Texas International Oilfield Tools, Ltd.

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1 Originated by: J. Tuttle Texas International Oilfield Tools, Ltd. QUALITY SYSTEM MANUAL Revision Date: May 26, 2010 Number: QSM000 Subject: Texas International Quality System Revision: A 1.0 INTRODUCTION Texas International Oilfield Tools (TIOT) is a privately held company which supplies critical oilfield equipment and tools to the petroleum industry. This Quality System Manual was designed to describe the quality management system utilized by Texas International Oilfield Tools. Texas International Oilfield Tools has documented and implemented a quality system that meets its internal requirements and is patterned after the international quality standard, notably the following: API Q Specification for Quality Programs for the Petroleum, Petrochemical and Natural Gas Industry ISO : Quality Systems Quality Management Systems Requirements ISO TS 29001:2007 Petroleum, petrochemical and natural gas industries Sector specific requirements Requirements for product and service supply organizations The quality system satisfies the requirements listed above and is documented in this Quality Manual (QSM000) and associated Quality Assurance Procedures (numbered QSPXXX), and Operating Procedures. NOTE: The bolded sections of this manual in small face type are the requirements as stated in ISO The bolded and italicized sections of this manual in small face type are the requirements as stated in API Q and ISO TS 29001:2007. The statements following the requirements are the Texas International Oilfield Tools procedures to meet those requirements. 1.1 SCOPE This Quality System is designed to include the complete activities of Texas International Oilfield Tools from the receipt of order from the customer through manufacturing (including purchasing) TEXAS INTERNATIONAL OILFIELD TOOLS PROPRIETARY DOCUMENT This information is proprietary to Texas International Oilfield Tools and is not be distributed in derogation of TIOT property rights. Approval: Rex Shepperd Title: President Approval: Richard Hellinger Title: General Manager Approval: Leticia Robles Title: Operations Manager

2 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 2 of 42 and delivery of products that consistently meet customer and applicable regulatory requirements. Its focus is enhanced customer satisfaction and it includes processes for continuous improvement. 1.2 CONTROL Procedures within this Quality Manual will be maintained under document (revision) control. The current revision level of each procedure is listed electronically in the Texas International Oilfield Tools computer network, G:\TIOT Models & Documents\Quality System Procedures & Documents directory and is maintained physically by the Quality Manager. It is the responsibility of each individual using these procedures to verify the correct revision level using the network. A listing of every recipient of a controlled copy of this manual and supporting procedures shall be kept in the G:\TIOT Models & Documents\Quality System Procedures & Documents directory and is maintained physically by the Quality Manager. 2.0 REFERENCES Certain aspects of this Quality Manual are based upon industrial specifications and/or recognized standards. These include but are not limited to the following: API Q1 Specification for Quality Programs for the Petroleum, Petrochemical and Natural Gas Industry ISO 9000 Quality Management Systems - Fundamentals and Vocabulary ISO 9001 Quality Management Systems - Requirements ISO 9004 Quality Management Systems Guidelines for Performance Improvements ISO Guidelines for quality and/or environmental management systems auditing ISO TS 29001:2007 Petroleum, petrochemical and natural gas industries Sector specific requirements Requirements for product and service supply organizations 3.0 DEFINITIONS References and definitions of MIL-I-45208, MIL-Q-9858A, ISO 8402/ANSI A3 and ISO 9000/ANSI Q90, Quality Management and Quality Assurance Standards, apply. 3.1 Terms and definitions for the petroleum, petrochemical and natural gas industries For the purposes of this Technical Specification, the terms and definitions given in ISO 9000:2005 and the following shall apply acceptance criteria - specified limits of acceptability applied to process or product characteristics acceptance inspection - demonstration through monitoring or measurement that the product complies with specified requirements calibration - comparison and adjustment to a standard of known accuracy

