1. 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. 2 Copyright 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

3. 3 Copyright 2009 Gulf Lead Consultants. All rights reserved. Quality Definition Quality is Meeting Customer Expectations. In Contracting: – Meeting owner expectations – Meeting contractor expectations – Meeting other stakeholders expectations

4. 4 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. Contractor Owner (MEW) Owner (MEW) Expectations 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

5. 5 Copyright 2009 Gulf Lead Consultants. All rights reserved. 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. 6 Copyright 2009 Gulf Lead Consultants. All rights reserved. Reactive Quality Contract Administration – Monitor compliance with objective/scope – Monitor compliance with schedule – Monitor compliance with budget – Review quality of deliverables Material Services

7. 7 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

8. 8 Copyright 2009 Gulf Lead Consultants. All rights reserved. Conformance Level vs. Quality Costs

9. 9 Copyright 2009 Gulf Lead Consultants. All rights reserved. Fishbone – Contract Failure

10. 10 Copyright 2009 Gulf Lead Consultants. All rights reserved. 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. 11 Copyright 2009 Gulf Lead Consultants. All rights reserved. Balancing Measures - SPO Structure/Process/Outcome StructureProcessOutcome 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

12. 12 Copyright 2009 Gulf Lead Consultants. All rights reserved. Balancing Indicators - Balanced Score Card Average time & SD to process claims No. of variation orders Amount of training Number of employee suggestion Return on Assets Return on Equity Liquidity Satisfaction scores among contractors Contractor performance scores CustomerFinancial Internal Business Processes Innovation and Learning

13. 13 Thank you… Gulf Lead Consultants