Contracting Policy and Procedures
No formal contractor policy or procedures exist. Everyone manages contractors differently, or applies the same approach to all contracts.
A number of contracting procedures exist to ensure compliance and control:
• Procedures are primarily driven by financial requirements.
• Compliance with health and safety regulations is covered in detail.
• There is a general understanding that different contracting types exist.
• Contractors are largely managed based on instinct.
A formal contracting policy ,with supporting procedures, exists:
• Contractor categories are defined based on work criticality, costs and risks.
• The policy defines criteria for deciding when work should be contracted out.
• The policy specifies how different contractors should be managed.
• Detailed contracting procedures with steps and responsibilities exist and are accepted by all role players.
The contracting policy and procedures have been expanded and refined:
• The current policy and procedures have been implemented and evaluated.
• The performance management process for contractors is defined.
• The policy and procedures provide sustainable development guidelines.
• The contractor development focus is defined, e.g. develop locals, reduce dependency, or improve performance.
The policy is reviewed regularly in line with the AM Strategy:
• Changes in legislation and/or working conditions are addressed.
• Changes in operational conditions or the AM Strategy are addressed.
• All contract incidents or problems have been analysed and addressed.
• Contractors from all categories are included in the review process.
There is no guideline or process for selecting a contractor. Everyone uses his own judgement, which is normally based on price or some ulterior motive.
The policy specifies that contractors are selected based on the lowest price:
• A procedure defines the format and number of quotations to be obtained.
• Extensive motivation is required to accept a higher quotation.
• A list of approved contractors is available for a small amount of generic outsourced work.
Contractor selection criteria are category specific:
• Selection criteria have been defined for each of the 4 contractor categories.
• These criteria include price, technical competence and EHS track record.
• A formal selection procedure defines the steps and responsibilities involved.
• A list of approved contractors exists for all significant outsourced work.
Contractor selection is based on more advanced criteria:
• Previous performance is considered.
• EHS compliance is considered.
• Additional value-adding services are considered.
• Affirmative action and economic empowerment are considered.
• The list of approved contractors is kept up-to-date.
The selection process is dynamic:
• The criteria are updated in line with the organisations strategy and circumstances.
• The selection process supports the sustainable development policy.
• It considers the contractors own continuous improvement programme (e.g. ISO 9001 or 14001).
No formal contracting agreements are documented. The contractors quotation is the only form of agreement available.
A generic contractor agreement template is available for contract work:
• The agreement is updated for each new contract, but only contains the agreed price and high level deliverables.
• EHS requirements are specified.
• Formal acceptance is acknowledged by the contractors signature.
The format of the contractual agreement and the process have been formalised:
• A standard agreement template exists for each contractor category.
• The contractual agreement covers all aspects defined in the contracting policy.
• Specific deliverables and responsibilities are listed in an SLA.
• The payment process enforces compliance with the agreement.
• The standard guidelines facilitate fast negotiations between parties.
Formal agreements are in place according to a standards:
• All categories of contracts have signed agreements.
• Agreements cover all aspects of contractor management, including payment, EHS, performance and roles.
• Forward purchase agreements are in place for regular non-critical contracts.
• Formal recognised contract negotiation practices are used to define the deliverables and price.
The EAMS is used to manage the agreements with contractors:
• Contractors are aware of their role in implementing the AM Strategy.
• The EAMS can facilitate full contractor management and quality assurance (QA).
• Performance targets are benchmarked to ensure that they are realistic.
• Contract negotiations focus on developing a win-win agreement for both company and contractor.
The work performed by contractors is managed in an ad hoc way. Instructions are normally verbal, leading to poor control and misalignment with the internal asset management systems.
Contract owners manage contractors informally with different levels of success:
• Field releases or purchase orders are used for instructions to contractors.
• The use of the internal safety procedures (e.g. permits) is enforced.
• Safe working procedures are available to contractors but not always used.
• Contract owners have not had any training in contractor management.
Contractors are managed via internal work orders from the CMMS/EAMS:
• All contracted work is issued via WOs.
• Completed WOs are returned and captured as history in the CMMS/EAMS.
• The return and completeness of WOs is a pre-requisite for payment.
• Safe working procedures are referenced on the WOs.
• Persons responsible for contractors had training in contractor management.
Contractors are managed via the Work Planning and Control system:
• All contract work is formally planned and scheduled.
