application submission of the Contractor, the

Applicant will be notified by fax of either:

a. The scheduled date of the Site visit to his premises; or

b. Rejection of his application.

26A.7.4 LCEC will inspect Contractor ’s premises as per Items 26A.4 & 26A.5 above.

26A.7.5 LCEC will prepare a report that includes the technical capabilities, financial

status and organization structure of the applicant.

26A.7.6 The report shall also contain a recommendation for acceptance or rejection of

the applicant(s), endorsed by each member of the LCEC members.

26A.7.7 The LCEC Chairman will forward the final report to Manager (Commercial

Affairs) for approval.

26A.7.8 Upon receiving Manager Commercial Affairs’ approval, the Applicant will be

notified by fax regarding the status of his application. An applicant, who is

rejected, may however re-apply for pre-qualification after a lapse of minimum

six months period. In such event the same procedure for evaluation shallapply.

26A.7.9 Approved applicant(s) will be included in the KOC List of Approved

Contractors.

26B Prequalification of International/ Specialised Contractors

26B.1 The Controlling Team and/or the Contract(s) Team will prepare a request to

initiate pre-qualification for international/specialised contractors.

26B.2 Team Leader Contracts Services will obtain DMD (TS)’s approval thru’ Manager Commercial Affairs to initiate pre-qualification exercise and

formation of an Adhoc Evaluation Committee. CTC approval shall also be

obtained as applicable.

26B.3 Following receipt of approval/s, the Team Leader Contracts Services will

communicate with the appropriate Teams requesting them to designate a

representative for the Adhoc Evaluation Committee. The Adhoc Evaluation

Committee will consist of representatives from the Contracts Team

(Chairman), Internal Audit, Financial Services Group, Controlling Team and

others as appropriate. Members of the Adhoc Evaluation Committee shall be

no less than of a Team Leader level or equivalent.

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26B.4 The Adhoc Evaluation Committee will finalize the Pre-Qualification

document upon receipt of approval to proceed.

26B.5 Contracts Services Team will prepare the content of the advertisement to be

placed in the local newspapers and the official gazette and will arrange for

publishing the same through Team Leader Information.

26B.6 Applicants will purchase the questionnaire from Contracts Services Team or

CTC as the case may be, and will forward their submissions on or before the

closing date.

26B.7 Submissions received from the applicants will be forwarded to the Adhoc

Evaluation Committee for evaluation and recommendation.

26B.8 If a Site visit outside Kuwait is deemed required as approved by DMD (TS),

Contracts and Controlling Teams will send representatives to conduct the site

visits. After each visit, the Team will prepare a Site visit report.

26B.9 The Adhoc Evaluation Committee will prepare a final recommendation report

regarding the Contractors submission to Deputy Managing Director (Technical

Services) for approval, through Manager Commercial Affairs.

26B.10 Following receipt of Deputy Managing Director Technical Services’ approval,

the Applicants will be notified by fax regarding the status of their submissions.

However, should the prequalification exercise be conducted through CTC,

Applicants may only be notified of the results after obtaining CTC’s approval

based on KOC’s recommendations.

26B.11 Approved applicant(s) will be included in the KOC List of Approved

Contractors for the Works/Services concerned.

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Petrochemical Industries Company (K.S.C.)

A Subsidiary of Kuwait Petroleum Corporation

Internal Memorandum

To : Messrs. Departments Managers and Heads of Staffs

From : Internal Tenders Committee's Secretary

Date: 13/07/2009 Our Ref: KS/335/2009

Subject: Identification of the Estimated Budget of Tenders and Bids

In reference to the abovementioned subject, and to the Letter of Central

Tenders Committee, it has been noted lately that there is a big variation

between the winning bid value and the estimated budget for the tender

prepared by the concerned authority, which indicates that there is a

default in preparing the tender documents and conditions and assessment

of the actual costs, resulting in the tender cancellation for unavailability

of sufficient financial budget.

Therefore, the Committee calls upon all Departments to carefully studythe tenders required for being invited for before submission to the

Committee to start the tendering procedures to avoid the State's projects

delay and excessively charging companies participating in the tender.

With our best regards;

(Signature) Salem Ali Al-Kandari

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Internal Memorandum

To : Messrs. Departments Managers

From : Internal Tenders Secretary

Date: 25/5/2009 Our Ref: KS/250/2009

Subject: Updating the Tenders Companies, Factories and Suppliers Lists

In reference to the above mentioned Subject, and referring to the Letter of

Central Tenders Committee regarding expanding the range of

participation in tenders and avoidance of monopolization, which affects

positively on having competitive prices from one hand and from the other

hand developing the services, in addition to limiting the qualification

requests during tendering and for avoidance of any delay that may result

therefrom and influence the tenders program and utilization thereof.

Therefore, the lists of the qualified companies, factories and suppliers to

participate in the tenders shall be updated as per the followingregulations:

1.

Checking and updating the local and foreign qualified companies,

factories and suppliers' names and data complying with their status

before tendering to avoid the subsequent modification requests.

2.

Setting clear criteria that determine the qualification coping with

the targeted project and works nature and achieve the desired goal.

3. Performing the qualification process periodically in a sufficient

time to enable companies, factories and suppliers to participate.

4.

Replacement, as possible, the manufacturers' lists with the standard

specifications and quality control criteria to be the evaluation

standards.



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Central Tenders Committee

Date: 14/4/2009 Ref: CTC/5/5825

Mr. Chairman and Managing Director of Petrochemical Industries

Company

Best regards;

Subject: Updating the Lists of Companies, Factories and Suppliers

Qualified for Tenders

In reference to the above mentioned subject, and stemming from

expanding the range of participation in tenders and avoidance of

monopolization, which affects positively on having competitive prices on

one hand and developing the services on the other hand, in addition to

limiting the qualification requests during tendering and for avoidance of

any delay that may result thereof and influence the tenders program and

utilization thereof.

Therefore, the lists of the qualified companies, factories and suppliers to

participate in the tenders shall be updated in accordance with thefollowing regulations:

1. Checking and updating the names and data of the local and foreign

qualified companies, factories and suppliers complying with their

status before tendering to avoid the subsequent modification

requests.

2.

Setting clear criteria that determine the qualification coping withthe targeted project and works nature and achieve the desired goal.

3.

Performing the qualification process periodically in a sufficient

time to enable companies, factories and suppliers to participate.

4. Replacement, as possible, the manufacturers' lists with the standard

specifications and quality control criteria to be the evaluation

standards.


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Signature and Seal

Ahmed Khalid Al-Kulaib

President of Central Tenders Committee

Copy to:

Secretary's Office.

Legal Affairs.

Preparation and Auditing Department.

Tenders Department.

General File.