3 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 3 of control feature - organization's documented method to perform an activity under controlled conditions to achieve conformity to specified requirements delivery - point in time and physical location at which the agreed transfer of ownership takes place design acceptance criteria - defined limits placed on characteristics of materials, products, or services established by the organization, customer, and/or applicable specifications to achieve conformity to the product design design validation - process of proving a design by testing to demonstrate conformity of the product to design requirements design verification - process of examining the result of a given design or development activity to determine conformity with specified requirements field nonconformity - product nonconformity that is detected after delivery or use has started manufacturing acceptance criteria - defined limits placed on characteristics of materials, products and services established by the organization to achieve conformity to the manufacturing or service requirements tender - offer made by an organization in response to an invitation to provide a product The specific definitions above from API Q / ISO TS 29001:2007 apply. 4.0 QUALITY MANAGEMENT SYSTEM 4.1 General requirements The organization shall establish, document, implement and maintain a quality management system and continually improve its effectiveness in accordance with the requirements of this International Standard. Texas International Oilfield Tools' quality system is documented in this quality manual, QSM000, and in supporting procedures numbered QSPXXX. The revised, ISO compliant system was implemented in June It is been maintained through internal, customer and registrar audits, management reviews and corrective and preventative actions, and continually updated and improved. There are four levels of documentation in the Texas International Oilfield Tools Quality System: the Quality Manual, at the top level, containing the quality policy, is based on ISO 9001, API Q and ISO TS 29001; the second level, company and departmental procedures, including both inter-departmental and intra-departmental procedures, establish the uniformity and repeatability of Texas International Oilfield Tools processes and document them with an appropriate level of detail. The third level is work instructions. The fourth level includes forms, tags and other objective evidence items. The Quality Manual and the associated procedures are controlled documents. Uncontrolled copies can be obtained from the Texas International Oilfield Tools network, either via electronic media or paper. Controlled copies are available from the Quality Manager, on paper only. Third and fourth level documents are proprietary to Texas International Oilfield Tools and are available only by express permission of the President or the Quality Manager, and are usually restricted exclusively to on-premise use.

4 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 4 of 42 The organization shall a) identify the processes needed for the quality management system and their application throughout the organization (see 1.2), b) determine the sequence and interaction of these processes, c) determine criteria and methods needed to ensure that both the operation and control of these processes are effective, d) ensure the availability of resources and information necessary to support the operation and monitoring of these processes, e) monitor, measure and analyze these processes, and f) implement actions necessary to achieve planned results and continual improvement of these processes. These processes shall be managed by the organization in accordance with the requirements of this International Standard. Where an organization chooses to outsource any process that affects product conformity with requirements, the organization shall ensure control over such processes. Control of such outsourced processes shall be identified within the quality management system. NOTE Processes needed for the quality management system referred to above should include processes for management activities, provision of resources, product realization and measurement Outsourced processes and/or services - Supplemental The organization shall maintain responsibility for product conformance to specified requirements when processes are outsourced. The processes necessary to the Texas International Oilfield Tools quality system can be grouped under four headings: Management Responsibility, Resource Management, Product Realization and Measurement, Analysis and Improvement. Together the four groups link together to create a closed loop system for continuous improvement of the process of meeting customer needs with a profitable product that meets or exceeds their expectations. The sequences within the groupings are discussed below. The Management Responsibility grouping consists of 1) appointing a management representative for the Quality Management System, 2) establishing a Quality Policy, 3) establishing quality objectives, 4) evaluating the need and providing resources to support the objectives, 5) defining positions and authorities within the organization, 6) communicating to the organization the Quality Policy, requirements, objectives, accomplishments, and the importance of meeting customer, regulatory and statutory requirements, and 7) management review of the Quality Management System. The Resource Management grouping consists of 1) establishing and maintaining the infrastructure required to produce the product and meet customer expectations, 2) defining minimum competency requirements for positions affecting product quality, 3) defining training

5 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 5 of 42 needs and providing training to meet product conformity and customer requirements, and 4) management of the work environment so as to achieve product conformity. The Product Realization grouping consists of 1) defining and documenting customer product requirements, including regulatory/statutory requirements, manufacturability and delivery, 2) review of identified customer requirements to determine the ability to achieve the requirements prior to acceptance of the order, 3) communicating acceptance and/or changes to customer purchase order, 4) design and development planning, review, verification and validation and controlling changes thereto; 5) documenting and communicating requirements to other applicable functions within the organization, 6) quality planning - defining how we measure and meet customer, company, and industry standard requirements for the product, 7) communicating changes to customer, company, and industry standard requirements for the product, 8) validating welding, heat treating, cleaning, and any other processes that cannot be verified by subsequent inspections, 9) purchasing process controls, including approval of suppliers and communicating product and/or service requirements, including changes to requirements, 10) providing for identification and traceability of materials and products, 11) controlling of the receipt and issue of customer supplied materials/equipment, and 12) providing for proper handling, packaging, storage, preservation and shipment of materials and products. The Measurement, Analysis and Improvement grouping consists of 1) calibration and control of measuring and test equipment, including furnaces, welding machines, and other equipment requiring calibration control, 2) verifying and accepting procured materials, services and products, 3) verifying and accepting products during the manufacturing process, 4) verifying and accepting products prior to release for shipment and/or inventory, controlling non-conforming product, 5) identifying, monitoring, and measuring key aspects of internal processes to obtain continual improvement of the Quality Management System, 6) internal auditing of the Quality Management System, 7) monitoring and measuring customer satisfaction, and 8) performing corrective/preventive actions. The individual items in these groupings, and how they are performed, are discussed in detail in the further sections of this quality manual.

