Contractor Management

One of the biggest risks to any organization has to be contractor management. In many cases, contractors are not managed as stringently as our own employees with the management of contractors being a mammoth task in itself.

Contractors:

• Introduce additional risks to the Organization by virtue of people, plant & equipment’s, materials and substances to name but a few
• May be unfamiliar with your site hazards and risks
• May have poor work practices and safety culture
• Contractors have not signed a 37(2) Agreement before work commences and may not be in Good Standing with the Compensation Commissioner.

The benefits of external resources

It’s easy to justify moving work from internal to external resources (Contractors). Not only is there often a clear cost-saving, but it also allows the organization to focus on their core business but still use specialist skills for those other (non-core) activities.

Another often-cited business benefit is increased agility where the company can tap into a larger resource pool, as and when required, but without carrying the overhead.

So, in theory, at least, external resourcing can deliver a significant competitive advantage.
However, whilst these benefits no doubt look attractive on paper, they come with a fresh set of challenges.

Benefits realisation

Realising the benefits of external resourcing comes down to the organisation’s ability to put in place the management structures, processes and leadership skills required to exploit this new model. It, therefore, requires foresight and the ability to adapt as it increases its use of external resources.

Below are the main areas that, in our experience, companies need to focus on:

1. Legal Agreements – The OHS Act is not affected by any agreements other than those in S 10(4) and S 37(2). It is highly advisable to ensure that your contractors sign a Contractors/ Mandatories Agreements – highlighting your expectations of them on site. This does not transfer liability to them but highlights the relationship that they are an employer in their own right (not your employee) and are responsible to provide ensure safe practices. Please note as the employer this does not remove your responsibility to manage the contractor in terms of the letter of that agreement.

2. Contractor Risks – A Thorough understanding of each Contractors activities, products, services, plant, equipment, materials and substances is essential. This should be supplied as part of their contractor information submitted prior to work commencing. The contractor having a unique understanding of their hazards and risks should provide a risk assessment for their work. The Client should also provide the Contractor with the site risk assessment relevant to their areas scope of work.

3. Leadership – Contractors should see a strong sense of Visibly felt leadership on behalf of the Client, this helps entrench the fact that the client sets the example and they will be comprehensively managed and reviewed during the project. Clients should clearly define who and how Contractors will be managed, Contractors should in turn deploy roles and responsibilities clearly through Job Descriptions, Appointments and Contracts.

4. Processes need to be clear and easy to follow using Contractors places much greater emphasis and strain on your operational processes.
That’s because you’re now relying on external personnel to carry out key steps in the process and you can’t afford any mishaps. 
The easiest way to address this is with well-constructed processes that are properly explained to all involved parties. Only then can you be sure you’ve clearly explained who does what when, how they do it – and why they do it.

5. Costs need to be controlled and understood Now this might sound obvious – and easy to achieve – but many organisations don’t even have good visibility into how much they’re spending on external resources.
And for those that can at least accurately count the beans, many can’t allocate those beans to the appropriate ‘bucket’ – be it a particular job, cost centre or general ledger code.
Failing to understand the true cost of Contractors is inviting certain failure.

6. Performance needs to be managed, Of course, getting a handle on your costs is a very basic prerequisite to complete performance management. You’ll also need to make sure you can properly manage the speed and quality of your external resources.
That’s where having the right service level agreements (SLAs) and key performance indicators (KPIs) becomes critical. 
Without a solid performance management platform in place – that both parties understand – you’re setting yourself (and your contractor) up to fail.

7. Software needs to enable (not hinder) success Most companies will need new or better tools to help them achieve and manage the six requirements discussed above.
For example, they’ll need good software to help them manage risks, processes and performance. They’ll also need to consider how to make knowledge-sharing and collaboration seamless.
Otherwise, the software will simply ‘let the side down and hinder those great initiatives.

The Takeaway

Organisations who maximise the benefits of external resourcing have the frameworks, processes and tools in place to leverage such complex structures and they can then strike the right balance between internal control and external empowerment and build a truly collaborative operating model. And their rewards? How about cost-savings, greater agility and higher quality (to name but three). Sounds to us like it might be worth it.

Key Legislation in understanding Contractor Management

37. Acts or omissions by employees or mandataries

(1) Whenever an employee does or omits to do any act which it would be an offence in terms of this Act for the employer of such employee or a user to do or omit to do, then, unless it is proved that –

(a) in doing or omitting to do that act the employee was acting without the connivance or permission of the employer or any such user ;

(b) it was not under any condition or in any circumstance within the scope of the authority of the employee to do or omit to do an act, whether lawful or unlawful, of the character of the act or omission charged; and

(c) all reasonable steps were taken by the employer or any such user to prevent any act or omission of the kind in question, the employer himself shall be presumed to have done or omitted to do that act, and shall be liable to be convicted and sentenced in respect thereof; and the fact that he issued instructions forbidding any act or omission of the kind in question shall not, of itself, be accepted as sufficient proof that he took all reasonable steps to prevent the act or omission.

(2) The provisions of subsection (1) shall mutatis mutandis apply in the case of a mandatory of any employer or user except if the parties have agreed in writing to the arrangements and procedures between them to ensure compliance by the mandatory with the provisions of this Act.