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All, we're working on improving our procurement practices with both contractors and material suppliers. Our company is fairly new and we don't have standard Terms & Conditions yet to send out. So what I'm working on is a department level instruction and then likely 2 RFQ templates, one for contractors and one for materials, and finally a Notice to Proceed template. Sadly, in our new state, what we've been doing so far is only sending a PO and signing their proposal when required, knowing this is highly inadequate and leaves us defenseless. Thus our focus on this now to shore this up.

In writing these out, we came up with a few situations that we're wondering how everyone else handles:

1. When firm projects, such as an engineering design, run late. How often do companies insert penalties up front? If not using that, what other forms of pressure/leverage do you use to get overdue contractors/engineers to get their scope done on time?
2. Invoices that are submitted sometimes a year after the fact. ("Our AR dept did an audit and found these two invoices .....")
3. Material only terms - do you include standard supply terms? Ie we want all material suppliers to communicate order confirmations and shipping confirmations and we're addressing this because it is very hit or miss

Thanks in advance. If you have anything else that helps your maintenance/reliability team present a strong hand in procuring contractors and materials, please share!

Cyrus, 

My background in Alcoa was as an Operations Area Supervisor at Alcoa in Rockdale, Texas many years ago.  I had the added responsibility of supervising the Buyer for the plant, who was a very good Buyer.  I asked him, what could I do to help in my position?  He said that he needed more support on terms and conditions (T&C), among other things.  Alcoa had standard T&C attached to every purchase order, but for engineering projects, other services, contractors, etc. there were other corporate T&C that had been developed.  In particular, there were master service agreements in place with a few key suppliers (suppliers who central procurement would approve easily if bids were won).  Long story short, I went to Pittsburgh and got training from two corporate lawyers on the various T&C's and how to apply them in specific cases.  This was key to transforming our process in that assignment.  Years later I stepped in as a Procurement Manager in an organization that was issuing PO's that referenced sellers' proposals for overhaul projects, etc. that were not aligned with corporate policy.  In some cases, we were receiving invoices prior to the departments issuing requisitions for processing to purchase orders.  It took a lot of hands-on work and key communications with leaders to turn the situation around.  If you're looking for examples of T&C's, some companies have them available online for their suppliers.  If you'd like examples, let me know.

------------------------------
Terence Easterwood
Owner/President
TMEI Services LLC
Bryan TX

Original Message:
Sent: 03-17-2023 02:59 PM
From: Cyrus Brown
Subject: Time to shore up our procurement processes

All, we're working on improving our procurement practices with both contractors and material suppliers. Our company is fairly new and we don't have standard Terms & Conditions yet to send out. So what I'm working on is a department level instruction and then likely 2 RFQ templates, one for contractors and one for materials, and finally a Notice to Proceed template. Sadly, in our new state, what we've been doing so far is only sending a PO and signing their proposal when required, knowing this is highly inadequate and leaves us defenseless. Thus our focus on this now to shore this up.

In writing these out, we came up with a few situations that we're wondering how everyone else handles:

1. When firm projects, such as an engineering design, run late. How often do companies insert penalties up front? If not using that, what other forms of pressure/leverage do you use to get overdue contractors/engineers to get their scope done on time?
2. Invoices that are submitted sometimes a year after the fact. ("Our AR dept did an audit and found these two invoices .....")
3. Material only terms - do you include standard supply terms? Ie we want all material suppliers to communicate order confirmations and shipping confirmations and we're addressing this because it is very hit or miss

Thanks in advance. If you have anything else that helps your maintenance/reliability team present a strong hand in procuring contractors and materials, please share!

------------------------------
Cyrus Brown
Kahului HI
------------------------------

Terence, thanks for responding. I think your experience with this is ideal. I would be interested in seeing anything you'd be willing to share.

Our situation is the company has a license agreement for contractors working on site. It does not cover invoicing or anything like that, just liability, hazardous materials, etc. So for the first situation, where contractors are involved, I'm looking at creating a Notice to Proceed template that will reference the license agreement, a contractor safety compliance terms/signoff, and then contracting terms* not covered in the license agreement. A bit complex as it will be a master document with 3 attachments but it will do the trick and is best I can do with our company setup currently. The NTP will then give us a chance to expound upon the boiler plate license, safety, & general contracting terms (ie insert time-based penalty, etc).

