SECTION TWO QUALITY MANAGEMENT SYSTEMS Version No 1. PREFACE This document has been developed to assist subcontractors to meet Monaco Hickeys (MHPL) Quality Management (QM) requirements whilst working on a MHPL project. The document should be able to be used as guidance to assist your organisation to meet a number of the key requirements of your contractual agreement with MHPL when working on a MHPL project. Note: This document is for guidance purposes only. MHPL does not accept any liability for the use of this document, or any losses incurred as a result of using this document. QM-GN-02/01 Page 1
INDEX PREFACE 1 1.0 INTRODUCTION 3 2.0 DEFINITIONS 3 3.0 BENEFITS OF QUALITY MANAGEMENT 4 4.0 QUALITY MANAGEMENT SYSTEMS 5 4.1 ISO 9001 QUALITY MANAGEMENT PRINCIPLES 5 4.2 ISO 9001 QUALITY MANAGEMENT SYSTEM CRITERIA 8 5.0 ADDITIONAL INFORMATION 9 QM-GN-02/01 Page 2
1.0 INTRODUCTION MHPL is committed to continual improvement in our effectiveness in relation to the delivery of our Client s projects. Our subcontractors are fundamental to this delivery. MHPL has developed this Subcontractor Quality Management Guide with the intent of providing our subcontractors with guidance regarding our expectations in relation to quality management and to support these with standard templates. Subcontractors on MHPL projects are required, as specified in the Subcontract Agreement Terms & Conditions (Clause 23.0), to have a documented quality management system in place that is compliant with ISO 9001, and to submit a project specific Quality Management Plan for the works to be undertaken. This guide has been prepared to enhance subcontractors existing quality management and or, in the absence of a system, provide basic templates to ensure compliance with MHPL s quality management requirements. We have also taken the liberty, in preparing this guide, to take the opportunity to highlight to our subcontractors the benefits to their organisation of developing, implementing and maintaining a Quality Management System. These benefits may include managing risk, reducing costs, increasing profit and obtaining repeat business. The Subcontractor Guide is divided into two distinct sections. The first section. The second section. provides information regarding the benefits of quality management and a description of quality management systems, namely ISO 9001 The relevant attachments contained within this document are to be completed and provided to the Site Quality Facilitator or Contract Administrator at least 72 hours prior to commencement on site. 2.0 DEFINITIONS Head contractor refers to MHPL Client refers to MHPL s client Subcontractor refers to the organisation contracted to MHPL to undertake a specific scope of work Quality Management (QM) is the performance of tasks, which ensures that construction is performed according to plans and specifications, on time, within a defined budget, and in a safe work environment. Quality Management System (QMS) is a management system to direct and control an organisation with regard to quality. It provides a structure, including documentation and processes, which enables the delivery of products and services to be controlled and managed to consistently meet the specific requirements. Quality Management Plan (QMP) is a project specific plan developed by the subcontractor to plan and carry out the contract works for a specific project, to ensure conformity with the requirements for the project contract and to manage any risks. Inspection and Test Plan (ITP) is a single document that records all inspection and testing requirements relevant to a specific process, it includes hold and witness points, references relevant Australian Standards, other relevant standards and acceptance criteria and records to be maintained. It should reflect the requirements of the contract documents, that is the drawings and specifications. Hold point defines a point beyond which work may not proceed without the authorisation of a designated subcontractor personnel, (i.e. foreman) and may include the Head Contractor, Client or consultant or authority (local council, WorkSafe etc). Witness point provides the nominated party (such as the Head Contractor, Client, consultant, regulatory authority) with the opportunity to witness the inspection or test or aspect of the work, at their discretion. Surveillance intermittent monitoring of any stage of the work in progress whether by the subcontractor, head contractor or client. QM-GN-02/01 Page 3
Self inspection where the subcontractor performing the work verifies the quality progressively, often with the aid of checklists. 3.0 BENEFITS OF QUALITY MANAGEMENT Quality management may mean different things to different people. In general, in construction, quality management includes: Delivering a product or service to the expected outcome Achievement of customer satisfaction Compliance with contractual requirements, including relevant drawings and specifications Conformance with prescribed legislation, standards and codes Fitness for use Achieving the contract works on time and on budget The construction industry has well established minimum quality requirements for most construction processes and they are incorporated into both the Head Contract and subcontract agreements. These requirements include conformance to contract documents (drawings and specifications), Australian Standards, Building Codes etc and the requirement to test and inspect the work to meet minimum quality requirements. There is a perception that quality management costs, that higher quality requires higher costs, either by buying better materials or machines or employing more labour. However the cost of poor quality management can be much higher. Doing the job right in the first instance saves money. Direct costs as a result of poor quality management: Non-conforming and defective work Rework and associated costs Troubleshooting and problem solving Design changes Labour costs not budgeted for Additional materials and associated costs Re-inspection and retesting Contractual disputes Indirect costs as a result of poor quality management: Loss of productivity Travel costs and time spent Repair costs after warranty period Poor morale absenteeism & staff turnover Head contractor incurred costs Dissatisfied head contractor loss of repeat business Reputational risk Data available regarding the estimated cost of rework alone in the construction varies between 2% and 12% of a project s contract value. Estimates vary regarding the cost of defective work to the commercial construction industry with estimates in Victoria at being $255m per year. The US insurance industry, in 2007, estimated it spent between $3 and $4 billion dollars to settle defects claims in the United States 1. The reality is that subcontractors bear the majority of that cost. The primary benefits of good quality management are, through the development of an effective quality management system, the containment of cost and risk. 1 R.L. Andrews, Construction Defect Issues Presentation, Zurich Services Corporation, 2008. QM-GN-02/01 Page 4