6 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 6 of 42 Texas International Oilfield Tools Process-Based Quality Management System - Interaction of Process Groupings Texas International Oilfield Tools's process based quality management system is modeled directly upon the API Q / ISO quality system model. The above diagram illustrates the interactions between the groupings. The basic outline of the Texas International Oilfield Tools actions relative to the process groupings are discussed in sections through Details of the responsibilities and requirements relative to the elements of each grouping are outlined in further sections of this manual, and associated procedures MANAGEMENT RESPONSIBILITY The top management of Texas International Oilfield Tools has defined the positions and authorities for the facility, including the Quality Management Representative, as shown in the current organization chart which can be obtained from the office of the President. Top management has established a quality policy and has communicated its importance via the

7 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 7 of 42 signature of the President and its inclusion in this manual. Top management has established and communicated quality objectives for the facility. These are the foundation of the quality management system. Top management provides the resources necessary to meet the quality objectives, and continually improves the effectiveness of the quality system using feedback from the Measurement, Analysis and Feedback process grouping RESOURCE MANAGEMENT Texas International Oilfield Tools management determines and provides the necessary resources to meet customer requirements and to implement, maintain, and continually improve the Quality Management System. These resources include qualified and competent personnel, process equipment, capital goods, facilities, maintenance, work environment, and supporting services. As part of the management review of the quality program, management utilizes input from the Measurement, Analysis, and Improvement grouping and the projected business environment to evaluate the resource requirements and work environment of the facility PRODUCT REALIZATION Texas International Oilfield Tools identifies, plans, develops, and implements processes needed for product realization. Quality objectives and product requirements are determined. Resources are provided specific to product requirements relating to Texas International Oilfield Tools, customer, statutory, and regulatory requirements. The President and designees review customer inquiries and interface with customers to determine customers needs. Customer requirements are communicated to appropriate personnel by the President and designees or directly by the customers. The President and designees review customer inquiries and provide quotations for the customers requested products. The President and designees communicate quotations and any changes and/or exceptions to customers. The President and designees receive customer purchase orders, and are responsible for contract review and for issuing work orders that communicate customer needs to the appropriate departments in the company. Acceptance of orders is communicated to the customers. The Purchasing department procures the materials and services required for the product. Purchasing interacts with Engineering and Quality for the identification and qualification of suppliers. Engineering and Manufacturing management utilizes data from customers, operators, the President and Quality to develop process routers that communicate manufacturing, inspection, and assembly and test requirements to manufacturing. The manufacturing and procurement processes interact with the receiving inspection, in-process inspection, and final inspection processes identified in the Measurement, Analysis, and Improvement groupings of this manual for acceptance of the product. Manufacturing is also required to interact with the Measurement, Analysis, and Improvement element processes for the calibration and control of equipment used to produce the product.

8 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 8 of 42 The warehouse and shipping and receiving receives accepted product including customersupplied product. Shipping and receiving interacts with manufacturing and suppliers to obtain product for shipment to customers, as communicated on customer orders. Handling, storage, packaging, preservation and shipping are in accordance with documented procedures. The overall Texas International Oilfield Tools Quality System and associated documents is amplified with specific process instructions, process drawings and additional company and/or departmental procedures as needed to meet the specified requirements for products, projects, or contracts. The Foreman, leadmen and other managers are responsible for the identification of any controls, processes, equipment (including inspection and test equipment), fixtures, resources, and skills (over and above those currently in use) that may be needed to achieve the required quality, and ensuring the compatibility of the production process, inspection and test procedures, and the applicable documentation. Engineering and Manufacturing personnel are jointly responsible for the clarification of standards of acceptability for all features and requirements, particularly those that contain a subjective element. The Quality Manager is responsible for the updating, as necessary, of quality control, inspection, and testing techniques, including the development of new instrumentation; the identification of any measurement requirement involving capability that exceeds the known state of the art, in sufficient time for the needed capability to developed; and the identification of suitable verification at appropriate stages in the realization of product MEASUREMENT, ANALYSIS AND IMPROVEMENT Texas International Oilfield Tools identifies, plans, develops, and implements the monitoring, measurement, analysis, and improvement processes needed to demonstrate product conformity, to insure conformity of the Quality Management System, and to continually improve the effectiveness of the Quality Management System. Specific interactions are established between the inspection processes and the calibration process to assure the quality of accepted product. Interactions are established between management, inspection, purchasing, manufacturing and quality planning processes for the control of nonconforming product. Interactions between all processes are established to address corrective and preventive actions that are issued as a result of Quality Management System audits and/or recognized nonconformances. Top management utilizes the data produced by the Measurement, Analysis, and Improvement element processes so that the processes of the Management Responsibility and Resource Management elements may be effective. 4.2 Documentation requirements General