*Contractor T&C's I've written out but not yet formalized:

Contractor Bid / Proposal Requirements<o:p></o:p>

1.       T&M proposals require a labor breakdown showing expected number of each trade/profession, hours per each, and hourly rate per each. This shall be similar in appearance to how the final invoice will be presented.<o:p></o:p>

2.       All bids require a milestone schedule. This includes available windows to start work based upon notice to proceed<o:p></o:p>

3.       Firm proposals require a payment schedule based on the milestone schedule<o:p></o:p>

4.       All inclusions and exclusions<o:p></o:p>

5.       All standard terms & conditions including whether or how standby time / work gaps are billed<o:p></o:p>

6.       Full cut sheets for any materials supplied by the contractor<o:p></o:p>

Contracted Work Communications<o:p></o:p>

1.       Provide a daily summary of completed work to project manager and include any anticipated schedule changes and/or coordination needs.  For projects with a duration of over a month, a weekly summary will suffice<o:p></o:p>

2.       T&M contractors – timesheets must be presented for review and signature daily<o:p></o:p>

3.       No scope changes authorized without receiving prior permission from the project manager<o:p></o:p>

4.       Any change orders that may potentially be imposed, whether from mutually agreed upon scope changes mentioned above or other reasons, must be communicated to the project manager as soon as possible<o:p></o:p>

Invoice Submittals<o:p></o:p>

1.       Submit invoices for completed work directly to project manager who will submit to accounts payable<o:p></o:p>

2.       Invoices for T&M work must be submitted at least monthly or more frequent. For monthly submittals, these will be within the first 5 business days of a new month and cover all of the prior month. These will include a summary showing total billed costs, current billed costs, and remaining costs.<o:p></o:p>

3.       All other invoices (firm labor, materials, etc) must be submitted within 10 business days of completion of applicable milestone<o:p></o:p>

------------------------------
Cyrus Brown
Kahului HI

Original Message:
Sent: 03-24-2023 09:06 AM
From: Terence Easterwood
Subject: Time to shore up our procurement processes

Cyrus, 

My background in Alcoa was as an Operations Area Supervisor at Alcoa in Rockdale, Texas many years ago.  I had the added responsibility of supervising the Buyer for the plant, who was a very good Buyer.  I asked him, what could I do to help in my position?  He said that he needed more support on terms and conditions (T&C), among other things.  Alcoa had standard T&C attached to every purchase order, but for engineering projects, other services, contractors, etc. there were other corporate T&C that had been developed.  In particular, there were master service agreements in place with a few key suppliers (suppliers who central procurement would approve easily if bids were won).  Long story short, I went to Pittsburgh and got training from two corporate lawyers on the various T&C's and how to apply them in specific cases.  This was key to transforming our process in that assignment.  Years later I stepped in as a Procurement Manager in an organization that was issuing PO's that referenced sellers' proposals for overhaul projects, etc. that were not aligned with corporate policy.  In some cases, we were receiving invoices prior to the departments issuing requisitions for processing to purchase orders.  It took a lot of hands-on work and key communications with leaders to turn the situation around.  If you're looking for examples of T&C's, some companies have them available online for their suppliers.  If you'd like examples, let me know.

------------------------------
Terence Easterwood
Owner/President
TMEI Services LLC
Bryan TX

Original Message:
Sent: 03-17-2023 02:59 PM
From: Cyrus Brown
Subject: Time to shore up our procurement processes

All, we're working on improving our procurement practices with both contractors and material suppliers. Our company is fairly new and we don't have standard Terms & Conditions yet to send out. So what I'm working on is a department level instruction and then likely 2 RFQ templates, one for contractors and one for materials, and finally a Notice to Proceed template. Sadly, in our new state, what we've been doing so far is only sending a PO and signing their proposal when required, knowing this is highly inadequate and leaves us defenseless. Thus our focus on this now to shore this up.

In writing these out, we came up with a few situations that we're wondering how everyone else handles:

1. When firm projects, such as an engineering design, run late. How often do companies insert penalties up front? If not using that, what other forms of pressure/leverage do you use to get overdue contractors/engineers to get their scope done on time?
2. Invoices that are submitted sometimes a year after the fact. ("Our AR dept did an audit and found these two invoices .....")
3. Material only terms - do you include standard supply terms? Ie we want all material suppliers to communicate order confirmations and shipping confirmations and we're addressing this because it is very hit or miss

Thanks in advance. If you have anything else that helps your maintenance/reliability team present a strong hand in procuring contractors and materials, please share!

------------------------------
Cyrus Brown
Kahului HI
------------------------------

Cyrus, 

Looks like you've customized the terms to your application, which is good.  In Alcoa's case, their terms & conditions were managed in centralized fashion and applied to multiple business units.  In some cases, regions (non-domestic operations) or specific business units customized the terms and conditions to their own applications.  Since their T&C are public information, you can see the T&C for services, for example, and simply Google other T&C as you see fit.

https://www.alcoa.com/global/en/contact/supplier/north-america/pdfs/standard-terms-and-conditions-services.pdf

Note that the T&C dovetail into Alcoa's standards for safety.  

Again, I don't speak for Alcoa, as I left the company in 2016, but the majority of my experience was in production management, procurement management, and reliability engineering (including management of engineering standards for global operations), so my impression was that the suite of standards fit together very well in support of global operations.

Terence, thanks for responding. I think your experience with this is ideal. I would be interested in seeing anything you'd be willing to share.

