Contract Review and ISO 9001
Aug 30
In an attempt to define an effective set of management processes, ISO 9001:2000 has a section devoted to the management of the contract process. Previous versions of the Standard (e.g. ISO9001:1994) described this process as Contract Review, an unmistakable indication of its original nature and intended purpose. ISO 9001:2000 has located it in a section (7.2.2) “Review of requirements related to the product”. In both instances the goal was to make sure that organisations were able to, and required to, clearly evaluate the customer needs before obligating themselves to a contract, and also to find out the extent of their ability to meet these particular requirements.
But isn’t this obvious? Possibly, and no one is claiming any originality for this inclusion in the Standard. The imperative question at this point is, what led the creators of the Standard to believe that it was somehow important to re-state what was blatantly obvious? How often as individuals have we been told, “I didn’t know you meant that”, or “Oh, that’s what you meant”? These are clear indications of a supplier’s misunderstanding of the customer requirement, OR a lack of understanding of how to meet the customer requirement, OR simply an inability to meet the requirement; maybe in most cases, a combination of these leads to a customer becoming dissatisfied. Contract Review as we will call it here, is outlined to remove any misunderstanding of the requirement, while conveying an assurance of the supplier’s current ability and capability to accommodate the necessary requirements.
At its simplest, the requirement leads the potential supplier to fully understand the customer’s needs and expectations, while assessing his (the suppliers) ability to adequately meet those needs. This ability isn’t just restricted to the production and delivery of products and services; it includes provision in a time specific domain and at a level of expense which is acceptable to the client. Also, there is an implicit requirement, if not otherwise specified, that the product is fit for purpose, conforms to legislative requirements, and will be supported in an appropriate manner after sale. The Standard states that the potential supplier must verify this before the actual submission of a bid or a quote.
If there is an acceptable bid, then the next stage would usually be the delivery to the potential supplier of a contract or a purchase order. The Standard demands a review of this document before any acceptance, to verify the ongoing acceptable status of the requirement and the ability of the organisation to accommodate the obligations set forth in the offered contract. This latter element might seem obvious to the point of being unnecessary, but with any organisation there is a great temptation to accept any and all orders, particularly during a general down-turn in business prospects, and to worry about the consequences later. This strategy is not good for either party, so the requirement is for the potential supplier to conduct another review where key aspects of the proffered contract are compared to the organisations ability to deliver to the requirements. These include:
1. Ensuring that the product (or service) requirements are (adequately) defined.
2. Any requirements that differ from those previously expressed (the bid invitation and quotation) are resolved.
3. Confirming that the organisation has the ability to meet the defined requirements.
Most observers of this review requirement would probably agree on the reasonableness of the requirements, and maybe add further detail, but independent audit experience suggests this review is seldom carried out with any rigour, frequently being confined to a cursory assessment by a sales department manager, more concerned with incoming order value than the organisations technical and administrative ability to deliver.
If companies are to improve their image in the market place, and with their customer base, the requirement to seriously review the commitments they are about to make with any new contract is an essential step towards this improvement strategy.
Ed. Bones is a chartered quality professional and an IRCA registered Lead Auditor. He is also a senior partner with the Meon Consulting Group, supplying expert audit and consultant services for ISO9001 & ISO14001 management systems. The company web site provides detailed information for your perusal, and includes the special offer of FREE Advice. Want to learn more?