Shutdowns, Turnarounds and Outages (STO) is a time-bound activity.

In order to complete the Shutdowns and Turnarounds successfully

within in a limited timeframe, plants may require several pairs of
extra hands over and above that of its own employees. This is when
companies are required to make the crucial decision of whether
to hire contractors or not. If not thought through and managed
correctly, the strategy to hire contractors could not only impact
the success of a shutdown but also signicantly bring up the costs
without delivering expected results.
Lets have a look at factors that contribute in creating a successful
contractor management strategy
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Contractor
Management:
The Un-Sung Hero of
Effective Turnarounds!
SO WHY HIRE CONTRACTORS THEN?
Proper contractor management, although challenging, can prove to be highly protable if planned well in
the successful implementation of turnaround projects.
The case for using contractors in a turnaround include:
n When in-house personnel are limited, hiring contractors with past experience in handling similar
projects successfully can be hugely benecial
n Hiring contractors reduces elapsed time of an outage
n Plants dont always have the required licenses for the jobs. Hiring a team of contractors that has the
necessary licenses and a string of success records can save crucial time and money
n Skilled, trained and experienced contractors with deep subject-matter knowledge are more likely to
ensure successful turnaround compared to in-house staff that may lack in essential skills; thus saving
time, effort and money
n Hiring contractors for a limited time is less expensive than employing and retaining highly skilled full
time employees
n Cleaning operations, setting up and dismantling of machinery, and removal of abandoned equipment
are the jobs best left to the care of experienced contractors
CONTRACTS: WHAT DO THEY MEAN TODAY?
In the present age of outsourcing, effective contracting is the key to success of any project. Company staff must fully understand the
complexities of the contracting process, and implement a systematic approach to select the most qualied contractors and vendors.
For example:
Initial Activities
Managing Contractor - MC (General Contractor)
Unit Contractor (Main Contractor)
Single Contractor
Personel Supplier
Preparation Planning
Level 4
Level 3
Level 2
Level 1
Execution Finalization
n Initial activities
n Planning and preperation of
all trades
n Managing & coordination of
all activites in the unit(s)
n Execution of merch. works
n HSSE (MC-customer)
n QA/QC (MC-customer)
n Planning
n Execution of
mechanical
works
n Coordination of
activites (SIP)
n HSEQ
n Execution of
mechanical
works
n Coordination of
activites (SIP)
n HSEQ
n Provision of
personnel
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CHALLENGES IN HIRING CONTRACTORS
Many times, companies are clear about what they have, but
they are not very clear about what they want. The contracting
options available are endless, and without proper knowledge of
relative costs and benets of each option, it is very likely that
management may feel bogged down. The contractor strategy has
to be customized to suit companys specic needs and its culture,
covering:
n Cost:
Hiring contractor can make quite a big dent in your overall
budget. This may happen by overcharging a piece of work,
carrying out extra unnecessary non-urgent work, and
sometimes taking longer than agreed time, seriously impacting
a successful turnaround. Hence, companies should make sure
that the cost benet ratio is favourable.
n Loss of control:
It is very important to pay close attention to contracting
strategy. Because it is essentially like giving power and
control to people who might not completely understand how
things work in your organization, you might begin to feel like
you are losing control and that the contractor is not
working in your best interest.
n Legal:
There could be legal difculties in drawing up a contract, as
internal employees may have little legal knowledge. It is
advisable to take a legal opinion to understand the ne print
and to protect their interests from hidden or misleading clauses.
n Communication barrier:
If the communication between you and the contractor, and
also between contractor and its sub team hasnt cascaded
down well to all the levels, there could be misalignment in your
vision of the turnaround and that of your contractors. The
whole working relationship with outsiders can become very
complex if the communication is ambiguous, not channelled
correctly, and if the nal goal and vision of the turnaround is
blurry in the eyes of management.
n Other factors:
l Unavailability when required contractors may also be
required by other companies at same time.
l Contractors are not always as effective as their
proposals suggest. Lower skilled staff may be used to
supplement skilled ones and to make up the numbers
l Difcult client-contractor relationship
l Conict between contractors
l Some contractors might resort to use of sub
contractors that may lead to compromising quality
n Shared goal and vision:
At the outset, it is important to have a clear vision in your
mind about where you want to be after STO. This brings in
a lot of clarity
n Establishing KPI:
Establishing clear lead and lag indicators help you to
evaluate the performance of contractors in a more
concrete and measurable manner. The measures listed
below can be translated into metrics or measures of
success. They could vary from industry to industry.
l Budget:
Budgeted spending to actual spending or budgeted
to actual on a job-by-job basis or chart of accounts
basis. Comparing planned costs, forecasted costs and
actual costs helps in understanding gaps between
budgeted and actual.
l On time:
How many days did the total shutdown last, compared
with the number of days scheduled. If the date is
important, then how many days early or late is the plant
ready to produce. Incentives to nish early or penalties
on delays can be put in place within the contractor
agreement.

l Start-up:
There are two ways to look at start-up data. The
common one is the ratio of the number of maintenance
days for the shutdown to the total days from last good
production to rst good production. The other is number
of days from shutdown completion to stable quality
production would be a valid measure of success.
Year
n Planned
n Actual
D
a
y
s

