SUPPLIER QUALITY REQUIREMENTS MANUAL

Supplier Quality Requirements Manual

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TABLE OF CONTENTS
Section A – General Quality Standards for Purchased Material
SQM-1.0 Purpose 3
SQM-2.0 Scope 3
SQM-3.0 Supply Chain ___________________________________________ 3
SQM-4.0 Supplier Contact Information 3
SQM-5.0 Quality Systems 3
SQM-6.0 Right of Access 4
SQM-7.0 Confidentiality Agreement____________________________________________ 4
SQM-8.0 Raw Material Suppliers ___ 5
SQM-9.0 Special Processes Suppliers 5
SQM-10.0 Sub-Tier Suppliers__________________________________________ 5
SQM-11.0 Distributors ___________________________________________ 5
SQM-12.0 First Article Production Approval 6
SQM-13.0 Purchased Part Control 6
SQM-14.0 Process Control for Key Characteristics 6
SQM-15.0 Material Identification 6
SQM-16.0 Sampling 6
SQM-17.0 Drawing and Change Control 6
SQM-18.0 Records 7
SQM-19.0 Change in Manufacturing Process Control 7
SQM-20.0 Foreign Object Debris/Damage (FOD) Prevention Program 7
SQM-21.0 Nonconforming Material 7
SQM-22.0 Notification of Escapes 8
SQM-23.0 Certification of Conformance 8
SQM-24.0 DFARS 8
SQM-25.0 ITAR Sensitive 8
SQM-26.0 Shipment and Packaging Requirements __________________________ 8
Section B – Supplier Approval
SQM-27.0 Introduction 9
SQM-28.0 PMP Register of Approved Suppliers: Requirements ______ 9
SQM-29.0 Supplier Performance Requirements 9
Section C – Purchase Order Terms and Conditions
SQM-30.0 Formation: Offer, Acceptance; Exclusive Terms 10
SQM-31.0 Quality 10
SQM-32.0 Delivery 11
SQM-33.0 Changes 11
SQM-34.0 Applicable Laws 12
SQM-35.0 Liability 12
SQM-36.0 Conflict Minerals ___________________________________________________ 12

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Section A – General Quality Standards for Purchased Material

SQM-1.0 Purpose
The purpose of this Supplier Quality Requirements Manual (“Manual”) is to define the supplier quality
requirements for Precision Machined Products, LLC. (“PMP”) to ensure that purchased product
conforms to specified purchasing requirements.
PMP reserves the right to amend/update/revise this Manual at any time.

SQM-2.0 Scope
This Manual applies to suppliers who directly provide material (raw materials, production services,
component parts and assemblies) to PMP, unless otherwise exempted by Contract, Purchase Order,
or noted in this Manual. Facility (building) MRO items and general services are excluded from this
process, except for the purchase order terms and conditions.
In the event that the Purchase Order or Contract conflicts with the requirements of this document, the
Purchase Order or Contract requirements will supersede.

SQM-3.0 Supply Chain

The supply chain is an entire network of entities, directly or indirectly interlinked and interdependent in
serving the same customer. It comprises of suppliers that supply raw material and/or services,
organizations who convert the material into products, and customers who ultimately consume and/or
deliver the product and/or services to end users.

Supplier Organization Customer

SQM-4.0 Supplier Contact Information

All suppliers must provide PMP with the contact information for their Sales, Customer Service,
Material Control and Quality Departments. Updates to the contact information must be submitted
every year and/or when any changes occur.

SQM-5.0 Quality Systems

Requirements shall be in effect for all suppliers who directly supply materials, items, services, and/or
special processes to PMP. This includes those suppliers identified as distributors [SQM-11.0], special
process suppliers (heat treating, plating, welding, etc.) [SQM-9.0], calibration laboratories [SQM-5.1],
and raw material suppliers [SQM-8.0].

SQM-5.1 Supplier must have established, documented, implemented, and

maintained a quality management system in accordance with the
requirements of ISO 9001 and/or AS9100. Calibration suppliers shall have
a quality system that is compliant to ISO/IEC 17025 or ANSI/NCSL Z540.

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SQM-5.2 A supplier must have an environmental, health and safety (EHS) program
that meets all statutory and regulatory requirements appropriate to their
business.

SQM-5.3 A supplier not meeting the above quality system requirements may be
assessed at any time for reasons not limited to performance, and may be
liable for actual costs of such assessments.

