Thomas Industrial Library

Disadvantages of contracting

Of course there are downsides to using contractors. For example, the downsides might include losing control of the shutdown because the contractor is responding but not communicating.

There are some serous pitfalls when the work scope is not complete or not well defined. You could open yourself up to excessive charges and have no recourse. Your scope is your protection against overcharges. This potential for loss is a problem for both in-house crews and contractor crews, but it is more expensive with contractors.

If the contractor has had a lean time they might take jobs outside their core expertise just to keep people busy and pay their bills. They may be stretching their expertise just to get the work. The result for you is poor quality work and possibly excessive labor charges. Fortunately most contractors want to get additional jobs and look good, so they limit themselves to work in which they have experience.

It’s also sometimes hard to get the last part of the job completed. The bulk of the contractor’s people are gone and the ones left are preoccupied about getting on with their next job. We’ve also seen contractors who were satisfactory at their trades but seemed apathetic about compliance with safety rules and protecting their employees. You also could get off on the wrong foot and have a contractor-owner shouting contest. A contractor can miss deadlines, disrupting the schedules of other contractors, which cascades through the schedule.

Reasons to use a contractor during an outage:

If contracting is so full of pitfalls, why do we even bother hiring contractors for shutdowns? The simple answer is, if organizations could do shutdowns without contractors they probably would. There are specific reasons that usually can be traced back to the fact that proper use of contractors saves money.

Some recommendations:

Reduce the elapsed time of outage

You don’t have enough people to do it yourself (even if you wanted to).

Improve quality by hiring specialists who have long experience in the area.

You lack in-house skills (heavy rigging, tank construction, etc.).

You don’t want to manage the job (you are hiring the contractor to do that).

You don’t want to lose control of existing work to make room for the shutdown.

You lack the appropriate license (even if you have the skills).

You lack the specialized equipment, and job specific chemicals, or materials.

Work that can be moved off-site should be because it will not strain your resources or infrastructure.

Liability can be reduced by having another insurance company (the contractor’s), hold you harmless from damages.

You can reduce hazards to your own employees (in tank cleaning, asbestos removal).

In one interesting case the contractor’s flexibility saved the day. It seems that headquarters planned a critical shutdown during an important religious festival. That religious group happened to dominate the contractor’s usual crew, and it looked as if the shutdown was going to be in trouble. The contractor pulled the rabbit out of the hat when he realized he had another crew being mobilized for another job that was dominated by a different religious group. The mobilization allowed some people to be slipped out for a limited period. The second crew was used to keep the work moving for the week of the festival.

Changes will occur

Changes to the work scope (change orders) are a popular place for contractors to make a profit. When a change order is issued, it isn’t usual to bid it out and the contractor’s rates are accepted. Hopefully your contractor has specific language about charge rates. Whatever you do, change orders always seem to be expensive.

In most shutdowns, scope creep is inevitable because unknowns existed when the shutdown started. Vigilance must be maintained. Some emergent work can be accommodated by your own employees and not impact the contractor. Other work can be covered with contingency funds built into the budget for unexpected surprises.

The key is to protect the overall project, protect your boss from looking bad, and protect your team from disruptions to the priorities that changes create. After everything is said and done, manage the changes. If possible get an estimate from the contractor.

Business priorities change and some requests for changes won’t go away. Formalize the process of accepting changes. Create a change order process at the very beginning of the project. As mentioned it should be part of the initial contract. How many times have you heard, or worse yet, thought, “While we are doing this thing A, it would be silly not to do this other thing B?”

Within reason, fight the urge. If you do take on the extra work, make everyone up the ladder sign off on the change order, and make sure they are informed in explicit terms on the consequences of the change. Adjust the remaining duration and cost estimates when scope changes are approved.