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Internal Memorandum

To : Messrs. Departments Managers and Heads of Staffs

From : Internal Tenders Secretary

Date: 22/02/2009 Our Ref: KS/79/2009

Subject: Alternatives of Direct Contracting on Purchasing Materials

or Commissioning Works or Services

In reference to our Letter No KS680/2008 dated 26/10/2008 regarding the

aforesaid, we would like to note that due to the multiplication of direct

commissioning works applications, on requesting any works to be

reviewed by the Committee, you are kindly requested to answer and

clarify compliance with the following regulations:

1. Assurance of the lack of any other alternative resources through

which materials can be supplied / works or services can becommissioned.

2. Exhaustion of all attempts and means to attain several offers from

various resources instead of one source by the direct order.

3.

Contacting the associate petroleum companies in Kuwait / Gulf

countries for the possibility of any similar activity and a number of

companies performing such activity.4.

Taking into consideration the possibility of companies

manufacturing materials / equipment through providing alternative

samples.



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Internal Memorandum

Messrs. Departments Managers and Heads of Staffs

From: Internal Tenders Secretary

Date: 22/06/2009 Our Ref: KS/315/2009

Subject: In Case of Requesting Any Subject to be Reviewed by the

Internal Tenders Committee

In reference to the abovementioned subject, and when requesting inviting

for any tender / bid or by the direct order commissioning, noting filling in

the form concerning reviewing any subjects to the Internal Tenders

Committee (attached) when requesting the Internal Tenders Committee to

review any subject.



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Petrochemical Industries Company – Contracts Staff


Form of Requesting the Internal Tenders Committee to Review any

Subjects

(Tender / Bid / Direct Order Commissioning)

Date: ---/----/-------

From: ----------------

To: Mr. Internal Tenders Committee' Secretary

1.

Subject and type of requested materials / works: ------------------

Supplying supply and Installing Services Consultant

Spare Parts equipment Others

2. Estimated value for the approved budget: KD --------- (In Letters:

Only …………………. Kuwaiti Dinars).

3.

Specifications and technical standards of the requested materials /

Works: …………………………………………………………

4.

Brief of the last purchase / similar works: ………………..-

Company's Name:…………(Purchase/Contracting) Date:…………

- Amount:……………….Unit Price:…………Quantity: …………

- Current Contractor's Performance: Excellent Very Good

Good Weak

-

Valuation applied during the duration of the contract:……………

-

Violations Type: Delay in Works Completion Delay of hisStaff behind the Schedule Violations of the Requested

Work Quality Other

5.

Budget Financial Provision: Operational Capital

Payment Item: ……….. Number of Financial Provision: …………

6. Date set for commencing works: …………………………….

Current Contract Completion Date: ………………………….

7. Works / Supplies Completion Period: …………………………

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8.

Concerned Division / Employee / Phone No: ………………….

For Usage for Tendering / Bidding For Usage for Direct Order

Commissioning

9. Tendering Method: Limited Public 9. A. Current Value for the Offer: ………

B. Validity Date: ……………………

10. Number of Companies: ……….. 10. A. Supplier/Contractor: ………..

B. Manufacturing Company/Country: ….

C. Local Agent: ………….

11. Justifications of Limited Tendering /

Bidding: ……………

12. Custom Duties: Exempt Nonexempt

13. Divisibility: Divisible Indivisible 11. Direct Order Commissioning

Justifications: -urgent

-Inability to Determine the Specifications

-Sole Resource

14.Alternative Offers:

Accepted Unaccepted

15. Preliminary Meeting:

Necessary Unnecessary

16. Number of Labor and their positions

and Number of Kuwaiti labor: ….

12. Supplying through:

Manufacturer Agent

Manufacturer and Agent17. Required Equipment Statement: ……

General Provisions: No purchase with direct order or commissioning providing services or

contracting works from one source are allowed, of which value exceeds KD 5000 or announcing it or

even asking the approval thereon unless approved by the Internal Tenders Committee, and in doing so

the concerned authority shall apply for the Committee Secretary to show at least the aforesaid

particulars.

Name: ………………………………..

Signature: ………………………………..

Concerned Department Manager / Concerned Deputy Managing Director / Managing Director

Approval of the Internal Tenders Committee: ……………

Notes:

A. Departments shall provide a statement regarding the availability approved financial funds.

B.

All data shall be completed in full.

C. A valid certificate shall be attached regarding supporting the national manpower for

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purchasing / direct commissioning issued by the National Manpower Development Office at

the Ministry of Social Affairs.

D. Attaining the approval of the concerned Deputy Managing Director for the subjects

exceeding KD 50.000 up to KD 1.000.000.

E. Attaining the approval of the Managing Director for the subjects exceeding KD 1.000.000.

F. In case of tendering / bidding, the following particulars shall be attached:

- Companies updated list.

-

Special terms and specifications.

- All stipulations.

-

Bills of quantities.

- Attendance of the concerned Department Manager or his representative.

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Internal Memorandum

To: Messrs. Departments Managers and Heads of Staffs

From: Internal Tenders Committee's Secretary

Date: 26/10/2008 Our Ref: KS/679/2008

Regulations of the Tenders Required for Materials Purchasing or

Commissioning Works or Services Exceeding the estimated Value of

KD 5000.000 (Only Five Thousand Kuwaiti Dinars)

In reference to our Memorandum No KS/619/2008 dated 15/09/2008,

take into consideration the attached Tenders Regulations on inviting for

any tender relating to your department:

1.

Purchasing materials or commissioning works or services which

estimated value exceeds KD 5000.000 (Only Five Thousand

Kuwaiti Dinars) can be done provided no contracting shall be done

for the same materials, works or services more than once monthlyand the transaction shall not be divided into monthly deals each

shall be approximately KD 5000.000 (Only Five Thousand Kuwaiti

Dinars).

2.

The application shall include the required materials, works or

services conditions and specifications fully and accurately as per

the required form.3.

Attaining at least three quotations from different suppliers /

contractors, provided such quotations shall be in sealed envelopes,

except in certain cases identified by the requesting party’s

manager, and no multiplied quotations are requested in case the

materials supplying or providing the services are not stipulated

unless done by sole agent or supplier / contractor. Application

hereof necessitates taking the following into consideration:

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3.1.

Approval of the Committee prior to inviting for offers.

3.2.

Inviting the institutions and companies for offers.

3.3.

Uniting the day and hour for all companies and institutions to

return offers and they shall be in sealed envelopes.

3.4.

A special box shall be assigned for tenders in which all tenders

shall be deposited on a timely basis and it shall have two keys,

one of them with the Department's Manager and the other with

the concerned Staff Leader. Both keys shall be delivered to their

deputies in case of their absence.

3.5.

The box slot shall be sealed in wax after the time of closing the

tender by the concerned Department.

4. On receiving the bids, the requesting party shall unseal them in a

special statement showing the supplier's / contractor's name and the

price and shall be approved as per the Financial Authorities

Regulations, thereafter the requested service or purchase order shall

be issued.5.

The statement shall be approved by three employees at least; one

amongst them shall be the Staff Leader at the concerned Department

or his deputy.

6.

After studying the submitted offers by the companies and institutions,

the concerned Department will recommend the awarding for the

Internal Tenders Committee under a statement showing the prices andviolations gradation accurately, while emphasizing the existence of

funds covering the bid.

