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PROJECT NON CONFORMANCE REPORTING PROCEDURE

TABLE OF CONTENTS

1.0 OBJECTIVE

2.0 SCOPE

3.0 RESPONSIBILITIES
3.1 The QA/QC Manager
3.2 The Recipient
3.3 The Identifier / Originator
3.4 The Document Control Center – D.C.C.

4.0 DEFINITIONS

5.0 REFERENCES

6.0 PROCEDURE
6.1 Discovery of Nonconformance
6.2 Issue of the Non-conformance
6.3 Non-conformance Criteria
6.4 Proposal and Agreement of Corrective Actions
6.5 Corrective Action Request Upgrade
6.6 Preventative Action
6.7 Register of Non-conformances
6.8 Non-conformance Identification
6.9 Disposition of the Non-conformance
6.10 Close out of the Non-conformance
6.11 Review and Analysis
6.12 Records

7.0 APPENDICES

7.1 Appendix 1 NCR / CAR Flow Chart

7.2 Appendix 2 Non-conformance Report
7.3 Appendix 3 NCR Register

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ILC B-00-1512-005Rev1
Project Non Conformance Reporting Procedure
Custodian: ILC QA/QC
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1.0 OBJECTIVE
This procedure defines the method for raising, recording, controlling and closing out
the Non-Conformance(s) Reports (NCR’s) within the IRAN LNG Project.

The objective of this non-conformance procedure is to provide a system for

identifying and generating appropriate actions on potential and real situations or
issues which could have an undesired effect on the quality of the project deliverables
or present a significant risk to the project.

In addition, its aim is to share learning to prevent further loss, and to increase the
overall knowledge of staff, by recording and distributing key information among all
IRAN LNG Project Staff.

2.0 SCOPE
This procedure applies to Non-conformance reporting at any phase of the IRAN LNG
project development. Any member of the Project Team can identify non-
conformances.

Non-conformances may apply to the ILC Project processes and systems to

Contractors, their Sub-Contractors or Suppliers’ processes and systems or to any
Product or Service required for the Project.

Where applicable to their scope of work the IRAN LNG Contractors shall comply with
the requirements of this procedure

3.0 RESPONSIBILITIES

3.1 The QA/QC Manager

The QA/QC Manager, or his designated representative, shall be responsible for the
maintenance of the NCR Register including the allocating of unique numbers,
maintaining records of analysis and evaluation of non-conformances and corrective
action, and reporting the findings to the ILC Management.

3.2 The Recipient

The Recipient of the non-conformance shall be responsible for proposing and
addressing both the Corrective Action and Preventative Action requirements and
shall ensure their implementation within the agreed timeframe; all in accordance with
the requirements of this Procedure.

3.3 The Identifier / Originator

The observer who discovers or identifies a deviation from Project Specification shall
be responsible for reporting the findings to the QA/QC Manager and the raising of the
NCR. The Originator of the NCR shall not propose on the NCR the corrective or
preventative actions. It is the Responsibility of the Recipient to decide the action
required to correct the situation and to prevent reoccurrence.

3.4 The Document Control Center, DCC

The IRAN LNG DCC shall be responsible for transmitting the original of the NCR to
the Contractor also maintaining an index of NCR’s issued and for receiving back from

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the Contractor the officially transmitted original of the closed-out NCR and for filing in
a specific NCR filing systems.

4.0 DEFINITIONS

4.1 Non-conformance
Any failure to comply with specified Project specifications that if uncorrected could
lead to loss of life, loss of production or the loss of the use of a utility or facility.

4.2 Non-conformance Report

The document used to track a Non-conformance and the subsequent actions from
the point of identification through to its approved correction and closeout.

4.3 Corrective Action

Action taken to correct a failure to comply with specified Project specifications or a
deviation from Project requirements. This action is a prerequisite for closing any
NCR.

4.4 Preventive Action

Action taken to remedy the cause of a non-conforming product or its service and as a
result prevents reoccurrence.

6.0 PROCEDURE
All NCR’s shall be processed in accordance with the following procedure and the
attached Flowchart, reference Appendix 1.

6.1 Discovery of Non-conformance

In general most non-conformances or deviations will be discovered through quality
control activities and accordingly will be raised by the Project QC personnel.
However, other designated Project personnel may also identify non-conformances /
deviations and raise NCR’s.

Most system non-conformances will be discovered through internal or extrinsic audits

and accordingly will be raised by the Project QA/QC internal or external auditing
section. Other Project personnel who also identify system non-conformances shall
bring these to the attention of the QA/QC Manager.

When a discrepancy or deviation from the project requirements is identified the

identifier shall first discuss the discrepancy with representatives of the affected
organisation and seek an immediate commitment for corrective action to be
implemented.

