Procedure for Contract

 preteshbiswas  Uncategorized  February 6, 2019 9 Minutes

1. SCOPE

Applicable for Outsourced processes

2. PURPOSE

To ensure effective control of Outsourcing.

3. REFERENCE DOCUMENTS

3.1 XXX Quality Manual,

3.2 Procedure for Correction and Corrective Action.
3.3 Procedure for Manufacturing.
3.4 Procedure for QA
3.5 Procedure for Purchasing.

4.TERMS & DEFINITIONS

4.1 Outsourced Processes: 

An “outsourced process” is a process that the organization has identified as being needed
for its operations and quality management system (QMS), but one which it has chosen to be
carried out by an external provider outside the managerial control of your facility and may
not be subject to the same QMS as your organization.

5.0 RESPONSIBILITY AND AUTHORITY

The Contract Manager is responsible for the review, establish and maintain this procedure
and CE is responsible for the approval of this procedure. The project Manager and other
concerned Managers are responsible for compliance with this procedure.

6.0 DETAILS OF PROCEDURE

6.1 Contractor Registration

The need for contractors will be identified by the contract execution. The need could arise
out of the business plan or request by the Project Manager. The pre-qualification
parameters will be defined at the organizational level by the Contract Manager. The
parameters would include:-

 The minimum experience in similar work

 The minimum value of contracts handled by the contractor in past in individual

capacity.
 An acquaintance of contractor with city / local norms.
The Contract Manager will invite details from contractors. The invitation could be through a
newspaper advertisement, word of mouth, or through associates. The new contractor will
be required to submit the following documents:

 Company Profile (legal entity status) of the contracting firm

 Credentials and work have done
 List of equipment
 Financial Statements (Balance sheet, Profit and Loss statement)
 Current project in-hand
 Staff Details and Plant and Machinery details

The eligibility of a contractor will be determined on the basis of information submitted vis-à-
vis the pre-qualification parameters.  If the parameters are not met, then the contractor will
not be considered for registration, and communication of the same will be sent to the
contractor. In case the pre-qualification parameters are met a site visit will be organized at
one or more projects of the contractor to get an understanding of the execution-specific
parameters like quality, finishing, safety, etc. The observations of the site visit will be
captured in a site visit report. The inspection team puts its observations in a site visit. Report
and comprises of one representative each from execution, contract, and quality
department. The contract executive will then collect the information and prepare a
contractor assessment report. The final assessment includes parameters like – market
reputation (clientele/developers worked within the past), staff strength (labor –
skilled/semi-skilled), equipment, etc. The type of work that can be awarded to the
contractor will be decided by the Contract Manager and the entry-level rating of the
contractor will also be decided. In case the contractor rating is not satisfactory the
contractor will not be considered for registration and the same will be communicated to the
contractor and the details will be captured in the contractor database. In case the
contractor rating is satisfactory the contractor details are captured in a registration form.
The registration form consists of the following details:-
• Details of the company – name, and type of entity, contact details
• Registration details
• Details of resources – plant and machinery, manpower, material
• Financial details – turnover, financial statements, latest income tax clearance, etc.
A report of shortlisted contractors will be forwarded weekly to the Contract Manager for
approval. The contract Manager will review the details and rating of the new contractors. If
the contractor and rating are not acceptable the contractor will not be considered for
registration in the database and the details will be updated in the contractor database. In
case the contractor and the rating are acceptable, the Contract Manager will sign the
contractor registration form and the details will be updated in the contractor database.