7.

Observing the Financial Authorities Regulation.



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Internal Memorandum

To : Messrs. Departments Managers

From : Contract Staff Leader

Date: 17/05/2009 Our Ref: KS/236/2009

Subject: Central Tenders Committee's Resolution

In reference to the abovementioned subject and the Central Tenders

Committee’s Letter regarding the Council of Ministers' Resolution No

(910/2006) regarding compliance with the Resolution provisions,

including "All Ministries and Governmental Departments and the

authorities of dependent and independent balances shall notify the Central

Tenders Committee and the Committee of Consultant Houses at the

Ministry of Planning regarding the companies, contractors and consultant

offices in case of noncompliance with their contracts or failure in

performing their works with the concerned authority."Kindly provide us with any observations on the companies and

contractors in case of any violation for the contracts or failure in

performing their works in preparation for reporting the subject to the

Internal Tenders Committee.



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Internal Memorandum

To : Messrs. Departments Managers and Staffs Leaders

From : Internal Tenders Committee Secretary

Date: 22/06/2009 Our Ref: KS/314/2009

Subject: Purchasing Materials or Commissioning Works or Services

by Direct Order

In reference to the above mentioned subject, and on purchasing materials

or commissioning works or services, including the consultancy works, by

the direct order, you are kindly requested to fill in the attached Checklist

Form on presenting the subject to the Internal Tenders Committee.



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Petrochemical Industries Company – Contracts Staff


Purchasing Materials or Commissioning Works or Services by Direct

Order

Checklist

1.

Subject of the required (works / materials): …………………….

2. Justifications for commissioning by direct order (in details):

…………………………………………………

3.

Looking for alternative sources: (Yes) …. (No) …..

4.

Coordination with Local / Gulf Associate Petroleum Companies:

(Yes) …………. (No) ……………

5. Exerted attempts and efforts to attain various offers from various

resources: (Yes) …………. (No) ……………

Concerned Department Manager:

Name: ………………….

Signature: ………………….. Date: ………………………Note: This form shall be attached in case of reviewing the subject by the

Committee for the direct order commission.

General Provisions:

1.

No purchase by direct order or commissioning providing services

or contracting works from one source are allowed, of which value

exceeds KD 5000 or announcing it or even asking the approvalthereon unless approved by the Internal Tenders Committee, and in

doing so the concerned authority shall apply for the Committee

Secretary to show at least the aforesaid particulars.

2. Purchasing materials or commissioning works or services which

assessed value exceeds KD 5000.000 (Only Five Thousand

Kuwaiti Dinars) can be done provided no contracting shall be done

for the same materials, works or services more than once monthly

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and the transaction shall not be divided into monthly transactions

each shall be approximately KD 5000.000 (Only Five Thousand

Kuwaiti Dinars).

3.

The application shall include the required materials, works or

services conditions and specifications fully and accurately as per

the required form.

4. Observing the Financial Authorities Regulation.

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Sunday March 25, 2007

© Petrochemical Industries Company 2005

Common Mistakes in

Departments Applications1. Letting a tender through the concerned department before

obtaining the Committee’s Approval.

2. Noncompliance with the tenders regulations during tendering.

3. Not negotiating with contractors and suppliers to reduce theprices.

4. Not reviewing the contractors and suppliers’ list at the associatepetroleum companies.

5. Reliance on previous companies list without updated qualification.

6. Following stipulations leading to monopoly of a contractor orsupplier.

7. Dividing the transaction of quantity, services or works for morethan one monthly and dividing the transaction into monthly ones.


Petrochemical Industries Company 2009

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Common Mistakes in

Departments Applications, Cont’d

8. Qualifying a contractor not fully skilled or qualified inservices tenders.

9. Requesting extending the contracts after expirythereof.

10. Noncompliance with the supplementary rules for theInternal Tenders Committee works, such as“Incomplete / Non-updated Subject Review Form”.

11. Not attaining three offers from three differentcompanies as per the regulations.

12. Clarifying from the bidders regarding a tender offeredby the departments.

13. Identifying an operational budget for works on whichthe capital budget applies.


Petrochemical Industries Company 2009

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Common Mistakes in

Departments Applications, Cont’d

14. Releasing the bank guarantees in the services

contracts and periodical contracts for the formercontractor before the new one’s receipt of the assignedrequired manpower.

15. In case of two concerned authorities, applying thepenalty without coordination with the other authority.

16. In bids offered by the concerned authorities, the initialbank guarantees percentage 2% and the final 10% are

not identified of the contract total price.17. Requesting extending the closure period during the

last week.

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Common Mistakes inCommon Mistakes in

Departments ApplicationsDepartments Applications1. Letting a tender through the concerned department before

obtaining the Committee’s Approval.2. Noncompliance with the tenders regulations during tendering.

3. Not negotiating with contractors and suppliers to reduce theprices.

4. Not reviewing the contractors and suppliers’ list at the associate




pe ro eum compan es.

5. Reliance on previous companies list without updated qualification.

6. Following stipulations leading to monopoly of a contractor or supplier.

7. Dividing the transaction of quantity, services or works for morethan one monthly and dividing the transaction into monthly ones.



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Departments Applications, Cont’dDepartments Applications, Cont’d

8. Qualifying a contractor not fully skilled or qualified in

services tenders.9. Requesting extending the contracts after expiry

thereof.

10. Noncompliance with the supplementary rules for the




,“Incomplete / Non-updated Subject Review Form”.

11. Not attaining three offers from three differentcompanies as per the regulations.

12. Clarifying from the bidders regarding a tender offeredby the departments.

13. Identifying an operational budget for works on whichthe capital budget applies.



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Departments Applications, Cont’dDepartments Applications, Cont’d

14. Releasing the bank guarantees in the servicescontracts and periodical contracts for the former contractor before the new one’s receipt of the assignedrequired manpower.

15. In case of two concerned authorities, applying the




pena y w ou coor na on w e o er au or y.

16. In bids offered by the concerned authorities, the initialbank guarantees percentage 2% and the final 10% are

not identified of the contract total price.17. Requesting extending the closure period during the

last week.

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1

Regulations

Of Tenders, Practices,

Contracts and Bids

Internal Tendering Committee

Date: 30/10/2005

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2

INDEX

CHAPTERS SUBJECT PAGE

NO.

Chapter 1

Definitions

Formation of the Internal Tendering

Committee

Committee’s Competences

Committee’s Meetings

Chapter 2

Tenders

Chapter 3 Practices

Chapter 4

Direct Order

Chapter 5

Materials Purchase/ commissioning work or

Services of estimated value not more than

KD 5000

Chapter 6 Qualification and classification of

Contractors and Suppliers

Chapter 7

Contracts

Chapter 8

Bids

Chapter 9 General Provisions

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3

Having perused the following:

• The Public Tenders Law No. (37/1964) on Public Tenders and

amendments thereto.• The Supreme Petroleum Council Resolution No. (5/97), as

amended by Resolution No. (1/1998) and by Resolution No. 1/74

(2/2005) concerning Organizing the Tenders of the Petroleum

Corporations.

