A Guide to Supply Chain Engagement

Transcription

1 Major Projects Ready A Guide to Supply Chain Engagement INFORMED / CONNECTED / COMPETITIVE / SUSTAINABLE

2 MAJOR PROJECTS READY A Guide to Supply Chain Engagement Contents 01 Introduction P 4 Phase 1 Pre-Qualification and Other Preparations P 9 02 Pre-qualification P 10 Pre-qualification What Does it Mean? P 10 Registering for Major Projects P 10 Checklist Supplier Ready P Capability P 15 Definition of a Capability Statement P 15 What is Your Value Proposition? P 15 Checklist Preparing and Planning a Capability Statement P Finance Ready P 17 Providing Financial Information P Accreditation Ready P 19 What is a Quality Management System? P 19 Quality Accreditation P 19 Checklist Establishing a Quality System P 22 Work Health & Safety Accreditation P 23 Checklist Setting up a WH&S system P 24 Environmental Accreditation P 25 Checklist Implementing Your Environmental Management System P 26 Phase 2 Responding to Major Project Opportunities P Tender Ready P 29 How Tenders are Evaluated P 29 The Tender Response Process P 30 Checklist Tender Response P 32 Tips for Effective Bidding and Delivery P 35 P 2 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

3 Contents 07 Project Ready P 39 Project Management Issues P 39 The Project Management Process P 40 Checklist Project Management Planning P Business Continuity Planning and Risk Ready P 42 Risk Management P 42 Checklist Implementing Risk Management P 46 Business Continuity Planning P 48 Checklist Establishing Your Business Continuity Plan P e-business Ready P 51 Types of e-procurement Systems P 51 Tips for Implementing e-business P Workforce Ready P 53 Checklist Workforce Planning P Partnerships and Resources P 56 What is a Business Collaboration? P 56 Forming a Business Collaboration P 56 Checklist Collaboration Partner P 63 The Major Projects Ready A Guide to Supply Chain Engagement provides an easy to read overview of the key issues facing small business wishing to participate in major projects and supply chains. It can be used as a stand-alone document or incorporated into a facilitated workshop environment. The guide is freely available to South Australian businesses as a downloadable pdf document from the DMITRE Small Business Gateway You can also download the checklists used in this guide to help you prepare your business to be major projects ready. Any feedback on the content of this document can be left on the DMITRE Small Business Gateway. P 3

4 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 01 Introduction Major Projects An Opportunity for Small Business South Australia s Economic Development Board (EDB) believes the scale of major projects underway or on the horizon, especially in defence, mining and energy, and civil construction, provides unprecedented opportunities for high growth and prosperity. The EDB believes these projects will be the game changer for the state s economy. These major projects create opportunities for those small businesses that understand the supply chain for major projects and position themselves to participate accordingly. This A Guide to Supply Chain Engagement is designed to enable small businesses to take advantage of these opportunities. South Australian Industry Participation Policy On 1 July 2012, a new South Australian Industry Participation Policy came into operation which aims to ensure local businesses are given full, fair and reasonable opportunity to tender and participate in significant public and private sector projects (see It is forecast to provide a five-fold increase in financial benefits to South Australia as compared to the existing policy, resulting in more jobs linked to our major projects and a strengthened economy throughout the State. As compared to the previous policy, the new policy broadens the range of projects and contracts covered, while lowering the commencement threshold for required projects and introducing a tiered approach to ensure compliance costs are appropriate for the size of the contract. The new policy applies to the following range of projects: South Australian Government procurement of goods and services including infrastructure and construction: with a value of $5 million and over in metropolitan Adelaide; or with a value of $3 million and over in regional SA. Public/private partnerships Federally-funded infrastructure and construction projects managed by the South Australian Government Private sector projects receiving $2.5 million and over in cash and/or in kind support from the South Australian Government Private sector projects bound by an Indenture Agreement Projects seeking Major Developments status under Section 46 of the Developments Act Under this new policy successful tenderers and major project proponents will need to identify and report on how they will ensure local suppliers will be provided with reasonable opportunities to compete for work. P 4 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

