CHECKS FOR OUTSOURCING ENGINEERING GOODS TO CHINA
For the present world market China is one of the few biggest suppliers for all kinds of engineering goods offering almost perennial sources to all consumers of the world. But consumers will do better to keep their eyes open for Chinese goods with extra stress on quality check. The discussion is intended to formulate guidelines for this for outsourcing procurement of engineering goods to China focusing on the major industrial uses which cover the following areas.Metallurgy & Minerals EnergyManufacturing and Process MachineryIndustrial Plant and EquipmentDefence EquipmentThese guidelines however with marginal and judicious moderation may also be applicable for any other merchandise for outsourcing.During the last five decades China has progressively and successfully been able to acquire western technology in producing engineering goods to a great extent although it is still far from perfecting the quality of the products. As a result although the Chinese manufacturers sell a lot of engineering goods at home and abroad their durability , utility and aesthetic values are often called to question in China and outside. This deficiency is however largely made up by difference in price of goods mainly due to cheaper labor still available in China and low cost of flaccid quality control of products.Notwithstanding this skepticism on quality of goods it may be noted that there are certain areas of technology where Chinese manufacturers have made pioneering progress. One such example is Regenerative burners and furnaces where lean fuel gas such as LD gas or BF gas are successfully utilized for heating billets or slabs for hot rolling in integrated steel plants. Western manufacturers have not made much progress in this area as because they by and large have sufficient supply of Natural gas as fuel for industrial purposes and hence never spent much on researches for elite utilization of lean gases. In such areas outsourcing to Chinese manufacturers is profitable if energy availability of the purchaser is a compelling factor.Outsourcing to Chinese manufacturers is almost unavoidable at present where the procuring country suffers from economic sanctions from the west due to political reasons. Countries like Russia, Cuba , Venezuela, Iran etc are examples of such machinations where their growth and survival become difficult due to so called elite nations closing their trade windows on them for whatever reasons. China although itself an emerging economy, has grown up to a large economic power house well in line with USA, UK, France ,Germany , Japan and South Korea to inevitably deserve such outsourcing.Also, for the present our attention will be focused to EPC ( Engineering, Procurement and Construction ) contracts only for outsourcing as the other forms of purchase i.e for standard bought outs etc , scope of intensive quality control is limited and is to be explored in product oriented ISO ( International Standard Organisation) regulations which however can be formulated by small moderation of quality control steps of EPC contract discussed here.
2. Control during tendering :
For outsourcing in China the tender inquiry should invariably have the following features.
2.1 Eligibility Criteria :
It will be an open tender inquiry released in customers' website available for access only in China where the inquiry shall specify an Eligibility Criteria for participation which inevitably should include (a) Recorded International sales for at least 5 preceding years of the current tender (b) A stipulated minimum volume of exports in the two preceding years of the current tender. (c) Relevant valid ISO Certification in manufacturing. (d). Certification of non use or controlled use of toxic substances from national controlling authority.(e) latest Routine test certificates of Raw materials being free of radioactivity, (f) latest Routine test certificates of products complying to composition and physical property of its relevant International standards (AISI or DIN or BS )
2.2 Tender Specification :
Tender specification which is intended to be the signed contract documents covering all aspects of the engineering , procurement manufacturing and installation of an item, should be meticulously and carefully made to include Quality Acceptance Procedure (QAP) which is an ISO requirement and where the controls are applied by the customer at every stage of manufacturing and procurement . Requirement of each type of tests to be witnessed and or shop-test certificates to be produced should be unfailingly included in the QAP matrix which shall constitute a signed page of the contract technical specification. Contract should also have a General Specifications (GS) of all kinds of Inspection work that may arise on the given job.It will be of a great benefit to customer if reputed professional and accredited Quality Control groups like Bureau Veritus or Lloyds or similar agencies whose services will not be affected by sanctions by the west are engaged for total quality control of the product depending on the complexity or stringency of quality the job calls for. These Quality Control groups should be associated right from specification making whereby QAP and General Specification (GS) on Inspection may be properly made and incorporated in contract. QAP and GS on Inspection will also provide for solutions to all normal disputes on Quality assurance during and after manufacturing.It is relevant to recall here that , out of the large number of common engineering goods which often fail in quality checks for goods supplied from China , mention needs to made particularly of Pipe welds. Normally most Chinese manufacturers try to cut short the ASME-9 directives of pipe welds to engage unprofessional welders who do not have certificate or even experience of Radiographic quality of welding. As a result, these pipe welds fail during pneumatic tests after manufacturing and often after installation when large amount of time, money and repute go to waste to repair the damage.In China where these checks are mostly avoided for reduction in cost, massive pipe line fires and explosions often result with loss of life and property. But the leaders get away with it suppressing news media as there is no democratic rule.It is therefore so very important to fix and follow a proper QAP (Quality Assurance Procedure) when inflammable and explosive petroleum products particularly Natural Gas or crude oil is transported through cross country pipe lines for a customer who is outsourcing the piping materials to China. These pipes are required to be of high quality API grade and site welds are to be of Radiographic quality. An adequate QAP and a top order inspection agency must be applied in such cases to control supply , manufacture as well as field installation work.All the above and similar other points should be meticulously recorded in the final contract specification which will be signed by parties concerned.