In the event that corrective action is not implemented within the required time frame
then the identifier shall discuss the issue with his immediate supervisor and obtain
agreement that a NCR should be raised. Also a check shall be carried out to ensure
that the discrepancy is not already the subject of an existing NCR, concession,
deviation, change request or other formal process for remedial action.

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6.2 Issue of the Non-conformance

When it is agreed that a non-conformance has occur the identifier shall type the NCR
(see Appendix 2) then obtain QA/QC team leaders endorsement and the Iran LNG
Company Site Representative (CSR) acknowledgement if applicable. The identifier
shall collate all relevant paper work and issue to the QA/QC Manager, who shall
register the NCR with a unique sequential number and issue the original to the Iran
LNG DCC for transmittal to the Contractor. The QA/QC Manager shall retain a copy
on file.

The NCR / CAR shall be drafted in complete and precise detail including sub-system
identification, such that traceability and monitoring of the nonconforming item can be
readily achieved. It shall also be worded such that it can be closed out subsequent to
corrective action having been completed by the recipient. It shall be the responsibility
of the CSR or IRAN LNG Project Processes and Management Systems owner to
initiate the appropriate immediate action i.e. stop the work, introduce an immediate
system change, etc., until the corrective action has been proposed, completed and
accepted.

The DCC shall transmit the original NCR to the recipient; undercover of a Transmittal
Note. The DCC shall also update their NCR index and maintain a copy of the NCR
on file.

6.3 Non-conformance Criteria

The defining criteria for a Non-conformance / deviation is any failure to comply with a
specified requirement that is documented and as such all NCRs shall specifically
identify the governing document / section / clause / acceptance criteria etc. that has
not been met.

6.4 Proposal and Agreement of Corrective Actions

The Recipient of the NCR shall propose the corrective action(s) / preventative action
required to resolve the non-conformance. The time frame for the recipient to respond
with his proposed corrective action is 3 days for an initial response with a maximum
of 10 days for a detailed response.

The proposed corrective action(s) and the proposed time scale for close out shall be
agreed with the QA/QC Manager, in conjunction with the CSR or equivalent, prior to
implementation.

6.5 Corrective Action Request Upgrade

In such cases where the approved corrective action on a NCR has not been initiated
by the agreed completion date, then the QA/QC Manager may upgrade the NCR
eventually leading to a contractual letter as required.

6.6 Preventative Action

The recipient of the NCR shall investigate all non-conformances to establish the
reason and cause of the discrepancy and the findings of the investigations shall be
recorded. Once the cause or reasons for the discrepancy has been identified then
preventative measures shall be established or the applicable current procedures
revised to prevent or minimise re-occurrence as much as is practicably possible.
These preventative measures shall be recorded on the NCR document.
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6.7 Register of Non-conformances

The QA/QC Manager shall maintain a register of all Project NCR’s - reference
Appendix 3 - and monitor the progress to ensure that corrective actions and
subsequent close out is conducted in a timely manner.
The DCC shall maintain an Index of all NCR’s to ensure traceability of the original
document.

6.8 Non-conformance Identification

Where possible, all non-conforming products shall be segregated from conforming
products or placed in a quarantined area and shall be clearly identified as
“Quarantined” in a suitable manner complete with the NCR unique number in order
that they are not used until remedial action has been
taken.

The method used may vary according to the type of product and the type of Non-
conformance (e.g. tag and quarantine a valve, lock out a CAD model).

For an NCR relating to management systems a Quality Bulletin (or Project Email)
may be used to alert others of the nature of the Non-conformance and the probability
that the system is to be modified.

6.9 Disposition of the Non-conformance

The disposition of a product Non-conformance may be determined by one of the
following methods:

o Carry out remedial work in accordance with an approved procedure and re-
inspect to the original requirements.

o Amend the Drawing, Design and/or Specification requirements in accordance

with the approved Design Change Control Procedure to reflect the Non-
conformance and accept the product as produced.

o Issue a Concession Request to accept the product as “Fit for Purpose”

o Reject the product in it’s entirety and return to the supplier or re-fabricate to the
original requirements.

The disposition method used shall be noted for the inclusion in Project quality
records

6.10 Close out of the Non-conformance

After completion of the corrective action, the Recipient shall initiate the Close out by
requesting QC re-inspection to the original specification. Upon re-inspection and
acceptance the recipient shall request that the NCR shall be signed by a responsible
Iran LNG QC Field Inspector / QC Supervisor / QA/QC Manager to confirm that all of
the proposed remedial actions have been completed and accepted. The NCR shall
then be presented to the CSR or equivalent, who shall also verify completion of the
corrective action and where the CSR can not sign for whatever reason then QA/QC
Manager can sign off for the CSR.
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The QA/QC Manager shall verify that the Non-conformance has been processed in
accordance with this Non-conformance Procedure by finally counter signing the
NCR. The QA/QC Manager shall record the close out details in the NCR register file
a copy of the NCR and all relevant documentation, for inclusion in the Project quality
records. The NCR shall then be considered formally closed out. The original will then
be officially transmitted to the Contractor.

