Many organisations have processes and procedures in place to procure third party services, but with a growing ESG agenda, they need to manage risk effectively and provide quality and reliable services. Many organisations have processes and procedures in place to procure third party services, but with a growing ESG agenda, they need to manage risk effectively and provide quality and reliable services.
This month we look at some of the issues around securing and managing contractors, what you should be considering and what some of the issues?
In this whitepaper:
1. Who is a contractor and what is contractor management?
2. Why is contractor management important?
3. Securing the right contractors for the right work
4. What issues can arise with poor contractor management?
5. Successful Contractor Management
1. Who is a contractor and what is contractor management?
The Oxford English Dictionary (OED) definition of “contractor” is “one who contracts or undertakes to supply certain articles, or to perform any work or service”.
Expanding this further the HSE (in Managing contractors: A guide for employers (HSG159) identifies a contractor as:
“Anyone you get in to work for you who is not an employee. Using contractors – for maintenance, repairs, installation, construction, demolition and many other jobs – may be routine in your company. But many accidents involve contractors working on site.”
Managing contractors: A guide for employers HSG159
From a WFM perspective, this could encompass a variety of scenarios, from the totally outsourced solution to individual specialist companies delivering services. At any one time, possibly even as you read this, you could have a significant number of contractors working at your premises, doing a range of tasks and activities.
Contractors could include third party companies, independent workers, subcontractors or others who provide services, and this could be from a one-off to a long-term basis.
Contractor management therefore refers to the processes and strategy your organisation uses to engage, oversee, coordinate, assess and review the specific activities these contractors undertake on your behalf.
2. Why is contractor management important?
Effective contractor management is about delivering a service that meets your requirements while managing risk through maintaining levels of typically, quality, compliance, safety and cost control.
Contractors are usually engaged where specialist or expert work is needed and the relevant skills are not available in-house, the scale of the work is beyond the organisational capability, or the service is seen as outside core business. Benefits in using contractors can include:
- Legal compliance and risk mitigation – where organisations can manage the risks associated with various areas of compliance (e.g. health and safety, technical, IT), critical system maintenance and service delivery standards.
- Expertise – access to specialist knowledge and skills that are not available in-house.
- Cost management - contractors offer a cost structure that avoids potential long-term financial commitments of employing permanent staff to fulfil the roles.
- Flexibility and speed of delivery – the ability to resource and deliver work quickly and/or readily adapt to changes in need.
Equally, engaging contractors can also pose challenges, such as:
- Adherence to agreed terms of service;
- Timeliness and meeting deadlines;
- Maintaining quality/performance standards;
- Competence; and
- Costs.
As HSG159 also identifies “many accidents involve contractors working on site.” Selecting the right contractor and managing them effectively is an important consideration for you and your organisation.
3. Securing the right contractors for the right work
Good contractor management is about establishing your needs and putting in place the right process to deliver these. Often, and usually dependent on the size, scale and spend, numbers of departments could be involved in selecting the contractors you use. But whether by committee, board or an individual, it pays to invest in the process. This should cover aspects such as:
- Identifying your terms of reference – where, when and why external support/expertise is needed and clearly defining the scope of work, timelines and expected deliverables for the work.
- Contractor selection – when the need for a contractor is established, having a clear process in place to assess what is available in the market and which solution will work best for you. Bids are initially sought from several organisations, on a one-off basis or through a more formal tendering.
Either way vetting the qualifications, certifications, and past work/industry experience of each potential contractors is crucial. Similarly conducting background checks, reviewing references, and confirming legal/regulatory compliance (e.g. insurance/certifications/licenses) are further essential elements.
Contractors should have proven expertise in the specific tasks and ideally the sector and the selection process should result in choosing a partner who meets the company’s requirements, aligns with its values, and offers value for money – the lowest cost is not always the best value for money.
Some organisations operate a preferred supplier system where specific contractors have been pre-vetted in the delivery of specific services.
Formalising the relationship through the negotiation and agreement of contract terms follows. A well-drafted contract benefits both parties, although often terms and conditions need close scrutiny, which is critical in avoiding possible disputes, misunderstandings, and legal complications down the line. Elements covered can include:
- Scopes of Work (SOW) - description of the tasks to be completed, objectives, deliverables and standards of service.
- Financials - payment terms, invoicing requirements and methods.
- Timeline - can include milestones, deadlines and completion dates and be supported by, for example, agreed key performance indicators (KPI) or service level agreements (SLA).
- Rights, liabilities and risk - the provisions for insurance, indemnification, compliance, risk management /control and aspects such as confidentiality, data protection, intellectual property (IP) for example.