5 01 Introduction For contracts less than $10 million (and above the lower thresholds of the policy) tenderers will be required to complete a statement of intent which will acknowledge the policy and signify a commitment to giving full, fair and reasonable opportunities to local suppliers. For larger contracts, of $10 million and more but less than $50 million, tenderers will be required to prepare a plan which provides details on how local suppliers will be given full, fair and reasonable tendering opportunities. For substantial contracts, over $50 million, tenderers will be required to prepare a detailed plan which will set out the approach to ensure local suppliers are given full, fair and reasonable opportunities along with the processes to support this and an identification of broader economic benefits. Understanding the Major Projects Supply Chain Major projects share a number of characteristics, regardless of their industry (defence, mining, civil construction etc.) or their objective (build a warship, a new hospital, new mine or a new high speed broadband network). Invariably they are technically complex, expensive, take years to complete, and require the combined effort of a vast array of businesses to complete. No single business, no matter how large or experienced they may be, can undertake all of the tasks required to complete a major project. Invariably major projects require many companies and businesses to work together, as if they were links in a chain. The supply chain for major projects is a cascading series of contracting and sub-contracting relationships, which is illustrated in Figure 1. The principal contract (to build a warship, construct a major piece of infrastructure, develop a new mine etc.) will be between the contract owner (also known as the funder or project proponent) and a major contracting entity, who will invariably be a large national or international company with most of the requisite skills, resources, experience, systems and the balance sheet necessary to undertake the project. In Figure 1 these are represented as the Prime or Tier 1 contractor. The Prime or Tier 1 contractor will commit to perform the entire contract and accept responsibility for its satisfactory completion, and accordingly will be held accountable for completion and delivery by the contract owner. The Prime or Tier 1 contractor will then break up the work into a series of components, some of which they will execute themselves, and some of which they will offer to other parties to complete. These other parties are the Tier 2 sub-contractors. Similarly the Tier 2 sub-contractors will break up the work into a series of components, some of which they will execute and some of which will be offered to other parties to complete. There is no particular limit to the number of tiers required to deliver a major project. The opportunity for small businesses to participate in major projects is based on this system of contracting and sub-contracting. The more tiers there are in a major project the greater the opportunities are for small business to be involved. P 5

6 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 01 Introduction Figure 1: The Major Project Supply Chain CUSTOMER (Issues the contract) Contractual requirements PRIME CONTRACTOR (Tier 1) SUB-CONTRACTOR (Tier 2) SUB-CONTRACTOR (Tier 2) Small Business suppliers (less than 20 employees) Tier 3/4 supplier Tier 3/4 supplier Tier 3/4 supplier P 6 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

7 01 Introduction Of course understanding how the supply chain works is important, but the process begins with knowing where the opportunities might be. Experience shows building relationships at all levels i.e. with customers (current and potential), suppliers, third party compliance organisations and even competitors (who may be potential alliance partners) is important to identifying opportunities to work on major projects. This includes understanding the culture of client organisations and the people who make the decisions to engage sub-contractors and suppliers. It also means being flexible and cooperative (within reason) things change, they may change quickly, and you need to be responsive. Develop your networks, gather market intelligence and spend as much time as you can on preparations. Generally you need to be ready for the contract well in advance of the RFT. Once the tender or contract has been announced it is often too late. The DMITRE Major Projects Ready Program The Small Business Major Projects Ready Program has been developed by the Department for Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) to assist businesses understand and prepare to engage in supply chains, major projects, large projects and tenders and joint ventures. This A Guide to Supply Chain Engagement is a key element of the Major Projects Ready Program. As the name implies, it has been produced as a guide or framework to help small businesses understand what they need to do to take advantage of major project opportunities. It is important to recognise from the outset though that there is no single approach, and no magic formula that will guarantee success in winning major project work. But some approaches are more likely to lead to success than others, and that is what this guide is all about. Ultimately your ability to be part of a major project supply chain will depend on the businesses in the chain that you want to work with forming a positive view about your business. They will look to the following issues: upside or opportunity capability can you deliver? relationships can they work with you? value do you offer better value for money than your competitors? downside or threat if things go wrong, can the consequences be managed without harming the project (i.e without delays, cost blow outs, adverse impacts on quality etc.) or their business? Clearly, the more complex the supply chain is, the greater the risk will be that there will be a breakdown somewhere. And it is human nature to be wary of these risks, especially if the downside is significant. For this reason the A Guide to Supply Chain Engagement has been designed to: help you understand the major risks in a major project from the perspective of the contract owner and the principal contractors in the supply chain show you how to position your business to lessen those risks and create opportunities in a major project supply chain. P 7

