Purchasing Procedure

A PURPOSE
To ensure that all expenditure incurred by the Resort is authorised in accordance with stated management policy as outlined below.

B POLICY

1. The Purchasing department is responsible for using good purchasing methods;

optimizing price savings, quality or value of products, vendor working

relationships; placing orders with approved suppliers; negotiating pricing with

suppliers.



2. The standard policies and procedures cover all items of purchase and service in

the Hotel.

- Non-Perishable items

- Market list items

- Capital Assets

- Contracts for supply of goods and services



2. The Purchasing Department should obtain quotes for goods and services from

prospective vendors by implementing a competitive bidding process to

minimize the cost without affecting quality, quantity and delivery date.

3. Formal approval by hotel management through purchase order is necessary

(except for the daily market list); no verbal order placement or commitment to

any third party prior to obtaining formal approval, is permitted nor should be

honoured.

4. All purchase requests and purchase orders that are cancelled or refused by

Management before being placed shall be clearly marked as such and retained

to ensure that these are not later placed by accident or followed up on the

mistaken assumption that goods or services were requested but not yet

provided.

5. It is the responsibility of the Purchasing department to place orders for all goods and services required in the running of the Resort. No Head of department is allowed to place order directly with the suppliers as it leads to duplication of order and confusion. All HOD’s should only raise a PR and forward to Purchasing for further action.

6. In fulfilling this role the Purchasing Department should ensure that he obtains competitive quotes from suppliers capable of meting the specifications of the requirement in terms of the quality and delivery schedule.

7. It is company policy to keep inventory levels as low as possible, but this should not be done to the detriment of the operation order levels should therefore be set at a minimum to ensure a constant supply of all items in relation to known consumption patterns and the expected level of activity of the Resort operation.

8. By having a single purchasing function a greater level of expertise can be employed. Also the Purchasing Department could be expected to respond to purchase requirements in a more independent manner than the staff of the requisitioning department.

C PROCEDURES

1. ORDER REQUISITIONS:

1.1 The Head of Department who needs any goods, services, or service contracts should obtain them by requesting the Purchasing Officer to raise an order. In the case of items which from part of the various operating supplies, the request should be made through the Store Keeper.

1.2 The request should be made on a purchase requisition form. This should be a pre-printed 2-part document distributed as follows :

a) a copy for purchasing to file numerically;

b) a copy for the requisitioning department for their future reference.

1.3 In the case of the Food and Beverage Department, the daily market list, the weekly grocery list and the weekly cellar list, will take the place of this purchase requisition form.

1.4 The purchase requisition should detail :

a) the quantity on hand at the time order is place;

b) the quantity to be ordered;

c) the monthly consumption

d) the date and details of the last order requisition ( not necessary for food and beverage lists) ;

e) any other specification considered necessary;

f) the justification of, or reason for the request.

1.5 The requisition may cover several items and may involve purchases from more than one supplier. The requisition should be cross-referenced to the purchase order and therefore there should be a reference per line item.

1.6 All purchases requisitions should be signed by a Department Head or a Management Executive with proper justification. It is expected that they will have regard to the agreed budget at the time of requisitioning the purchase. All PR’s must be first authorised by FC and finally approved by General Manager.

1.7 For all purchases, it is compulsory for the requisition to be first authorised by FC approved by the General Manager before the order is raised. In The absence of General Manager, it can be approved by financial controller.

1.8 The only exception to the requisition process is for an occasional purchase which can be made on petty cash expenditure. DBRS policy is that such expenditure should be limited to VND 1 million.

2. ORDER PROCESSING:

2.1 Upon receipt of the completed purchase requisitions the Purchasing Department will prepare a purchase order after considering the following factors.

2.2 First, is the quantity to be ordered should be reasonable. This should be considered in terms of the quantity on hand, the experience of consumption patterns in earlier periods and the projected volume of future activity in the Resort.

2.3 Having established that the quantity is not excessive the next stage is to determine which supplier should be used to satisfy the order. There should be a selection based on written quotations from at least three suppliers.

2.4 In the event that the order is for a standard item which is purchased regularly it is permissible to place the order with the originally chosen supplier provided the unit price quoted has not increased by more than 5 % (on an annual basis) from the time that the quotes were obtained.

2.5 The details supplied by the requisitioning department about earlier requests can provide a starting point, although a competent Purchasing Agent (buyer) should through experience be aware of all the possible suppliers.

2.6 In the case of goods and services which represent a purchase in excess of VND 4 million and which are not covered by DBRS capital expenditure requirements, the suppliers should be asked to submit sealed tenders to the Financial Controller. A meeting to discuss these bids should be convened between the Financial Controller, the Purchasing Agent, the Department Head and the General Manager. The bids should be opened in the meeting and a decision on which supplier to choose should be taken at that time.

2.7 The Purchasing Agent should consult with the Department Head to ensure that the specifications set down can be met. This is particularly important for food and beverage products.

2.8 The quotations should be compared in relation to specifications, price and delivery time. Provided that all suppliers are able to supply the same quality of goods in a reasonable time the order should be placed with the supplier offering the lowest price.

2.9 In the event that the selected supplier does not appear as an existing supplier in the Creditor Master File, the Purchasing Agent should prepare a request to add the supplier, and obtain the approval from the Assistant Controller. The approved request is then passed to accounts payable, who then will create the new supplier record in the Credit Master File.