- Integrating in your contractors – all contractors should be appropriately briefed and onboarded, so both parties are clear on expectation, including, policies, procedures, reporting structures, access and other essential workplace information. A good working relationship between your employees and contractors, benefits both sides.
Once the contractor begins working, it is crucial to actively monitor and manage their performance. This should include:
- Regular meetings/check-ins to progress of the works and any day-to-day issues that are occurring. This could be in service delivery, performance or health and safety issues.
- Deviations from or additions to specified works.
Joint site walks (as relevant), which can provide a practical view of performance and the relationship between contractor and your staff. - Compliance monitoring in the form of more formal reviews to assess progress against KPIs or SLAs and the quality of work to ensure that it is meeting the required standards.
- Good lines of communication and honest discussions are key to developing a good working relationship and allow both parties to recognise the benefits.
Evaluating the outcomes of the work once the contract is completed is again important to both parties. It can see long term contracts hopefully extended/renewed or additional work secured for one-off jobs. Aspects such as performance review/evaluation against project deliverables, KPIs, SLAs and cost, payment, deviations from scope, added value, etc. can all be assessed. Getting the right contractors in place and developing a good working relationship can lead to long-term partnerships and trust between both parties.
4. What issues can arise with poor contractor management?
While both the organisation and the contractor want to develop a successful and mutually beneficial relationship, issues can arise where one or both sides are unhappy or dissatisfied. These can be down to a number of common problems which include:
- Getting the process wrong – where the contractor engaged does not have the capability or resources to deliver what is being asked for, or, the expectation, demands or resourcing of the contract is unrealistic from the client’s perspective. Costs, asset condition and competence can be common factors in causing these issues.
- Legal and compliance risks – governance in managing contractors requires adherence to various regulations. In WFM, this is not just tax, health and safety and employment, but can include sustainability, ESG, data protection and confidentiality to name a few. Failing to make sure of compliance or manage the legal risks can result in disputes, fines, or damage to both organisation’s reputations as well as dissatisfaction.
- Communication – is said to be the hardest thing to get right and easiest to get wrong. Particularly where priorities, processes or objectives change, unless contractors are included, involved and/or informed of such events it can lead to communication gaps, misunderstandings and failures.
- Costs/quality – if a contractor is not well-managed or the scope of the work is not clearly defined, costs can escalate, affecting budgets, as indeed can poor costing at the tender/contract stage affecting delivery. Unforeseen issues, delays, or changes in project scope (see also above) can lead to cost, service and/or quality variations.
5. Successful Contractor Management
Developing and maintaining a successful relationship with your contractors requires effort on both sides. Having a robust management process, that is understood by all, is also essential. Some points to consider are:
- Communicate clearly – have open lines of communication and set expectations for how and when updates will be provided and make sure that the contractor feels ‘part of the team’ and supported in their roles and that you are working to common goals/aims.
- Look for synergies – when assessing the market for potential contractors, look for organisations modelling similar values.
- Get the contract right – make sure the contract is detailed and comprehensive. Each of you should have a clear understanding of the terms and conditions, expected performance levels and delivery.
- Look for value add – look for contractors offering assurances and accreditations above the industry norm. This usually signals organisations who are not only demonstrating competency but are serious about delivering it.
- Take references – and look for them from organisations who are similar in sector and size to your organisation.
- Are you spending or investing – while most contracts say cost is not the overarching consideration, it usually plays a significant part. Particularly for specialist areas of risk and critical services, are you looking to invest in compliance, if so, what are you getting for your money?
- Build long-term relationships – look to develop long-term relationships with your contractors performing well.
- Check, check, check – regularly monitor the performance of your contractors through scheduled check-ins and feedback loops. Provide positive reinforcement for good work and equally make sure any concerns are addressed immediately.
- Keep risk under review – particularly where critical systems are involved, conduct regular audits and make sure of compliance with all safety, legal, and regulatory requirements. While this is usual at the start of the contract, are they being appropriately maintained?
- Have a back-up – do you have contingency plans in place in case the contractor fails to deliver as expected?
Good contractor management is an essential component for modern organisations, as increasingly external expertise is needed and sought for non-core activities. A comprehensive vetting, selection, management and review process is key to delivering successful outcomes, managing costs, delivery and risk. While challenges may arise, implementing the right processes can deliver a productive and collaborative relationship between contractors and the organisation.
Assurity Consulting is the UK’s leading independent consultancy specialising in workplace health, safety and environmental solutions. As your partner in compliance management you will reap the benefit of our more than 35 years’ experience of helping customers across a range of different sectors – manage their compliance responsibilities as effectively as possible. If you need any help with your health, safety or environmental compliance, or if you would like more information on the services Assurity Consulting offer, please get in touch.