• EHS requirements such as permits and risk assessments are included on the WO.
• Contractors participate in weekly scheduling meetings to align with maintenance and operational activities.
• No contractor is allowed to work on assets without a formal WO.
• KPIs such as schedule compliance and backlog are applied to contractors.
The EAMS enables real time management of contractors:
• Contractors record work progress and feedback on-line (via a PDA or tablet.)
• WO status is tracked on-line.
• Response times are monitored in real time for critical SLA elements.
• Problem areas are automatically escalated to the appropriate authority.
• Contractors participate in problem solving and improvement initiatives.
Performance and Quality Management
The quality of contract work is not checked via a formal process. This leads to frequent rework, repetitive failures and allocation of blame between the organisation and the contractor.
Performance management is limited to an informal review of work quality:
• Ad hoc checks are performed by supervisors during walk-abouts.
• Completed work is checked for sign-off before payment.
• Extra quality checks are done when using a contractor for the first time.
• Some disputes occur because the scope of work and standards are unclear.
Performance management is formalised:
• A formal procedure with clear roles exists for over-inspections and QA.
• More effort is spent to manage critical contractors.
• Less critical contracts are frequently not managed closely.
• Most contract KPIs are generic and not always objective.
• Contract work is reviewed at least once during execution, with a final review after completion.
The performance management process has been streamlined:
• The process is category-specific and focuses on significant contracts.
• Specific and objective KPIs are used, with predefined incentives and penalties.
• The performance of all contractors is regularly reviewed against their SLAs.
• Over-inspection results are managed and recorded via the EAMS.
• Results are used for future contractor selection.
The EAMS facilitates the performance management of significant contracts:
• The EAMS is used to measure contract deliverables against the SLA.
• WOs make provision for detailed quality assurance steps.
• Contractors use the EAMS to view their performance and drive improvements.
• Response times for critical SLA items are monitored electronically and problems are escalated automatically.
Contract administration is done in an informal and ad hoc manner, since it is not recognised as a specialist function. As a result, there are conflicts and confusion, and time is wasted in processing transactions that involve contractors.
Contract administration is more structured but still informal:
• Standard procurement rules apply to contracts and contractors.
• Contractors are paid on receipt of formal invoices.
• Meetings and interactions with contractors happen on an ad-hoc basis.
A formal contract administration process is in place:
• A detailed procedure exists with clear responsibilities and support documents.
• People responsible for contract administration had formal training.
• A system exists to store and access contractor records and documents.
• Interaction with contractors happens according to clear guidelines.
Contract administration is a streamlined specialist function:
• Forward purchasing agreements are in place for frequent low value contracts to facilitate automated payment.
• Payment of penalties and incentives are integrated with these FPAs.
• Contract agreements are reviewed at set intervals.
• Disputes are managed formally.
Contract administration effectiveness is measured and automated:
• Contract administration staff are measured on contract performance.
• Contract close-out reports cover lessons learnt and contractor performance.
• Closeout reports are stored and used for future contractor selection.
• FPAs are used extensively across all contractor categories.
Contractor EHS Management
Contractors are expected to perform the work with minimum effort and expense. The contractor is also entirely responsible for all EHS problems on the contract. As a result, there are frequent EHS incidents on contracts.
EHS performance on contracts is treated with varying levels of importance:
• Contractors have to meet initial EHS pre-qualification requirements.
• The focus on EHS frequently decreases during the contract execution.
• Standards are frequently lowered when contractors do not meet them.
• Contractors have to use their own resources to achieve EHS standards.
EHS is a key focus area during contract allocation and execution:
• Contractor pre-qualification requires proof of a working EHS management system conforming to minimum criteria.
• EHS induction programs are developed for each contractor category.
• The organisation and contractors run joint EHS initiatives.
• EHS conformance is a key element of the performance and quality review.
The organisation invests in contractor EHS capability to ensure full compliance:
• All the standard internal EHS practices apply in full to all contractors.
• Contractors are rewarded for reaching the organisations EHS targets.
• EHS training is provided to contractors.
• Formal EHS risk assessments are done jointly before contract commencement.
• Safety checks are implemented prior to all contracted work.
There is a joint zero tolerance approach to contractor EHS practices:
• EHS problems are solved jointly and proactively with contractors.
• Both parties expect and accept that work will be postponed until EHS standards are met.
• Evidence proves that the contractors EHS performance is world class.