CONTRACTOR MANAGEMENT PARADOX - Understanding the - American Society of Safety ...
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BEST PRACTICES
Understanding the
CONTRACTOR MANAGEMENT PARADOX
By Stefan Malhotra
In almost every major organization, contract work is a reality if not an operational obligation. It is not often
that a company has all the necessary internal resources at its disposal to accomplish every project at a level
sufficient to satisfy company stakeholders while maintaining quality standards.
At some point, a business model remains an elusive and difficult process agement system, mainly relegated to
without contractors becomes unsustain- to define, especially for growth compa- whoever is willing to assume the task.
able and outside expertise becomes an nies. This is due to an inherent paradox While any OSH professional will
inevitability for operational success. whereby a contractor must seamlessly openly profess the intrinsic importance
Entire industries have been built on integrate with a client’s system, com- of contractor management, few may re-
performing a single technical task or bining OSH elements that are at times alize just how much hazard mitigation
developing one particular product for a contradictory, misaligned, out of scope a client abdicates to them (Beale, 2003).
handful of clients or, in some cases, a sin- or extremely difficult to gauge, either on This is especially evident when contrac-
gle client. Such is the energy generation paper or in practice. tors isolate energized systems, where the
sector, whether oil and gas, renewables, Essentially, contractors exist in breadth and depth of mitigations must
or nuclear, where a glut of contractors competing states simultaneously, both match the complexity of the system’s
(e.g., drillers, civil engineering, crane independent of and dependent on the hazards. The inadequate application of
services, well logging, balance of plant, client. Look no further than control lockout/tagout (LOTO) resulting in inci-
waste management, maintenance ser- of work procedures or lift planning, dents such as high-pressure releases, live
vices) greatly outnumber the companies where differences in process can result circuit contact or unplanned equipment
that actually comprise the industry itself. in confusion and work stoppages in the activation is all too common. One of the
Furthermore, as companies embrace the field. Much like ill-fitting puzzle pieces, most disastrous and well-known exam-
latest technologies (e.g., data analytics, gaps form where communication breaks ples involving contractor LOTO is the
cloud-based databases, drone inspec- down, expectations are ill-defined or 1988 Piper Alpha disaster, in which the
tions) to further extract every ounce unmet, and standards dramatically removal of a single pressure relief valve
of organizational efficiency and reduce differ, all at the expense of the safety of led to the death of 167 offshore workers
overall costs, they promote an accel- those performing the work. (Tombs, 1990). In the author’s recent
erated dependence on the specialized Regardless of the level of contractor experience, one contractor’s haphazard
competencies of contractors, thus further involvement in an organization, the substation LOTO downstream of a fa-
cementing an organization’s reliance on contractor management process is a cility resulted in a total site outage that
its external business partners. unique improvement opportunity that subsequently caused the activation of an
The ubiquity of contractors able to is often mistakenly viewed, outside of asset’s emergency mode. Unfortunately,
perform work at every level of an orga- an OSH context, as an onerous for- another contractor group was simultane-
nization, coupled with the inevitable mality that can be sidestepped. In part ously working inside the asset and failed
necessity for a company to operate due to the difficulty of managing the to fully apply LOTO, resulting in thou-
competitively, demands some measure contractor paradox, this perception is sands of dollars of equipment damage.
of contractor management. In an oper- short-sighted at best and negligent at Even a slight deviation in LOTO
ational context, and more specifically worst. Within the OSH context, con- procedures will result in near-hits, se-
from an OSH perspective, contractor tractor management is perceived as vere injuries or worse. The classic risks
management is a requirement and has one of the least glamorous and overly associated with contractor work are
been for some time. However, it still monotonous aspects of an OSH man- well known: discrete spending, resource
Much like ill-fitting puzzle
pieces, gaps form where
communication breaks
down, expectations are
JUNPINZON/ISTOCK/GETTY IMAGES PLUS
ill-defined or unmet, and
standards dramatically
differ, all at the expense
of the safety of those
performing the work.