2.10 A purchase order should then be raised to meet the requisition. This will be a pre-printed form and will, on completion, be a legally binding contract. Great care should therefore be taken in the drafting of this form in relation to local legislation.

2.11 It will also be a primary document for the expenditure control system. The order form should be a pre-printed 5-part set and should e distributed as follows :

a) the top copy to go to the supplier;

b) a copy to goods receiving as authority to accept the delivery;

c) a copy for the a/c payable section for payment processing;

d) a copy for purchasing to file with their copy of the purchase

requisition and quotations;

e) a copy for filing sequentially as a control mechanism on orders.

2.12 The completed order set together with purchasing copy of the purchase requisition and the quotations should be sent to the Financial Controller for authorisation and then to General Manager for signature and approval prior to the order being placed. If the order is exceeding VND 4 million, the Purchase order after obtaining approval from General Manager it should be forwarded to Director of Tan Viet Corporation for final approval. The Purchasing department will retain a copy of such PO’s/PR’s and also maintain a record in a log book with following details:

a) Purchase order No.

b) Purchase order details

c) Date send to TVC

d) Acknowledgement from the person receiving at TVC



2.13 If No approval is required, after approval from GM, PR/PO is send back to purchasing department for placing the order with suppliers.

2.14 If TVC Director has any queries on the PR/PO send to him for approval, he should get clarification directly from GM or FC only and not directly from Head of department or purchasing department to avoid miscommunication.

2.15 If satisfied with the clarification, TVC directly will send the approved Purchased order to the General Manager to enable him to send to Purchasing department for placing the order.

2.16 If TVC, for any reason, disapproves the Purchase order, the PO/PR has to be send back to GM’s office with reasons for rejection.

2.17 Please note that Maximum lead time for the Purchase order to come back from TVC director’s office is 3 days, if delayed beyond 3 days, the reason should be immediately conveyed to GM by TVC director’s office.

2.18 For food items the daily market list and the weekly grocery list will take the place of purchase orders. The contractual arrangements with such suppliers should be drawn up to ensure that this exception to the normal routine is agreed and understood by all parties. The weekly cellar list is only a requisition form and purchase orders must be raised for such purchases.

3. BUDGETARY CONTROL:

3.1 The cycle of expenditure requires that items may be taken into stock or purchased on a prepayment or deposit basis. Eventually such items will be consumed or otherwise utilised. It is then measured against budget in the management accounts for each period.

3.2 As stated in the introduction, the Department Heads should be accountable for the expenditure of their department to the General Manager who is in turn responsible to the Head Office Management for the control of overall expenditure of the Resort.

3.3 The budget should have been developed in conjunction with the Department Heads. They should therefore be aware of the constraints on their expenditure.

3.4 If they are uncertain of the level of expenditure relative to the budget they should check with the Controller’s Department before raising the purchase requisition. If necessary they should provide an adequate explanation of the need for the purchase.

3.5 If either the General Manager or the Financial Controller is uncertain about signing a purchase order they should satisfy themselves of the status of the proposed expenditure against the budget before authorising it.

3.6 Budgetary control checks should therefore be an exception routine rather than a standard procedure. That is to say an exercise conducted specifically to focus the attention of management on an area in need of corrective action rather than as a part of everyday procedures.

4. EXPENDITURE AUTHORITY LIMITS:

4.1 The ordering procedure places the authority for expenditure with the General Manager and the Financial Controller. The ultimate responsibility rests with the General Manager but there should be limitations on his ability to commit the Resort, and therefore ultimately the company, to expenditure.

4.2 The limits on the General Manager’s authority can be summarised as follows:

a) all purchase orders which commit the Resort to expenditure of up to VND 4 million or equivalent for a single purchase provided it is within budget for that category of expense ;

b) all contracts which have a term of one year or less and a value up to VND 4 million or equivalent ;

c) all purchases related to capital expenditure up to VND 4 million or equivalent for a single project.

4.3 Any expenditure which exceeds these limits must be referred to Head Office for the approval of a director or of the board depending on the actual amount of the expenditure. All contracts of one year or longer and any financing arrangements must be referred to Head Office.

5. ORDER EXPEDITING:

5.1 The Purchasing Department should also be responsible for ensuring that the suppliers deliver the goods according to the schedule stipulated in the purchase requisition, by the Originating Department.

5.2 A review of all outstanding orders, including partially filled orders, must be made monthly or more frequently as operational needs demand to expedite the delivery.

6. CANCELLATION OF PURCHASE ORDERS:

6.1 If for any reason an outstanding order must be cancelled, the Purchasing Department should notify the supplier concerned and obtain their approval for the cancellation. Cancellation penalties should be avoided, and a negative response from the supplier should be drawn to the attention of the Financial Controller who will determine the best course of action.

6.2 If the supplier requests the Resort to cancel a confirmed order, a penalty must be sought if possible, substitute goods must be ordered and the Relevant Department Head concerned must be notified.

7. DEALING WITH A PRICE INCREASE AFTER PURCHASE ORDER HAS BEEN PLACED :

7.1 Should there be a price increase after a purchase order has been placed; the Purchasing Department should check the price with other suppliers. If a Resort is able to obtain the goods at the same quantity, and delivery schedule at a lower price, the original order should be cancelled and the order placed with another supplier.

7.2 Should the Resort have to accept the price increase, fresh purchase order should be issued to supersede the old one. Approval from the Financial Controller and General Manager must be obtained. When submitting the new purchase order for approval, a note giving the reason and the old purchase order should be attached.