• Regulations of the Higher Committee for Kuwaiti Petroleum

Corporation and Oil Companies issued by the Chairman of

Kuwaiti Petroleum Corporation dated 15 February 1984 and

amendments thereto.

• The regulations governing tenders of petroleum companies ofKuwaiti Petroleum Corporation issued by a memorandum of the

CEO dated 25 July 2005.

• Regulations of Tenders and Practices, Contracts, Biddings issued

by the Chairman and Managing Director.

• The Regulations of Internal Practices issued by the Top

Management Circular No. MR/11/80 dated 12/5/1980 and

subsequent amendments.

• The Regulations of the Finance Authorities approved by the Board

of Directors Resolution No (6/2/97) dated 8/3/1997, and

amendments adopted by the Board of Directors’ Resolution No.

(13/2004) on 13/7/2004.

• The Resolution of Board of Directors No. 5/2005 dated

30/10/2005 approving the Regulations of Tenders, Practices,

Contracts and Biddings.

• The Resolution of the Internal Tendering Committee adopted in

its meeting No. 6/2005 held on 16/11/2005 approving the

Supplementary Rules Regulating the works of the Internal

Tendering Committee.

Decided:

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4

CHAPTER 1

DEFINITIOS AND FORMATION OF THE COMPANY'SINTERNAL TENDERING COMMITTEE AND ITS

COMPETENCES

Article (1)

Definitions

These definitions apply as they are presented in the Regulations unlessotherwise is required by the context.

1-1

Means the purchase or commissioning services or consultancy studies

or work assignment by invitation to participate through a means of

publication in accordance with the conditions, specifications andprocedures established by the Company and the Tender may be general

or limited.

1-2

Means the purchase or commissioning services or works assignment by

invitation to participate through a means of publication in accordancewith the conditions, specifications and procedures established by the

Company, that includes in some cases what the Committee may decide

to negotiate with suppliers / contractors in order to modify prices or

technical specifications or waiver or modification of reservations

associated with the tender and the practice may be general or limited.

Tender

Practice

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1-3

Means the purchase or commissioning services, including consultancyservices or work assignment to one supplier or contractor directly,

without resort to tender or to practice for more than a bidder including

contracting with a single source approved to the Company to be the only

manufacturer or the contractor for materials or services required .

1-4

Means preliminary and preparatory activities, that do not include in

their scope the implementation of work by the entity that carries out

these activities, but their scope of work is limited to carrying out

technical, economic, administrative, regulatory and legal studies, and

the preparation of computer software, as well as collecting data and

information and making designs, the duties of supervision,

development of statistics, analyzing them and submitting proposals and

recommendations, as well as project management services and

contracts for training courses and medical consultations.

1-5

It is the authority concerned with contracts within the Company

entrusted with launching tenders, soliciting offers and other related

duties.

Direct Order

Advisory Work

Concerned Authority

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1-6

It is the authority that requests materials, services and works within the

Company, and in case of purchases, Materials Division is deemed to be

the requesting party.

1-7

Means the Company's Internal Tendering Committee formed by virtue

of a decision by the Chairman and Managing Director to carry out the

assigned duties in accordance with the competences stated in the

Regulations for organizing the Tenders of Oil Companies and the Kuwait

Petroleum Corporation.

1-8

Means the Higher Committee for Tenders of the Kuwait Petroleum

Corporation and Oil Companies formed by virtue of a Resolution by the

Chairman of the Kuwait Petroleum Corporation, dated 15.02.1984 and

subsequent amendments.

1-9Means the Committee formed under Law No. 37 of 1964.

1-10

The regulation issued by the Kuwait Petroleum Corporation to organize

tenders for oil companies and the Kuwait Petroleum Corporation.

Requesting Party

Committee

Corporation's Committee

Regulations

Central Tenders Committee

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Article (2)

Committee Formation

2-1 Tendering Committee is formed within the Company by a decision

issued by the Chairman and Managing Director, called (the

Internal Tendering Committee). It consists of seven members who

are: A direct Executive Assistant to the Managing Director, as

President, a Vice-President, and other five members who are

elected from the managers of departments representing the

various activities of the Company. The formation decision

includes the appointment of a substitute for each original member

of the Committee replacing him in case of absence and may

include members from outside the Company.

2-2 The Committee shall have a secretary who is not a member of the

Committee, appointed by the Chairman and Managing Director,

that will be responsible for registering and recording all actions

taken by the Committee as well as keeping files and documents

and any other functions assigned to it by the Committee. In

addition, he shall also attend the meetings and record all minutes

of meetings, edit decisions, but may not participate indeliberations and will not be counted in voting.

Article (3)

The Committee’s Competences:

The Committee shall have the following competences:

3-1 Considering and deciding on launching and following-up tenders'

procedures, purchase orders, practices, and direct contracts

exceeding KD 5000. (Kuwaiti Dinar Five thousand).

3-2 Considering and deciding on the awarding of tenders and

purchase orders, practices and direct contracts exceeding KD

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5000 (Kuwaiti Dinar Five thousand) and in cases that the

estimated value exceeds one million dinars, the recommendation

is passed to the Corporation's Committee, while in case that the

estimated value exceeds KD 5,000,000 (Kuwaiti Dinar Five

million), the recommendation is passed to the Central Tenders

Committee, in addition to the Corporation's Committee.

3-3 Approving the issuance of modification orders that occur on

contracts and the Company shall be entitled to approve them, and

make recommendation to the Corporation's committee and the

Central Tenders Committee to approve the orders of modification

within the competences of any of them depending on the

circumstances.

3-4 Opening Bids envelops

3-5 Cancelling Tenders and procedures and what result thereto.

3-6 Approving the list of companies invited to participate in the

tender as well as modifying that list.

3-7 Considering of tenderers' complaints received by the Company.

3-8 Deciding the liquefaction of primary insurance in appropriate

cases.

3-9 Applying fines stated in Article (67) of the Regulations.

3-10 Any matters related to contracts and purchases, the Chairman and

Managing Director deem to assigns to the Committee at any time.

Article (4)

Committee Meetings

4-1 The Committee holds its regular meeting weekly and during the

days and working hours according to the workload and the

decision of the Chairman and shall hold extraordinary meetings at

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the invitation of the Chairman or his Deputy, Also, the Chairman

may cancel the regular meeting if there is not work required.

4-2 For the validity of holding the committee, four genuine members

or their substitutes are required to attend the meeting, providedthe Chairman or his Deputy shall be amongst them, and the

decisions are issued by a majority of the present members and in

case of even votes, the Chairman's side is the winner, however, if

the reason leads to the absence of both Chairman and his Deputy,

present members shall select one of them to head the meeting.

4-3 The committee's meetings shall be recorded in minutes to be

approved in the first following meeting, and sent to the members

of the Committee for reviewing prior to the meeting.