Benefits of good quality management? Improved planning Better communication and consultation Improved organisational skills Consistent delivery of a quality product Reduced defects, rework Reduced costs and time Increased profit and production An atmosphere of a high performance team Head contractor and client satisfaction Confidence is working relationships Outstanding performance evaluations repeat business! Keys to improving quality management Know your client Improve processes that define, produce and support your products / services Know your contractual obligations, e.g. drawings and specifications Processes, not people, are usually the problem Review process compliance and make adjustments Every employee is responsible for quality Provide training resources Measure and review process compliance Making the time to manage the process Construction quality can be achieved by use of a quality management system or programme 4.0 QUALITY MANAGEMENT SYSTEMS There are a number of recognised quality management programmes or systems that may be adopted by organisations (e.g. Total Quality Management, Total Quality Leadership, Six-Sigma, ISO 9000). ISO 9001 is the most widely referenced quality management system in the construction industry. As the Head Contractor, we are more often than not required to be certified to ISO 9001, and our subcontractors are required to have in place a quality management system which complies (but is not necessarily certified) with AS/NZS ISO 9001 (as specified in MHPL s Subcontract Agreement Terms & Conditions, Clause 23.0). 4.1 ISO 9001 Quality Management Principles The ISO 9001 Quality Management Standard is based on eight quality management principles which are intended to assist organisations manage cost and risk, and meet their customers expectations. Any business looking to do what they do better, would be greatly benefited by understanding and adopting these quality management principles. QM-GN-02/01 Page 5
Principle One - Customer focused organisation Organisations depend on their customers and therefore should understand current and future customer needs, meet customer requirements and strive to exceed customer expectations. Applying the principle of customer-focused organisation leads to the following actions: Understanding the whole range of customer needs and expectations for products, delivery, price, dependability, ensuring a balanced approach among customers and other stakeholders owners, employees, suppliers, local communities needs and expectations, i.e. time is crucial on a construction project and having a thorough understanding of the construction programme and your ability to meet it will go a long way to satisfying the client. Communicating these needs and expectations throughout the organisation Measuring customer satisfaction and acting on results Managing customer relationships Beneficial applications of the principles include: For policy and strategy formulation, making customer needs and the needs of other stakeholders understood throughout the organisation For goal and target setting, ensuring that relevant goals and targets are directly linked to customer needs and expectations, i.e. avoiding claims against you for extension of time For operational management, improving the performance of the organisation to meet customer needs, i.e. improved performance may allow you to expand your operations. For human resources management, ensuring people have the knowledge and skills required to satisfy the organisation s customers, i.e. avoiding time delays and rectifications works Principle Two - Leadership Leaders establish a common outcome to be achieved and the direction of the organisation. They should create and maintain the internal environment in which people can become fully involved in the organisation. Applying the leadership principle should result in: Being proactive and leading by example Understanding and responding to changes in the external environment Considering the needs of all stakeholders, including customers, owners, people, suppliers, local communities and society at large Establishing a clear vision of the organisation s future Establishing shared values throughout the organization Building trust and eliminating fear Providing people with the required resources and freedom to act with responsibility and accountability Inspiring, encouraging and recognizing people s contributions Promoting open and honest communications Educating, training and coaching people Setting challenging goals and targets Implementing strategy to achieve these goals and targets. QM-GN-02/01 Page 6
Principle Three - Involvement of people People at all levels are the soul of the organisation and their full involvement enables their abilities to be used for the organisation s benefit. Successful application of this principle of involvement leads people in an organisation to: Accept ownership and responsibility to solve problems Actively seek opportunities to make improvements Actively seek opportunities to enhance their competencies, knowledge and experience Freely share knowledge and experience in teams and groups Focus on creation of value for customers Be innovative and creative in further the organisation s objectives Better represent the organisation to customers, local communities and society at large Derive satisfaction from their work Be enthusiastic and proud to be part of the organisation Principle Four - Process approach A desired result is achieved more efficiently when related resources and activities are managed as a result. Outcomes of a process approach to running an organisation are: Defining the process to achieve the desired result, i.e. work methods and Inspection and Test Plans for the particular scope of works Identifying and measuring the inputs and out puts of