SQM-6.0 Right of Access

The Supplier shall provide PMP, its customer(s), and/or a specified third party (statutory/regulatory
agency) right of access to the facility and all records related to product ordered by PMP or its
customers. PMP, its customer(s) representative(s), and/or a specified third party reserves the right to
perform an audit or inspection at the supplier’s facility to verify that supplied product conforms to
specified requirements. This verification does not absolve the supplier of the responsibility to provide
acceptable product and does not preclude subsequent rejection by PMP or its customer.

SQM-7.0 Confidentiality Agreement

By accepting the terms of a PMP Contract and Purchase Order, supplier agrees to adhere to the
confidentiality agreements stated herein. “Confidential Information” considered confidential may
include, but is not limited to:

• Customer-supplied documentation/records;
• Customer-supplied product/property;
• Customer furnished data used for design, production, and/or inspection;
• Intellectual property.

SQM-7.1 NO USE – Supplier agrees not to use Confidential Information in any way, or
to manufacture, test, and/or distribute any product embodying Confidential
Information, except for the purpose set forth in the Purchase Order.

SQM-7.2 NO DISCLOSURE – Supplier agrees to use its best efforts to prevent and
protect the Confidential Information, or any part thereof, from disclosure to
any person other than supplier's employees having a need for disclosure in
connection with supplier's authorized use of the Confidential Information and
production/process activities.

SQM-7.3 CYBER SECURITY – Supplier is required to follow policies and procedures

for cyber security based on industry standards (e.g. ISO 27000, NIST 800-53)
when sensitive information is shared.

SQM-7.4 PROTECTION OF SECRECY – Supplier agrees to take all steps reasonably

necessary to protect the secrecy of the Confidential Information, and to

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prevent the Confidential Information from falling into the public domain or into
the possession of unauthorized persons.

SQM-7.5 TERM AND TERMINATION – The obligations of this Agreement shall be

continuing until the Confidential Information disclosed to suppliers is no longer
confidential.

SQM-7.6 SEPARATE AGREEMENT – Supplier agrees to execute a separate Supplier

Confidentiality Agreement immediately upon request. Supplier further agrees
to obtain Confidentiality Agreement, in form and content acceptable to PMP,
from any sub-tier supplier or third party whom supplier deems disclosure of
Confidential Information necessary, it being understood that no disclosure of
Confidential Information shall be made without prior written consent of PMP.

SQM-8.0 Raw Materials Suppliers

Unless otherwise specified, all raw material suppliers shall provide material certifications/test reports
with all shipments. PMP will periodically validate supplier’s reports for raw material to verify that data
in those reports are acceptable per applicable specifications.

SQM 9.0 Special Processes Suppliers

All special process suppliers shall have a quality system that is compliant to ISO 9001 or AS 9100 or
accredited to AC7004 (PRI-Nadcap). All suppliers shall use only end user approved suppliers unless
otherwise specified by the Purchase Order. PMP participates in the Nadcap special process
accreditation program administered by the Performance Review Institute (PRI). All special process
(Non-Destructive Testing, Heat Treating, Chemical Processing, Coatings and Material Testing Labs)
suppliers must comply with end user NADCAP accreditation requirements.

SQM-10.0 Sub-Tier Selection/Control

PMP reserves the right to specify and/or approve sub-tier suppliers chosen by its suppliers. Direct
suppliers shall flow down to all sub-tier suppliers; all relevant quality requirements imposed by this
manual, purchasing documents, and applicable contract requirements, PMP customer requirements
such as DPD, including government and Department of Defense (DoD) requirements.

SQM 11.0 Distributors

A distributor is defined as a supplier that procures parts, materials, or assemblies and sells such
products to a customer without affecting product characteristics or conformity. Distributors must
ensure that only approved, conforming parts make their way into the supply chain. The constant
concern of "black market" or "counterfeit" parts has reached heightened levels and this SQM includes
requirements that when effectively implemented, shall assist PMP to minimize the risk of such activity.
Definitions of counterfeit parts may include but not limited to; unauthorized copies or substitutes of an
OEM or OCM, parts that are not traceable to an OEM sufficient to ensure authenticity in OEM design

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and manufacture, parts that do not contain proper external or internal materials or components
required by the OEM and are not constructed in accordance with OEM design, parts that have been
re-worked, re-marked, re-labeled, repaired, refurbished but are represented as OEM authentic or as
new or parts that have not successfully passed all OEM required testing, verification, screening, and
quality control processes.

Distributors of aerospace commodity items must employ a documented quality system that is
compliant to (AS/EN/JISQ) 9120 Aerospace Requirements for Stockist Distributors or (AS/EN/JISQ)
9100 Quality Management Systems – Aerospace – Requirements. Copies of the AS standards can be
purchased from SAE International at www.sae.org.