4-4 The Committee shall decide, when considering the furnished

issues, what it deems appropriate to make sure of the following:

4-4-1 That the procedures for determining the specifications, standards,

technical requirements, contract conditions, supply, methods of

tests, inspection and appropriate fines are properly carried out to

obtain the best bids, and that the conditions of the contract,

supply, methods of examination, inspection and fines areappropriate.

4-4-2 That there is a sufficient number of suppliers or contractors to

ensure a good competitive situation for each tender or practice on

the table.

4-4-3 Examining whether there are alternative ways for obtaining the

required services, materials or construction at a lower cost.

4-4-4 Verifying that the evaluation of bids and awarding

recommendation are carried out properly and in accordance with

the approved regulations and procedures applicable in each party.

4-4-5 Verifying the application of laws and policies related to national

labor.

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4-4-6 Ensuring the availability of funds.

4-5 The requesting party's representative may attend in case of

presenting a matter concerning it to the Committee in order to

provide clarifications or additional data to the Committee whennecessary, to facilitate its work and ensure the rapid completion

of the work.

Chapter (2)

Tenders

Article (5)

Public Tenders Provisions / limited

5-1 The Company's departments and divisions shall not purchase

commodities or commission the execution of services or assign

works in excess of KD. 5000 (Kuwaiti Dinar five thousand) except

through a way of tender through the Committee, and the method

of direct order may be followed after obtaining the approval of theCommittee.

5-2 Such a contract shall not be concluded to cover the same

commodities, services or work than once in one calendar month.

Also, one transaction shall not be parceled onto several monthly

deals, the value of each being within the limits of KD 5000.

(Kuwaiti Dinar Five thousand).

5-3 The tenderer shall have to be a legal person a merchant or aprofessional individual or company and shall conform to the

percentage of Kuwaiti labor established in the time of submission

of tender in respect of companies and local institutions and

authorized dealers of foreign companies in the event of the

completion of this works within the State of Kuwait. A foreign

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company could bid, provided it is registered in the Chamber of

Commerce and Industry of the country to which it belongs and do

the required works.

5-4 In high value tenders, the Committee may authorize for more thana legal person, to present a joint bid on condition defining clearly

the obligations and responsibilities of each of them or the bid

shall include their acceptance of responsibility jointly and

severally simultaneously .

5-5 Bids must be submitted in the tender documents issued to

bidders, all bidding documents are deemed to be personal to

tenderers who have obtained them, and may not be transferred

to others, that shall have to be noted it in the tender documents.

5-6 The Committee shall be entitled to cancel the tender at any time

prior signing a contract with the successful tenderer, that shall

have to be noted in the tender documents, such cancellation shall

not give the tenderer the right to claim compensation of any kind

for any damage.

5-7 Awarding the tender and notifying the successful tenderer

respectively shall not entitle the tenderer to any right from theCompany in the event of retracting the awarding of the tender, the

tenderer shall not be considered contractor except from the date

on which signature is affixed on the contract by both parties.

5-8 In case of the withdrawal of the successful tenderer, the

Committee shall consider, at the demand of the requesting party,

cancelling the tender or re-launching it or the possibility ofawarding the tender to the tenderer of the following rate.

5-9 in case of renunciation of the Committee on its decision awarding

the tender prior signing the contract, it shall have to bring the

matter before the Chairman and Managing Director along with a

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statement of reasons for such renunciation, if the Chairman and

Managing Director does not approve on such retracting, or

decides to cancel the tender, the Committee is obliged to carry out

its first decision.

5-10 The tender box shall not be opened except in case the Committee

is in session, and tenders and bidders shall be entered in a

schedule prepared for this purpose, the Tendering Committee

shall advertise the tender price on the Notice Board after opening

bids envelopes.

5-11 The concerned authority shall be entitled to directly address the

bidders to clarify some matters relating to their bids without

reference to the Committee provided that shall not lead to a

change in the prices submitted.

5-12 The Committee shall award the tenderer whose bid is most

conforming with the awarding standards, if the warding

standards are not mentioned, the award goes to the tender who

presents the lowest rate if his bid is in line with the prerequisites

of the tender documents.

5-13 If the Tendering Committee believes that there is a strongjustification for preferring a tenderer who submitted a high price

without the conditions in the preceding article being met, the

Committee shall decide awarding such tenderer with the approval

of 2/3 of the present members provided the Chairman or his

Deputy are amongst the said members.

5-14 The Committee may award the tender to a tenderer who

submitted a higher bid if the sum of the lowest tenderer was

unreasonably low and does not import reassurance so far as the

tender concerned.

5-15 In all cases of tenders whose estimated value is in excess of KD

1,000.000 (Kuwaiti Dinar one million), and less than KD 5,000.00

(Kuwaiti Dinar five million), the concerned authority, after the

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approval of the Committee, shall submit the recommendation to

the corporation's committee, and in case such value exceeds KD

5,000.000 (Kuwaiti Dinar five million), the concerned authority,

after the approval of both the Committee and the corporation's

committee, shall submit its recommendation to the Central

Tenders Committee with exception of the consultancy works done

by the latter Committee.

5-16 Upon making amendments to the contracts not exceeding KD.

1,000.000 (Kuwaiti Dinar one million), the Committee's approval

shall be obtained. If, after modification, the contract value

exceeded KD. 1,000.000 (Kuwaiti Dinar one million) the prior

approved of the corporation's committee shall be obtained.

5-17 If the value of modifications exceeded 10% of the original value of

the contract, for the contracts approved by the Corporation's

committee, or the amount of KD 5,000.000 (Kuwaiti Dinar five

million), whichever is less for the modifications, the approval of

the Committee and the prior Corporation's committee shall be

obtained, if these modifications exceeded 10% , for the contracts

approved by the Central Tenders Committee, or the amount of -

KD 5,000.000 (Kuwaiti Dinar five million) the approval of the

Central Tenders Committee shall be obtained.

Article (6)

Public Tenders Procedures / Limited

6-1 The requesting party shall prepare the purchase order or

commissioning services or assignment of work, and shall obtain

approval from the authorized entity in accordance with the

Regulations of the Finance Authorities of the Company and the

order shall contain detailed description of materials, services or

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works required (technical specifications / special conditions), and

shall include a statement of whether there is an approved budget

covering the estimated value of materials, services or works

required, it shall include as well whether it is required to invite

for a limited tender and the justification for that instead of a

public tender, in this case shall attach to the application a list of

the names of suppliers / contractors that they will be limited to

the invitation to the tender according to the procedures set forth

in this regulation.

6-2 The purchase order shall be within the limits of the actual

requirements necessary for the workflow or production on the

basis of realistic and objective studies prepared by the requesting

party.

6-3 In the limited tenders, the concerned authority shall take into

account inviting the suppliers and contractors registered in the

qualification lists corresponding to their activity with the

Company or qualification lists that would be appropriate to other

entities, in cases where there is no list of qualified contractors or

suppliers, the requesting party shall provide a list of tenderers,

who the tender is limited to and present this list to the Committee

for approval, also in each case of adding or cancelling a tenderer

to or from this list, it shall be submitted to the Committee for

approval.