6.2 Contractor Selection

 Determination of method of appointment of the contractor

The Contract Manager in coordination with the Project Manager will decide the type of
contract to be awarded. Types of contract can be classified as below:
• Lump-Sum Contract
• Item Rate Contract
• Turnkey Contract
• Cost Plus Contract

Based on the decision taken by the Contract Manager, the contracts department personnel
will determine the category of contractor required as well as the period of the contract. The
contract can be awarded through three methods. Based on the requirement, the contracts
Manager will identify the best suitable method. Methods for the appointment of
contractors are:

1 Appointment through Tendering Process

2 Appointment through Competition Process
3 Appointment through Preferred Vendor Selection

6.2.1  Selection through tendering process

The contract Executive will prepare a tender document. The tender document will consist
of: company covering letter, the scope of work, bid qualification criteria, bill of quantity
(BOQ), tender drawings/plans, technical specifications, standard terms of the project,
special terms of business, completion period, commercial terms (bank
guarantee/performance guarantee/insurance, etc.) cut-off date and time for the closing of
the bid.

The tender document will be forwarded to the Contract Manager for review. The required
changes will be made by contracts department personnel in case of any change
recommended by the Contract Manager and will be signed by the Contract Manager.
Registered contractors who are considered under tendering process category will be
identified by the contract executive from the contractor database. The contractors to be
identified for bid are decided by the contracts department in consultation with the Project
Manager/MD.

The criteria for identification are available & the current workload of the contractor apart
from the experience in the required job. A Notice Inviting Bids for the tender will be sent to
the applicable media by the contract execution. Notice inviting bids for the tender should be
sent to the minimum number of contractors. (Not less than 3). A signed copy of tender
documents will be distributed to the interested contractors on the decided date.

Duly filled and sealed tender bids, both technical and financial will be received from
contractors by the contract executive on the decided date. . Any bid, received after the cut-
off date/time, will not be considered valid for negotiation. The technical bid will be first
evaluated by the contracts department. The contractors who do not pass the technical bid
will be rejected and the contractors who pass the technical bid will be considered further for
price bid evaluation.

After the contractors are finalized for price/financial bids, a preliminary cost comparison is
formulated. Rates quoted by contractors for every item will be compared with the
company’s expected rates. Based on the comparison, the list of items with rate variations
more than tolerable limits of company rates will be prepared and contractors will be called
for discussion for the same. If any anomaly is found in the discussion, contractors will be
asked to submit the fresh bid for the identified items, and based on fresh bids, cost
comparison sheets will be prepared. If any anomaly is not found, the preliminary cost
comparison sheet will be finalized.

Comparative sheets will be analyzed in detail and the same will be compared with budgeted
cost. Rounds of negotiations will be conducted by the contracts department. Details of
every negotiation round shall be documented by the contracted Executive. Based on the
negotiations and comparative sheets, HOD contracts will finalize the contractor. The
contractor finalization note shall be generated and will be signed by all the concerned
parties.

6.2.2 Selection through the Competition process

The contract Executive will prepare an inquiry for the work to be contracted and get
approval from the head of contracts. Once the inquiry is approved and signed by the head, it
will be forwarded to contractors selected from the contractor database. The contract
Executive will receive the quotes on the date mentioned in the inquiry. Once the quotations
are received, the contracted Executive will compare the costs of different quotations.
Through comparative analysis,  negotiation will be carried out with the bottom three
contractors.

Based on the negotiation, the two lowest contractors will be determined and the cost
comparison sheet will be updated by the contract execution. Cost sheets of both the lowest
contractors will be compared with the company’s budgeted cost. The Contract Manager will
carry out rounds of negotiation with both the contractors. Based on negotiations, the
contractor providing the lowest rate would be considered, and finalized note will be
prepared. The finalized note will be sent to the director for approval.

  If the Managing director does not approve the contractor, the contract manager will
approach other contractors.
 If the director approves the contractor, the contractor will be finalized and the detail
contract agreement will be prepared.

The contract agreement will be signed by the contractor and the Managing director.
Selection for minor works based on standard rate list. BOQ for the minor works will be
received by PM at the site. The items under minor works shall be verified for their inclusion
in the rate list. If the items are not included in the rate list, rate analysis will be done by PM
with contract executive and the same will be forwarded to Contract Manager for approval. If
the items are included in the rate list, the contract Manager shall identify whether the
suitable registered contractor is available or not.

