Building Bonds With Contractors

Managers have a vested interest in ensuring that the partnerships they form with service providers are productive and secure. The overall quality of those relationships will directly affect the value the organization receives.

At the same time, managers must understand the sometimes emotional nature of outsourcing, being careful to balance the organization’s need for cost effectiveness with the morale of the in-house staff.

For outsourcing partnerships to work as efficiently and cost-effectively as possible, managers must weigh several factors before selecting a service provider, and they need to continually monitor performance through-out the term of the contract.

Choose wisely
Managers at Chevron Real Estate Management Co. in San Ramon, Calif., have enhanced their method of selecting a service provider that will best meet the organization’s needs. George Horn, Chevron’s facility coordinator of operations and maintenance, serves on the team that selects the service providers for the 1.5-million-square-foot campus. He says the process has been successful for the organization, which outsources all of its craft and service functions.

“We determine the scope of work, discuss skill sets that the job requires, look at the safety record of different contractors, as well as their experience in the field and financial stability, and check their references,” Horn says.

Team members first compile a list of qualifications a contractor must possess. They then weigh the importance each qualification by assigning a numeric rating, usually 1 to 10. The team ranks each bidding contractor based on how well they meet each criteria.

“The process has become a lot more analytical that it use to be,” Horn says, adding that providers previously had been selected primarily on price. Managers often would develop a general scope of work and grant the job to the lowest bidder. While cost remains a consideration, the decision now is based on a broader range of requirements.

“Now, we often don’t hire the person giving us the lowest price because we need someone who qualifies better in other areas that are more important,” he says.

The more organizations go through the outsourcing process, the better they become at knowing what qualifications to look for, says Bob Casagrande, director of plant operations and facility maintenance at Southern Methodist University in Dallas.

“We’ve become more refined the more we go through the process,” he says, adding that his department also looks at factors beyond price.

“We look at the size of the organization, their history and success stories, their ability to meet our needs, and their staff’s expertise,” he says, adding that managers need to do their homework to make sure the contractor is reputable.

“We look for not only quality in business but also quality in personnel,” he says. “Groups that take care of their own staffs will tend to take care of your organization.” Determining a company’s ethics and character, however, can be difficult.

“You have to use your past experiences and trust your own sense of judgement,” he says.
Along with good ethics, managers should seek companies that are dedicated to their customers by being available 24 hours a day, says Pat Stott, facilities operations manager for Lee County, Fla.

“When you hire somebody, you want to get a good job done in a timely fashion at a reasonable cost,” Stott says. “But more than anything, you want that person to be there when you have a problem or emergency.”

For example, Stott, who once owned a mechanical contracting firm, says in that job, he had clients who demanded reliable cooling systems. Some organizations, such as assisted-living centers, must evacuate their facilities if they are without air-conditioning for any length of time. While most such facilities have back-up cooling systems, his clients felt reassured knowing that help was available in the middle of the night if their primary cooling system failed, Stott says.

Location, location, location
Managers also would be wise to consider the contractor’s presence in the local geographical area, Horn says. For example, Chevron once hired an engineering service provider who had no presence in the nearby San Francisco Bay area.

“When we needed additional personnel, they didn’t have any resources that could serve us,” Horn says.

Since Chevron merged with Texaco in 2001, the organization has organized a global procurement group to set up global contracts with service providers. The benefit of such contracts is that the hiring company usually can obtain a lower price for the services, he says.

“The theory is, if Chevron could get one service provider for around the world, the bang for the buck would be extremely good,” he says. The drawback can be a lower level of local service if the provider doesn’t have resources near all of the organization’s facilities, Horn says. A global provider with little regional presence currently provides security services for Chevron’s San Ramon campus.

“When we lose people in security, our local site manager must do all of the advertising to recruit applicants and complete the screening process because the contracting organization doesn’t have any presence in our area,” he says.

Documenting details
Creating a clear and comprehensive contract is the most important step in avoiding misunderstandings between the institutional or commercial facility and a contractor.

“It is critical that when you initially create the contract that you have a clear definition of the specifications and requirements,” says Brad Membel, director of the facilities management division at the Colorado Department of Human Services.

“Depending on the contract, managers might want to include how often they want the service performed, within which time frames, and list every piece of equipment that they want serviced,” Membel says.

Taking extra time to make sure all specifications are correct and described in detail, could save organizations a lot of pain, Membel says, adding that this is particularly true if the hiring organization is creating the contract.

The individual who wrote the contract is responsible for ensuring its thoroughness, he says. If the specifications are not clear or the contract contains any ambiguity and a legal situation arises, the court will favor the party who didn’t write the contract, he says.

Managers can help avoid contract disputes by working through issues during the negotiation process before the contract is finalized.

“If everyone walks away happy when you negotiate, it was a good negotiation,” Membel says. “It is always better to be fair when you negotiate,” he says, adding that when the service providers feel that they are not receiving a fair deal, the quality of the work can suffer.

But even the best written and negotiated outsourcing contract cannot guarantee that differences between the parties will not arise.

“We have 30-day escape clause in all of our contracts,” says Horn, adding that the clause benefits both parties. “If the contractor discovers they bided to low to complete the job and negotiations don’t allow them to increase their price, they have a way out of the contract.”

Communicate and verify
Once the contract is finalized and work begins, managers should continually monitor the progress of the work and stay in communication with the providers.

“Honesty and communication are the biggest keys to sustaining a good working relationship with contractors,” Stott says.

It is important for managers to make themselves available to talk with contractors, especially when questions or issues need to be discussed, Horn says. Chevron runs a non-stop operation, and the 23 contracted engineers that work on the campus are spread out over three shifts.

“Because of the schedules, I don’t get to see them all the time, but I’m available enough that we can schedule time to interact and talk about issues,” he says.

The contractor’s “job is to get the work done and my job is to clear the barriers,” Horn says, adding that communication is essential for understanding any obstacles that contractors might face, as well as avoiding future complications.

“I always try to give our contractors the respect that they deserve on the areas of their expertise,” Horn says. “I always engage them in decisions that affect their area,” Horn involves them in discussions that might have implications that affect the project on which they’re working.

Problems are inevitable, so managers need to address issues diplomatically and strategically.

“You must have the reality that no one is perfect, Casagrande says. “There will be errors throughout the life of the contract. You have to give people opportunities to correct problems, and sometimes, it just doesn’t happen overnight.”

Casagrande adds that managers need to realize that mistakes can happen when trying new procedures. For example, about seven years ago his organization used the same contractor for both custodial and food services. During summer months when classes are out of session, the university needed less help with food service.

“Instead of laying off the food service workers in the summer, we thought they could work in the custodial operation,” Casagrande says. But assigning the food service staff to clean buildings wasn’t successful because cooking and housekeeping require different skill sets.
Having regular, scheduled reviews with service providers can help eliminate misunderstandings, address issues and resolve conflicts.

“We perform quarterly reviews with one of our vendors,” Casagrande says. “They bring in one of their operational vice presidents, and we have to grade them on their performance.” He says the reviews have been extremely helpful in opening the doors of communication.

Meeting regularly is particularly important when dealing with long-term contracts because in some cases, workers have a tendency to become complacent as time progresses, Stott says.

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