8 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 01 Introduction How to use the Guide to Supply Chain Engagement This guide addresses 10 steps you can follow to position your small business so that it is ready to participate in major projects. These are presented in this guide in two phases: Phase 1 entails pre-qualification and other preparations; Phase 2 focuses on how to respond to major project opportunities. The 10 steps are briefly summarised below and the steps themselves are discussed in more detail in the remainder of this guide. Phase 1 Pre-qualification and other preparations 1. Pre-Qualification Explains the pre-qualification process and includes a simple Supplier Ready checklist to help you determine if your business has the core capabilities to enter into a major project or supply chain. 2. Capability Contains information, templates and a comprehensive workbook to help you develop a simple and powerful Capability Statement. 3. Finance highlights some key financial issues that can affect businesses engaging in major projects. 4. Accreditations Outlines the types of accreditation required for working at various tiers of the supply chain and provides checklists to help you understand the steps to implement and maintaining these certifications. Phase 2 Responding to Major Project opportunities 5. Tender Ready Outlines what is required when responding to tenders and quotes for both commercial and government projects? 6. Project Ready Assists in understanding all elements of project management including risks, resources, financial and timing constraints. 7. Business Continuity Planning and Risk Ready introduces the basics of risk management and how to plan for continued supply of goods and services following a disruption to operations. 8. e-business Ready What you need to do to communicate electronically with large-scale ordering and procurement systems, and understand the impact of large procurement systems on small business orders and financial management systems and processes. 9. Workforce Ready Ensure businesses have effective staff recruitment and retention strategies to ensure the business can supply goods and services. 10. Partnerships and Resources Provides examples and issues related the formation of business. alliances to assist small businesses to secure larger contracts. Note: Information contained in this workbook can also be found on the DMITRE Small Business Gateway ( P 8 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

9 Phase 1 Pre-Qualification and Other Preparations P 9

10 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 02 Pre-qualification The first step to win work on major projects is pre-qualification. This section explains what pre-qualification means and the process for major projects. It concludes with a simple Supplier Ready checklist to help you decide if your business has the core capabilities necessary to join the major projects supply chain. Pre-qualification what does it mean? Supplier pre-qualification is essentially a risk mitigation strategy used by many major contractors, builders and government authorities. It is a continuous process of review. The main objective of pre-qualification is to assess the capabilities of potential suppliers and identify those who have the requisite technical, managerial and financial capacity to deliver the contracted works according to the specified requirements. In effect the pre-qualification process is used to decide a short list of potential suppliers. It minimises contractual risks and reduces the overall cost of tendering for the major contractors. Pre-qualification is used to determine a supplier s ability to tender and bid for works on offer; it is not a guarantee of work. Companies that have completed the pre-qualification process may qualify as a preferred supplier, and usually (but not always) suppliers who have not completed the pre-qualification process are not invited to tender. Throughout the pre-qualification process, the small business applicant gives permission to the major contractor to carry out any necessary investigations to evaluate the applicant and decide whether it meets the relevant criteria. Such investigations include, but are not limited to, a company search, bank reference checks, and audits of quality and occupational health and safety systems. You should request all information submitted to be treated as commercial-in-confidence. The applicant is approved for pre-qualification based on an assessment of their capacity to undertake work of varying financial, technical complexity and risk categories. Typically the pre-qualification criterion includes (but is not limited to) the following areas: safety systems and performance experience resources to implement the contract (people and equipment) industrial relations history financial stability business continuity plan and risk management strategies. Registering for Major Projects The key steps to become a pre-qualified or preferred supplier for a major project are summarised below in Figure 2. Note that suppliers can enter the supply chain for a major project at any tier or level. However, the requirements placed on the Prime or Tier 1 contractor by the principal or contractor owner filter down to all suppliers in the supply chain. Therefore the key requirements relating to safety, experience, resources, quality etc. will also apply to subsequent level suppliers. P 10 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

11 02 Pre-qualification Figure 2: Typical Pre-Qualification Process for a Major Project or Supply Chain Step 1 Prime contractor issues contract / tender Tender listed on various procurement sites Step 2 Industry reviews opportunities Step 3 Are you listed on project procurement sites? Yes No Business registers / updates capabilities on various procurement sites Can you meet all the requirements? No Business obtains capabilities Step 4 Did your bid succeed? Yes Yes No Step 5 Congratulations, you are accepted as a preferred supplier P 11

