TOKYO GAS TOP > PURCHASING > STANDARD PURCHASING PROCEDURE

STANDARD PURCHASING PROCEDURE

The Company's Standard Purchasing Procedure as follows:

1. Basic System

(1) Registered supplier system

This is a system of pre-registering suppliers doing business with the Company as suppliers. What this means in concrete terms is that if a company wants to start doing business with the Company, it first undergoes an examination of its technologies specific to the gas industry and a credit assessment by the Company, and, if it passes, it is then awarded a “supplier code.” Suppliers that have already obtained a “supplier code” are also examined once a year by the Company. Should there exist reasonable grounds for deeming them ineligible to remain suppliers on a continuing basis, then purchasing relations are suspended or the supplier code is revoked.

(2) Private tender system

When the Company asks suppliers for estimates, it may do so by competitive tender (when multiple suppliers are asked for estimates) or by extraordinary tender (when a specified supplier is asked to submit an estimate). For competitive tenders, the Company uses a private tender system in which it designates bidders from among the suppliers registered under the above registered supplier system. Under this system, the Company may further negotiate contract terms as necessary with the supplier that offers the best terms.

2. Preliminary Procedure

(1) Offer for Commencement of Business Transaction

Those companies or parties (in this section called “Potential Suppliers”) who are interested in the commencement of business transactions with the Company should submit their offers to the Company’s Purchasing Department using this Application Form. After your application, we will make a decision as necessary on when to have your company or representative in Japan schedule an appointment.
When we meet you, you should expect to explain details of the structure of your organization, financial position, and explanatory information on your products or services. Items to be presented should also include available catalogs, technical and sales data, organization and management of contracted works, and records of past works as well as information concerning other available technologies and the like. Such information about the product of the Potential Supplier should be explained to the Company usefully and informatively in light of our purchasing guidelines and requirements.

(2) Preliminary Examination

The products of the Potential Supplier shall undergo a preliminary examination by the Company once the Company has decided on a definite purchasing schedule. This examination shall include the times of delivery and specifications of the products and services to be purchased.
The preliminary examination of Potential Suppliers is intended to comprehensively examine the following:
  • whether the products or services offered are needed by the Company;
  • whether the products or services offered meet the standards and specifications set by the Company;
  • whether the Potential Supplier’s financial position, product or service supplying capacity, technical capability, maintenance, and servicing capabilities meet the standards set by the Company; and
  • what the advantages are to the Company in selecting the product or service.

During the examination, the Company may ask the Potential Supplier to submit additional data, explanatory information, samples of products, etc., as deemed necessary.
The information concerning Potential Suppliers will be kept in the Company’s “File of Candidates Approved for Submission of Estimates” for future use in selecting new suppliers whom the Company may ask for the submission of estimates according to its purchasing schedule. (At this stage, the supplier is not yet registered.)

The results of the preliminary examination can be released if requested by the Potential Supplier, provided that information which the Company considers should be kept confidential from non-parties shall be excluded.

3. Specified Purchasing Procedure

(1) In-Company Purchase Request

The standards, specifications, quantities and terms of delivery will be determined by the relevant departments or sections in the Company. The Company’s Purchasing Department begins its purchasing activities after receiving such requests for purchase from the Company’s various departments or sections.

(2) Selection of Suppliers

The Purchasing Department selects the suppliers to whom the requests for the submission of estimates are to be made (called “Supplier Candidates” in this and the next section) from among those companies or parties listed in the “File of Existing Suppliers, File of Candidates Approved for Submission of Estimates.”
In selecting Supplier Candidates, the quality, performance, and terms of delivery of the products or services will be considered as well as their adaptability to and compatibility with the Company’s existing equipment or facilities. The capacity and past experience of each Supplier Candidate will also be taken into consideration.

(3) Request for Submission of Estimates

The request for submission of an estimate will specify basic requirements such as quality, performance, standards, material, dimensions, inspections, and methods of inspection.