9 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 9 of 42 The quality management system documentation shall include a) documented statements of a quality policy and quality objectives, b) a quality manual, c) documented procedures required by this International Standard, d) documents needed by the organization to ensure the effective planning, operation and control of its processes, and e) records required by this International Standard (see 4.2.4). NOTE 1 Where the term documented procedure appears within this International Standard, this means that the procedure is established, documented, implemented and maintained. NOTE 2 The extent of the quality management system documentation can differ from one organization to another due to a) the size of organization and type of activities, b) the complexity of processes and their interactions, and c) the competence of personnel. NOTE 3 The documentation can be in any form or type of medium QUALITY POLICY Texas International Oilfield Tools constantly strives to produce superior oilfield equipment with outstanding value at the time the customer needs it. We make every effort to maximize customer satisfaction through insuring that all of our products comply with customer and relevant safety and regulatory requirements providing the highest level of customer service before, during and after the sale setting manufacturing and quality objectives and measuring our performance organizing production responsiveness and timely delivery continually improving our systems, processes and products. Our employees understand our business and take ownership in what they do. Our employees know that our services impact the performance of our customers. As a company we recognize the value of each individual's knowledge and skills. We appreciate and utilize this knowledge and these skills. They set us apart from our competitors. We are always working to improve our processes. Our systems and technology allow for lower costs and reduced lead time of products for our customers. Our systems connect our business activity to our customers needs.

10 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 10 of 42 Texas International Oilfield Tools Quality Policy is summarized in the following statement. Superior equipment, outstanding value, produced on time. The Quality Management System documentation includes a) the above quality policy and objectives, b) this quality manual, QSM000, c) procedures required by API Q and additional procedures deemed necessary by the organization numbered QSPXXX, d) sublevel procedures required by the organization numbered QSPXXX.YYY, as well as other documents identified in the procedures and QSP4.2.4, Quality Records, and e) records required by API Q1-2007, as listed in QSP4.2.4, Quality Records Quality manual The organization shall establish and maintain a quality manual that includes a) the scope of the quality management system, including details of and justification for any exclusions (see 1.2), b) the documented procedures established for the quality management system, or reference to them, and c) a description of the interaction between the processes of the quality management system Quality manual - Supplemental The quality manual shall identify the manner in which the organization addresses each specific requirement of this technical specification, including both the requirements of ISO 9001:2000 and the supplemental requirements QUALITY MANUAL QSM000 (this quality manual) describes the scope of the Quality Management System and the details of exclusions and their justification. See paragraph 1.1. Throughout the quality manual are either 1) general descriptions of separate procedures established for the quality system, followed by references to the separate procedures, by number, or 2) the actual procedures themselves. The description of the interaction between the processes of the quality management system is described and shown graphically in section 4.0 of this quality manual Control of documents Documents required by the quality management system shall be controlled. Records are a special type of document and shall be controlled according to the requirements given in A documented procedure shall be established to define the controls needed a) to approve documents for adequacy prior to issue, b) to review and update as necessary and re-approve documents, c) to ensure that changes and the current revision status of documents are identified,

