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Initiate or reinitiate the Purchase Order. Ensure that there is a clear trail to

the requirements document (contract) backward through the Requirements

Flow-down Matrix (see Attachment 8) and the Requirements Traceability Matrix

(see Attachment 7).

Ensure that the Purchase Order fully describes the products or services to be

delivered. Each product or service must be separately listed.

Each Purchase Order is complete and properly written when it contains:

Reference Number, Order Date, Vendor, Contact Information, Name of Item,

Stock (Catalog) Number, Number of Units, Price, Delivery Schedule, Delivery

Location, Purchaser, and Authorizing Signature.

It is beneficial that the information contained in the Purchase Order be complete

and properly written for a few reasons. For example, it conveys to the

vendor exactly what is expected. Also, you must know exactly the status of each

Purchase Order because of the impact it has on your schedule and your budget.

Most companies have preprinted Purchase Order forms. If yours does not,

create your own. Even if your Purchase Order form is nothing more than a

memo, at least it is documentation of what has been ordered and provides a

basis for the schedule and for financial accountability. If your preprinted form

does not contain all the information above, I suggest you add the information

within the body of the Purchase Order.

6b (NO) All vendors are not competent to perform their tasks.

Vendors are not competent to perform their tasks if they have not passed the

criteria set forth in your enterprise standards. If you do not have enterprise

standards, the following should be established as the criteria:

Technical Performance

Cost Performance

Delivery Performance

Management Performance

Procurement Policies and Plans

Quality Assurance Program (see Attachment 6 for Quality Assurance


Cost of Quality Position (see glossary)

Each criterion must meet the levels established by the enterprise or, in the

instance that there are no enterprise standards, by your project. The vendors

should have been graded against these criteria before each subcontract was



Each vendor that has been shown to be not competent should be reevaluated

using the format similar to that shown in Figure 4-1 on the following page.

The results of this evaluation will isolate the vendor’s problem area. If you

already know what that problem area is, fine. In that case, this exercise will

document the situation for any future activity found necessary such as a Show

Cause letter, etc.

Once you have isolated the problem area, you can set about determining the

cause of the problem and eliminate or change it.

6c (NO) Purchase Orders are not properly monitored.

Simply stated, a Purchase Order (PO) is not properly monitored if an event,

positive or negative, occurs and you are not aware of its happening.

The PO can be considered to be properly monitored when the vendor’s work

is monitored by an assigned project person (usually the Materials Manager calling

upon technical and program personnel as required) using monitoring techniques

such as:

F i g u r e 4 - 1 — V e n d o r E v a l u a t i o n S h e e t


Date 4-Jul-02

Program High-Flyer

Subcontractor/Vendor National Software

Equipment/Software Analog Selction Algorithm

Evaluator G. Smith

Scale Factor 0-5

Item Consideration Rating*

1 Organization 3

2 Management 4

3 Manpower 5

4 Access to Management 5

5 Processes 3

6 Procedures 2





Subtotal** 22

No. of items rated** 6

Average of ratings (Subtotal/No of items)** 3.7

*An evaluated number within the Scale Factor.

**Calculated number.

M-M Form

Vendor Progress Reports

Vendor Meetings

In-Process Reviews

The above include Schedule and, if proper, Budget Reviews.

These reviews must be conducted at regular, frequent, and strategic intervals.

Simply conducting these meetings and reviews does not mean the subcontract

is performing properly; it only means that the subcontract is being monitored

properly. But, if the subcontract is not being monitored properly, you will

not know if it is performing properly.

Within each of these must be monitoring points or metrics that indicate that

an event is in tolerance or out-of-tolerance.

If schedule is critical, the PO should include an incentive or liquidated damages

clause (see glossary) that is invoked in the event the delivery time is not



POs present a particular problem. Because they are generally of relatively low

economic value, they are frequently issued then left alone. A problem is not in

evidence until the item is not shipped, and then it’s too late. Consequently, you

must monitor a PO as you would a subcontract.

Establish reports, reviews, and meetings such as:

Vendor Progress Reports

Vendor Meetings

In-Process Reviews

These reports, meetings and reviews include schedule progress and, if proper,


These reviews must be conducted at regular, frequent, and strategic intervals.

Within each of these must be monitoring points or metrics that indicate that

an event is in tolerance or out-of-tolerance. When an out-of-tolerance condition

occurs, it must be rectified immediately. Most POs are issued for shortturn-

around items, and time is critical.

The most common problem with POs is that the item purchased is ‘‘bumped


out’’ of its planned place in the production cycle by some other, higher priority

project. If this happens, you must ensure that the item is reinstated on the

production line in time to make your schedule. If schedule is critical, it is a

good idea to have an incentive or liquidated damages clause in the PO that puts

a dollar value on delivery time.

6d (NO) Vendors are not performing properly.

Vendors are not performing properly when all monitored events are not

being performed on schedule, within budget, or are not technically competent.

The method you use in determining this status is to conduct regular and frequent

reviews at strategic points in the process to ensure that performance is