OUTSOURCING IN WORKSHOPS

 Outsourcing – need to outsource

While it may be ideal to do most of the jobs in-house to ensure strict control over quality of inputs and processes, outsourcing the work to other agencies may become inescapable, under circumstances such as:

a. There is no possibility of getting it done in other Railway workshops with known capacity and capability for the product.

b. Sudden spurt in the requirement of components/sub-assemblies far beyond the capacity of the shops

c. Need to optimize and augment capacity of core shops (assembly shops) resulting in re-deployment of personnel from non-core to core shops (component to assembly shop) with consequent capacity reduction ofcomponent shop

d. Introduction of new material/technology for which skills/capacity/equipment may not be available within the workshop

e. Standard components that can be procured from outside or the work outsourced, resulting in lowering of cost. This is due to economy in scale of production available with the supplier.

f. Short-term / one time jobs for which permanent capacity cannot be created within the workshop

g. Need for heavy inputs of infrastructure not commensurate with the quantum of required by Railways for its production.

Under these circumstances, the shop in-charge should decide to opt for outsourcing. Outsourcing can be from either a unit outside the workshop premises or an outside agency which will be required to execute the task inside the workshop.

1104. Outsourcing to units outside the workshops.

Components and assemblies can be outsourced to unit a outside the PU through a system of tendering, keeping in view the under mentioned guidelines:

a) Decision on outsourcing shall be taken at the level of the Workshop / Factory In charge, with Finance Concurrence, except for certain critical components as excluded by the PHOD wherein criteria for out sourcing as and when needed will be finalised by HOD of Workshop for Zonal Railways only, in consultation with associate finance.

b) Pricing guidelines shall be established on the basis of in-house manufacturing-cost-excluding overheads and overheads to be added at commercial rates for cost comparison.

1105. Outsourcing or contracting for works within the Railway Premises.

In case of certain sub-assemblies, assemblies and critical items, it becomes necessary that manufacture, assembly and/or testing is carried out inside the Railway premises by the contracting party due to reasons such as:

a. Need to control of quality of raw material

b. Facilitate control of quality of workmanship through stage inspections

c. Specialized large-scale infrastructure needed for the manufacturing process may not be available with vendors.

d. Need for investment in costly specialized equipment, which are otherwise not usable by the vendor for other general products manufactured by the vendor. Since both these aspects will inflate his bid price which will ultimately get loaded on the cost of production. Special tooling required for the job

e. Component/processes forming part of an assembly line in the ProductionUnit or Workshop.

f. Logistical problems and disproportionate transportation costs.

1106. While outsourcing within the shop facilities, all safeguards in Para 1103 shall be ensured. In addition, to avoid contract disputes, care should be taken to see that following conditions are fulfilled and precautions taken:

a. Work area for the contractor to be separated from that of Railway staff

b. Shared machine and equipment time available to the contractor to be clearly defined to avoid mix up

c. Wherever raw material and consumables are to be supplied by the Railway, stock should kept separately and accounted for.

d. Consumption norms for raw materials and consumables to be evolved for each item issued to the contractor by the Railways

e. Documentation to be signed by both Shop Supervisor and Contractor

f. Electric power, water and utilities including tools provided by the railways tobe accounted and documented

g. Control of quality of workmanship by in process inspection

h. Accountal of scrap / left over material to be returned by contractor to be accounted and kept separate

i. Industrial safety standards as prevailing in the shop shall apply to the contract workers.

j. All relevant legal provisions and their compliance to be ensured.

Check list for precautions to be taken before contract is awarded for outsourcing work inside the workshop with outside labour.

Sl No	Precaution To Be Taken	Yes`	No
1	Has separate work area for contractor been earmarked
2	Has requirement of Railway supplied consumables – like special electrodes, water, electricity etc. been computed and listed
3	Has material requirement for outsourced job been separately worked out
4	Has machine hours for use of Railway equipment for the job been computed and listed
5	whether payment to contract workers is being made through bank, in a transparent manner
6	Have contractor’s workers been issued separate ID
7	Is an accounting system in place for contractor supplied items, raw materials and consumables
8	Has workshop supervision been organized to check on the work
9	Has the contractor complied with all legal provisions required under law, for which the Railway has an onus of responsibility

^{Note: The answer to all the items is to be ‘yes’, Before outsourcing Contract is awarded.}