3. Control During Design & Engineering:
Given below are a few common areas as examples where considerations and scrutiny should be applied during the design and engineering stage for a proper quality job.a)Safety Factor: It is normal practice of Chinese manufacturers or for that matter any company who is constrained to produce goods at exceedingly cheap price, tends to dilute Industrial safety factors and thereby save in material cost. Safety factor is explained in the following way.After the required thickness of a plate or a structural section is calculated considering all possible loading and severity, it is multiplied by a factor which is normally above 2 and varies in different design standards and applications. The load bearing thickness of the structural member is designed by applying this factor. The same concept is followed for all construction appliances like chains , pulleys , ropes, turnbuckles , fasteners etc.Hence, it is necessary to ensure a proper safety factor for selections of all material sizes, in preparing specification and executing design, procurement and site work.a)Corrosion considerations: Corrosion encompasses an inordinately large area in selection and treatment of material for acceptance for the required end uses and is a chapter by itself. Hence we will not discuss at length on this vital point . But adequate attention should be made during specification making and design & engineering to include correct and sufficient protection against the prevailing corrosive ambiance at site. The factors to be seen are proper surface preparation and painting , anti-corrosive cladding where necessary and selection of material of construction to consider a sufficiently long life of say 25 years of operation. These should be contractually incorporated in design as well as specifications.Normal Chinese manufacturers would try to save on material cost by cutting down expenses in above factors.b)Ease of maintenance of equipment :This aspect is particularly important for design of plant and equipment where human access , room for work and ease of work have to be considered by keeping proper space,platform , stairs , ventilation and illuminations. In an attempt to cut on cost a manufacturer is quite likely to overlook these. c)Safety guards on moving machine parts:Toe guards against fall, handrails and back guards at heights and covers over rotating hubs and couplings etc are inevitable and common safety features which manufacturers should not avoid in order to cut costs.Items (a) and (c) are particularly important as a small number of uncalled for accidents on these counts may jeopardize the delivery schedule and push the contractor and purchaser to permanent disrepute.d)Welding procedures with dimensions of welds, type of electrodes, preheating/post heating of welds and preheating of electrodes are essential features of quality welding which should be prescribed by the designers or manufacturers in the drawings released for manufacture and should be suitably covered in QAP to be followed during shop inspection while manufacturing and for inclusion in acceptance dossiers of the respective material for record against future review.e)Check for internal weakness in structural members : Apart from piping a cautious eye should also watch all structural fabrications of items like bridges, towers, turbine and motor shafts, chimneys etc where the members are subjected to high and fluctuating dynamic loading. These structural members must be checked for soundness of the body through nondestructive tests (NDT) including these in QAP so that cracks or inclusions or other kinds of internal non homogeneity is screened out from the parent forged/ cast pieces.The list is in fact being endless, it will be of great benefit if the customer engages a professional design consultant as mentioned earlier to check these during engineering stage of the project.
