Cracking the Code of Supplier Quality Surveillance: How SQS Can Prevent Delays, Frustration, and Rework

ByRoy O. Christensen

By Roy O. Christensen, RET, Integrity Specialist at Christensen Qualityworks Inc. This article appears in the March/April 2025 issue of Inspectioneering Journal.

Introduction

Supplier Quality Surveillance (SQS), also known as source inspection or vendor surveillance, is a critical process in project and supply chain management that ensures equipment and materials (i.e., deliverables) meet specified requirements, are complete and correct, and are delivered on time. SQS includes activities such as auditing, evaluating, inspecting, observing, and reviewing systems, including engineering and procurement, fabrication, manufacturing, and quality management. Unlike traditional ISO 9000 quality management programs, SQS is designed to effectively manage risks to project budgets and timelines.

SQS is distinct from traditional ISO 9000 quality management programs. While ISO 9000 emphasizes compliance with standardized quality systems, SQS is a tailored approach that effectively manages project-specific risks. Projects define their own SQS requirements based on their unique needs. When implemented effectively, SQS mitigates risks that lead to cost overruns, delays, rework, and waste [2]. Megaprojects often exceed budgets and schedules due to incomplete, incorrect, or late deliverables [3]. Most projects face similar risks, but effective SQS mitigates these challenges by maintaining consistency and preventing frustration.

For example, a test separator package (Figure 2) typically has source inspection at the supplier’s facility. This equipment, which includes fixed equipment, pressure piping, a pressure vessel, and structural steel, may also contain electrical components and other systems that require inspection.

SQS seeks to answer three critical questions about project deliverables before shipment:

  1. Do they meet specified requirements?
  2. Are they complete and correct?
  3. Will they be delivered on time?

This article examines SQS and highlights the role of API Recommended Practice 588 (API RP 588) in supporting source inspection or quality surveillance of fixed equipment (Figure 3) [5]. Published in 2019, API RP 588 addresses some knowledge gaps in the industry but leaves room for improvement in areas such as SQS coordination and planning.

Who Performs SQS?

SQS is executed by qualified subject matter experts (SMEs) who plan, coordinate, and oversee source inspection activities. Two key SQS roles are:

  • SQS Coordinator – This professional, based in the project office, plans SQS requirements, issues inspection assignment instructions (IAIs), reviews and distributes SQS reports, and addresses challenges like nonconformances. Typically, they work full-time for the duration of the project and report to supply chain management.
  • Supplier Quality Representative (SQR) – This professional, also known as a shop or source inspector, is often a third-party inspector based at the supplier’s facility. The SQR follows the IAI and the supplier’s inspection and test plan (ITP) to monitor quality verification points (QVPs) such as witness and hold points. They provide real-time issue resolution to ensure compliance with project requirements. They work part-time or full-time, depending on project needs, and report to the SQS coordinator.

Both roles require relevant education and significant experience. Knowledge transfer and mentoring junior personnel are vital for sustaining a capable SQS workforce as experienced professionals retire.

For maximum effectiveness, SQS activities should begin with project planning and detailed engineering. The Project Supplier Quality Surveillance (SQS) Activities checklist [6] expands on this subject and provides a list of key activities. Notably, about 90% of SQS relates to the SQS Coordinator’s activities and only 10% relates to the SQR’s source inspection activities.

A major challenge in SQS is the inconsistent use of terminology across disciplines, projects, and organizations. While API RP 588 attempts to standardize some terms, confusion remains. Projects may refer to SQS as source inspection, quality surveillance, and/or vendor surveillance, often using identical terms with varying meanings. Development of a project glossary is recommended for effective communication and project success.

Overview of API RP 588

API RP 588 is a valuable resource for SQS. It provides guidelines for source inspection activities related to fixed equipment – such as pressure vessels, piping, and structural components. These principles can be applied to other items like electrical and rotating equipment. This recommended practice emphasizes inspector qualifications, prefabrication meetings, and source inspection procedures. While primarily focused on technical aspects, it does not cover broader areas of SQS that impact project success.

What API RP 588 Covers

API RP 588 covers:

  • Detailed source inspection procedures;
  • Prefabrication or pre-inspection meetings (PFMs/PIMs);
  • Qualification levels for inspectors;
  • Risk-based source inspection planning principles; and,
  • Supplier nonconformance processing.

What API RP 588 Does Not Cover

API RP 588 does not cover:

  • Budget management for third-party inspections;
  • Practical guidance for SQS coordination and planning;
  • Risk assessment frameworks for inspection or quality surveillance (QS) levels;
  • Sub-contractor and sub-supplier source inspection requirements; and,
  • Tools like SQS logs for tracking activities and status.

API RP 588 is a valuable recommended practice for source inspection of fixed equipment, however it does not address the full scope of SQS. The lack of broader SQS guidance presents challenges for projects that need to manage complex inspection requirements. A comprehensive SQS body of knowledge (BOK) is needed to cover the broader SQS scope, which includes electrical, instrumentation and control, machinery, and modular or packaged systems. Much of the knowledge essential for effective SQS remains proprietary, often accessible only through on-the-job training or specialized programs. The absence of standardization continues to hinder effective knowledge transfer.

API RP 588 also lacks guidance on critical activities like factory acceptance testing (FAT), which is a major intervention point for many projects. Furthermore, it offers limited advice on managing third-party inspection agencies, a common challenge for projects relying on external resources. This can lead to inconsistent practices, confusion, and frustration.

A more inclusive SQS BOK would address these gaps by providing practical recommendations for planning, coordinating, and executing SQS across various industries.

