How to Break Down a Contract into Standard Operating Procedures
Where there’s a will…shall, or must statement, there’s an SOP
If your company is working on contracts with your customer, there are specific tasks that are called out. Many Contract Managers call this section a Performance Work Statement, Statement of Work, or simply Clauses. An analysis of these sections should be the first thing to do. I normally convert the contract to word and do a quick number count of how many times these three words are used. From there, I extract the statements sorting them by what manager is responsible for them. This will give the topics within your SOP. For example: “The contractor shall perform preventative repairs but shall not perform cosmetic repairs”, I would assign this clause to a Maintenance Manager. He now knows to include how his section will provide maintenance for the customer’s equipment without fixing cosmetic flaws. His SOP will ensure that his subordinates know the same thing without sending them constant emails or direction.
| Clause | Statement | Responsible Party | Process, Policy Procedure |
|---|---|---|---|
| C.3.2.4 | The contractor shall report damage caused by the contractor IAW … | Property Management | Loss, Theft, Damage, Destruction SOP |
| C.4.1 | “The contractor shall develop and comply with any environmental procedures IAW… | Quality/ESH Management | Environmental Health and Safety Plan |
| C.3.1 | Wrecker: Standard:Each national and regional work site maintains an annual average OR rate above 80% for the life of the contract. Wrecker: AQL:Each national and regional work site maintains an annual average OR rate above 70% for the life of the contract. | Maintenance Management | Maintenance Operation SOP |
Metrics, KPIs, Percentages
Playing to the number game is right up SOPs alley. When a percentage is in the contract, it is either a standard or acceptable quality limit. 100% is a contract killer in many fields because of human error. It would be foolish for a company to accept 100% without requesting an acceptable quality limit. The AQL would be your leeway for a still satisfied customer. As a process owner, spelling out how your section will meet (or exceed) the metrics, key performance indicator, or percentage in the form of an SOP will standardize operations and make the employees subject matter experts (if they read it!).Advertising Space – After your Hub is published advertisements may be placed in this space.
Not everyone is cut out for a job, An SOP can prove it.
Have you had a person that completed the bare minimum? Did a task that someone had to come back to and redo? Have you had to repeatedly ask this person to do something? When there is a Standard Operating Procedure in this place, you can have your reason to let them go. You will have the fire power you need by showing the clauses in your SOP they are violating. Working hours, housekeeping, dress and appearance, or any other internal operation you want your employees to follow should be standardized. In the world of political correctness, having standards is a must or a legal battle can ensue from a war of words.
Implicit Regulations
As the market place is globalized, branching out may introduce your company to rules and regulations you didn’t face in your current market place. If you ever worked for the government you will know of many alphabet regulating bodies in which an SOP must cater to. Federal Acquisition Regulation (FAR), Cost Accounting Standards (CAS), Code of Federal Regulation (CFR), Sarbanes-Oxley (SOX) can all be implied on your company without being in the explicit contract. Even host countries have laws that your company has to abide by to operate there. Many companies hire consultants or have a legal team to ensure they are in compliance. A small business has to do all of this on their own, be wary some fines can ensue if you don’t do your homework and “I didn’t know” doesn’t always grant leniency.
Don’t overdue it
SOPs can be a great time saver, it can give the employee the ins and outs of a task without day to day instructions, and it can be a savior to a company when there is an accident due to human error. SOPs are also a double-edged sword. Hearing “that’s how it has been done for years,” can be a barrier to continual improvement. Tasks that do not warrant an SOP become like “blue laws”. Constant review of Processes and Procedures can be value added, keeping the SOP a live document.
Don’t know where to start on SOPs?
Many small businesses cannot have their own quality/compliance section. If you have a product or service you are trying to get out there, there are consultants that can help. For a one time fee, these consultants can assist your company to create a Quality Management System or Compliance System which can boost your company’s growth dramatically. Industry Standards such as ISO, ANSI and other agencies are requested by many customers, showing compliance (and later certification) may get your foot in the door.
SOP questions? We consult and can make you ISO 9001:2015 compliant
- KC Solution Group LLC; Logistics Consulting
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Article written by Luis Rosado, KC Solution Group LLC, Director of Quality and Compliance