Our situation is the company has a license agreement for contractors working on site. It does not cover invoicing or anything like that, just liability, hazardous materials, etc. So for the first situation, where contractors are involved, I'm looking at creating a Notice to Proceed template that will reference the license agreement, a contractor safety compliance terms/signoff, and then contracting terms* not covered in the license agreement. A bit complex as it will be a master document with 3 attachments but it will do the trick and is best I can do with our company setup currently. The NTP will then give us a chance to expound upon the boiler plate license, safety, & general contracting terms (ie insert time-based penalty, etc).

*Contractor T&C's I've written out but not yet formalized:

Contractor Bid / Proposal Requirements<o:p></o:p>

1.       T&M proposals require a labor breakdown showing expected number of each trade/profession, hours per each, and hourly rate per each. This shall be similar in appearance to how the final invoice will be presented.<o:p></o:p>

2.       All bids require a milestone schedule. This includes available windows to start work based upon notice to proceed<o:p></o:p>

3.       Firm proposals require a payment schedule based on the milestone schedule<o:p></o:p>

4.       All inclusions and exclusions<o:p></o:p>

5.       All standard terms & conditions including whether or how standby time / work gaps are billed<o:p></o:p>

6.       Full cut sheets for any materials supplied by the contractor<o:p></o:p>

Contracted Work Communications<o:p></o:p>

1.       Provide a daily summary of completed work to project manager and include any anticipated schedule changes and/or coordination needs.  For projects with a duration of over a month, a weekly summary will suffice<o:p></o:p>

2.       T&M contractors – timesheets must be presented for review and signature daily<o:p></o:p>

3.       No scope changes authorized without receiving prior permission from the project manager<o:p></o:p>

4.       Any change orders that may potentially be imposed, whether from mutually agreed upon scope changes mentioned above or other reasons, must be communicated to the project manager as soon as possible<o:p></o:p>

Invoice Submittals<o:p></o:p>

1.       Submit invoices for completed work directly to project manager who will submit to accounts payable<o:p></o:p>

2.       Invoices for T&M work must be submitted at least monthly or more frequent. For monthly submittals, these will be within the first 5 business days of a new month and cover all of the prior month. These will include a summary showing total billed costs, current billed costs, and remaining costs.<o:p></o:p>

3.       All other invoices (firm labor, materials, etc) must be submitted within 10 business days of completion of applicable milestone<o:p></o:p>

------------------------------
Cyrus Brown
Kahului HI

Original Message:
Sent: 03-24-2023 09:06 AM
From: Terence Easterwood
Subject: Time to shore up our procurement processes

Cyrus, 

My background in Alcoa was as an Operations Area Supervisor at Alcoa in Rockdale, Texas many years ago.  I had the added responsibility of supervising the Buyer for the plant, who was a very good Buyer.  I asked him, what could I do to help in my position?  He said that he needed more support on terms and conditions (T&C), among other things.  Alcoa had standard T&C attached to every purchase order, but for engineering projects, other services, contractors, etc. there were other corporate T&C that had been developed.  In particular, there were master service agreements in place with a few key suppliers (suppliers who central procurement would approve easily if bids were won).  Long story short, I went to Pittsburgh and got training from two corporate lawyers on the various T&C's and how to apply them in specific cases.  This was key to transforming our process in that assignment.  Years later I stepped in as a Procurement Manager in an organization that was issuing PO's that referenced sellers' proposals for overhaul projects, etc. that were not aligned with corporate policy.  In some cases, we were receiving invoices prior to the departments issuing requisitions for processing to purchase orders.  It took a lot of hands-on work and key communications with leaders to turn the situation around.  If you're looking for examples of T&C's, some companies have them available online for their suppliers.  If you'd like examples, let me know.

------------------------------
Terence Easterwood
Owner/President
TMEI Services LLC
Bryan TX

Original Message:
Sent: 03-17-2023 02:59 PM
From: Cyrus Brown
Subject: Time to shore up our procurement processes

All, we're working on improving our procurement practices with both contractors and material suppliers. Our company is fairly new and we don't have standard Terms & Conditions yet to send out. So what I'm working on is a department level instruction and then likely 2 RFQ templates, one for contractors and one for materials, and finally a Notice to Proceed template. Sadly, in our new state, what we've been doing so far is only sending a PO and signing their proposal when required, knowing this is highly inadequate and leaves us defenseless. Thus our focus on this now to shore this up.

In writing these out, we came up with a few situations that we're wondering how everyone else handles:

1. When firm projects, such as an engineering design, run late. How often do companies insert penalties up front? If not using that, what other forms of pressure/leverage do you use to get overdue contractors/engineers to get their scope done on time?
2. Invoices that are submitted sometimes a year after the fact. ("Our AR dept did an audit and found these two invoices .....")
3. Material only terms - do you include standard supply terms? Ie we want all material suppliers to communicate order confirmations and shipping confirmations and we're addressing this because it is very hit or miss

Thanks in advance. If you have anything else that helps your maintenance/reliability team present a strong hand in procuring contractors and materials, please share!

------------------------------
Cyrus Brown
Kahului HI
------------------------------