Engineering Procedure

SAEP-397 20 October 2015

Vendor Performance Escalation
Document Responsibility: Project Quality Standards Committee

Contents
1 Scope.............................................................. 2
2 Intended Users............................................... 2
3 Applicable Documents.................................... 2
4 Definitions....................................................... 3
5 Deficiency Classification................................. 4
6 Escalation Process......................................... 4
6.1 Notification Stage....................................... 4
6.2 Warning Stage........................................... 5
6.3 On Hold Stage............................................ 6
7 Responsibilities............................................... 7

Appendix A - Vendor Escalation Process Flowchart.... 9

Previous Issue: New Next Planned Update: 20 October 2018

Page 1 of 9
Contact: Al-Ghamdi, Khalid Salem (ghamks0k) on +966-13-8801775

Copyright©Saudi Aramco 2015. All rights reserved.

Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

1 Scope

This procedure provides guidelines on escalating major quality and technical

deficiencies and unsatisfactory performance by Company-approved vendors that supply
inspectable commodities.

The objective of the escalation process is to communicate major quality and technical
deficiencies, which directly impact the quality of supplied products, to vendor’s senior
management and ensure timely completion of corrective actions and improve vendors’
overall performance.

2 Intended Users

This procedure is intended for use by Engineering Services Admin area technical and
quality teams.

3 Applicable Documents

The requirements contained in the following documents apply to the extent specified in
this procedure.

3.1 Saudi Aramco Documents

Saudi Aramco Engineering Procedures

SAEP-301 Instruction for Establishing and Maintaining Saudi
Aramco Engineering Requirements
SAEP-379 Quality Issues Notification
SAEP-380 Equipment Deficiency Report
SAEP-381 Project Quality Issues Escalation Process
SAEP-1150 Inspection Coverage on Projects

Other Document
Vendor Review Committee (VRC) Bylaws

3.2 Industry Code and Standard

International Organization for Standardization

ISO-9001:2008 Quality Management Systems

Page 2 of 9
Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

4 Definitions

Equipment Deficiency Report (EDR): SAP notification (type Q4) listing equipment
deficiencies with sufficient detail reflecting procurement document, specifications, the
equipment manufacturer and investigation result in accordance with SAEP-380.

Responsible Inspection Office Supervisor: Supervisor of Quality Assurance Unit of

Vendor Inspection Division in SAO, Quality Management Head in AOC-The Hague &
AAJ-Tokyo, and ASC Inspection Supervisor.

Responsible Standards Committee Chairman: Chairman of the engineering

standards committee for standards and commodities.

Responsible Technical and Quality Teams: Designated Engineering Services

individuals (In-Kingdom & out-of-Kingdom) to review and assess vendors’ approval
and performance matters for inspectable commodities.

Saudi Aramco Subsidiaries Appropriate Entity: Saudi Aramco Subsidiaries

Managing Directors or their delegates.

Responsible Assessor: Either the responsible Inspection office supervisor or the

responsible Standards Committee chairman or their delegates.

Responsible Standardization Agent: The RSA represents the highest level of

engineering or technical expertise within Saudi Aramco for a specific class or subclass
of material master items.

Vendor Review Committee (VRC): A review committee led by Engineering Services

Chief Engineer to oversee, review, and approve actions pertaining to vendors’ approval,
rejection, as well as change of status for existing suppliers.

Engineering Services Department Heads: Department Heads or their delegates to

oversee, review, and approve actions pertaining to vendors’ approval, rejection, as well
as change of status for existing suppliers.

Industrial Development Department Head: Material Supply Department Head or his

delegate responsible for strategic procurement, sourcing, supplier relation management
and other important material supply functions.

Mandatory Saudi Aramco Engineering Requirements (MSAER): Mandatory Saudi

Aramco Engineering Requirements (MSAERs) are documents which include engineering
standards (SAESs), materials system specifications (SAMSSs), engineering procedures
(SAEPs) and standard drawings (SASDs) that are developed for uniformity and applied
Company-wide.

Page 3 of 9
Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

5 Deficiency Classification

Deficiencies shall be classified as major if one of the following conditions applies:

1. Deficiencies that put quality and integrity of the product, and project/facility
including its workers and equipment at risk. That is, the deficiencies that prevent
putting a facility in operation as they represent, if not corrected, an evident danger
to Company property or personnel safety, and those that may impact the safe
commissioning, start up, and operation of the facility.
2. Outsourcing core manufacturing processes without proper approval from Saudi
Aramco Responsible Technical and Quality Teams.