11 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 11 of 42 d) to ensure that relevant versions of applicable documents are available at points of use, e) to ensure that documents remain legible and readily identifiable, f) to ensure that documents of external origin are identified and their distribution controlled, and g) to prevent the unintended use of obsolete documents, and to apply suitable identification to them if they are retained for any purpose Control of documents - Supplemental A master list or equivalent control feature shall be used to identify the documents required by the quality management system, and their current revision status Control of document changes - Supplemental Changes to documents shall be reviewed and approved by the same functions that performed the original review and approval CONTROL OF DOCUMENTS Texas International Oilfield Tools controls documents required by the quality management system both manually and electronically, with change access limited to authorized employees. These employees review and update as necessary, and re-approve documents for use when necessary. Changes and the current revision status of documents are identified, and controlled electronically. Relevant versions of applicable documents are provided as part of a work order package, or as part of a collection of documents identified in the work order. Documents are reviewed for legibility and identifiability by the producing and using personnel, and replaced as needed. Documents of external origin are identified by their electronic location and distribution is limited to Texas International Oilfield Tools employees. Obsolete documents are controlled manually or electronically by moving them to a suitable location, clearly identified so as to label them obsolete. Obsolete paper documents, if retained, are marked so as to identify them obsolete. Texas International Oilfield Tools maintains on-line systems including the Texas International Oilfield Tools network, for identifying the revision status of all documentation. Documentation and data is controlled per the Document and Data Control Procedure QSP Invalid and /or obsolete documents are controlled per the Revision Change Notice Procedure, QSP Changes to customer provided documentation and data are performed per the Revision Change Notice Procedure QSP All other document and/or data changes are generated, reviewed and approved by the same responsible management, unless specifically designated otherwise. Customer documents may be annotated, in accordance with the Document and Data Control Procedure QSP4.2.3, in cases where a customer design may contain an error not deemed by the customer sufficient to warrant a formal design change, or the customer agrees to alter requirements at the request of Texas International Oilfield Tools. The annotation shall supersede the original customer requirements as though a formal design change had been issued and received Control of records

12 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 12 of 42 Records shall be established and maintained to provide evidence of conformity to requirements and of the effective operation of the quality management system. Records shall remain legible, readily identifiable and retrievable. A documented procedure shall be established to define the controls needed for the identification, storage, protection, retrieval, retention time and disposition of records Control of records - Supplemental The documented procedure shall identify the functions responsible for the collection and maintenance of records. Records required by the applicable industry product standards shall be retained for not less than the period of time specified by the industry standard or five years, whichever is longer. Records required to provide evidence of conformity to requirements and of the effective operation of the quality management system shall be retained for a minimum of five years. NOTE: Collection is the process of obtaining, assembling and/or organizing applicable documentation with the intent of meeting the requirements of CONTROL OF RECORDS All quality records shall be stored and retained by the responsible management within the guidelines of the Quality Records Procedure QSP Documented procedures addressing all aspects of the Quality Management System are available which detail the following: records to be prepared records to be retained storage location(s) retention periods final disposition. Records at Texas International Oilfield Tools may be of more than one type of medium and may consist of paper, electronic, or other media depending on the most economic means of storage and retrieval capability. 5 Management responsibility 5.1 Management commitment Top management shall provide evidence of its commitment to the development and implementation of the quality management system and continually improving its effectiveness by a) communicating to the organization the importance of meeting customer as well as statutory and regulatory requirements, b) establishing the quality policy, c) ensuring that quality objectives are established, d) conducting management reviews, and e) ensuring the availability of resources.

13 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 13 of MANAGEMENT COMMITMENT Top management provides evidence of its commitment to the development and implementation of the quality management system and continually improving its effectiveness by 1) communicating the importance of meeting customer, statutory and regulatory requirements through company and area meetings, postings, s and individually addressed written communication; 2) establishing the quality policy, training employees in its content, and making it available company wide; 3) establishing quality objectives; 4) conducting management reviews; and 5) insuring resources are available for the implementation of the quality management system. 5.2 Customer focus Top management shall ensure that customer requirements are determined and are met with the aim of enhancing customer satisfaction (see and 8.2.1). 5.2 CUSTOMER FOCUS At Texas International Oilfield Tools the customer is the reason for everything we do. Top management reviews specific operations on a daily basis and in aggregate on a periodic basis to insure customer requirements are accurately determined, and met in such a way as to enhance customer satisfaction. 5.3 Quality policy Top management shall ensure that the quality policy a) is appropriate to the purpose of the organization, b) includes a commitment to comply with requirements and continually improve the effectiveness of the quality management system, c) provides a framework for establishing and reviewing quality objectives, d) is communicated and understood within the organization, and e) is reviewed for continuing suitability Quality policy - Supplemental Top management shall document its approval of the quality policy. 5.3 QUALITY POLICY Top management insures the quality policy is appropriate to the purpose of the organization by periodic review and comparison to the organization's goals and alignment. It always contains a commitment to comply with requirements and to continually improve the effectiveness of the quality management system. It provides for the establishment of quality performance measures and objectives (goals) and for the review of organizational performance relative to those measures and goals. The quality policy is communicated throughout the organization via training and management reinforcement. See Section