6-4 The requesting party shall prepare the technical specifications

and special conditions, drawings, bills of quantities and prices,

taking into account that these specifications allow competitionand obtaining the best alternatives and the least cost, and put in

the tender documents the elements and bases of the technical and

commercial evaluation, if any, and the requirements of the

minimum limits for acceptance of bids, while the concerned

authority in coordination with Legal Department shall prepare the

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contract formula and the general conditions and other

documentation for the tender (the tender form - instructions to

tenderers).

6-5 The requesting party shall request launching services, contractingand supplies contracts (periodically) including all the required

details and according to the models approved by the concerned

authority in a period of not less than (8) months prior to

expiration on the Committee to take the necessary approval.

6-6 Following the Committee's approval for launching the tender, the

concerned authority shall take the appropriate actions necessaryfor the tender and advertise the tender in the Official Gazette and

any other means if necessary, and determine the appropriate

period for returning tenders from the date advertised provided

that the advertisement shall show the date and time for the return

of the tender ,the product to be supplied and the work to be

executed, the cash fees per copy of the terms and conditions of

tender.

6-7 Having received tenders and lists of tenderers from the

Committee in case it is within the competences of the Committee

or the competences of the Central Tenders Committee, the

Secretary shall send the tenders to the requesting party, which in

turn, analyze and study the bids received and submit its

recommendations to the Secretary as he presents them to the

Committee, which in turn shall review the bids as a prelude to the

adoption of the final recommendation.

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Chapter (3)

Practices

(Article 7)

The Provisions of Practices

With the exception of the provisions of Chapter Two, Article (5),

tenders can be induced directly if the specifications of the

materials or services or work required to be executed cannot be

exactly determined, or they are urgently required and delay may

not in the interest of work.

Article (8)

Practices Procedures

8-1 The requesting party shall prepare the form in accordance with

Article (6-1) hereof, in consistence with the nature of the practiceand shall approve it from the authorized entity in accordance with

the Regulations of the Finance Authorities of the Company,

provided that the request shall include justification for purchase

of materials or commissioning services or assignment of work

directly instead of launching a tender.

8-2 The form of practice launching shall be referred to the secretary

to take necessary actions to be presented to the Committee for

obtaining the necessary approval.

8-3 After the approval of the Committee on launching the practice, the

requesting party shall take the procedures for the solicitation of

bids.

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8-4 The Committee shall be entitled to ask the requesting party to

provide practice bids by way of the Committee.

8-5 Without prejudice to the provisions of this Chapter - Practices - all

the procedures stipulated in Article (6) hereof shall be followed inthe request for purchase or commissioning of services or work

assignments directly as well as the recommendation of award and

in reviewing the terms and signing the contracts therewith, to

comply with the nature of the practice.

Chapter (4)

Direct Order

Article (9)

The Provisions of Direct Order

9-1 As exclusion to the provisions of Chapter 2, Article (5), material

may be purchased and works and serviced, including consultancy

works, may be commissioned by direct order, if such materials or

works or services cannot be determined with accurate

specifications or bear the urgency or otherwise deemed by the

Committee, and the procedures shall be reviewed by the

Committee as well as awarding the tender in the same manner

followed in the tender.

9-2 Prior to contracting with the sole source, it shall be taken into

account using all attempts and ways to get several offers for the

purchase of materials or commissioning services or assigning

works from several sources rather than from a single source by

direct order, and when found to provide materials or services or

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the works from several sources, the procedures set out in this

Regulation apply regarding the purchase of materials or

commissioning services or assigning works by way of a public

tender, limited or bids.

9-3 The requesting party shall obtain the approval of the Committee

prior to its procedures for contracting directly with any interested

party provided that the procedures shall be reviewed by the

Committee prior to actual contract.

Article (10)

Procedures of Direct Order

10-1 The requesting party shall prepare the application in accordance

with Article (6-1) of the bidding procedures and obtain the

approval from the authorized entity in accordance with the

Regulations of the Financial Authorities provided that the

application shall include the justifications for purchasing the

materials or commissioning services or assigning works to a sole

source by direct order.

10-2 The direct order application shall be transmitted directly to the

Secretary in preparation for submission to the Committee to

obtain approval, then the requesting party, after being notified of

approval, begin inviting bids quotations from the supplier /

contractor with the need to negotiate with the supplier /

contractor, trying to reduce the cost.

10-3 Without prejudice to the provisions of this Chapter - Direct Order

- all the procedures stipulated in Article (6) of this Regulation

shall be followed in the purchase orders or commissioning

services or assigning works by direct order in accordance with the

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nature of the direct order, and the same applies in recommending

awarding, reviewing the conditions and signing the contracts.

Chapter (5)

Purchasing materials / commissioning the work and

services not exceeding an estimated value of KD 5000.

(Only Kuwaiti Dinar five thousand)

Article (11)

As exclusion to the provisions of Chapter 2 Article (5) of this

Regulation, purchasing materials or commissioning the work or

services not exceeding an estimated value of KD5000 (Only

Kuwaiti Dinar five thousand), provided that such a contract shall

not be concluded to cover the same commodities, services or

works than once in one calendar month. Also, one transaction

shall not be parceled onto several monthly deals, the value of each

being within the limits of KD 5000. (Kuwaiti dinar five thousand).

Article (12)

Procedures for purchasing materials / commissioning works or

services not exceeding an estimated value of KD 5000 (Only

Kuwaiti Dinar five thousand).

The following procedures shall be followed after the approval of a

purchase order or commissioning work or services from the

authorized entity in accordance with the Financial Authorities

Regulation, and the application shall include the conditions and

specifications of materials, works or services required fully and

accurately

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Attaining at least three quotations from different suppliers /

contractors, provided such quotations shall be sealed envelopes,

except in some cases identified by the requesting party’s manager,

and no multiplied quotations are requested in case the materials

supplying or providing the services are not stipulated unless done

by sole agent or supplier / contractor with no prejudice to the

provisions in Clause (5-2) hereof.

12-2 On receiving the bids, the requesting party shall unseal them in a

special statement showing the supplier's / contractor's name and

the price and will be approved as per the Financial Authorities

Regulations, thereafter the requested service or purchase order

shall be issued.

12-3 As exclusion to the procedures set forth in Clauses (12-1) and (12-

2), the purchase of materials or commissioning services or

assigning works of value less than KD 250 (Only Kuwaiti Dinartwo hundred and fifty) and their approval shall be in accordance

with the Financial Authorities Regulations in the Company.

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Chapter (6)

Qualification and classification of Contractors and

Suppliers

Article (13)

The responsibility of qualification and classification

A Committee for qualification and classification of contractors and

suppliers shall be formed by a decision of Mr. / Chairman and Managing

Director.

Article (14)

The Procedures of Examining the applications for Qualification

The following procedures shall be applied when considering the

applications for qualification and classification:

14-1 The Committee shall establish principles and criteria of

qualification.