assp.org MAY 2019 PROFESSIONAL SAFETY PSJ 27
BEST PRACTICES
allocation, subcontractors, tempo- Whether an artifact of previous client structured, as a haphazard appearance
rary workers, technical competency, demands or out of a fear of legal liability, is difficult to understand and calls into
training, procedural compatibility and most contractors regardless of size now question the competency of a compa-
more. However, beyond the reality that have something resembling an OSH ny’s OSH department. Avoid grouping
contractor management systems are management system, at least on paper. unlike questions, which can break the
necessary for protecting against the Templated safety manuals covering flow of data input and create confusion.
aforementioned risks, OSH departments every OSHA element can easily be pur- Questions should be direct, objective and
often fail to proactively manage these chased or obtained from online sources. explicitly target the data requested in
risks relative to the contractor’s scope of Although contractors are most likely quantifiable terms. One should not leave
work. Managing contractors and their well-intentioned and there is no require- any ambiguity or omit specificity for fear
subcontractors is an active process that ment for every OSH manual to be an of overreach or pushback from contrac-
demands a full cycle approach (i.e., plan, original masterpiece, these manuals hold tors; transparency and accuracy benefit
do, check, act), where there is constant little value for either party when devel- all aspects of OSH.
communication and feedback at every oped solely for bureaucratic purposes. 3) If historic areas of concern exist,
step of the process, not only when things Skimming through hundreds of con- pose multiple questions about the topic.
go off script. This article aims to explore tractor management system documents, For example, instead of asking whether
the common avoidable mistakes OSH de- often identical, will inevitably lead to subcontractors or temporary workers
partments regularly commit in relation complacency and missed deficiencies. At will be used on site, the questions should
to the contractor management paradox some point, this method of review be- be which ones, how many and for what
and proposes solutions to address their comes unsustainable and contractor ver- specific job task? More importantly,
underlying causes. ification becomes a mindless chore rather one should avoid too many binary,
than a tool for risk assessment, thus closed-ended questions such as “does
Pushing Paper calling into question the usefulness of your company have a safety program?”
Spending an inordinate number of the entire process. Ironically, this burden or “do you know of any previous inci-
work hours perpetually developing may be shifted to online third-party con- dents working with our company?” These
and revising an organization’s OSH tractor management databases at an ad- questions dissuade objectivity because
management system while accepting a ditional cost (i.e., a contractor to manage they elicit a point of view and also pro-
contractor’s system without proper due contractors’ data). Notwithstanding the vide limited actionable information.
diligence is an irony often lost on indus- data streamlining and resource deferral If open-ended questions prove to be
try professionals. Often, these reviews provided by such services, the core prob- problematic or unmanageable, multiple
are performed once during the initial lem of gauging procedural implemen- response questions can be used.
contractor qualification process and nev- tation and field performance remains. 4) Supporting documentation is a ne-
er again. Frequently the review consists Although third-party databases provide cessity. A total recordable incident rate
of the client attesting to the contractor’s a deeper dive into content and statistics, is only as good as the OSHA 300 form
OSH system comprehensiveness and the true picture of a contractor’s actual signed by the contractor. This applies to
performance with limited information as quality can remain obscured from view. all other supporting documentation that
to the actual scope of work. The elements While the insights that desktop analyses can provide a more complete representa-
of the contractor’s management system provide are a critical first step and point tion of contractor performance. There is
(e.g., working at height, LOTO, manage- of reference, they also provide a standard- no reason that documents such as OSHA
ment of change) are hurriedly evaluated ized and objective initial approach. The forms, EMR letters, training certificates,
against client standards, while OSH sta- following examines common missteps and OSH procedures, incident reports and
tistics (e.g., total recordable incident rate, potential areas for improvement in the regulatory citations should be omitted
days away restricted or transferred rate, desktop analysis methodology. from a contractor’s record, especially
rate, near-hits) are compared against 1) Avoid paper-based forms entirely. when the objective is to mitigate future
somewhat nebulous criteria [e.g., Bureau The contractor’s initial encounter with operational risk. No other department
of Labor Statistics rates, experience mod- an organization’s OSH management would assume such risk without proper
ification rate (EMR), internal key perfor- system is the contractor OSH question- due diligence, so why would OSH be
mance indicators]. Beyond recognizing naire. In the age of digitization, a pa- excluded? It would be professionally irre-
obvious data discrepancies, the result can per-based form, whether a stand-alone sponsible to accept incomplete documen-
be an ill-defined process with limited in- document or part of a larger contractor tation that conspicuously falls below an
formation that can, and often does, easily qualification package, is subject to organization’s standard.