6 Escalation Process

The escalation process shall be initiated by the responsible Inspection office supervisor
or responsible Standards Committee chairman after one or more of the following
scenarios are experienced:
1. Major quality/technical concerns/deficiencies identified during manufacturing or
plant assessment.
2. Major product deficiencies identified during site receiving inspection or during
commissioning and operation.
3. Lack of vendor’s responsiveness to end user’s requests and after-sale services.
Comment: Major product deficiencies identified at site and lack of vendor responsiveness
cases will be reported in accordance with SAEP-380. This procedure will
govern the escalation process of Equipment Deficiency Reports.

Quality and/or technical concerns/deficiencies and poor performance concerns should

be coordinated among responsible technical and quality teams and shall be brought to
the attention of the vendor’s senior management according to the following escalation
stages for in-Kingdom & out-of-Kingdom vendors:

6.1 Notification Stage

1. Within three (3) working days of encountering one or more of the above
scenarios, contact the Industrial Development Department (for In-Kingdom
vendors) or the appropriate subsidiary entity (for out-of-Kingdom vendors)
to communicate the experienced Quality and/or technical deficiencies and
poor performance as an initiation of the escalation process.
2. Send Notification Letters
Upon receiving the concerns/deficiencies from the technical and quality
teams, the Industrial Development Department (for in-Kingdom vendors) or

Page 4 of 9
Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

the appropriate subsidiary entity (for out-of-Kingdom vendors) shall send a

notification letter to the vendor’s senior management within two (2)
working days. The letter should provide details on deficiencies and shall
mandate the vendor to complete corrective actions within a maximum of
forty five (45) days of the letter date or within an agreed completion time
frame.
The letter to out-of-Kingdom vendors shall mandate the vendor to submit a
corrective action plan to the responsible technical and quality teams within
two (2) weeks of receipt of the letter.
3. Initiate SAP Workflow
Responsible Assessor shall initiate a follow up workflow in SAP using
transaction code ZQ0017. See Appendix A. If the case has been reported
in accordance with SAEP-380, a workflow is not necessary at this stage.
4. Conduct Performance Counseling
Within two (2) weeks of issuing the notification letter to In-Kingdom
vendors, the responsible Inspection office supervisor or responsible SCC
or their delegates shall conduct a performance counseling meeting with the
vendor’s most senior management. The meeting minutes and attendance
shall be recorded in SAP using transaction code ZQ0017 workflow or using
SAP notification (type Q4) for Equipment Deficiency Report (EDR).
The objective is to produce an improvement action plan that will be
implemented by the vendor.
5. Assess Corrective Actions
The responsible assessor shall perform a desk review or physical assessment
to verify the effective implementation of the vendor’s corrective actions.
If the vendor’s corrective actions are effective and satisfactory, no further
escalation is required. The responsible assessor shall close the SAP
workflow as approved or close the Equipment Deficiency Report (EDR).

6.2 Warning Stage

In case a vendor fails to submit a satisfactory corrective action plan within the
allocated time frame or fails to effectively complete required corrective actions
within the given time frames the following actions shall be taken:
1. Send Warning Letters
The responsible Engineering Services Department Head or his delegate
shall formally request the Industrial Development Department (for in-

Page 5 of 9
Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

Kingdom vendors) or the appropriate subsidiary entity (for out-of-Kingdom

vendors) to issue a warning letter to the vendor’s highest senior
management (CEO or equivalent) and send a copy to the Vendor Review
Committee. The letter shall specify all unresolved quality and/or technical
deficiencies and advise the vendor’s management to complete actions
within (14) days or risk being placed on hold.
2. Assess Corrective Actions
The responsible assessor shall perform a desk review or physical assessment
to verify the effective implementation of the vendor’s corrective actions.
If the vendor’s corrective actions are effective and satisfactory, no further
escalation is required. The responsible assessor shall close the SAP
workflow as approved or close the Equipment Deficiency Report (EDR).