A Manufacturer Certificate of Conformance is required for each item delivered to ensure that the
product provided is as specified in the PMP procurement document.

SQM-12.0 First Article Production Approval

When required by contract, First Articles shall be performed by suppliers as per AS9102 requirements
or other similar/proven methods. The designated quantity of components, randomly selected from a
significant production run, must be produced utilizing production tooling, processing and cycle times.
This approval must include dimensional and performance requirements and, in some cases, may also
include specific visual and functional approvals.

SQM-13.0 Purchased Part Control

Suppliers must certify, as part of sample submission, compliance with current constraints on restricted
substances as specified by purchase order or contract, especially toxic and hazardous substances.

SQM-14.0 Process Control for Key Characteristics

When required by the purchase order or contract, suppliers must implement a process compliant with
AS9103.

SQM-15.0 Material Identification

Supplier is required to establish a documented system for the control of all materials. The inspection
and test status of all materials must be easily identifiable by the system, and documentation must
include a description of any applicable containment areas and/or devices. Parts or products removed
from the normal process flow must be segregated and clearly marked.

SQM-16.0 Sampling
Supplier may use sampling plans when historical records indicate that a reduction in inspection can
be achieved without jeopardizing the level of quality. Supplier may employ sampling inspection in
accordance with nationally accepted or customer required standards. Sampling may not be used to
justify the existence of known defectives or discrepancies in a lot. Supplier shall maintain quality
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records in sufficient detail to establish evidence that any sampling was representative, the required
tests and verifications were properly performed, and only material meeting specified requirements has
been accepted for production and delivery to PMP. These records shall be available for review by
PMP or a PMP authorized representative, as required and copies of individual records shall be
furnished to PMP upon request.

SQM 17.0 Drawing and Change Control

Supplier’s quality management system must ensure that the latest engineering drawings and
specifications are available at the manufacturing, test, and/or inspection locations. Written
procedures should indicate the method(s) utilized for receipt, review, or distribution of all changes and
the method(s) of recalling and disposing of an obsolete item. A review process, conducted at least
once each calendar year, must be established in the system for confirming that specifications are at
the latest revision level with the issuing source.

Supplier must coordinate and document all changes with PMP’s Order Processing personnel. This
may involve customers and/or regulatory authorities in accordance with contract or regulatory
requirements.

SQM 18.0 Records

Supplier must retain adequate quality system records, including all production planning documents,
process guidelines, laboratory test instructions, gauge/test equipment verification and calibration, and
performance test methods. In addition, supplier must retain quality performance records, including
control charts, and inspection and test results, where appropriate. At a minimum, supplier must retain
the records for the periods indicated and make such records available for review as required:

- Quality system records 20 calendar years

- Quality performance records 20 calendar years

In the event that supplier discontinues business operations, supplier shall agree to transmit to PMP
those records maintained in support of PMP’s contract agreements.

SQM-19.0 Change in Manufacturing Process Control

Our continuous improvement philosophy encourages process improvements both internally and at our
supplier’s facilities. However, prior to any such “modification”, to a process being implemented,
supplier must complete all required/necessary verifications and tests to ensure that any new process
continues to yield product/services that meet PMP specifications. First Article requirements per
AS9102 apply.

SQM-20.0 Foreign Object Debris/Damage (FOD) Prevention Program

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Supplier shall assure cleanliness of products/services provided. When designated on Purchase

Order, delivered product must be clean and free from any debris; such as machined chips, burrs,
grinding dust, forming materials, corrosion, oil, and other foreign material on surface to prevent F.O.D.
entrapment.

SQM-21.0 Nonconforming Material

All products or processes found to be nonconforming by the supplier to the engineering drawings,
specifications, or Purchase Order, shall be identified, segregated and reworked or replaced with
conforming products or processes prior to delivery to PMP. In the event the supplier needs to submit
a request for deviation approval, supplier shall submit the deviation to the Purchasing Department.
Supplier is responsible to segregate nonconforming product to prevent delivery to PMP, until the
deviation is processed and disposition has been given. A copy of the Supplier Deviation Request will
be returned to supplier showing final Material Review disposition. A “Use as is” or “Repair” disposition
by the Material Review process does not relieve supplier of the legal responsibility and liability for
such products/processes.

Nonconforming products identified:(1) at a supplier’s facility;(2) returned from PMP’s facility; or (3)
through performance testing, and/or field failures must be systematically analyzed to determine the
root cause(s) of the nonconformance. Failure to respond to a Corrective Action Request may result in
punitive action up to and including removal and/or suspension from the PMP’s Approved Supplier
List/Register.