S
h
u
t
d
o
w
n
2007 2006
35
30
25
20
15
10
5
Cost Curve - Plan, Forecast, Actual and Commited Costs
n Plan Cost
n Forecast Cost
n Actual Cost
n Commited Cost
Jan12
550.000
440.000
330.000
220.000
110.000
Feb12 Mar12 April12 May12 Jun12 July12
CONTRACTOR STRATEGY
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There are various strategies to be considered when choosing a
contractor. These strategies are formulated around some key
factors namely cost, competency in carrying out the tasks, and
contractors reputation and safety record of their past works.
Some other factors that would inuence the strategy are work
scope, nature of job, skills of the in-house personnel and their
risk-bearing capacity. With these factors in place, a company
should select a contract strategy it believes is most benecial.
The organisation may use one main contractor, who will then
hire other sub-contractors to manage the outage or use the in-
house management as the main management team. Contracts
generally fall into three main categories such as xed price or
lump sum contracts, cost reimbursable contracts, and unit
price contracts. Some of the key aspects of efcient contractor
strategy include:
n Qualities of contractor
n Operational aspects of contractor management
n Partnership with contractors
n Contractor safety
QUALITIES OF A CONTRACTOR
While there are various qualities the company should look for, few
of the important ones are:
n Previous experience and technical knowledge/
qualication in respective eld: Having previous experience
and technical qualications mitigates the risk of creating new
problems or delays often associated with hiring inexperienced
and non-technical contractors.
n Strong nancial and production/work capabilities:
Following on the previous point, the contractors capabilities
should be kept in mind before hiring. This is especially important
if the STO project is of large size.
n Easy access to site location: Before hiring a contractor, it
is important that they are located or have an ofce located in
the same geographical area as the company ofce or plant.
OPERATIONAL ASPECTS OF CONTRACTOR
MANAGEMENT
To ensure smooth day-to-day functioning during a STO, some of
the key points to remember are:
n Reduction of interfaces among the different contractors on
one hand and between in-house personnel on the other.
n Pay schedule for the contractors to be properly dened and
adhered to.
n Proper assessment in terms of quality control and assurance
of contractors supplied materials and jobs.
PARTNERSHIP WITH CONTRACTORS
Considering the cost and efforts put into recruiting/selecting
contractors, it is recommended to establish good relationships
with the very best contractors in the industry. This will not only
ensure that the contractor knows the tasks to be carried out,
it also gives the contractor some sense of belonging, which
leads to more commitment with the clients shutdowns. In some
cases this may lead to a reduction in the service cost, since the
contractor feels a part of the organisation.
CONTRACTOR SAFETY
STOs present numerous challenges for safety. Large numbers
of contractors may be working on site for the rst time with
little knowledge of equipment and processes. Contractors may
be unfamiliar with the hazardous site, putting them at a higher
risk of health and safety. If they are not inducted well to the
surroundings and given proper health and safety guidelines, they
stand at a risk of serious injury. Cleaning, inspection and repair is
often carried out with special isolation requirements in conned
spaces or other challenging environments, and it is utmost
important to pay heed to the safety standards.
CONTRACTORS PERSPECTIVE: THE OTHER SIDE OF THE STORY
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In order to work to the best of the ability and carry out all their activities successfully, contractors need to feel like they own the project
and that they are part of the team. Here are few things to keep in mind for good contractor management:
Point of contact: Some would say contractor s need only one point of plant contact, so all information to the contractor
is funnelled through that point, thus minimizing mixed communications. But the question that needs to be answered is how
available is the primary plant contact? During a shutdown, time is of the essence. Holding up work because the contractor
cant get answers can add hours, or eventually days, to a turnaround schedule.
Roles & Responsibilities: Contractors need to be clear on the extent of their decision-making powers. Do they have to get
verbal or written permission to proceed outside the original scope of work? Who is responsible for identifying risk points in the
job scope (contingency planning) on critical jobs? Is the contractor responsible to analyze risks and contain them?
Site Tour: Obviously they need to know where the equipment they are working on is, but beyond that, they need to know if
there is a sequence for working on multiple pieces of equipment. Part of site orientation is showing the contractor how to get
things done from a paperwork perspective.
QA/QC Expectations: One denition of quality is tness for use, that is, its good enough for the application. The equipment
owner is responsible for clearly dening what is good enough for a particular application
Disposal Rules: The contractors need to know the disposal and housekeeping rules. Where can they put his scrap materials?
What should they do with waste product cleaned out of vessels? Who must approve disposal of hazardous materials? What
permits are needed? Who is responsible for getting rid of it? Who supplies the trucks, tanks, wagons, etc? What are the
housekeeping requirements around his work site?
Safety Rules: Most sites take this task seriously, given the human and business losses, and regulatory costs for lack of
safety enforcement. Safety rules should be covered with all contractors in unfailing in detail.
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Sources:
http://www.bilnger.com/leadmin/corporate_webseite/unternehmen/Messe/1104_Turnarounds_Amerer_EN.pdf
http://www.reliableplant.com/Read/27760/strategies-to-optimize-shutdowns
http://reliabilityweb.com/index.php/articles/shutdowns_turnarounds_from_the_contractors_perspective/
A strategic approach to contractor management can tilt the game in your favour. Learn more about different
aspects of contractor management in Shutdown & Turnarounds Asia 2014. Liaise with thought leaders, meet
industry peers and learn about best practices in Contractor Management at STO Asia 2014, 24 - 27 June, 2014 -
Kuala Lumpur, Malaysia
Celebrating 11 Years
PLAN, MANAGE & EXECUTE YOUR MOST SUCCESSFUL TURNAROUND EVER!
n Main conference:
25-26 June 2014
n Pre conference full day masterclass:
24 June 2014
n Post conference half day workshop:
27 June 2014
n Venue:
Kuala Lumpur, Malaysia
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