devolve into a pencil-whipping exercise. greater analytical error. Third-party 5) The contractor must be specific
Given the broad range of potential contractor databases are quickly be- about a work scope on the questionnaire.
work scopes for a multitude of contrac- coming the preferred data management Neither consulting nor crane work is a
tors working on a single project, mean- method, although internal spreadsheets work scope, rather, they are generic job
ingful evaluation of every contractor’s are equally reliable in collecting and descriptors. When a contractor is op-
management system and performance analyzing large volumes of data for dis- erating under the purview of a client,
is near impossible. Contractor submit- crepancies and redress. the anticipated level of risk is inversely
tals are often an amalgamation of every 2) Develop a questionnaire that cap- proportional to the specificity of the pro-
possible OSH topic that could potential- tures all pertinent OSH data in a suc- posed work scope, regardless of the type
ly touch on their expertise and can be cinct, specific and logical format. The of work to be performed. A specific work
unnecessarily hundreds of pages long. questionnaire should be meticulously scope along with supporting technical
28 PSJ PROFESSIONAL SAFETY MAY 2019 assp.orgdocumentation will allow for the appro-
priate risk mitigations to be put in place,
Successful
not excluding the selection of a different contemporary
contractor if needed.
contractor
Process Meets Practice
The greatest disservice an organization management
can render regarding contractor safety
is to ignore or circumvent any part of
requires a strategic
the contractor management process. approach to
This practice ultimately negates the need
for having a process and dramatically the contractor
erodes organizational integrity. The root
causes of this negligence may vary (e.g.,
paradox, where
operational conflicts, internal metrics, contractors are
poor scheduling, unskilled labor pool,
unplanned events, competing depart- both temporary
GORODENKOFF/ISTOCK/GETTY IMAGES PLUS
mental interests). However, the long-term
negative consequences of such action and permanent,
(e.g., personal injury, loss of reputation,
protracted lawsuits) will far outlive any
integral and
expected short-term gains of getting the separate, trusted
job done.
While documented systems and prior but verified,
performance data are valuable to any
contractor management program, they
subordinate and
are only part of a much larger process. equal.
Desktop analyses are often given dis-
proportionate value in comparison to be specifically tailored to the contractors barriers (e.g., procurement, supply chain)
the actual competency and quality they on site. The client must have high visibil- has created greater contractor account-
attempt to describe. This is mainly be- ity in the field. Managing from a distance ability and site responsibility.
cause of the resource-intensive nature is not a suitable option if contractors and Completing the management cycle
of actively evaluating contractors in the employees alike are to recognize the im- (i.e., plan, do, check, act) is crucial to op-
field versus analyzing contractor data in portance of procedural discipline. erational sustainability and will further
the office. The latter is inherently easier. Regularly completing this task is easier drive opportunities to identify contractor
Nonetheless, the contractor management said than done, given that most OSH deficiencies before they materialize in
process extends well beyond the initial professionals must manage large swaths the field. The level of process fidelity and
stamp of approval. A common error is of contractors in multiple locations per- consistent contractor review executed
the failure to follow through the entire forming a broad range of work scopes. In by an organization is directly tied to an
process past the desktop phase. such cases, an organization must make organization’s overall OSH performance.