6.3 On Hold Stage

If a vendor fails to submit and complete the corrective actions specified in the
warning letter within the given time frame, the responsible Inspection office
supervisor or the Standards Committee Chairman shall initiate the placement on
hold process by the following steps:
1. Prepare the Vendor Review Committee Action Request forms and include
copies of the notification letter, the signed minutes of the performance
counseling meeting, and the warning letter.
2. Submit and present to the Vendor Review Committee the request to place
the vendor on hold. The presentation shall include potential impact on
projects, operation impacts, and alternative sourcing as a result of placing
the vendor on hold.
3. Upon obtaining VRC approval, contact the Industrial Development
Department to initiate SAP workflow in case a workflow is not initiated in
the notification stage. The responsible Inspection office supervisor and the
Standards Committee Chairman and their delegates shall process the
workflow with on hold action using SAP transaction code ZQ0017.

Page 6 of 9
Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

7 Responsibilities

Title or Organization
Action or Task
Accountable

Industrial  Sends notification and warning letters to vendor’s senior

Development management reported by responsible technical and quality teams
Department Head or
his delegate  Initiate the SAP workflow to place the vendor on hold

 Initiate the SAP workflow for follow-up actions on vendors quality

and/or technical deficiencies and poor performance concerns
Inspection
Department/
 Lead counselling meeting with in-Kingdom vendors in coordination
Responsible
with Inspection Supervisor or his delegate
Inspection office
supervisor or his
delegates  Prepare Vendor Review Committee Action Request to place the
vendor on hold in accordance with Engineering Services VRC
bylaws

 Request Industrial Development Department (for in-Kingdom

Engineering Services
vendors) or the appropriate subsidiary entity (for out-of-Kingdom
Department Heads or
vendors) to issue a warning letter to the vendor’s highest senior
their delegates
management (CEO or equivalent)

Saudi Aramco
 Issue official notification and warning letters to the vendor’s senior
Subsidiaries
management
appropriate entity

 Initiate the escalation process in coordination with Inspection

Supervisor or his delegate
Standards Committee  Conduct counselling meeting with In-Kingdom vendors in
Chairman or his coordination with Inspection Supervisor or his delegate
delegates
 Prepare Vendor Review Committee Action Request to place the
vendor on hold in accordance with Engineering Services VRC
bylaws

 Oversee, review, and approve actions pertaining to vendor’s

Vendor Review
approval or rejection, as well as change status for existing
Committee
suppliers

Page 7 of 9
Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

Title or Organization
Action or Task
Accountable

 Prepare a list of identified quality and/or technical deficiencies and

vendor performance concerns
 Communicate to the Industrial Development Department (for in-
Kingdom vendors) or the appropriate subsidiary entity (for out-of-
Kingdom vendors)
Responsible
Assessor  Review and assess (desk review or physical) the vendor’s
corrective actions plan, and corrective actions implementation
 Conduct counselling meeting with in-Kingdom vendors
 Recommend closure or escalation of vendor’s corrective action
implementation

Revision Summary
20 October 2015 New Saudi Aramco Engineering Procedure that defines the escalation process of major
quality and technical issues and unsatisfactory performance by Company-approved
vendors that supply inspectable commodities.

Page 8 of 9
Document Responsibility: Project Quality Standards Committee SAEP-397
Issue Date: 20 October 2015
Next Planned Update: 20 October 2018 Vendor Performance Escalation

Appendix A Vendor Escalation Process Flowchart

Escalation Process Start

Notification Stage (45 Days Max or Agreed Time Frame)

Yes No
IK Vendor

Issue Notification Letter to Issue Notification Letter to

Shall Complete within (14 Days)

Vendor Sr. Management Vendor Sr. Management

within one week within one week
Dyas Max)

Satisfactory
Conduct Performance No
Counselling Meeting with Corrective Action Plan
Vendor Sr. Management within 14 days

Yes

Verify Yes Yes Verify No

Corrective Action Corrective Action
Implementation Implementation

No
Warning Stage (14 Days Max)

Issue warning letter to No further escalation. Issue warning letter to

Vendor highest management Document the issue in SAP Vendor highest management

Verify Verify
Corrective Actions Yes Yes Corrective Actions
Implementation Implementation

No No

Inspection Supervisor or
SCC Recommends Hold
On Hold Stage

Placement to VRC

Yes No
VRC Approve Follow VRC
Place Vendor On Hold Recommendation Decision/Directives

Page 9 of 9