Quality in Contracting

1. Quality in Contracting Dr. Tariq A. Aldowaisan; CSP, CQA, CQE, CQM/OE Gulf Lead Consultants Kuwait Electricity & Water Contractors Conference & Exhibition 26 & 27 May 2010

2. Agenda • Quality Definition in Contracting • Supplier/Customer Dual Roles • Proactive vs. Reactive Quality in Contracting • Quality Cost Types in Contracting • Fishbone – Contract Success • Balanced PM in Contracting • SPO • BSC

3. Quality Definition • Quality is Meeting Customer Expectations. • In Contracting: • Meeting owner expectations • Meeting contractor expectations • Meeting other stakeholders expectations

4. Supplier-Customer Dual Roles Owner (MEW) Contractor • MEW Expectations: • Quality services and manpower. • Meeting specifications • Competent manpower • Projects completed on time. • Projects completed without – or with minimal – variation orders. • Reasonable prices. • Contractor Expectations: • Fair and quick handling of disputes and claims. • Flexible and inviting prequalification process (innocent till proven guilty!) • Timely information on future projects. • Timely payment of valid invoices. • Assistance to close quality and performance gaps; e.g. advise, training, seminars, & field visits Expectations

5. Proactive Quality • Prequalification & short-listing • Criteria: Company Experience, Financial, HSE Credentials • Type I Error: rejecting when you should accept • Type II Error: accepting when you should reject • Challenge: how to encourage local, professional, new entrants • Tendering (Preparation & Award) • Well-defined objective and scope of work with clear deliverables • Selection of competent owner representative • Objective selection of winner

6. Reactive Quality • Contract Administration • Monitor compliance with objective/scope • Monitor compliance with schedule • Monitor compliance with budget • Review quality of deliverables • Material • Services

7. Quality Cost Types in Contracting Contractor’s Perspective Owner’s Perspective Preventive Choosing qualified resources Quality training Appraisal Follow-up through progress reports Review progress reports’ feedback Internal failure Fixing errors in progress reports’ feedback External failure Error in estimating/developing overall project budget • Preventive • Audits of the effectiveness of the quality system • Quality training • Appraisal • Quality audits • Setup for test or inspection • Internal failure • Material procurement costs • Rework labor and overhead • External failure • Cost of field servicing and handling complaints • Lost sales arising from a reputation for poor quality

8. Conformance Level vs. Quality Costs

9. Fishbone – Contract Failure

10. Quality Indicators in Contracting • No. of prequalified contractors. • No. of bidders. • No. of disputes/claims. • Average time & SD to process claims • No. of variation orders. • Contractor performance scores, i.e. less delays, more quality, more safety. • Satisfaction scores among contractors. • Satisfaction scores among MEW front-liners.

11. Balancing Measures - SPO • Structure/Process/Outcome Structure Process Outcome • Satisfaction scores among contractors • Satisfaction scores among MEW front-liners • Contractor performance scores, i.e. less delays, more quality, more safety. • Ratio of resources to tenders issued • Percentage of credentialed employees • Resources training intensity • No. of disputes/claims • Average time & SD to process claims • No. of prequalified contractors • No. of bidders • No. of variation orders • Contractor performance scores, i.e. less delays, more quality, more safety.

12. Balancing Indicators - Balanced Score Card

13. Thank you… Gulf Lead Consultants