12 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 02 Pre-qualification Step 1: The Prime Contractor releases a contract/tender The tender or contact will often be posted in print and/or online on such sites as: Industry Capability Network (ICN) South Australia Gateway Department of Planning, Transport and Infrastructure (DPTI) Defence Industry eportal SA Tenders and Contracts Local government websites Industry association magazines and newspapers. Not all tenders and contracts are posted publicly. Instead a prime contractor may approach companies who have pre-qualified or registered interest in participating in a project. The approach will be based on an initial assessment of their ability to successfully complete the elements of the project that will be the subject of the contract. In some projects, the contract owner may provide contact details of the successful Prime or Tier 1 bidder on procurement websites such as the ICN Gateway. This enables smaller businesses to register their interest with the prime or tier 1 contractor to supply and apply for pre-qualification. Step 2: Industry reviews opportunities Individual businesses, industry associations, alliance partners and industry clusters are able to view any newly advertised project opportunities. It is up to each individual business to review these sources regularly to see if there are opportunities that may suit them. It s also advisable to develop relationships with prime contractors who may be aware of possible work before it is advertised. Such insights give you more time to investigate the opportunity and obtain any equipment, staff or accreditations that may be required to bid for the work. Step 3: Are you registered on the procurement sites? It s important to register your business and capabilities on various procurement websites and regularly update this information. This could involve a simple notification (e.g. SA Tenders and Contracts) or posting detailed capabilities (e.g. ICN Gateway). Some construction projects ask you register your interest to participate in a particular major project. P 12 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

13 02 Pre-qualification Step 4: Do you meet the entire tender / contract requirements? There is a range of capabilities that you need to develop before you can bid for work or be invited to pre-qualify for a project. It may not be worth the expense of bidding for the project if you don t have all the capabilities required for the work package. Alternatively you can partner with other organisations to obtain these capabilities. There are some core capabilities that you should have before you consider bidding for work on a major contract. These can be found in the Supplier Ready checklist at the end of this section. Some organisations that may be able to help you develop your capabilities include: Enterprise Connect: A federally funded program offering comprehensive advice and support to eligible Australian small and medium-sized enterprises to help them grow and reach their full potential. Your industry representative body: Industry associations can provide members with useful market knowledge about future projects and contracts. They can also provide support and identify ways to develop the capabilities you may need for a particular project. Regional Development Australia (RDA): RDAs assist regional businesses identify opportunities and obtain necessary capabilities. Business Information Matrix: A search tool located on the DMTIRE Small Business gateway, ( that allows you to search for a range of applicable business support programs, providers and relevant industry associations. Step 5: Submit bid Submitting a comprehensive contract/tender bid takes time and resources. For this reason, it is important that you give yourself plenty of time and not rush the bid response. Note: The Phase 2 Responding to Major Project opportunities Tender Ready section provides more details and tips on effectively responding to a tender or contract. Step 6: Accepted as a preferred supplier When you can demonstrate your ability to meet the core capabilities for a major project e.g. safety, accreditation, financial stability etc., at the level which is suitable for a business like yours within the supply chain, then you may be invited to undertake a pre-qualification audit and assessment. If you achieve pre-qualification status, you may be listed by the prime (or other tier contractor) as a preferred supplier. If you were not successful in the bid process, you can always discuss your bid with the prime to help you understand why you missed out. You can then build your capabilities in the particular area and update your capabilities on the procurement websites ready for the next opportunity. Pre-qualification does not guarantee that you will receive work. On the other hand, not being pre-qualified probably means you wont be invited to tender for work in the major project supply chain. P 13

14 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 02 Pre-qualification Checklist Supplier Ready The following checklist helps to identify your core capabilities. It also shows where to find more information in this workbook. Item For More Information go to: 1. I have a comprehensive Capability Statement Capability Ready 2. I have an accredited quality system e.g. ISO 9000, 9001, Accreditation Ready 3. I have a human resource management (HRM) policy and related manuals and procedures 4. I have an accredited Occupational Health and Safety system (e.g. OSHAS18001) for a project of a similar size and complexity 5. I have audited annual reports/financial statements for the past three years including balance sheets, P&L statements cash flow statement, director s report and auditor s reports 6. I have a cash flow budget for the next 12 months including details of assumptions 7. I have the capacity to borrow including bank contact details and a letter from the bank confirming available credit facilities 8. I can provide details of previous projects where we completed the tasks within budget, on-time and to specification 9. I can provide details of subcontractors and associated value of works procedures for selection and performance assessment Workforce Ready Accreditation Ready Finance Ready Finance Ready Finance Ready Project Ready Tender Ready 10. I have a current Business Continuity Plan Business Continuity Planning and Risk Ready 11. I have a website and can accept electronic orders e-business Ready 12. I am currently part of a business alliance Partnerships and Resources Ready P 14 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

