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Quality in Contracting

Dr. Tariq A. Aldowaisan; CSP, CQA, CQE, CQM/OEGulf Lead Consultants

Kuwait Electricity & Water Contractors Conference & Exhibition 26 & 27 May 2010

2Copyright 2009 Gulf Lead Consultants. All rights reserved.

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

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Quality Definition

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

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Supplier-Customer Dual Roles

• MEW Expectations:– Quality services and manpower.

• Meeting specifications• Competent manpower

– Projects completed on time.– Projects completed without – or with

minimal – variation orders.– Reasonable prices.

ContractorOwner (MEW)

Exp

ecta

tion

s

• 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

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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

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Reactive Quality

• Contract Administration– Monitor compliance with objective/scope– Monitor compliance with schedule– Monitor compliance with budget– Review quality of deliverables• Material• Services

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Quality Cost Types in Contracting

Contractor’s Perspective

• 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

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

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Conformance Level vs. Quality Costs

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Fishbone – Contract Failure

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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.

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Balancing Measures - SPO

• Structure/Process/Outcome

Structure Process Outcome

•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.

• 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

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Balancing Indicators - Balanced Score Card

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Thank you…

Gulf Lead Consultants