Owner/Contractor Collaboration: Moving Projects to On-Time, On-Budget Completion

Dec. 2, 2010
Use KPIs to track progress in real time.

Juggling many activities at once and integrating moving parts in real time is integral to effectively managing turnarounds and maintenance projects. Unfortunately, project cost management has proven a difficult area for many manufacturers -- a staggering 85% of complex construction and maintenance work industry-wide comes in late and over budget. A key component to solving this problem is owner/contractor collaboration.

The need for contractors continues to grow among plants of all sizes industry wide as:

  • Owners shrink their own hourly workforces
  • Plant assets age
  • Plants grow through capital additions and new plants are built
  • Service specialization advances

Contractors offer manufacturers an attractive solution to meeting the variable resource needs that typically arise during major projects, and they can provide specialized, highly skilled and low-overhead sources of labor. As manufacturers increasingly turn to contract labor to handle maintenance and construction activities, the success of their projects to a great degree depends on their ability to effectively collaborate with contractors.

World-class refineries, chemical plants, and other large-scale manufacturing plants have implemented some of the following best practices to achieve owner/contractor collaboration:

Accurately Forecast the Project

Begin by forecasting turnaround costs based on the history of previous similar projects, current contractor pricing and a realistic estimate of labor productivity. By using automated project forecasting solutions, owner/contractor teams can forecast the scope, costs and resources needed for future projects using drill-down dashboards of historical and real-time data -- including costs, resources required and contingency plans of previous or current projects.

Focus on Work Planning and Scheduling

Progress, cost and status measurements are only meaningful in the context of an up-to-date plan. Best-in-class plant managers understand that complex projects contain multiple variables, including requirements, capabilities, continuity, replacements plans, long-lead-time items and indirect activities and costs. Since a change to any of these variables might affect the outcome of a project, owners an

Achieve Visibility

With hundreds or thousands of contractors on site each day, it is difficult to keep track of contractor hours, project status, projected completion dates and total project costs. Since traditional manual, paper-based processes are time-consuming and error-prone, world-class manufacturers are automating timesheet and billing processes to capture accurate data. By using contractor cost management software, owners and contractors have visibility into the same accurate, real-time data, including timesheet and billing details project status and costs.

Use KPIs to Track Progress in Real Time

Some project teams are using advanced dashboard with key performance indicators (KPIs) to monitor contractor spend over specified time periods and apply the insight they gain to project planning, scheduling and control. By using these metrics, owners and contractors can monitor, identify and address areas of concern as they arise.

Manufacturers are tracking metrics such as: planned and actual, real-time headcount by contractor/skill/shift; equipment and materials used by contractors each shift; alerts of labor and equipment "no-shows;" cumulative hours and costs at the purchase order (PO), work order and activity level; planned vs. actual variance reporting of final costs; and any POs and WOs that are approaching planned cost and hours. World-class plants are able to make better decisions based on actual project status by gaining daily transparency into cost and project status -- real-time, information available at the end of each day on the status of activities performed by contractors and associated project costs.

Implement Standards

Standardizing all aspects of contractor engagements leads to better project team collaboration and streamlines operations. Timekeeping and invoicing are key areas that can be standardized, including: shift scheduling, work hours, contract compliance, invoice calculations and project management. Additionally, plants should consider implementing contracts with localized commercial terms and rates; developing standard contract commercial Terms & Conditions templates; and using consistent nomenclatures and definitions for labor skills and qualifications, equipment and materials. Standardization helps both owners and contractors. By having identical processes regardless of the plant location, contractors can reduce the cost of adapting to processes and gain greater efficiency.

Demand for contractors steadily increases, yet achieving effective owner/contractor relationships can be challenging, and breakdowns can result in costly errors and project delays. By implementing best practices, owners and contractors can work together effectively, minimize the distractions that slow down work, and help drive projects toward on-time and on-budget completion.

Bob L. Harrell is CEO of (Management Controls, Inc.), a provider of contractor cost management software.

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