In the event that there is a request from the Contractor to perform a Joint QC
Inspection or for the Final Joint PC&C Inspection prior to the closeout of associated
NCR’s then at the discretion of the QA/QC Manager the closure of the NCR’s may be
carried over and recorded as a punch item on the relevant Punch List.

6.11 Review and Analysis

The QA/QC Manager shall carry out periodic reviews and analysis of all Non-
conformances Reports and Preventative Actions to establish whether any specific
trends or patterns are emerging. The areas shall cover but not be limited to the
following:

o Cause of non-conformance / discipline / categories.

o Time taken to close out NCR’s
o Disproportionate numbers of non-conformances against particular
Contractors, Suppliers, departments or system elements.

If after review and analysis any significant trends of failures are identified then
measures shall be taken to prevent continuing re-occurrence and the details shall be
recorded through the lessons learned philosophy.

The QA/QC Manager will produce as required, on a weekly basis a chart of open
NCR and closed NCR. This information will be passed to the team as an inclusion
into the weekly report

6.12 Records
NCR records are crucial for project demonstration of Technical Integrity and hand
over. The IRAN LNG Project Team Leaders shall maintain all records related to the
NCR for inclusion in the “Handover” documentation

7.0 APPENDICES
o Appendix 1 NCR Flow Chart
o Appendix 2 Non-conformance Report
o Appendix 3 NCR Register

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ILC B-00-1512-005Rev1
Project Non Conformance Reporting Procedure
Custodian: ILC QA/QC
 IRAN LNG PROJECT

Appendix 1 - NCR Flow Chart

REF. Activity Description ILC REP. ILC QA/QC ILC CSR ILC DCC Contractor

1 Deviation from Quality

Deliverables that could present
a risk to the Project observed, 1
NCR drafted and signed.

2 NCR registered by ILC QA/QC

manager or designated rep &
retains copy. 2

3 ILC CSR decides to stop work

or NOT via the contractual
procedure 3

4 DCC recieves original NCR and Completed

updates register: QA/QC 4
manager retains copy

5 NCR original issued to Contractor

by DCC via transmittal note: DCC
retains copy of NCR 5

6 Contractor reviews NCR content

and inserts corrective /
preventative action & completion 6
date.

7 Contractor retains original NCR

and issues copy to ILC QA/QC
Manager 7

8 Contractor executes corrective

actions and obtains verification
signatures on the NCR as per 8
9 - 10 & 11.

ILC B-00-1512-005 Rev 1

Project Non Conformance Reporting Procedure
Custodian: ILC QA/QC Sheet 1 of 2
 IRAN LNG PROJECT

Appendix 1 Sheet 2 (Continued) - NCR Flow Chart

REF. Activity Description ILC REP. ILC QA/QC ILC CSR ILC DCC Contractor

9 ILC Inspector verifies that

re-work is acceptable and signs
NCR 9 9

10 ILC Engineer verifies rework is

acceptable and signs NCR
10 10

11 ILC QA/QC Manager or

designate monitors corrective
rework and signs and closes
11 11
the NCR - retains copy.

12 Contractor transmits original

NCR to ILC DCC using
transmittal note 12

13 DCC updates NCR register

and files original NCR in
designated NCR filing system. 13

ILC B-00-1512-005 Rev 1

Project Non Conformance Reporting Procedure
Custodian: ILC QA/QC
 IRAN LNG PROJECT

Appendix 2 - Non-Conformance Report.

NON - CONFORMANCE REPORT

NCR NUMBER
Reciprient
Site Location

System: Contract No.

Sub - System
ILC Team Member/REP ILC QA/QC Department ILC Discipline Engineer
Issued By Endorsed By: Acknowledged:
Name Name Name:
Title Title Title
Signature Signature Signature
Date Date Date
Controlling Code, Specification or Procedure : Including Section & Paragraph

Details of Non-Conformance:

Corrective Action (To be proposed by Reciprient within 10 days of reciept)

Proposed By: By Date: (Date of Final completion )

Preventative Action (To be determined by Reciprient)

The ILC QC confirms Corrective Action has been completed and is acceptable with ILC Specifications
Name: Title: Signed: Date:

The Completion of the above Corrective Action has been verified by ILC Discipline Engineer
Name: Title: Signed: Date:

The Completion of the above Corrective Action has been Accepted and Closed ILC QA/QC
Name: Title: Signed: Date:

ILC B-00-1512-005
Project Non Conformance Reporting Procedure
Custodian: ILC QA/QC
 Appendix 3 - NCR Register
IRAN LNG PROJECT
Non - Conformance Register

NCR No. Sub System Issued Discipline Location Description Date Issued Proposed Comments
No. to Closed out date

ILC B-00-1512-005
Project Non Conformance Procedure
Custodian: ILC QA/QC