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SECTION VII

SUPPLIER MANAGEMENT
SUPPLIER MANAGEMENT

The purpose of the CONTRACT is to enable COMPANY and CONTRACTOR to work together to create
superior long term value for both firms. The business relationship enacted by the CONTRACT shall be
performance based and underpinned by a culture of continuous improvement.

COMPANY and CONTRACTOR are committed to continuously improving performance throughout the
execution of the Works. COMPANY and CONTRACTOR will operate a Supplier Management (SM) process
which helps drive performance improvement year-on-year, through increased safety, reliability and
efficiency, thereby reducing total cost of ownership of the goods/ services.

1.0 KEY OBJECTIVES OF SUPPLIER MANAGEMENT


SM has the following main objectives:

 Developing and agreeing performance metrics (Key Performance Indicators) based on the
value objectives. Targets for performance will be reviewed and updated annually to promote
year-on-year improvement. Qualitative and quantitative data is collected, collated and
reported through the communication channels established by the CONTRACT governance
structure.
 Ensures consistent and rigorous management of performance to assure delivery against
targets. The performance of the CONTRACTOR and the relationship is reviewed and tracked
at set intervals against the stated objectives and goals. Interventions are made as required
and performance is monitored against improvement plans.
 Ensures efficient communication and drives best practice across the Sector/ Sub-Sector.

2.0 KEY ELEMENTS OF SM

SM has three (3) key elements, the application of which will lead to better engagement and subsequent
performance assurance:-

(a) Support (Organisation & Communication)

Actively support and develop relationships with CONTRACTOR to deliver performance


targets and objectives. Roles and responsibilities of the Parties will be clearly defined and
communicated to the appropriate individuals in the CONTRACTOR and COMPANY
organisations.

(b) Targets (Scorecards & Key Performance Indicators)

Set performance targets for continuous improvement based on best in class benchmarks.
As a minimum, key performance areas to be addressed will include HSSE, Cost,
Competency, Local Content, Efficiency, Quality and Innovation.

(c) Process (Performance Reviews)

Establishing processes to formally measure, compare and improve performance. This requires a
mechanism for bringing together performance data in a way that allows it to be acknowledged,
understood and acted upon both internally and externally.

3.0 THE SM PROCESS


CONTRACTOR'S performance will be assessed by comparing actual performance versus agreed
targets and objectives using an appropriate set of KPIs. These KPIs will be set through a process
of mutual consultation.

Actual performance will be measured throughout the CONTRACT life by use of a scorecard that
will be developed and implemented following CONTRACT award. CONTRACTOR will be
responsible for completing the scorecard on a quarterly (or as agreed) basis. Scorecard content
will be reviewed and approved by COMPANY REPRESENTATIVE on a quarterly basis.

Reviews of actual performance versus targets will be performed on a regular basis (once a
quarter or other frequency as mutually agreed) throughout the life of the CONTRACT. COMPANY
and CONTRACTOR shall meet formally to discuss the previous quarter's performance and identify
any performance gaps and opportunities for improvement.

In all such Performance Review Meetings (PRMs), CONTRACTOR shall prepare minutes of meeting.
CONTRACTOR shall submit proposed minutes to COMPANY for confirmation. If appropriate,
COMPANY shall acknowledge the agreed minutes as being a true record of the meeting in
question.

Progress on follow-up actions from PRMs will be recorded and monitored on a Corrective Action
Reporting (CAR) or other form of mutually agreed action tracking report register maintained by
CONTRACTOR. CONTRACTOR shall provide interim performance data on a monthly basis.

It is anticipated that longer-term performance improvement initiatives will be identified as a


result of these regular performance reviews. These initiatives will be discussed and agreed by
CONTRACTOR REPRESENTATIVE and COMPANY REPRESENTATIVE and documented in the form of a
Performance Improvement Plan.

The governance structure for SM teams shall be agreed within the first two (2) months after the
Effective Date of the CONTRACT.

4.0 KEY PERFORMANCE INDICATORS

The following balanced scorecard shall be used as a basis for open, cooperative, performance
focused discussion during Performance Review Meeting held between COMPANY and CONTRACTOR.
COMPANY emphasizes the importance of continuous performance improvement under the CONTRACT
hence the KPIs themselves, the KPI’s targets or the basis of KPI measurement shall be revised from
time to time with mutual agreement of COMPANY and CONTRACTOR.
The balanced scorecard and KPIs shall be finalised prior to award of a CALL OFF. Below is an illustrative
example:
Principle

KPI Measure KPI Target

2. Closure of key actions ensuing from Performance Review


100% closure within 3
Meetings between CONTRACTOR and COMPANY
Purpose

months of PRM
3. Assess CONTRACTOR’s performance in delivering safe
Zero Major Findings Monitor
engineering designs through audits performed on the project.
sum of Yellow findings, with
improving trend

1. Roll-up of HSSE performance under each KPI. To be agreed -

2. Assess CONTRACTOR’s ability to deliver on CTR execution to


estimated budget and proposed schedule
Budget Measure +/- 10%
Performance

Measure roll-up percentage calculations, pertinent to both


Schedule Measure +/- 10%
Budget and Schedules .

3. Deliverables Register. Measure number of CONTRACTOR


project documents requiring multiple revisions submitted to
COMPANY for review prior to approval as Rev 0. (issued for
use).
50% or less
Note: Deliverables include all documents, specs, drawings and
calculations which are assigned document numbers as
permanent project documents.

1. Average total home office man-hours expended per measure To be agreed


Productivity

to be agreed. __ MH/ ____

2. Average total local based man-hours expended per measure to To be agreed


be agreed. __ MH/ ___
People

1. Level of key CONTRACTOR personnel maintained during the To be agreed


Contract duration __ % per annum

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