Contractors must be assessed on a contractor management a core responsi- Without verification beyond the initial
continual basis, independent of prior bility for both line managers and site per- vetting phase, the process cannot impact
performance. Whether a contractor has sonnel. Many of the same auditing tools on workplace safety. Only when the con-
two, 20 or 200 workers on site, the same are needed for site management to doc- tractor management cycle is followed in
assessment process must be consistently ument contractor performance. Indeed, its entirety will true gains in safety per-
applied, albeit with varying levels of the most effective method is to formally formance be realized and in turn raise
scrutiny relative to risk. Passing muster share ownership of contractor manage- minimum performance standards across
on paper does not equate to acceptable ment and empower site staff to ensure the board.
contractor performance in the field. that contractors perform to expectations.
This reality becomes apparent when To start, feedback from weekly contrac- Set Up for Failure
a contractor’s work habits are observed tor meetings and direct lines of commu- The preceding guidance is the mini-
firsthand. If this part of the contractor nication to corporate OSH are critical mum that any contractor management
management process is not respected, to addressing contractor safety issues as system should accomplish. However, a
the door to risk is left wide open. There- they occur. Beyond this, direct involve- question remains: how can something so
fore, constant communication of OSH ment throughout the entire contractor well-known and inextricably linked to
expectations and verification of expecta- management process, from selection risk management be consistently over-
tions in the form of frequent site audits, to commercial operation, is absolutely looked? Is the process inherently flawed?
regular site visits, fact-based evaluations, essential to identify opportunities for Let’s examine the reality of applying the
contractor interactions, daily/weekly improvement that would be otherwise management process and its difficulties.
reporting, post-job reviews or any other missed by corporate management. This A contractor’s OSH procedures are
means of assessment, whether formal or author has observed that shrinking the only a framework to enforce, they do
informal, become obligatory. All should hierarchy and shifting organizational not always represent actual practice.
assp.org MAY 2019 PROFESSIONAL SAFETY PSJ 29BEST PRACTICES
Merely checking a box that a contrac- this should be documented for future risk only compound their own failures in
tor’s energy isolation program exists is projects as a proactive measure. Doing the contractor management process.
not enough. So, what is the appropri- so obligates contractors to reevaluate Regardless of organizational priorities,
ate level of review? The answer lies in their protocols to avoid repeat events and time constraints, resource availability
knowing the basic best practices of OSH allows clients to more efficiently forecast or even a spurious sense of security,
and creatively auditing against these resource allocation. Rather than only re- contractors should not be expected to
practices in the office and in the field. sponding to outcomes with written rep- assume any operational risk. Contractors
What distinguishes a functional con- rimands, repetitive change orders, verbal are by definition an extension of compa-
tractor management program from one warnings or, worse yet, near-hit reports, ny risk and as such must be managed be-
on autopilot is the ability to ask ques- documented nonconformance can feed yond their impact on project quality. An
tions that address the underpinnings of back into the procurement process and actively engaged contractor management
a contractor’s programs and gauge the preemptively shift operational risk away system presents numerous potential
depth of their competency. For example, from the project before any contractors gains in safety for a reasonable invest-
ask for an energy isolation program, as arrive on site. Documented nonconfor- ment relative to potential risk. As noted,
well as completed LOTO forms, train- mance breaks the familiar cycle of repeat the slightest improvement such as refor-
ing documentation, PPE requirements mistakes and promises to improve. At mulating questions, changing medium
and a specific list of equipment that the some point, no matter how convenient or or consistent exchanges with contractors
contractor is qualified to work on. The cozy a business relationship is, without will start paying dividends almost im-
contractor should be able to describe some measure of OSH accountability, mediately. Alternatively, failing to make
in detail the specific types of hazard- repeat errors can and will metastasize, sustained investments in contractor
ous energy present and their isolation skewing expectations and normalizing management can lead to pronounced
methods. Follow up with a field visit and deviations within the process. There- losses in overall contractor quality and
verify that these conditions are actually fore, organizations should actively track performance, furthering the degradation
followed. If any part is unsatisfactory or nonconformance as a means to protect of the contractor base.