the process, i.e. the requirements of the scope of works and progress in relation to programme, budget and quality Identifying the interfaces of the process with the functions of the organization Evaluating possible risks, consequences and impacts of processes on customers, suppliers and other stakeholders of the process, i.e. ensuring the client is aware at the earliest possible time if supply of a product is likely to be delayed, or if on review of the contract documents there is a buildability concern When designing processes, consideration is given to process steps, activities, flows, control measures, training needs, equipment, methods, information, materials and other resources to achieve the desired result, i.e. what to do we need to do the job? Principle Five System Approach to Management Identifying, understanding and managing a system of inter-related processes for a given objective improves the organisation s effectiveness and efficiency. A system approach to management has these outcomes: Defining the system by identifying or developing the processes that affect a given objective Structuring the system to achieve the objective in the most efficient way Understanding interdependencies among the processes of the system Continually improving the system through measurement and evaluation, i.e. post project debriefs (internally and with the client), analysis of non-conformances, etc Establishing resources constraints prior to action. Principle Six- Continual Improvement Continual improvement should be a permanent objective of the organisation. These activities and outcomes are found in an organisation practicing the continue improvement principle: Continual improvement of products, processes and systems is an objective for every individual in the organisation The basic concepts of incremental improvement and breakthrough improvement are practiced Periodic assessments against established criteria of excellence are undertaken to identify areas for improvement Continual improvement of all processes, promoting prevention based activities Every member of the organization is provided with appropriate education and training on the methods and tools of continual improvement, such as the plan-do-check-act cycle Measures are established to guide and track improvements. QM-GN-02/01 Page 7
Principle Seven Factual approach to decision making Effective decisions are based on the analysis of data and information. These attributes tend to be found in an organisation managing by analysis of facts: Measurement and collection of data and information relevant to the objectives takes place, i.e. ensure processes are in place to report on time spent on rework, materials wastage etc The accuracy and reliability of data and information is ensured, i.e. the reporting is occurring frequently and consistently Data and information is analysed using valid methods, i.e. the reports are analysed in a manner that makes sense Appropriate statistical methods are understood Decisions are made and action is taken based on results of logical analysis, balanced with experience and intuition, i.e. the analyse is used to make decisions Principle Eight Mutually beneficial supplier relationships An organisation and its suppliers are interdependent, and a mutually beneficial relationship enhances the ability of both to create value. The organisation upholding this principle should do the following things: Identify and select key suppliers Establish supplier relationships that balance short-term gains with long-term considerations for the organisation and society at large Create clear and open communications Initiate joint development and improvement of products and processes Jointly establish a clear understanding of customer needs Share information and future plans, i.e. where improvements can be achieved Recognise supplier improvements and achievements. Source: Website of TC 176/SC2, hosted by British Standards Institute 4.2 ISO 9001 Quality Management System Criteria A quality management system is a framework or roadmap for quality management. It provides clarity around responsibilities and authorities of staff and their interrelation allowing the organisation to deliver its products and services in a controlled, systematic and uniform manner. A quality management system rationalises the administrative and production processes, and generates permanent records of verification of authority. In short, a quality management system provides structure; guidance and consistency to assist an organisation meet the expectations of its client. As mentioned earlier, MHPL s Subcontract Agreement Terms & Conditions specifies that the subcontractor is required to have a quality management system that complies with ISO 9001. The system is to be used when carrying out the subcontract works and should be made available to MHPL for monitoring and auditing on request. In order to comply with ISO 9001, a Quality Management System must be documented and incorporate the following criteria. How the required criteria is met is up to each individual organisation to determine. It should reflect, and be appropriate, to the organisation s business needs. In particular, it should incorporate the project nature of the construction industry, with the many and varied interfaces required with head contractors and suppliers, and organisations with whom you have no contractual obligations, for example the head contractor s client, project consultants and other subcontractors. QM-GN-02/01 Page 8
ISO 9001 Documented Quality Management System Documented procedures Control of documents Control of records Management responsibility Management commitment Customer focus Quality policy Resource management Provision of resources Human resources Infrastructure Work environment Product realisation Planning of product realisation Customer related processes Design and development Purchasing Product realisation Production and service provision Control of monitoring and measuring devices Measurement, analysis & improvement Monitoring and measurement Customer satisfaction Internal audit Control of non-conforming products Analysis of date Improvement Corrective action Preventive action Source: ISO 9001 Quality Management Systems (www.saiglobal.com) 5.0 ADDITIONAL INFORMATION ISO 9001 Quality Management Systems (www.saiglobal.com) Quality Management System Guidelines, New South Wales Government, (www.services.nsw.gov.au) QM-GN-02/01 Page 9