14 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 14 of Planning Quality objectives Top management shall ensure that quality objectives, including those needed to meet requirements for product [see 7.1 a)], are established at relevant functions and levels within the organization. The quality objectives shall be measurable and consistent with the quality policy QUALITY OBJECTIVES Top management establishes and communicates the quality objectives of the company. The quality objectives, including those needed to meet requirements for product, are established at relevant functions and levels within the facility to support the overall intention of the Quality Policy. Relevant functions pertaining to quality objectives include: a) Engineering; b) Manufacturing; c) Materials management, Accounting, Purchasing, Warehousing, Shipping and Receiving, and Human Resources; and d) Quality. The quality objectives are: a) structured toward attaining the desired results of meeting customer satisfaction and needs; b) quantitative and measurable; c) attainable and realistic; d) consistent with the Quality Policy; e) controlled by the relevant functions; f) documented, monitored and measured. When establishing the quality objectives, top management takes into account the relevant findings from management reviews, current product results, and the level of customer satisfaction. Quality objectives may apply broadly across the company or may focus on a particular product, department or process Quality management system planning Top management shall ensure that a) the planning of the quality management system is carried out in order to meet the requirements given in 4.1, as well as the quality objectives, and b) the integrity of the quality management system is maintained when changes to the quality management system are planned and implemented. NOTE: See also 5.6, 7.1, 7.1.1, 7.3.1, 7.5.1, 8.1 and for other planning requirements QUALITY MANAGEMENT SYSTEM PLANNING The Quality Manager is responsible for identifying and documenting the processes needed for the Quality Management System, and that the sequence and interaction of these processes are identified. The processes shall be documented and controlled through one or more of the following: a) the Quality Management System manual and procedures; b) work

15 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 15 of 42 instructions/departmental procedures; c) flow charts; d) process routings and CNC program notes; e) specific quality plans; f) other controlled media. The Foreman and area managers are responsible for ensuring that changes to these processes are controlled and do not diminish the integrity of the Quality Management System. Top management is responsible for identifying resource requirements and providing sufficient and appropriate resources essential to the implementation of the Quality Management System. The Quality Manager is responsible for ensuring that changes to the Quality Management System are planned and implemented so as to maintain the integrity of the system. 5.5 Responsibility, authority and communication Responsibility and authority Top management shall ensure that responsibilities and authorities are defined and communicated within the organization RESPONSIBILITY AND AUTHORITY A detailed organizational chart with the names of the individuals currently responsible for the management of each of the major departments within Texas International Oilfield Tools can be obtained from the office of the President Management representative Top management shall appoint a member of management who, irrespective of other responsibilities, shall have responsibility and authority that includes a) ensuring that processes needed for the quality management system are established, implemented and maintained, b) reporting to top management on the performance of the quality management system and any need for improvement, and c) ensuring the promotion of awareness of customer requirements throughout the organization. NOTE The responsibility of a management representative can include liaison with external parties on matters relating to the quality management system MANAGEMENT REPRESENTATIVE The Quality Manager has the responsibility and authority to insure that processes needed for the quality management system are established, implemented and maintained. The Quality Manager reports to top management on the performance of the quality management system and any need for improvement, and promotes awareness of customer requirements throughout the organization Internal communication

16 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 16 of 42 Top management shall ensure that appropriate communication processes are established within the organization and that communication takes place regarding the effectiveness of the quality management system INTERNAL COMMUNICATION Top management ensures that processes are established to effectively communicate internal and external requirements, and is responsible for communicating quality objectives and accomplishments. The Quality Policy is included in the Quality Manual and is available to all company employees. Methods of communication may include: a) documented and controlled procedures; b) meetings; c) or memos; d) area meetings / briefings; e) employee or customer surveys; f) notice boards; g) videos or slide presentations. 5.6 Management review General Top management shall review the organization's quality management system, at planned intervals, to ensure its continuing suitability, adequacy and effectiveness. This review shall include assessing opportunities for improvement and the need for changes to the quality management system, ncluding the quality policy and quality objectives. Records from management reviews shall be maintained (see 4.2.4) General - Supplemental The management review shall be conducted at least annually. NOTE: includes monitoring of quality objectives as part of the management review Review input The input to management review shall include information on a) results of audits, b) customer feedback, c) process performance and product conformity, d) status of preventive and corrective actions, e) follow-up actions from previous management reviews, f) changes that could affect the quality management system, and g) recommendations for improvement. NOTE 1: c) in conjunction with 8.4 c) includes trends of product nonconformity. NOTE 2: f) includes changes to applicable petroleum, petrochemical and natural gas industry standards. NOTE 3: c) includes reports and analysis of field nonconformities (see 3.1.9) if applicable Review output