15 03 Capability This section describes the basics elements of an effective capability statement and why a well-constructed capability statement will help you obtain work on major projects. Definition of a capability statement A capability statement is a business document or record that summarises the competencies, achievements, associations and accreditations of your business. You use it to communicate these capabilities clearly and effectively to potential business partners, stakeholders, suppliers, customers and even employees. They use it to decide whether they may wish to do business with you. A powerful and persuasive, capability statement will differentiate your business from your competitors, reinforce your business brand and position your business favourably in the minds of existing or potential new customers. What is your value proposition? A powerful and persuasive capability statement is built around your value proposition, which is a clear and concise statement of how your business satisfies your client s needs. The value proposition is essential to help new customers in the major projects supply chain understand exactly what it is that you can offer them. Understanding your value proposition is essential to remaining competitive in your chosen market. A clear and concise value proposition helps customers understand exactly what it is that your business can offer them. It explains what is superior about your products and/or services and encourages decision-makers to do business with you, instead of with your competitor. Your value proposition is the reason why customers choose your business, and your products or services over someone else s. It is important to fully understand your value proposition and be able to demonstrate it or back it up with evidence. There are two features that define a strong value proposition: it is written in a way that the customer understands; it highlights what your customer actually values. Example of a value proposition Renewable energy consultants We install commercial solar energy systems that reduce electricity consumption by up to 20%, and potentially save your business thousands of dollars on electricity bills. Understanding your capabilities There are six steps to help you develop a clear understanding of the value proposition and collate the basic information for inclusion into your capability statement. Step 1: Describe the type/s of products and/or services you offer to customers. Step 2: Describe the general nature of your business your role in the industry/sector/community and category of products/services you provide. Step 3: Define your current target markets by geographical boundaries and locations. Step 4: Develop a list of your current customers and categorise them by the industry or sector they come from. P 15

16 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 03 Capability Step 5: Define your competitors in South Australia, around Australia and/or internationally. What makes your business different from your competitor/s? Define this by your point of difference and key areas of specialisation. Step 6: What is your track record? List significant client projects and their dollar value if possible. Note that the capability statement should be clearly marked Commercial In Confidence and is not regarded as a general marketing brochure. Checklist Preparing and planning a capability statement After completing the steps outlined above, you should have the following information: Checklist Item Have I clearly defined the value of my products and services that I offer to my customers? Have I created a comprehensive list of my products products/services? Have I clearly defined the nature of my business? Have I made a list of my target markets by geographical locations, industry group and sector? Do I understand how I can position my business in the market against competitors? Have I clearly identified a point of difference (something unique) about my product/services? Have I developed a list of my experiences in managing projects and how these projects delivered value to my clients? Other support For more information, visit the DMITRE Small Business Gateway ( to download the free Developing a Powerful Capability Statement Participant s Workbook and Capability Statement Template. P 16 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

17 04 Finance Ready Contractors in the major projects supply chain place a great deal of importance on the financial standing of their suppliers in the pre-qualification process. Prime contractors believe that sub-contractors should be able to maintain a reasonable level of capital to ensure that a project can proceed without undue financial encumbrances. As a consequence they expect sub-contractors to have a strong balance sheet in order to reduce the risk of financial failure and subsequent non-performance. Information relating to the financial position of potential supplier provided as part of the pre-qualification process is provided on a commercial-in-confidence basis. The commercial viability of suppliers needs to be established to mitigate the likelihood of the supplier encountering financial hardships or entering into administration during the contract term. For example, the international engineering consulting firm Worley Parsons highlight the following broad financial requirements: Assure us that we are not going to have equipment trapped in your shop by receivers! Provide company performance data Show us evidence of approval by third parties such as Dun and Bradstreet. Providing financial information The prime contractor may ask applicants to provide financial statements that have been audited by a suitably qualified accountant (e.g. Certified Practising Accountant, Chartered Accountant or Professional National Accountant). The costs incurred conducting an initial financial assessment are sometimes borne by the prime contractor, although the cost of providing additional information may be borne by the applicant. Information to be provided may include the following: An audited annual report and financial statements for the past three years including balance sheets, profit and loss statements, a cash flow statement, director s report and auditor s reports A cash flow budget for the next 12 months including details of assumptions Management accounts no more than three months old Debt facilities the type, amount, term, repayment arrangements, securities and undrawn lines of credit Capacity to borrow including bank contact details and a letter from the bank on the Applicant s available facilities Current bank balances including overdraft, leases, credit cards and guarantee of bank revolving facility Details of encumbrances over business assets Details of contingent liabilities including guarantees provided Details of any financial covenants by which the business must adhere for any loan facilities Details of any pending legal action against the company or its directors Availability of guarantees (financial or performance) including cross guarantees across groups Any other details relating to information that potentially may affect the financial position of the Applicant. P 17