Other Resources

Several existing BOKs offer valuable insights for driving project success, though they lack SQS-specific guidance:

  • American Society for Quality (ASQ), The Certified Supplier Quality Professional Handbook. [8];
  • Construction Industry Institute (CII), Achieving Zero Rework Through Effective Supplier Quality Practices. [9];
  • Project Management Institute (PMI), A Guide to the Project Management Body of Knowledge. [10]; and,
  • Supply Chain Canada (SCC), The Competencies of Canadian Supply Chain Professionals. [11].

These resources emphasize project management, quality control, and supply chain management but underscore the need for an expanded SQS BOK to provide specialized knowledge and tools for project success.

SQS in Practice: Lessons Learned

Real-world experience often best demonstrates the value of SQS. The following two examples from the author’s professional experience illustrate how effective SQS management can drive project success.

Experience 1: Material Requisition Review

One of my first tasks as an SQS coordinator was to review material requisitions (MRs) before they were produced as purchase orders (POs). The importance of this step became clear when I identified conflicting requirements regarding pump performance testing.

The data sheet specified a non-witnessed test, while the inspection requirements document called for a witnessed test. Without intervention, this conflict could have led to supplier disputes, delays, and costly change orders (COs).

To address the issue, I:

  1. Flagged the conflict for immediate resolution;
  2. Engaged the responsible engineer and project manager to clarify the correct test type;
  3. Verified budget constraints and technical justifications for witnessed tests; and,
  4. Standardized the testing requirement for all pumps across the project.

This proactive approach ensured clear, consistent, and unambiguous POs, reducing the risk of COs and unnecessary project costs. Future projects also benefited by reusing these established criteria where applicable, with careful reviews to confirm their continued relevance.

Experience 2: Manufacturing Record Book (MRB) Review

During my time reviewing MRBs for Suncor’s oil sands projects, the Millennium project (1997-2001) saw only a 17% acceptance rate for first submittals. The primary cause was inadequate or unclear data requirements in the POs, leading to incomplete or incorrect MRBs.

Recognizing the need for improvement, I implemented a new approach on the Millennium Coker Unit (MCU) project (2001-2008). MRB cover sheets were required to include a table of contents (TOC) with early review, ensuring content accuracy and completeness before final submission.

This proactive measure resulted in an 81% first-submittal acceptance rate – a 476% improvement. Clear communication of MRB expectations in the POs and early review of cover sheets and TOCs streamlined the entire process, reducing delays, rework, and frustration.

Projects seeking similar success should ensure MRB content and format requirements are well-defined in POs and reviewed early in the process.

These two experiences underscore the value of proactive SQS management to avoid increased costs, enhance overall project efficiency, and prevent schedule delays. By promptly identifying and addressing discrepancies, SQS coordinators can mitigate risks, reduce the likelihood of costly COs, and establish clearer expectations for suppliers. Effective SQS management fosters collaboration with stakeholders, streamlines processes, and significantly improves project outcomes.

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Conclusion

Project success hinges on ensuring that equipment and materials are complete, correct, and delivered on time. Effective SQS plays a critical role in achieving these outcomes.

While API RP 588 provides a solid foundation for the source inspection of fixed equipment, it does not cover the full scope of SQS activities. The development of a more extensive SQS BOK will bridge this gap, promoting effective knowledge transfer and much-needed standardization.

Organizations that leverage proactive SQS management — through clear documentation, early conflict resolution, and robust MRB processes — will benefit from minimized COs with reduced cost and schedule overruns. Ultimately, SQS is a proven and vital driver of project success.

References

  1. Derek Rosner. Supplier Quality Surveillance is Mysterious. Rendered using Co-Pilot AI and SnagIt (TechSmith).
  2. Christensen, Roy O., 2020, “Effective Supplier Quality Surveillance (SQS) – Implementing programs on complex capital projects,” eBook, KT Project.
  3. Brown, J., Caletka, A., and Walcroft, D., 2014, “Successful capital project delivery – The art and science of effective governance,” Report, PricewaterhouseCoopers LLP. (broken link)
  4. https://www.hcpetroleum.hk/ueditor/image/20200804/Test_Separator_HC.jpg, 2024, “Figure 2: Test Separator Package.”
  5. American Petroleum Institute (API), 2019, “API RP 588: Recommended Practice for Source Inspection and Quality Surveillance of Fixed Equipment”.
  6. Christensen, Roy O., 2022, “Project Supplier Quality Surveillance (SQS) Activities”, Check List, KT Project.
  7. American Petroleum Institute (API), 2024, “Figure 3: API RP 588,” https://www.apiwebstore.org/standards/588.
  8. American Society for Quality (ASQ), 2023, “The Certified Supplier Quality Professional Handbook.”
  9. Construction Industry Institute (CII), 2015, “Achieving Zero Rework Through Effective Supplier Quality Practices.”
  10. Project Management Institute (PMI), 2021, “A Guide to the Project Management Body of Knowledge.”
  11. Supply Chain Canada (SCC), 2022, “The Competencies of Canadian Supply Chain Professionals.”

Notes

  1. This article was published by the Inspectioneering Journal https://inspectioneering.com/journal/2025-04-24/11544/cracking-the-code-of-supplier-quality-surveillance
  2. The Figure 1 feature image produced by Derek Rosner was not used by the Inspectioneering Journal.

About the Author

Roy O. Christensen, RET, Integrity Specialist at Christensen Qualityworks Inc.

Roy O. Christensen is a Welding Engineering Technologist who has over 40 years’ experience with oil and gas, pipelines, and other projects. He has authored countless instructions, manuals, plans, proposals, reports, specifications, and other documents that continue to drive success for many projects. He is the founder of the Knowledge Transfer (KT) Project, which saves organizations significant money and time, by providing key resources to leverage expert knowledge transfer for successful project execution.