14-2 The Committee shall classify contractors and suppliers to

categories in lists according to specialization..

14-3 The Committee shall prepare in coordination with relevant

departments a model of qualification.

14-4 The requesting party shall study the applications for qualificationand express an opinion in preparation for presenting them to the

Committee of qualification and classification for approval.

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Article (15)

In some tenders, Qualification operation, prior to launching the tender,

may be announced, provided the announcement shall be done by the

Central Tenders Committee if the estimated value in excess of KD5,000.000 (Only Kuwaiti Dinar five million).

Article (16)

Register of Contractors and Suppliers

The Qualification and Classification Committee shall keep a consolidated

register of the approved contractors and suppliers classified according

to categories of specialization.

Chapter (7)Contract

Article (17)

Contract Language

All contracts concluded by the Company shall be written in Arabic and

an additional copy may be written in a foreign language provided the

exceptions to the Resolution No. (2) for the year 2004, dated 02.24.2004of the Minister of Energy regarding editing all contracts in Arabic and

the exceptions thereof, shall be taken into account.

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Article (18)

Powers and Procedures for Concluding ContractsThe Managing Director and his Executive Assistants shall have the

power to conclude the contracts and modifications , extension, renewal

or early cancellation thereto in accordance with the Financial

Authorities and the concerned authority shall prepare all the related

procedures provided there shall be coordination with the Legal Dept. in

the event of early cancellation

Article (19)

Payments

Lists of payment by suppliers / contractors shall be provided under the

conditions stipulated in the concluded contract to the requesting party

for reviewing and ensuring conformity to the implementation of works,and then on approval, shall be forwarded to the Purchasing Department

and following-up payments in preparation for submission to the

Department of Finance.

Article (20)

Violation of the Contract Provisions

In the event of violation of the supplier / contractor for the provisions of

the contract or failure in implementation as well as queries on the

conditions of the contract, the requesting party shall refer such violation

to the concerned authority to approve the necessary action in

coordination with the Legal Dept. if necessary.

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Article (21)

Receiving the Work and Payment

21-1 At the end of the period of the contract, the requesting party - in

cases of projects and contracts, which provides for the issuance of

the certificate of receipt of work - form a committee, a

representative from the concerned authority and a member from

the Financial Dept., as well as a representative for the requesting

party shall be amongst its members to receive the work and

ensure its compliance with the terms of the contract, provided the

Committee shall issue a certificate of receipt of the work.

21-2 The last due payment for supplier / contractor shall be withheld,

as well as the bank guarantee till the supplier / contractor’s

signing of the final clearance attached to the contract and filed to

the Purchasing Department and Payments Follow-up.

21-3 A portion of 5% of the total value of the contract shall be withheld

till submission of a certificate approved from the Department of

Inspection and Tax Claims of the Ministry of Finance, exemptionfrom tax.

Article (22)

Fines

22-1 The amount and cases of fines shall be determined in the

contracts in coordination between the requesting party and theconcerned authority

22-2 Application of fines shall be approved by the requesting party’s

manager or his authorized representative, and in any case, the

extent of damage done to the Company as result of negligence on

the part of suppliers / contractors shall be taken into account so

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that in its light, the level and degree of the penalty stated in the

contract may be determined.

22-3 The Managing Director shall be entitled to have suppliers /

contractors exempted from fines, in this case, a priorrecommendation from the requesting party, at the request of

suppliers / contractors shall be presented to the concerned

authority to be submitted to the Managing Director to decide on

applying the exemption or not.

Article (23)

Insurance Policies and Bank Guarantees

23-1 Purchasing and Payment follow-up Department shall be

authorized to receive and keep the origins of Insurance Policies

and Letters of guarantee.


authorized to examine Insurance Policies and Letters of guarantee

to ensure that they are containing necessary conditions as per the

articles of the contract.


authorized to follow up the validity of the Insurance Policies and

Bank Guarantees with the departments and sections of the

Company.

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Chapter (8)

Bids

Article (24)Provisions of Bids

24-1 The principles set forth in the Circular of the Public

Administration No: M t / 13 / 77 dated 11.05.1977 regarding the

method of disposal of damaged assets.

24-2 The procedures described hereunder regarding Bids - Article (25)- shall not include the sale of the Company’s factories, as such

factories are subject to special procedures to be determined at the

time by Mr. / Chairman and Managing Director

Article (25)

Bidding Procedures

Following procedures shall apply in the sale of dispensed

items:

25-1 The requesting party shall prepare an application for the sale of

dispensed items, and the Department of Materials shall be

responsible for all the contents of the Company’s warehouses, as

well as residues of factories from scrap and other things

determined to be dispensed with, and the application shall

contain all the necessary details to conduct the bid sale such as

technical specification of materials or equipment to be dispensed

with, quantities and conditions of sale, accompanied by a

statement of exclusion, and then shall be sorted into usable or not

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to be put up each group separately in a bid independently, and

then sent to the concerned authority.

25-2 The usable dispensed material shall be offered to the oil

companies before launching the bid.

25-3 The concerned authority shall prepare the bidding documents.

25-4 The procedure for launching and awarding the bid represented in

advertising in local newspapers or the Official Gazette, and the

receipt of bids, unsealing bids and awarding shall be done incoordination between the concerned authority and the requesting

party.

25-5 Except as provided in this Chapter - Bids -, all the procedures

stipulated in Article (2) of this Regulation shall be followed in the

processes of launching and awarding the bids, review the terms

and signing contracts in accordance with the nature of the bid.

25-6 A special committee shall be formed to open the bids box, it shallbe constituted of the following departments’ / sections’ as

representatives:

-A representative of the concerned authority.

- A representative of the requesting party. (In case if the material

is scrap, Inventory and Stores Control Department shall be the

requesting party)

- A representative of the Department of Finance.

25-7 A special box with two locks shall be assigned for putting all bids

related to the tender.

25-8 No bid envelops shall be entertained except in the bids box at the

specified time deposited by the contractor or his subordinates.

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25-9 Members of the Committee (the concerned authority / the

Financial Department) shall keep the keys of the bids box for

opening the box at the closing time of bidding by the concerned

authority.

25-10 The members of the Committee shall together open the special

bids box shall never be open otherwise.

25-11 The prices shall be entered in a special list directly after opening

the box and shall be forthwith approved by the formed committee,

and the bids along with the list shall be referred of the requesting

party for studying and Awarding.

25-12 After examining the bids submitted by bidders and selecting thetender offering the highest price, the requesting party shall send

the awarding recommendation to the concerned authority and

notify the successful bidder to pay the value of the bid prior to

signing the contract.

25-13 In the event of the loss of a one of the box keys, the members of

the Committee shall recode that in a memorandum.

25-14 The members of the Committee shall never disclose or divulgeany information or details regarding the bid to other parties.