The request for submission of an estimate will normally be made to more than one Supplier Candidate on a competitive basis except where such request for submission has to be made to one particular Supplier Candidate for patent reasons or other exclusive proprietary rights, the urgency of need, the need to use products manufactured following research and development projects, the need to ensure stability and safety of city gas supply, or the adaptability to or compatibility with the Company’s existing equipment or facilities.

In order to provide a fair opportunity for all Supplier Candidates to understand the basic requirements so that they can submit accurate estimates, a meeting may, if necessary, be held to brief them on the requirements. In order to ensure the fairness of this briefing, all Supplier Candidates participating in the tender will be invited to attend together.

*In the interests of the efficient of the estimate request and submission process, the Company requests that Supplier Candidates take part in e-commerce. Use of the Company’s designated electronic estimate system allows specification documents to be sent and estimates and estimate specification documents to be registered via the Internet.

(4) Submission of Estimates

Please submit estimates and estimate specifications conforming to the requirements specified at the time of the estimate request by the tender deadline.

Supplier Candidates participating in e-commerce should enter the estimate amount in the Company’s designated electronic estimate system by the specified deadline, and append electronic files of their estimates and estimate specifications to the same system. (As a rule, the Company requests all Supplier Candidates to take part in e-commerce.)

Supplier Candidates that do not participate in e-commerce must post or submit directly to the purchasing section their sealed estimates and estimate specifications.

The submitted estimate specifications will be examined by the Purchasing Department and the relevant department to ensure that they conform to the requirements set by the Company. If the content of any submitted estimate is not in conformity with those requirements, the Company may ask the Supplier Candidate to submit additional information or to modify the content of the estimate.

*In order to ensure impartiality, estimates and estimate specifications registered using the electronic estimate system are secured by system-based arrangements so that they cannot be accessed by the Company’s employees until the tender deadline. Estimates and estimate specifications that are submitted sealed are opened on the day of the tender deadline in accordance with the official responsibilities and authority stipulated by the Company.

(5) Negotiations for and Decision on Pricing

The Company will enter into negotiations for contract prices and other conditions with the Supplier Candidate whose estimate is most beneficial to the Company, selected from among those Supplier Candidates whose estimates have been approved by the Company, following the examination referred to in section 5-2 (4). The Supplier Candidate will be notified of the result of the examination provided that the information which the Company considers should be kept confidential from non-parties will be excluded.
The Company may use more than one Supplier Candidate for the purchase of materials, products, and services necessary for the stable supply of city gas.

*The Supplier Candidate offering the best terms will be considered to have the right of first negotiation. After detailed consideration of price appropriateness and other factors, the Company may, if necessary, re-negotiate the contract price and other terms.

*If doing business with the Company for the first time, a Supplier will as a rule be made a registered supplier when it is given the right of first negotiation.

(6) Conclusion of Contract

Purchases will normally be made based on a written purchase contract. The basic purchase contract may be concluded separately from individual purchase contracts under which purchases may be made from time to time.

(7) Delivery and Inspection

Suppliers are obliged to strictly observe the contractual time of delivery. The details of the delivery schedule, however, may be adjusted following negotiation with the relevant department or section within the Company.
The delivered materials, products or services must pass an initial inspection upon receipt to be conducted by the relevant department or section. Some important materials, products or services, however, may also have to undergo an intermediate inspection during the course of their processes.

4. Other Points to be Noted in Purchasing Procedure

(1) Both the Company and each of its suppliers and Supplier Candidates are responsible for strictly controlling the information concerning their respective businesses and shall not disclose to any non-parties such information which they have come to know through their dealings, without obtaining prior written permission from the other party or parties.

(2) Should the supplier be unable to deliver the material, product or service on the specified date of delivery or not at all, the Company may require the supplier to pay a penalty and/or compensation for the damage caused by the failure to deliver on time or not at all.

(3) Should any dispute arise between the purchaser and supplier over the performance of the contractual terms and conditions, the dispute shall be interpreted and resolved in accordance with Japanese laws.

Page Top