Contract Administration is the essence of Supplier Management


Key Elements to Consider:


Ensuring understanding (mutual understanding that is)

Clear Statement of Work

Respond to Vendor Questions during Solicitation Phase,

After Award, Conduct Pre-performance Conference.  Discuss:






          Roles and Responsibilities


Contract Administration includes such diverse functions as:



              Monitoring Progress (CPM, Gantt Charts, Reports, Inspection)

              Surveillance (discussed in the lecture on Quality)

              Delivery (expediting)

              Documenting History - Supplier Evaluation


Supplier Motivation (review from Class 4)

              Punishment (or Disincentives)

              Rewards (or Incentives)



              Training (on your ways of doing things)

              Quality audits and procurement system reviews

              Problem solving and mutual resolution


Processing Payments

              Review (invoices, costs, services/deliverables provided)

              Verify/validate progress

              Approve and disperse




Administer Change Orders and Modifications




              Incorporate into contract


Transition between contractors


Disputes Resolution (formal, informal, ADR)


Termination/Partial Termination

              For convenience

              For default



Staffing for Contract Management:

     Oversight and Quality Assurance (QAR, COTR)

     Administrative Contracting Officer


     Termination Contracting Officer

     Cost Price Specialists



(Students: Research and Discuss Defense Contract Management Agency (DCMA) and In-Plant K-Admin Activities)


QUALITY is conformance to specifications (review from Class 2)


"Fitness for Use" is different than Quality in that -


A quality product may not be fit for use in that the latter deals with specification adequacy, not product conformance to that specification.  It may be said that Total Quality, from a Manufacturing perspective, is attained when a product is fit for its intended use.


Traditional role of inspection has been de-emphasized in favor of:

     Effectiveness of design

     Process control and continuous improvement (discuss SPC and envelope of quality)


Five general factors affect the quality of purchased material:

·        Adequate/appropriate specifications

·        Selection of qualified suppliers

·        Supplier understanding of quality requirement

·        Supplier motivation to achieve quality reqmt.

·        Measurement of supplier conformance by:

§        Inspection upon receipt of items, and/or

§         Quality assurance (of supplier’s QC program)


Suppliers are generally responsible for quality control; the Buyer is responsible for quality assurance.


Quality has costs associated with its attainment (or lack thereof)


Quality Schools of Thought:


Phillip Crosby and the Quality College:


The "Cost of Quality" (Crosby) is the cost of doing things wrong, hence -

effective quality programs result in cost avoidance to the firm


Deming and the Deming Prize - Japan (relate to Malcom Baldridge Prize in U.S.)


Deming's view:  Management is responsible for 85% of Quality Problems (such as design, manufacturing process, engineering, training, purchasing, customer relations)


ISO 9000 Quality Standards


Undesirable quality costs include:  Scrap, Rework, Repair, Loss of Customer Goodwill


Most quality advocates espouse quality as a "top down, bottom up effort"






Two Views of Quality:

Productivity and quality are  conflicting goals

Productivity gains are achieved through quality improvements

Quality defined as conformance to specifications or standards     

Quality is correctly defined requirements which satisfy user needs                                                             

Quality measured by degree of non-conformance Quality measured by continuous process/product improvement and user satisfaction
Quality is achieved through intensive product inspection Quality determined by product design and is achieved by effective process controls
Some defects allowed if product meets minimum quality standards Defects are prevented through process control
Quality is a separate function focused on evaluation of production Quality is part of every function in all phases of the product life cycle
Workers are blamed for poor quality Management is responsible for quality
Supplier relationships are short termed, competitive based, and oriented towards acquisition costs Supplier relationships are long term/quality oriented



Quality and the JIT  Manufacturing Perspective

JIT Elements Relating to Purchasing include:


Quality and Conformance (more important than price) -

Emphasis shifting from lowest price to lowest cost characteristics of -





Long-term supplier/relationships are encouraged

(Although average in U.S. has historically be approximately 1-2 years


Advantages? (Willingness to invest in process, R&D, training; conduct value analysis, improved learning curve


Some "Sole or Single Source" Contracts may be necessary, however, at least two vendors supplying materials may be wise to keep competition viable (primary and alternate supplier)


Formal vendor evaluation/certification programs imperative in JIT


JIT is characterized by frequent deliveries of small quantities directly to point of consumption on factory floor


Once vendors are certified, little or no incoming inspection is needed


Vendors are involved in production decisions, i.e. scheduling, needs and materials determination


JIT Purchasing can become an excuse to take advantage of vendors when firms MM and other management practices are at fault (i.e. faulty planning, design, marketing forecasting, etc.)


True Just In Time Production Lowers Everyone's Inventory (buyer and supplier alike)
Evaluation of a Quality Program:


Organization for Quality:

•   Defined responsibility, authority of personnel assigned QC responsibilities

•   Management involvement, review, and commitment

•   Training

•   Sufficient resources allocated (personnel, equipment, facilities, funding, etc.)


Effectiveness of Planning:

•   Review of requirements (specification review)

•   Identify special controls, processes, equipment, skills required

•   Determine required documentation, reporting, staff involvement


Review Work Instructions for -

•   Clarity

•   Do-ability

•   Contribution to desired level of quality


Develop and Maintain Responsive Corrective Action Programs (Post Detection Actions) -

•   Correction of work instructions

•   Vendor analysis and corrective action (jointly with vendors)

•   Improved technical data packages to vendors

•   Analysis of elements of cost of quality (scrap, rework, repair data, both internally and externally caused) to determine causes of defects, costs of quality trend analysis)

•   Introduce improvements and corrections

•   Maintain effective follow-up


Maintenance of Standards and Drawings

•   Current

•   Adequate

•   Configuration and change control


Adequacy/Availability of Test Equipment


Control Over Purchased Items

•   Source selection and vendor qualification

•   Vendor quality level is your quality level

•   Ongoing vendor evaluation programs

•   Feedback, correction of identified non-conformance's


In-process Inspection at Critical Points During Manufacture (or Service)

              (Critical points are established based upon their ability to impact product quality)


Completed Item Testing and Evaluation

•   Sampling

•   End item inspection/tear down

•   Performance validation/verification


Handling of Materials (Storage, Delivery) to Preserve Quality, Minimize Damage and Loss


Disposition of Non-conforming Vendor Supplied Materials


Information System to Provide Feedback

•   Internal - to identify faulty processes, causes on non-conforming products

•   External - to identify defective items getting to customers


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