Chapter (9)

General Provisions

Article (26)

The Provisions and Articles of the Regulations organizing the tenders of

the oil companies of the Kuwait Petroleum Corporation always apply in

the event of any conflict between the provisions or articles hereof with

the provisions or articles of these Complementary Regulations

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Article (27)

In the event of purchase of materials, the national product (locally

produced in the State of Kuwait) shall be given the priority than others

of similar products from abroad by (10%) (Ten Percent) , also the sub-national product (produced in the countries of the Gulf Cooperation

Council) shall be given the priority than others of similar products from

abroad by (5%) (Five Percent)

Article (28)

Commitment to Law Decree No. (3) of 1955 concerning the Kuwaiti

income tax and its amendments and in accordance with Ministerial

Decrees issued in this regard, and according to Ministerial Decree No.(8) of 2003 including the reservation of 5% of the total value of the

contract or any insurance or financial guarantees reserved with the

Company until to provide a Clearance Certificate issued by the

Department of income tax control in the Ministry of Finance and any

amendments thereto,

Article (29)

Commitment to Law Decree No. (25) of 1996 concerning the disclosure

of commissions that may be provided in contracts concluded by the

State, and that in all supply, purchase and public works contracts and

any other contracts not less than KD. 100,000 (Kuwaiti Dinar one

hundred thousand) and filling in forms of declarations issued by the

Audit Office in this regard.

Article (30)

The Committee shall issue supplementary rules regulating the work.

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Article (31)

These Regulations shall be applicable as of the date, and shall repeal any

regulations or circulars opposed to the content thereof.

Saad Ali Al-Shuaib,

Chairman and Managing Director

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Supplementary Rules Regulating the work of the Internal

Tendering Committee

Article (1)

The Committee’s Headquarters

The Committee Head Office is in The Company's Headquarters in the

south of Soubahya.

Article (2)

Date and Time of the Committee Meeting

The Committee shall hold its regular meeting on (Wednesday) each

week at 09:00 am at the Committee’s Head Office, each member shall

notify his substitute in case of his absence and to notify the Secretary in

writing sufficiently in advance in case of their absence.

Article (3)

Minutes

The Committee meetings shall be recorded in minutes to be approved in

the first following meeting, and shall be sent to the members of the

Committee with the agenda of the next meeting.

Article (4)

Requests for presentation to the CommitteeThe Company's concerned departments and divisions shall send the

topics desirous to be presented to the Committee at least two days prior

to the Committee’s session in the name of the Secretary.

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Article (5)

The Representative of the Department Relevant to the Request

The Committee shall be entitled to invite any experienced personal from

the Company's staff to express his opinion; also the Committee shall be

entitled to invite the representative of the requesting party or the

concerned party to provide clarifications or documents to meet the

purposes of the Committee.

Article (6)

Tender Box

1 – A box holding all bids and practices shall be kept at the Campany'smain office southern Soubahya.

2- Bids, tender envelops or practices shall only be entertained within

the tender box within the set time.

3 - The box shall be sealed wax following the specified time for

closing the tender by the Secretary, also the box shall be moved to

the Committee Head Office and be kept until the seal is broken by

the Tendering Committee during the next meeting.

4 - The tender box shall have two locks and the key of the first lock

shall be kept by the Secretary, the Chairman of the Committee or

his Deputy shall keep the key of the second lock, in the event of

the absence of the Secretary or the Chairman or his Deputy, the

keys of the locks shall be handed over to their substitutes.

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Article (7)

Announcement of the Tender Results and Awarding

The place for making the invitation for the tender, announcing the

tender’s results and awarding shall be at the entrance of the Company's

Headquarters.

Article (8)

Launching and Closing Times

Launching the Company's tenders shall be on " Sunday " in the Official

Gazette " Kuwait Today " and Closing shall be on " Tuesday " at one

o'clock p.m.

Article (9)

Validity of Prices Submitted in Bids

The requesting party shall take into account the validity of prices

presented in the tenders or consider the time required for presenting to

the Committee without affecting the validity of the presented prices.

Article (10)

Increases occurring on Operations making them subject to the

Committee's competences

Purchase operations, commissioning to provide services, work

contracting and consultancy services originally less than the limit of the

Committee's competences, and amendments or changing orders orclaims of the other party to the contract occur therein, or their

durations have been extended so that lead to increasing their total value

to the limit of the Committee's competences, consequently, they are

presented to the Committee with full details.

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Article (11)

Issues approved by the Committee and objected to by the

Committee of the Corporation or the Central Tenders

Committee

In the event of approval of the Committee on any of the topics presented

to it, and objection by the Corporation's Committee or by the Central

Tenders Committee emerge, resulting in a change to the Committee's

decision, then, upon completion of the procedures of the requesting

committee that raised objection, they shall have to be represented to the

Committee prior returning to the Corporation's Committee or theCentral Tenders Committee.

Article (12)

Irregularities

The Chairman of the Committee shall have to notify the Chairman and

Managing Director in the event of non-observance of the provisions ofthis regulation by the relevant authorities,

Article (13)

Methods of Presenting Details

The required details shall be presented to the Committee as per the

attached Forms for requesting issue presentation.

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The Details Required Relating to Issues Presented

to The Committee

Form No. (1)

Purchase Operation Details

A – Tender Details

The items required and utilization description.

- Specifications, Standards and Technical Requirements.

- Purchase Method:

• (Public Tender – Limited Tender - exercise - Direct Order)

• Statement of justification for preferring purchase method

instead of a Public Tender.

- List of suppliers / the name of supplier.

- Summary of historical details about the last similar purchase:

(A list showing the name of the supplier, date of purchase,

price of items)

- The estimated value.

- The presence of a provision in the estimated budget.

B – Awarding Details:

- Price List.

- Justification for the recommendation of award.

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Form No. (2)

Details of Contracts of Services Commission

a – Details of pre-qualification (if any):

- Qualification Conditions and Standards.

- List of Contractors Evaluation.

- Justifications and Recommendations.

B – Tender Details:

- The type of services / services required.

- Scope of work.

- Equipment required.

- The workforce / Labor.

- Services Commission Methods

• (Public Tender – Limited Tender - Offer - Direct Order)

• Statement of justification for Preferring Contracting

instead of a Public Tender.

- List of contractors / the name of the contractor.

- Summary of historical details about the last service contract:

(A list showing the name of the contractor, type of service, scope

of work, equipment, labor, the value of the contract, the durationof the contract)

- The duration of the contract.


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C – Awarding Details:

- Price list.


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Form No. (3)

Details of contractors' contracts

A- Details of pre-qualification (if any):

- Qualification Conditions and Standards.

- List of Contractors Evaluation.

- Justifications and Recommendations

B – Tender Details:

- The scope of work.

- Type of contract:

• (Cost Plus Contract - Lump-Sum Contract)

• Statement of justification for Preferring Contracting instead

of a Public Tender.

- List of contractors / name of the contractor.

- Summary of historical details about the last service contract:

(A list showing the name of the contractor, type of service, scope of

work, equipment, labor, the value of the contract, the duration of the

contract)

- The duration of the contract.



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C – Awarding Details:

- Price list.


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