lacks specificity, it is time to reassess. system integrity and transfer risk to the Successful contemporary contractor
One should ask for clarification, forefront of a project. management requires a strategic ap-
not change. Clients often engage in proach to the contractor paradox, where
self-deception when it comes to asking Erasing the Status Quo contractors are both temporary and
contractors to modify or differently Any OSH process performed passively permanent, integral and separate, trusted
interpret their management systems to is destined to produce failures at nearly but verified, subordinate and equal. Ad-
satisfy the client’s standard. Any deter- every step; contractor management is no equately assessing risk from the perspec-
mined contractor can modify a policy exception. The process does not seek to tive of these multiple states demands a
to meet a client’s requests, especially remove contractors from an ever-grow- system reflective of the level of their in-
when a major project is on the line. The ing pool of potential partners but rather terconnection. As a result of this inherent
idea should not be to subjugate contrac- aims to build up a reliable contractor inseparable risk, regardless of the client’s
tors to the client’s management system; group that exemplifies an organization’s intent, any action on a contractor man-
doing so will inevitably lead to lip ser- commitment to OSH principles. Opti- agement system will yield either positive
vice and deteriorating relationships. mally, the OSH standards by which a or negative synergistic and compounding
Contractors are business partners, not contractor operates should be no differ- effects on contractor quality. Simply put,
subordinates. Most require and wel- ent from those used by the organization a contractor’s quality is a function of the
come guidance to successfully accom- that hired it. Contractor risk is not client’s capacity to align competing para-
plish a work scope without incident. separate from company risk. Hence, a doxical states in the same direction. One
Expectations and obligations should be company’s expectations of itself cannot must remember that paradoxes cannot
clearly defined from the beginning. If differ from the expectations it has for its be solved, they always exist in some form
a contractor’s procedure does not meet contractors. These expectations must be or another. What counts is how they are
a minimum standard, one should doc- applied consistently and equitably across managed. PSJ
ument the discrepancy and bridge the all scopes of work. This creates an atmo-
gap. Often a bridging document or man- sphere in which accountability is viewed References
agement of change will suffice to clarify as a two-way street and forces companies Beale, C.J. (2003). Factors influencing the
any perceived deficiencies and create a to broaden their scope of OSH respon- safe management of contractors on major haz-
sibilities. Doing so advances the core ard installations. Proceedings of the Institution
sense of collaboration rather than de-
objective of developing a high-perform- of Chemical Engineers Symposium, Manchester,
pendence. U.K.
Documenting contractor noncon- ing contractor base and creates a cycle of Tombs, S. (1990). A case study in distorted
formance is a necessity and should be positive reinforcement. Conversely, com- communication. Proceedings of the Institution
used as often as the situation arises. panies that treat contractor liability as of Chemical Engineers Symposium, London,
Often nonconformance is followed by diminutive and severable from their own U.K.
disciplinary or negative action against
Stefan Malhotra, M.P.H., CSP, ASP, CHMM, REM, is an OSH professional in the energy indus-
a contractor. However, in practice,
try, specializing in management system development, emergency response and incident investigations.
documented nonconformance is a tool Malhotra has a master’s degree in Environmental and Occupational Health from University of Texas,
for overall process improvement, not School of Public Health in Houston and an undergraduate degree from University of Texas at Austin. He
punishment. If a contractor is unable to is a professional member of ASSP’s Gulf Coast Chapter, and a member of the Society’s Environmental
meet its OSH obligations for any reason, Practice Specialty.
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