SQM-22.0 Notification of Escapes

It is the responsibility of supplier to notify PMP immediately of any items that were provided and later
discovered by supplier to be defective. This Notification of Escape shall include, at a minimum,
purchase order number, part number, suspected quantity and discrepancy noted. Immediately
following the receipt of Notification of Escape, a complete Root Cause Analysis, including
containment action, corrective action, and preventive action with completion dates shall be provided
to PMP.

SQM-23.0 Certification of Conformance

Each shipment shall include a Certification of Conformance unless otherwise specified by Purchase
Order. The Certificate of Conformance must contain a statement that all inspections, processing, and
tests have been performed as required by the drawing requirements and/or Purchase Order.
Products controlled by heat numbers, certification numbers, batch numbers, or cure dates must be
linked to the Certificate of Conformance by the controlling number, and show physical and chemical
values when applicable.

SQM-24.0 Defense Federal Acquisition Regulation Supplement (DFARS)

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When required by Purchase Order, materials shall comply with all U.S. Government, Defense Federal
Acquisition Regulation Supplement (DFARS) 252.225-7008 and 252.225-7009 requirements,
including Country of Origin.

SQM-25.0 International Traffic in Arms Regulations (ITARS)

When required by Purchase Order, supplier is responsible for ensuring that all related transactions
conform to the requirements of the International Traffic in Arms Regulations.

SQM-26.0 Shipment and Packaging Requirements

Supplier shall comply with all requirements for shipping, packaging, and labeling. In the absence of
specific requirements, suitable protection from corrosion, contamination, and handling damage during
transit is required (see SQM-33.3).

SECTION B – SUPPLIER APPROVAL

SQM-27.0 Introduction
The approval process is an ongoing, comprehensive supplier-monitoring and feedback procedure that
optimizes total cost and quality and minimizes process variation. It requires performance
measurements and reporting and communicating with the supply base and features a method of
recognizing high-performance suppliers. Suppliers that are currently on an approved suppliers list of
a PMP customer may automatically be added to PMP’s Approved Suppliers List/Register.

SQM-28.0 PMP’s Register of Approved Suppliers: Requirements

Supplier must maintain an approved quality management system and acceptable performance levels
in order to retain active status.

SQM-29.0 Supplier Performance Requirements

While the key metrics below are targeted goals for qualification, it is expected that PMP suppliers will
strive for continuous improvement to meet zero defects for quality and 100% on-time delivery.

- Quality 2% or less rejects

- Delivery 95% on-time or greater
- Cost Price compared to market benchmark
- Documentation Accuracy, completeness and timeliness
In addition to these performance metrics, supplier is also responsible to provide timely corrective
action response, and demonstrate commitment to continual improvement through improving
performance trends. A supplier causing product quality escapes to PMP customers may be placed in
a conditional or disapproved status regardless of performance trends. A supplier exceeding either of

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these limits may be placed on conditional status. Conditional status requires the supplier to submit a
Corrective Action Plan acceptable to PMP. Once accepted, supplier must show significant
improvement toward meeting the required measurable within a reasonable period of time as defined
by PMP. A supplier that fails to show improvement may be removed from PMP’s Approved Supplier
List/Register.

SQM-29.1 Calculating Performance Levels

Product quality will be calculated using the following formula:
Number of defective parts
Number of parts received

SQM-29.2 Percentage on-time delivery will be calculated as follows:

Purchase Order line item quantity on time
Total Purchase Order line item quantity due
Note: Partial deliveries arriving after original due date, will be considered
late shipments.

SQM-29.3 Scoring Criteria

TOTAL
SCORING RATING STATUS
SCORE

5 Fully Meets 16-20 Excellent (E) APPROVED

4 Meets Most 11-15 Satisfactory (S) APPROVED

3 Meets Some <10 Unsatisfactory (U) DISAPPROVED/CONDITIONAL

2 Barely Meets

-5 Does Not Meet

SQM-29.4 Supplier Evaluation

All approved suppliers will be evaluated every 2 years starting from their
initial acceptance evaluation.

SECTION C – PURCHASE ORDER TERMS AND CONDITIONS

SQM-30.0 Formation: Offer, Acceptance, Exclusive Terms

SQM-30.1 Except as otherwise provided herein, each Purchase Order, together with
these terms and conditions, is an offer by PMP to enter into the agreement
it describes and shall be the complete and exclusive statement of such
offer and agreement.

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SQM-30.2 A contract is formed when supplier accepts the Purchase Order and the
terms and conditions of PMP by shipment of goods, performance of
services, and commencement of work on goods, written
acknowledgement, or any other conduct by supplier that recognizes the
existence of a contract.

