Definition Contract Review - What exactly is "Contract Review"?

A

Adam S

#1
What exactly is "contract review"?

I'm working within an ISO13485 environment, specifically looking at remodelling our supplier management systems.

I don't know, but I do not fully understand what is meant by the term 'contract review'

Is it:

a) reviewing customer orders, and assessing our ability to fulfil that order to the required customer spec

b) reviewing our orders/contracts with our suppliers, to ensure that our agreements and contracts adequately cover our requirements

c) both of the above




I believe it's a), others in my organisation believe it's b)

Help!
 
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Stijloor

Leader
Super Moderator
#2
Re: What exactly is "contract review"?

"Contract review" is a term used in older standards. It is now called "Customer Related Processes."

It involves:
  • Determination of customer requirements
  • Review of requirements
  • Customer communication.
You are correct.

Option "b" is called "Purchasing."

Stijloor.
 

JoCam

Trusted Information Resource
#3
Re: What exactly is "contract review"?

Hi Adam,

Contract Review is as you have described in a).

Any contracts or orders reviewed between an Organisation and their Supplier for raw materials and/or components is covered in Purchasing.

I hope this helps.

Jo
 

Wes Bucey

Prophet of Profit
#5
Re: What exactly is "Contract Review"?

In one of those threads about Contract Review (http://elsmar.com/Forums/showpost.php?p=264727&postcount=9), I wrote
Speaking only from my own experience and NOT ex cathedra, we used a multidiscipline approach to Contract Review.


  1. Engineers and operators commented on our capability to perform (did we have technical ability to produce according to requirements?)
  2. Managers and accounting commented on our capacity to perform (did we have the resources and open machine time without impacting current business?)
  3. Purchasing commented on whether we could obtain materials within a specified lead time (a BIG consideration when dealing with exotic alloys.)
  4. Quality people commented on whether we had expertise and instruments to inspect to meet requirements
  5. Managers checked on capacity and capability of prospective customer to pay us (some prospects had bad reputations as PIAs to do business with and we often declined a contract for such a reason.)
  6. We investigated "WHY?" a customer might be switching suppliers.
  7. We offered concurrent engineering to find a more efficient design or method of manufacture to deliver required form, fit, function.
  8. We only agreed to contracts (for custom made goods) where we and the customer approached the transaction as "partners" versus the master/slave relationship many here in the Cove are familiar with.
  9. When we were satisfied we were close to a deal, we charted ALL the requirements on a grid and made arrangements to meet or exceed each one, from delivery date and price to lot size and labeling and everything in between. When the contract was agreed, that "performance grid" became part of the traveler and no goods left our dock unless and until the grid was complete.
The sticky part is getting everyone to work as a team and eliminating the silos which plague so many organizations. I always found Deming's System of Profound Knowledge (SoPK) to be key in creating and maintaining a cohesive team.
Today, I think a smart purchaser ought to inquire whether his suppliers are performing a similarly rigorous Contract Review before accepting a contract (purchase order.)
 

JoCam

Trusted Information Resource
#6
Re: What exactly is "Contract Review"?

Today, I think a smart purchaser ought to inquire whether his suppliers are performing a similarly rigorous Contract Review before accepting a contract (purchase order.)
Excellent point Wes.

Jo
 
B

Boscoeee

#7
Re: What exactly is "Contract Review"?

What exactly is "contract review"?

I'm working within an ISO13485 environment, specifically looking at remodelling our supplier management systems.

I don't know, but I do not fully understand what is meant by the term 'contract review'

Is it:

a) reviewing customer orders, and assessing our ability to fulfil that order to the required customer specThis is actually determining customer requirements prior to submitting a quote.

Contract review has to be performed when you get the contract to confirm that the customer has indeed tendered the contract or PO that is in agreement with your quote.


b) reviewing our orders/contracts with our suppliers, to ensure that our agreements and contracts adequately cover our requirements. You are correct!

c) both of the above




I believe it's a), others in my organisation believe it's b)

Help!

IMHO, Contract Review deals with different situations.

Initially, there is a determination of customer requirements at which point as a supplier you indicate that you are capable of providing product meeting customer requirements. At which point you tender a quote along with lead time.