18 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 04 Finance Ready Other support Visit the DMITRE Small Business Gateway and download the Future Proof Your Business Workbook. This workbook has very useful information about managing your financial risks. Most banks also have free online cash flow and small business financial planning tools to allow you to better understand your cash flow. P 18 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

19 05 Accreditation Ready Accreditation Ready covers the three main areas of accreditation, which are quality management, work health and safety, and environmental management. These are summarised in Table 1 below. Table 1: Major Areas of Accreditation for Major Projects Type of Accreditation Quality Management System Work Health & Safety (WH&S) Environmental Management System (EMS) Details ISO 9000 or ISO 9001 accreditation reduces the risk profile of a company entering the supply chain. It is often an optional requirement that may make the difference in competing for work on major projects. The WH&S accreditation is a mandatory requirement for all major projects. ISO certification helps to reduce the environmental impact of your business. It is increasingly becoming a requirement for suppliers in the supply chain for major projects. What is a Quality Management System? A quality management system refers to the systems, processes and controls used in your business to drive continuous improvement and reduce the incidence of defects, errors and variances in your business operations and outputs. Prime contractors invariably have accredited quality management systems of their own and, as a consequence they prefer suppliers with accredited quality management systems too. These systems give prime contractors confidence the supplier can meet relevant performance requirements and accreditation serves as a signal that the risk of non-performance is reduced. Total Quality Management is a particularly valued quality management system which aims to continuously improve the quality of goods and services delivered through the participation and engagement of staff at all levels and functions in an organisation, not just those staff directly involved in supplying goods and services. A well-managed quality management system focusses on the customer s needs and requirements and aims for continual improvement in the areas of cost, reliability, quality, innovation, efficiency and business effectiveness. Quality accreditation The International Organization for Standardization (ISO) and the Australian Standards Authority (ASA) are responsible for defining standards and ensuring compliance with them. The ISO has established standards for quality management systems across a wide range of manufacturing, processing and service industries, and accredits organisations that comply with these standards. The ISO also specifies processes that can be used to meet these standards and improve their effectiveness and efficiency. In this way, ISO accreditation serves as a market signal or assurance of sound, ongoing quality management. P 19

20 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 05 Accreditation Ready The documentation created to implement and maintain these systems, processes and controls determines the quality standards of the business. These internal systems, processes and controls ensure these quality standards are consistently met. What does the ISO 9000 series certification cover? The Australian quality assurance standards are based on the ISO standards known as the ISO 9000 series. This series relates to quality management systems, not product quality standards. For example, certification requires a company to establish an effective quality system that includes: a quality manual documented procedures an organisation structure with clearly defined roles and responsibilities processes for capturing, managing and using data defined standards and controls for suppliers work instructions continuous monitoring of systems adequate process controls formalised corrective action procedures. Quality systems that meet the required standard are certified, and regular audits are then required to ensure compliance to the standard is maintained. To preview or buy a copy of the ISO 9000 requirements visit the SAI Global website: What are the benefits of certification? Potential customers see companies with certified quality assurance system as organisations with good management practices. The benefits of certification under the ISO 9000 series of standards extend beyond quality per se, and include: An enhanced reputation: greater consistency and reliability will inevitably improve your business reputation in the market. Your customers will be more likely to return and also recommend you to others. Creating new opportunities: some export and government markets as well as many large companies simply won t deal with businesses that don t have quality certification. Lower operating costs: simple business processes applied consistently inevitably reduce costs by reducing time lost managing complaints, the effort put into re-working below standard products and services, and reducing materials wastage. Better staff morale and productivity: better quality, an enhanced market reputation, new opportunities and lower operating costs inevitably lead to better staff morale and lead to lower turn-over and better labour productivity. P 20 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

21 05 Accreditation Ready The cost of gaining ISO accreditation Many factors should be considered when calculating the cost of implementing a quality management system in your company to gain an ISO accreditation. The time, effort and money your organisation puts into ISO registration will depend on the number of employees, locations, the ISO standard selected for registration and the current state of your quality system and processes. Typical costs include: management and employee time and effort creating and updating documentation training employees registration fees auditing and maintenance costs. Ultimately these costs should be offset with increased sales, reduced defects and improved productivity throughout the organisation. Nonetheless the investment required to implement and maintain an ISO quality system needs to be considered carefully. As with any new tool, the key to minimising implementation costs is to arm yourself with knowledge about the process. You can then design a sensible plan that has realistic objectives, adequate resources and a practical time schedule. One approach is to appoint a project leader or consultant to guide your business through the process, help you to control costs and achieve your goals more quickly. If you have a number of locations or departments, costs can be minimised by building on the information you learn and the resources you use as you move through the implementation and maintenance process. P 21