17 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 17 of 42 The output from the management review shall include any decisions and actions related to a) improvement of the effectiveness of the quality management system and its processes, b) improvement of product related to customer requirements, and c) resource needs. 5.6 MANAGEMENT REVIEW The President and selected personnel will conduct a management review annually (at a minimum) of the internal quality audit reports per the Internal Quality Audit Procedure QSP8.2.2 and other items to evaluate the effectiveness and suitability of the Quality System. This review will include as inputs: customer complaints; customer nonconformance reports; internal nonconformance reports; delivery performance; vendor quality and delivery performance; internal audit reports; corrective and preventative action items generated through application of Corrective and Preventative Action Procedure QSP ; measures of customer satisfaction not noted above; changes in business conditions that could affect the quality management system; recommendations for improvement. The review will include as outputs: decisions and actions to improve the quality management system and its processes; decisions and actions to improve products relative to customer requirements; identified resource needs. Records of these reviews will be documented in accordance with Quality Records Procedure QSP The Quality Manager shall prepare periodic reports, at least quarterly, of internal nonconformances, supplier nonconformances, customer rejects and any other quality issues he desires to discuss, such as audit results, for distribution to company management including the President. 6. Resource management 6.1 Provision of resources The organization shall determine and provide the resources needed a) to implement and maintain the quality management system and continually improve its effectiveness, and

18 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 18 of 42 b) to enhance customer satisfaction by meeting customer requirements. 6.1 PROVISION OF RESOURCES Top management determines and provides the resources necessary to implement and maintain the quality management system and for its continuous improvement, as well as for the resources necessary for enhancing customer satisfaction through meeting or exceeding customer requirements General Personnel performing work affecting product quality shall be competent on the basis of appropriate education, training, skills and experience Competence, awareness and training The organization shall a) determine the necessary competence for personnel performing work affecting product quality, b) provide training or take other actions to satisfy these needs, c) evaluate the effectiveness of the actions taken, d) ensure that its personnel are aware of the relevance and importance of their activities and how they contribute to the achievement of the quality objectives, and e) maintain appropriate records of education, training, skills and experience (see 4.2.4) Training - Supplemental The organization shall establish control features (see 3.1.4) for identifying training needs and providing for training of personnel who perform activities addressed in the quality management system. The training requirements shall provide for quality management system training and for job training of personnel. The frequency of training shall be defined by the organization. NOTE 1: provides on-the-job training for personnel in any new or modified job affecting product quality, including contract personnel. NOTE 2: includes having a process to measure the extent to which its personnel are aware of the relevance and importance of their activities and how they contribute to the achievement of the quality objectives [see d)]. Personnel whose work can affect quality should be informed about the consequences to the customer of nonconformity to quality requirements GENERAL, COMPETENCE AWARENESS AND TRAINING All personnel at Texas International Oilfield Tools are chosen on the basis of appropriate education, training, skills and experience. Necessary competence for employment is determined through (as applicable) job applications, resumes, interviews, and references matched against job requirements, and a probationary period where training is given and performance evaluated. Training can include several aspects: quality system training, safety training, specific job requirement training, specific technical training, and others. The minimum will include quality

19 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 19 of 42 system training, safety training and job specific training. Job specific training is often provided as on-the-job training. Performance reviews are conducted at least annually to determine the effectiveness of the actions taken. Personnel are apprised of the relevance and importance of their activities and their contribution to the achievement of quality objectives during quality system training and by management counseling. Appropriate records of education, training, skills and experience are maintained per QSP4.2.4 and QSP Infrastructure The organization shall determine, provide and maintain the infrastructure needed to achieve conformity to product requirements. Infrastructure includes, as applicable a) buildings, workspace and associated utilities, b) process equipment (both hardware and software), and c) supporting services (such as transport or communication). 6.3 INFRASTRUCTURE Top management is responsible for determining, providing and maintaining an infrastructure required to achieve product conformance and customer requirements. Infrastructure requirements shall be evaluated during the annual management review and at other times designated by top management. Infrastructure shall include but not be limited to: 1) buildings, workspace, and associated utilities; 2) process equipment, both hardware and software; 3) supporting services such as transport or communications. 6.4 Work environment The organization shall determine and manage the work environment needed to achieve conformity to product requirements. NOTE: 6.4 includes maintaining the premises in a state of order, cleanliness and repair consistent with the product and manufacturing needs. 6.4 WORK ENVIRONMENT Each area manager is responsible to top management for determining and managing the work environment needed to achieve conformity to product requirements. 7 Product realization 7.1 Planning of product realization