Once a customer PO has been received a supplier performs a contract review to ensure that the PO matches what the quote stated. This PO typically comes with a set of Terms and Conditions which by accepting the PO a supplier accepts the T&C.

In our business we also have General Supplier Agreements with our customers which are considered contracts (covering a list of parts) and provide the framework for dealing with all of the normal relationship issues between Customer and Supplier. Typically, this contract requires extensive review and agreement prior to execution usually on a three year cycle.

Suppliers

In dealing with suppliers it is expected that you are either using PO T&C or a "Contract" with the supplier. Either way, it is your responsibility to ensure that all your requirements are flowed down to the supplier by PO, T&C, and or formal contract.
 
C

Chris Ford

#8
Re: What exactly is "Contract Review"?

What exactly is "contract review"?

I'm working within an ISO13485 environment, specifically looking at remodelling our supplier management systems.

I don't know, but I do not fully understand what is meant by the term 'contract review'

Is it:

a) reviewing customer orders, and assessing our ability to fulfil that order to the required customer spec

b) reviewing our orders/contracts with our suppliers, to ensure that our agreements and contracts adequately cover our requirements

c) both of the above




I believe it's a), others in my organisation believe it's b)

Help!
Until 13485:2003, this was a topic of confusion for many companies. Many companies had interpreted this requirement to imply "any and all contracts", not just customer-related arrangements. But, it remained unclear exactly what they were reviewing in different situations. On the contrary, I've seen many companies state that contract review was not applicable to their organizations at all, because they didn't manufacture "custom" orders and/or were not contract manufacturers. In both cases, they missed the point.

Consequently, "Contract Review" was never intended to implicate purchasing or any other contracts. Contract review requirements in the standard are intended to assure that the organization understands customer requirements and fulfills them.

13485:2003 really clarifies this and removes the ambiguity. We no longer call it, "Contract Review" - the term was confusing and vague.

13485:1996 4.3 Contract Review translates to 13485:2003 5.2 Customer Focus which states:

"Top management shall ensure that customer requirements are determined and are met (see 7.2.1 and 8.2.1)."
Here, it's clear that contract review = determination of customer requirements (and meeting them). 7.2 goes on to explain:

"7.2.1 Determination of requirements related to the product

The organization shall determine

a) requirements specified by the customer, including the requirements for delivery and post-delivery activities

7.2.2 Review of requirements related to the product

The organization shall review the requirements related to the product. This review shall be conducted prior to the organization's commitment to supply a product to the customer (e.g. submission of tenders, acceptance of contracts or orders, acceptance of changes to contracts or orders) and shall ensure that

a) product requirements are defined and documented,
b) contract or order requirements differing from those previously expressed are resolved, and
c) the organization has the ability to meet the defined requirements.

7.2.3 Customer communication

The organization shall determine and implement effective arrangements for communicating with customers in relation to

b) enquiries, contracts or order handling, including amendments,"

As to "b) reviewing our orders/contracts with our suppliers, to ensure that our agreements and contracts adequately cover our requirements", these requirements are covered in Purchasing and acceptance activities. 7.4.1 and 7.4.2 clearly define the requirements:

7.4.1 Purchasing process

The organization shall establish documented procedures to ensure that purchased product conforms to specified purchase requirements
(e.g. specifications).

The organization shall evaluate and select suppliers based on their ability to supply product in accordance with the organization’s requirements
(e.g. product requirements, customer requirements, regulatory requirements, etc).

Criteria for selection, evaluation and re-evaluation shall be established.

7.4.2 Purchasing information

Purchasing information shall describe the product to be purchased, including where appropriate

a) requirements for approval of product, procedures, processes and equipment,
b) requirements for qualification of personnel, and
c) quality management system requirements.

The organization shall ensure the adequacy of specified purchase requirements prior to their communication to the supplier.
So, in purchasing, we establish the criteria to "qualify" suppliers. We conduct the appropriate review (e.g. quality audit, financial review, etc). We provide detailed purchasing information (specifications, requirements, inspection criteria, etc). Then we verify, either at the supplier's location or our own, that the purchased product meets the specification. We then periodically requalify the supplier, and monitor acceptance activities. The purchasing procedures will somewhat mirror "contract review", in that there is a series of verification steps required to assure that requirements are met. In essence, it's the same type of process, but spelled out with specific criteria in the standard.
 
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