22 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 05 Accreditation Ready Checklist Establishing a Quality System The checklist provided below which is based on the Australian Quality Training Framework (AQTF) training package Establish and maintain a Quality System (RIIQUA601A), can be used to establish your quality system. Requirement Checklist Item Establish and maintain the framework for the quality system Have the quality system compliance requirements for the relevant work activity been documented? Has the documentation for the quality system been approved? Have the requirements for implementing the quality system been incorporated into the duty statements of the relevant personnel? Have the resources for operating the quality system been identified, sourced and provided? Has the documentation been provided in a clear format in a readily accessible location for all staff? Establish a collaborative process Have relevant personnel been consulted? Have all issues raised in accordance with procedures been addressed promptly and appropriately? Have relevant personnel been informed of outcomes resulting from the consultation process? Establish and maintain procedures for identifying and assessing quality issues Design procedures for treatment of quality issues Have current and future quality issues been identified from the quality records system? Have procedures been developed and implemented to identify existing and potential quality issues? Will changes to the workplace be monitored to determine if additions or modifications to the quality system are required? Have procedures been implemented to treat quality in accordance with legislation, code of practice and trends identified from the quality system? Will procedures be implemented to apply interim solutions until permanent treatment measures are in place? Other support for quality systems Standards Australia provides a handbook on implementing quality systems for small business. This handbook is available through SAI Global ( A list of accredited certification bodies is available on the Joint Accreditation System of Australia and New Zealand (JAS-ANZ) website ( P 22 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

23 05 Accreditation Ready Work Health & Safety Accreditation The highest priority of prime contractors in any major project is usually the safety of workers. As a consequence this is usually the first issue that will be discussed or considered when they look to engage sub-contractors or suppliers for the project. Prime contractors will expect to see a strong culture of safety that is evidenced by systems, processes, effort and results not lip service and simply filling in forms. Widening the scope of safety The mining and construction sectors have expanded the scope of safety beyond occupational health and safety to include environmental safety and the safety of the community in which they operate. For example, Worley Parsons, a world leader in providing professional services to the energy, resource, and complex process industries, has created One Way TM an integrated management framework. This framework includes the following components which apply to their subcontractors and vendors: Goods and services provided to us or our customers meet appropriate health, safety and environmental standards Health, safety and environmental aspects are addressed as part of the pre-qualification, bid evaluation and order performance processes New plant, equipment and processes are designed or selected with consideration of known and projected health, safety and environmental requirements, including provision for decommissioning and disposal. Similarly, BHP Billiton has an all-inclusive approach to health, safety, environment and community (HSEC) known as Zero Harm. BHP Billiton looks for companies that have evidence of a strong commitment to OH&S, environment and community safety when undertaking their pre-qualification and selection process. This commitment is expected to continue during the life of the contract. P 23

24 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 05 Accreditation Ready Checklist Setting up a WH&S system The checklist below, based on the AQTF training package Establish and maintain an Occupational Health and Safety system (CPPSEC5001A) can be used to ensure your Work Health and Safety (WHS) system complies with legislative requirements. Setup Item Checklist Item Is there an established WHS system? Does the WHS system clearly state the organisation s commitment to WHS and compliance with legislative requirements? Are the WHS roles and responsibilities for all employees defined? Are the financial and human resources established and in place to implement the WHS system? Is there an WHS induction and training program and is it made available to all employees? Does the WHS system have a well-maintained record keeping system to allow hazards, risks and injuries to be identified? Are the WHS information and procedures communicated and available to all employees in an accessible format? Does the WHS system include participative arrangements? Has a consultative process been established and maintained to ensure a complete WHS compliance for all employees? Are WHS issues raised through participation and consultation and acknowledged and resolved promptly? Is feedback and changes derived from WHS consultation recorded and communicated promptly to all staff? Does the system have established procedures for managing hazards and risks? Are procedures for identifying hazards and managing risks developed in accordance with legislative requirements? Is hazard identification addressed in the planning, design and evaluation stages of any change in the workplace to ensure new hazards are not created? Are procedures for selecting and implementing risk control measures in place in accordance with the hierarchy of control? Are inadequacies in procedures for hazard identification and risk control identified and new measures promptly established? How is the effectiveness of the WHS system evaluated? Does the evaluation use verifiable evidence? Are improvements to the WHS system developed and implemented to achieve organisational WHS objectives? Is compliance with the WHS legislative framework continually assessed to ensure that legal obligations are met? P 24 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