4. Control during Installation and Commissioning :
It is a common fact that some quality/ safety points may escape scrutiny during approval of design work in spite of checks by reputed experts. These points are discovered during installation and commissioning work at sites . Supplier must be contract bound to comply on correction of these defects on receipt of written notices from the customer . These points will in turn go back to drawing board for inclusion in As-Built drawings and documents for future review. .For an important EPC contract it would be advisable to elicit an erection manual from the contractor and to get this vetted by the inspection agency to implement during installation stage for proper safety and quality of the job at each stage..
5. Control During Warranty Period :
Normally a production plant takes some time say 12 to 15 months for gradually going up to its rated capacity, provided conditions upstream and downstream remain good and steady. This period is defined as warranty period during which supplier is contract bound to replace free of cost any defective equipment or the plant as a whole for not performing as required.All the supplied equipment of the plant must work properly without undue break downs during this period except replacements of high wearing surfaces, heat insulation parts etc defined in contract specifications and normal maintenance requirement of the equipment specified in User's Manuals which customer needs to bear at his own cost even within this warranty period as he would be deriving production and its commercial benefits out of the new plant if it runs even intermittently during this period. While controlling proper functioning during warranty period customer needs to engage a team of experts who would conduct tests for each major equipment on the run and the plant as a whole to establish satisfactory performance for final acceptance and acquittal of dues. Final acceptance shall be held back until all recorded defects are satisfactorily removed and drawings are rectified and submitted in As - Built consignment of drawings and documents by the contractor. Contract management should be extremely careful and hard during this period as normal Chinese suppliers are seen to fall asleep and stop deploying people at work site virtually as soon as the first batch of production is recorded. effecting provisional acceptance. If this is an international contract this indolence is seen to be rife even though final payments would be held back till final acceptance certificate is issued which can be done only after satisfactory Performance Guarantee tests of the plant and equipment.
6.1 This article has mainly dealt with outsourcing engineering goods in context of EPC contracts. In case of standard bought out engineering goods and consumables such rigor may not possible. In these cases customer must follow the steps recommended in model QAP of the respective ISO for quality checks. Examples for these are routine test and sample test documents and periodic visits to factories for checks on manufacturing procedures.
6.2 The steps for a continuous vigilance on quality and propriety are summarized below with a few additional precautions against commonly arising problems.
a)Engage a reputed Inspection agency right at the tender stage to include QAP (Quality Assurance Procedure) in the tender document and follow it up for the full duration of the job.
b)Frame a proper eligibility criteria for tendering so that low order suppliers are denied access to the tender.
c)Issue a global tender through website so that all ISO accredited suppliers get access on merit and are not chosen on personal preferences.
d)Follow the quality checks from framing contract specification to its execution with meticulous scrutiny during design & engineering, manufacturing , construction , commissioning and warranty period of plant or its equipment
e)In a country like China where justice and fair play are dubious due to negation of personal freedom , it would be worthwhile to think of governmental guarantee against a supply or an EPC contract of large value or sensitive subjects of trade such as nuclear material or equipment, harmful chemicals etc.
f) For raw materials such as coal , minerals etc apart from standard international methods of sampling and checking, weight measurements of consignment should also be conducted and recorded by independent agencies at port of shipment and port of call with provisions for settlements of disputes on differences through internationally adopted standard methods.
g) Comprehensive Insurance coverage by customer should be ensured where nuclear isotopes are used for scanning , detection or any other purpose in an equipment so that accidental exposures and resultant contamination of ambiance are well covered for treatment of personnel and required rectification. The same caution is also applicable for radioactive raw materials or harmful chemicals being outsourced .
h)For work on oil and gas exploration unguarded spills or accidental leakages may cause devastation on ecology and environment apart from damages to human lives (for example – the oil spill in the Gulf of Mexico). Contract and QAP should provide for adequate safeguards against such mishaps particularly while outsourcing the exploration job to a country like China.
i)It would be the best if outsourcing is done to a supplier / contractor who is a local company in China set up as a joint venture with a reputed western manufacturer or if outsourcing is done to a reputed western manufacturer who is also incorporated in China for conducting business to all customers so that It may be possible in above cases to legally avoid sanctions or similar restrictions which may arise in case of a direct trade with a western company . This will assure the same quality control norms followed in the west. The mission in all cases will be to follow the strictest quality control norms in their undiluted forms and to institutionalize an unfailing system in the prevailing circumstances for effecting these norms .Written by Dibyendu Sekhar Kumar