How exactly should laboratory contract reviews be conducted?

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Laboratory contract review involves a comprehensive evaluation of the drafted contracts in terms of their legality, compliance, feasibility, reasonableness, and risk level, when a laboratory accepts clients’ requests for testing, inspection, or consulting services, or when it procures external goods or services. It is an important measure for enhancing the quality and efficiency of laboratories, mitigating risks, and ensuring continuous improvement. With the implementation of laboratory accreditation and CNAS recognition, this activity has become one of the key aspects of laboratory management. However, there are also some issues that require joint discussion; this article shares insights on the review of type one contracts. 01 Problems with Contract Review 丨 In my experience conducting laboratory audits, I have found that most of the risks faced by laboratories – such as schedule risks, payment risks, claim risks, and risks related to false reports – stem from the failure to carry out thorough contract reviews. Main problems in laboratory contract review: First, the review is a mere formality. Although various laboratories have established procedural documents for contract review, the responsibilities for such review are unclear, the processes are not defined, and it is difficult to implement them effectively; in most laboratories, contract reviews are merely done on paper and fail to serve any real purpose. Second, the evaluation criteria are unclear. Many laboratories are unclear about what to evaluate, what to review, and what the criteria are; they have no idea what to do. Third, the evaluation methods are inadequate. What methods are used for evaluation, what qualified and competent individuals conduct the evaluation, in what form does the evaluation take place? The lack of appropriate standards leads to a perfunctory evaluation process. 02 Main contents of contract review 丨 For laboratory contract review, it is essential to first understand what needs to be reviewed and what the objectives are; this is the foundation of this task. The main aspects of contract review include what the customer’s requirements are, whether the laboratory has the necessary capabilities, whether the customer can provide the required cooperation, the measures to be taken by the laboratory and the associated risks, as well as the legality and compliance of the contract terms. 2.1 Customer Needs The customer is the foundation of a laboratory’s operations; it is essential to understand their needs, whether they are government agencies, corporate organizations, or individuals. Customer requirements generally include laboratory qualifications, the details of the testing projects and their purposes; this encompasses testing methods, time frames, procedures for handling deviations, channels for communicating changes in requests, and methods for confirming such changes. It also includes ways of reporting results, methods of transmitting them, procedures for handling subcontracts, and confidentiality requirements. Additionally, there are requirements regarding the basis for testing (product standards or technical parameters), criteria for interpreting results, and guidelines for handling samples. 2.2 Laboratory technical capabilities: Based on customer requirements, verify whether the reference laboratory possesses the necessary capabilities, and check whether the contractual tasks conflict with the laboratory’s planned activities. This includes whether laboratory qualifications, experimental methods, environmental conditions (conditions and safeguards), equipment (condition and accuracy), personnel (qualifications and on-duty status), and task plans are satisfactory; it also encompasses the capability for sample collection or transportation, inventory levels of consumables, and procurement status. Assess the validity of the subcontractor’s contract, whether the subcontractor has the capability to meet the testing requirements, and check whether the subcontractor’s certified scope of qualifications includes the subcontracted project. It depends on whether the overall laboratory schedule allows for the timely completion of experimental tasks; in addition, the laboratory’s financial benefits as well as other constraints, such as the preferences of management and the strength of relationships with clients, must also be taken into account. 2.3 Customer’s cooperation capability: For the laboratory to complete tasks assigned by customers, their strong cooperation is essential; it cannot operate in isolation. For example, in joint experiments, customer representatives need to be present to work together on the testing. Consider whether the samples provided by the customer meet the requirements of the test method (such as quantity, composition, structure, size, shape, and condition), and whether the sampling method meets the **specified sampling requirements. For tests that need to be conducted on-site, has the customer provided the necessary conditions for such testing, such as space size, lighting conditions, air quality, as well as access to water and electricity? 2.4 Safeguard measures and risk management ✔ The laboratory should assess whether it can assign appropriate personnel within the stipulated timeframe, whether these personnel are capable of coordinating internal relations and collaborating effectively with clients, and whether they can allocate laboratories, equipment, materials, etc., to meet the experimental requirements. ✔The laboratory should assess the risks that may arise during experiments, such as staff changes, equipment failures, natural disasters, water outages, power outages, and gas outages. Considering the risks associated with policy adjustments, such as shutdowns and production halts in the Beijing area due to large-scale events, are there any emergency plans in place to address these risks, or can customer understanding be obtained? It is also necessary to consider the impact of suddenly being assigned a mandatory task on the client’s tasks. ✔At the same time, it is necessary to verify the accuracy of the customer’s name, address, contact person, and contact details; to ascertain the legitimacy of the project through relevant channels; and to assess the customer’s operational reputation, financial condition, and payment ability. 2.5 Format of contract content ✔ The legality of a contract is a necessary condition for it to take effect, and a legality review must be conducted. The main focus of the review is to determine whether there are violations of legal provisions and whether any malicious clauses exist. It is strictly prohibited to accept commission tasks that are illegal or violate the legitimate rights and interests of third parties for the sake of profit; it is also forbidden to take on such tasks beyond the scope authorized by relevant qualifications. Falsifying data or issuing false reports or certificates is also strictly prohibited. ✔Assess whether the assignment involves patents, technical secrets, trade secrets, as well as the ability to maintain confidentiality, in order to avoid disputes arising from leaks. ✔Carefully review the contract terms to ensure that nothing is omitted, that the terms are specific, clear, and unambiguous, and that they are practical and feasible. ✔The contract format shall comply with **regulations and relevant industry, authority, and standard requirements. Review the compliance of relevant approval procedures, ensuring that elements such as stamps, signatures, and dates are all present. Are the rights, obligations, indemnity clauses, force majeure circumstances, dispute resolution, etc., of both parties clearly defined? 03 Measures to Strengthen Contract Review 3.1 Improve systems and clarify responsibilities: The laboratory should establish procedural documents and systems for contract review, assign personnel responsible for this task, determine whether these individuals are full-time or part-time, and define the duties and authorities of those in charge of contract review, ensuring they have the power to obtain relevant information and mobilize necessary resources. Clarify the review process, the format and content of the review report, as well as the issuance, storage, and use of the review report. 3.2 Preparation of standard contract review forms: Although the requirements for various inspection and testing activities vary, in the case of commissioned inspections, the customer only needs to provide samples, and the test results are valid only with respect to those samples ； Legal inspections, on the other hand, require sampling, collection, transportation, and storage in accordance with relevant regulations. However, the key elements of contract review are essentially the same; therefore, the review items can be broken down into dozens of sub-items, and a standard form for laboratory contract review can be created to allow for thorough checking of each item and to prevent any items from being overlooked ； For those meeting the requirements, simply put a checkmark; for those that don’t, provide suggestions and recommendations for improvement. 3.3 Conduct thorough investigations to understand the actual situation. The evaluation of laboratory contracts should not be limited to the assessment of written documents; in some cases, on-site inspections are also necessary, such as random sampling for statutory inspections and testing of the components in samples. It is possible to check a customer’s business status and credit rating through platforms such as Tianyancha and Qichacha. 3.4 Leverage joint review mechanisms: Laboratory contract reviews involve technical personnel, support staff, and management personnel, as well as multiple specialties; it is therefore necessary to make full use of the laboratory’s technical committee to conduct joint reviews of large-scale and complex projects. It is necessary to ensure the completeness of the contract review process, and take measures to guarantee that no contract can be signed without a contract review form, and no test report can be issued without one.