25 05 Accreditation Ready More information Further information on developing your WHS system can be found on Safework SA website The specifics about South Australia s safework system are outlined in the South Australian Work Health and Safety Act Environmental Accreditation Many companies have found their business benefits from incorporating green practices into their daily operations. These benefits include possible improvements in productivity, competitiveness, business profitability, as well as establishing a green image. In general the benefits of enhanced environmental practices can be achieved by focussing on two basic objectives: (1) reducing the waste generated (2) maximising the efficiency of the resources employed (by means of recycling, reuse or any other type of reclamation activities). These practices can be developed into an Environmental Management System (EMS) which can be codified. The ISO standard for environmental management ISO is the international standard for developing an effective EMS and it applies to all industries. The ISO standard specifies a process for the controlling and continuously improving an organisation s environmental performance. It enables an organisation to: (a) Identify and control the environmental impact of its activities, products and services (b) Continuously improve its environmental performance (c) Implement a systematic approach to set and achieve environmental objectives and targets. The ISO standard applies to those environmental aspects which a business can control or influence. The ISO standard does not specify environmental performance criteria but merely how to develop an EMS. Impact of EMS Certification on Small Businesses Supply chain pressure is increasingly becoming the driver to implementing an EMS, especially on major projects. The ISO certification provides both tangible and intangible benefits for small businesses including cost savings, management control improvements, better compliance with customer expectations, and reduced liability risks. Issues Implementing ISO There are significant initial investment costs and other barriers that must be overcome to implement ISO These include environmental audits, design for the environment, product stewardship, reverse logistics, and life cycle analysis tools and programs. P 25

26 MAJOR PROJECTS READY A Guide to Supply Chain Engagement 05 Accreditation Ready Checklist Implementing your Environmental Management System The following checklist is useful in interpreting and applying the environmental legislation, codes and standards that are relevant to the work area, site, project or program. This checklist is based on the AQTF training package Apply Environmental Legislation, Codes and Standards (MSS027002A). Setup Item Checklist Item Access and interpret relevant legislation, codes and standards Have the relevant legislative, regulatory and licensing requirements and approvals that apply to site/project been reviewed? Have the broad significance of these requirements for the enterprise, key job roles and specific work activities been analysed? Has the legal accountability, obligations and consequences of non-compliance been identified and obtained? Has the scope of responsibility/authority for achieving specific environmental outcomes for your organisation been clarified? Have relevant enterprise environmental management policies, plans and procedures in conjunction with legislative requirements been reviewed? Ensure project or site specific environmental management procedures comply with requirements Has the organisation s management been consulted to assess the need for project or site-specific environmental management procedures? Have procedures identified environmental requirement gaps or deficiencies? Has the documentation been reviewed and/or approved? Has information about the environmental management roles and responsibilities been distributed to relevant personnel? Promote compliance by site personnel Has information about environmental management policies, plans and procedures, and work instructions been distributed to relevant personnel? Have the implications of non-compliance been explained to all staff in the relevant work areas? Have staff been trained and mentored to ensure they can manage their environmental responsibilities? Continued... P 26 DEPARTMENT FOR MANUFACTURING, INNOVATION, TRADE, RESOURCES AND ENERGY

27 05 Accreditation Ready... Continued Setup Item Checklist Item Ensure that work activities meet compliance requirements Are systems in place to notify appropriate personnel when current or planned activities may require changes to existing licenses/approvals? Have environmental management policies, plans and procedures been implemented to ensure compliance and achievement of environmental objectives and key performance indicators? Are systems in place to collect and collate environmental data to support preparation of required reports and compliance information? Are systems in place to ensure environmental data for completeness/ accuracy and identify opportunities for improving compliance is reviewed? Have all reports been completed in accordance with enterprise procedures and legislative requirements? Maintain knowledge of legislative requirements Are systems in place to monitor sources of information for changes to relevant legislation codes and standards? Does the organisation regularly update information for site personnel and explain changes to legal requirements that impact on work area? Further Assistance Some industry bodies provide accreditation services and you are encouraged to contact your industry body. For example the Civil Contractors Federation SA can help members obtain ISO 9000/2000 (Quality Assurance), AS/NZ4801 (Occupational Health and Safety) and ISO (Environmental Management) accreditation. P 27