 If a suitable contractor is available, the contractor shall be identified from the

contractor database and will be finalized.
 If a suitable contractor is not available, the contracts department will identify new
contractors for the same. New contractors must get registered with the company.
Follow the “contractor registration” process for new contractor registration. After the
 approval and registration, contractors shall be asked to quote for the concerned work.
A cost comparison sheet will be prepared and the contractor will be finalized by the PM
and contracts department.

6.2.3 Preferred Vendor

This type of contracting is preferred when the organization decides to do a corporate tie-up
with a particular brand/make for the large volume of work valid for a period of time e. g.
Cranes,  Lifts, water pumps, etc. Summary of the volume of contracts to be issued and
volume of work and period of work shall be prepared by the contract executive.

Rate analysis of the items under this method will be carried out. A cost comparison sheet
shall be prepared. The comparative sheet will be compared with the budgeted cost and will
be forwarded to the Contract Manager for discussion. If it is not found feasible, other
modalities will be worked out. If it is found feasible, the item will be shortlisted for inquiry.
As per the inquiry done, the contract executive will receive the details of work for bulk
orders. Based on the details, the contract executive shall identify the options for bulk
orders. Vendors will be asked to quote for the selected orders. After receiving the quotes, a
comparison statement on various offers will be prepared. Contract Manager contracts will
negotiate with the vendors and finalize the suitable vendor. After the vendor finalization, a
vendor note shall be prepared. Vendor Note includes the details of the vendor & the
agreement of bulk supplies. E.g. Percent of discount on the MRP prevailing at the time of
requirement or flat rate for a year or two etc.

6.3 Preparation of work order

Based on the finalized details of the contractor, the contract executive will prepare a draft
work order and the same will be forwarded to the Contract Manager for approvals. After
making necessary changes in the draft work order (if any), the final work order will be
prepared by the contract’s personnel and will be approved and signed by the Contract
Manager.
6.3.1 Amendment of work order
The Project Manager (PM) will suggest the amendment details to the contract manager. The
need for the amendment is noticed by PM in case of any one of the situations:

1. Scope of work getting modified due to site conditions (Extra work)

2. Quantity of work getting modified beyond the limit stated in the contract (Extra items)
3. Rate of one or more items in the Work Order getting changed due to site conditions

Impact of the amendment on project cost and progress of the project will be noted by PM
and the same along with the amendment details will be forwarded to the Contract
Manager. After getting the approval from the Contract Manager, the new work order
incorporating the required changes will be prepared by the contracts department. The
amended work order shall be signed by the concerned persons.

6.4 Evaluation of Contractor

The Contract Manager will identify the evaluation parameters for rating contractors. The
evaluation parameters would include broad parameters like- Schedule adherence, material
wastage, rework, safety measures at the site, work quality, billing efficiency (errors and
frivolous claims), interaction experience, etc. Contractor evaluation will be carried out every
six months. The contracts Executive shall distribute the evaluation forms to the site,
contract personnel, and quality assurance department. Contractor evaluation is to be
carried out by awarding points for each parameter.
Contractors will be stratified as Grade A; Grade B, Grade C vendors respectively

Vendor Grades Point Scoring Range Decision Action

Grade A 70- 100 Retain Give bulk of business

Grade B 40 – 69 Retain Ask for further improvement

Grade C 00-39 Discontinue Delist

After evaluating the contractors based on feedback forms received from the quality
assurance department and site, if the contractor gets grade C, the contractor will be de-
listed and details of the same will be communicated to the concerned departments. Briefing
on improvements needed for the work will be given to the contractors under Grade B. Key
concerns of contractors will be understood and documented by the persons communicating
with the contractors regarding improvement.  A report on contractor evaluation will be
prepared and forwarded to the HOD contracts.

7.0 RETAINED DOCUMENTED INFORMATION

7.1 Contractor Evaluation ( QMS F 083)

7.2 Contractor appointment processing time( QMS F 084)
7.3 Open work orders to date( QMS F 085)
7.4 Work awarded without work order( QMS F 086)
7.5 New contractors identified( QMS F 087)