SQM-31.0 Quality
SQM-31.1 Supplier shall meet all quality requirements of PMP and its customers,
including, but not limited to, the applicable quality management system
requirements (ISO 9001, AS9100, etc.) and any other customer specific
requirements.

SQM-31.2 Supplier must maintain adequate documentation, implementation, and

maintenance of a functioning quality management system while
continually improving its effectiveness in accordance with contract
requirements to ensure that all goods provided to PMP and its customers
conform to all specifications, drawings, quality, and performance
requirements under the terms of the Purchase Order.

SQM-31.3 Supplier may be held responsible for any and all costs associated with
nonconforming product or services provided by supplier, including, but not
limited to, PMP’s raw material cost, added value cost, quality issue
investigation, administrative costs, containment, and remedial actions
(including third party activities identified by PMP or its customers).

SQM-31.4 PMP or its customers may reject and return, at the supplier’s risk and
expense, or retain and rework goods received that fail to conform to the
requirements of the Purchase Order or any other specifications within that
Order. Supplier shall replace any nonconforming goods with conforming
goods unless otherwise notified, in writing, by PMP’s Purchasing
personnel.

SQM-32.0 Delivery
SQM-32.1 Deliveries shall be made both in quantities and at the times specified on
the Purchase Order. Supplier shall adhere to all shipping directions from
the Purchasing personnel and/or directions on the Purchase Order.

SQM-32.2 Premium shipping expenses and/or other related expenses necessary to

meet the delivery dates set forth in the Purchase Order shall be the sole
responsibility of supplier, unless the delay was solely caused by PMP or its
customers and supplier provides notice within 10 days of the occurrence.

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SQM-32.3 Supplier agrees to properly pack, mark, and ship goods in accordance with
the Purchase Order requirements and/or the requirements of PMP or its
customers. The marks on each package and identification of the goods on
the packing slips, bill of lading, and invoices shall be sufficient to easily
identify the goods purchased.

SQM-33.0 Changes
SQM-33.1 Without prior approval from PMP, supplier shall not make any changes to
any PMP Purchase Order, including goods and/or services covered by
Contract and/or Purchase Order, such as, but not limited to:

 Any third party supplier to the supplier of services, raw materials, or goods used by
supplier;

 The facility from which supplier operates;

 The price of any of the goods or services;

 The nature, type, or quality of any goods or services, raw materials, or goods used
by the supplier or its sub-tier suppliers;

 The fit, form, function, appearance, or performance; and

 Changes in product and/or any process in the manufacture of any goods.

SQM-34.0 APPLICABLE LAWS

Supplier shall comply with all local, state, federal, and international laws, rules, and regulations
affecting the price, production, sale, or delivery of the materials or services under PMP’s Purchase
Order and supplier shall indemnify and hold PMP harmless from and against any liability, expense, or
loss, including attorney fees, resulting from supplier’s failure to do so.

SQM-35.0 LIABILITY
Supplier shall indemnify and hold PMP and its officers, agents, servants and employees, or any of
them, harmless from any loss, damage, liability or expense, including attorney’s fees, for: (1) any
breach of any representation, warranty, covenant, or agreement herein, in the Order, or in any related
agreement, and (2) on account of damage to or loss of property or injuries, including death, to all
persons, including employees of supplier and its subcontractors and all other persons performing any
part of the work which may arise in the performance of any of its obligations or otherwise under the
Order. Supplier shall defend, at its own expense, any suits or other proceedings brought against PMP
and its officers, agents, servants or employees, or any of them, on account thereof and will pay all

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expenses and satisfy all judgments which may be incurred by or rendered against any of them in
connection therewith. PMP shall have the reasonable right of approval with respect to any legal
counsel selected to defend a claim. Supplier shall be excused from liability for failure to deliver, and
PMP from failure to accept deliveries hereunder when such failure is due to the acts of God or the
elements, fire, war, the public enemy, strikes, civil commotion, transportation or other embargoes,
acts of civil or military authority, governmental priority, or other similar causes beyond their control.

SQM-36.0 CONFLICT MINERALS

In the Democratic Republic of Congo and neighboring countries, conflict materials may serve as
funding sources from mines that finance militia groups committing human rights abuses. PMP is
committed to meeting all legislative and regulatory requirements that seek to eliminate conflict
minerals from the supply chain. PMP’s policy is not to purchase conflict minerals, materials or
products using metals made from conflict minerals. PMP expects its suppliers and their suppliers to
acquire minerals only from responsible sources.

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