20 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 20 of 42 The organization shall plan and develop the processes needed for product realization. Planning of product realization shall be consistent with the requirements of the other processes of the quality management system (see 4.1). In planning product realization, the organization shall determine the following, as appropriate: a) quality objectives and requirements for the product; b) the need to establish processes, documents, and provide resources specific to the product; c) required verification, validation, monitoring, inspection and test activities specific to the product and the criteria for product acceptance; d) records needed to provide evidence that the realization processes and resulting product meet requirements (see 4.2.4). The output of this planning shall be in a form suitable for the organization's method of operations. NOTE 1 A document specifying the processes of the quality management system (including the product realization processes) and the resources to be applied to a specific product, project or contract, can be referred to as a quality plan. NOTE 2 The organization may also apply the requirements given in 7.3 to the development of product realization processes Planning of product realization - Supplemental When product requirements are provided from external sources, the organization shall define the methods and shall establish control features (see 3.1.4) used to translate these requirements into the product realization process. 7.1 PLANNING OF PRODUCT REALIZATION Planning for product realization is done by Engineering and Texas International Oilfield Tools Manufacturing staff in conjunction with Quality and Materials Management in accordance with Documentation and Data Control Procedure QSP In general, customer requirements are first reviewed for completeness and correctness. Undefined features, characteristics or other requirements are resolved with the customer. If needed, a concept document is prepared for management and customer review. As required, design drawings, stress analyses and new specifications are created and reviewed. Processing steps are planned and estimated. Primary process instructions are given in routings. Where needed, Texas International Oilfield Tools process drawings are prepared to clearly indicate processing steps. All necessary standards, specifications and codes are provided, as well as details of any special quality plan requirements not met by the standard Texas International Oilfield Tools quality plan. Customer data is reviewed to establish quality objectives and requirements for the product, and contrasted with known Texas International Oilfield Tools equipment and processes, and the standard quality plan, to determine if special equipment, processes, documentation, or inspection/test/verification/validation/monitoring is required. Process parameters are continually monitored and controlled by Texas International Oilfield Tools management. When required, approval of processes and equipment is obtained. Criteria for workmanship is usually specified by the Texas International Oilfield Tools documentation, by recognized specification or by

21 QSM000 Texas International Oilfield Tools Quality System Manual REVISION A Page 21 of 42 customer requirement, as in surface finish, dimensional tolerances, heat treating, etc., and if not, clarification is provided. In addition, records requirements not met by the standard Texas International Oilfield Tools quality plan are established such that the processes and resulting product demonstrably provide a product meeting requirements. Texas International Oilfield Tools has an active preventative maintenance plan to insure continuing process capability. This is verified through in-process and final inspection. Non-deliverable (i.e. CNC) software is controlled per QSP4.2.3, Document and Data Control Procedure. Quality records are maintained per Quality Records Procedure QSP Customer-related processes Determination of requirements related to the product The organization shall determine a) requirements specified by the customer, including the requirements for delivery and post-delivery activities, b) requirements not stated by the customer but necessary for specified or intended use, where known, c) statutory and regulatory requirements related to the product, and d) any additional requirements determined by the organization Review of requirements related to the product The organization shall review the requirements related to the product. This review shall be conducted prior to the organization's commitment to supply a product to the customer (e.g. submission of tenders, acceptance of contracts or orders, acceptance of changes to contracts or orders) and shall ensure that a) product requirements are defined, b) contract or order requirements differing from those previously expressed are resolved, and c) the organization has the ability to meet the defined requirements. Records of the results of the review and actions arising from the review shall be maintained (see 4.2.4). Where the customer provides no documented statement of requirement, the customer requirements shall be confirmed by the organization before acceptance. Where product requirements are changed, the organization shall ensure that relevant documents are amended and that relevant personnel are made aware of the changed requirements. NOTE In some situations, such as internet sales, a formal review is impractical for each order. Instead the review can cover relevant product information such as catalogues or advertising material Review of requirements related to the product - Supplemental