08.16.11Bob Harrell, CEO and Founder, Track Software

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Turnarounds/shutdowns/outages and complex maintenance projects are an ongoing reality for refineries, chemical plants, power generators and other process industry manufacturers today. Once underway, these projects can often take on a life of their own, causing related contract labor, equipment and material costs to spiral out of control. Why?

It's almost impossible, using pencil and paper "systems" and spreadsheets to really know the progress of hundreds or thousands of work orders/work breakdown structure elements, not to mention the actual costs of hundreds or thousands of contract craftsmen working daily. In fact, it's widely held that 85 percent of turnarounds/shutdowns/outages are completed late and over budget because project teams are hard pressed to provide meaningful answers to questions about their projects such as:

• What is the status of the project? Is it on schedule, on budget? Have there been any surprises?

• When will the job be completed?

• What will the job cost?

• Did the contractors deliver today's required mix of labor, equipment and materials?

• Did we receive the right number of skilled workers, on-time and as scheduled?

• Are we seeing the productivity we forecasted? What's the earned value?
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The challenge for owners and contractors is to establish and maintain visibility and control despite the chaotic environments inherent in complex maintenance. As owners continue to shrink their hourly workforce, they also continue to contract for skilled craftsmen. Strategically, manufacturers are opting to expand use of the specialized supervision and labor offered by contractors. This trend places even more emphasis on automated cost and progress reporting systems delivering fast, high-quality information to both the owner and contractors so everyone can focus on the right activities at the right time.

When it comes to getting the right information at the right time, refineries, chemical plants, power generators and other process industry manufacturers gain tremendous business benefits from contractor cost management technology. The visibility provided by the automated solutions, even from pilot tests that compare the results of paper-based manual methods to automation over just 45 day periods, uncovers time reporting and invoicing issues and identifies areas where the contract terms, conditions and rates are not properly applied to hours, misstating costs and overstating "burned" hours. This leads to earned value miscalculations or, more simply stated, phantom progress.

Cost management technology can also uncover other problems, such as: lost productivity from contractor workforces coming in late and leaving early; lack of verification of invoiced hours because there was no access control system data used to report entry and exit times or off-site work authorization; contract compliance issues (overtime and double time claimed in error); and a host of other small details that by themselves seemed insignificant but when combined, amounted to 30-60 minutes per worker per shift.

It's important to note here that the culprit was not the owner representative who signed the timesheet even though it was wrong (not knowing it was inaccurate), nor was it the contractor who submitted the timesheet (his processes told him the data was accurate). The real culprit was a focus on getting the work done and figuring out the costs later. Unfortunately, later never seems to come.

Identified error rates can range in scale depending on the project and scope. However, these rates represent a large portion of actual costs for refineries, chemical plants, power generators and other process industry manufacturers since contractors made up a vast majority of the daily workforce. After seeing first-hand the value of having accurate, fast job progress and cost reporting and other benefits a diligent contractor cost management solution can provide, companies typically change the way they monitor contractor activities and costs.

So how does it work? Contractor cost management solutions automate the entire process of contractor engagements from work-hour time reporting to invoicing. Near real time information keeps jobs out of the ditch, which leads to an "on schedule" return to operations or completion of vital maintenance. This real-time information is presented in a dashboard format, containing key performance indicators that enable owners to monitor contractor spend over specified periods of time and leverage that insight for project planning, scheduling and control.

However, the responsibility doesn't sit with just the owners. They must work together with the contractor teams to keep projects on target using technology to measure: planned headcount by contractor, skill and shift; equipment and materials required for the day's activities, by contractor and shift; and real-time, all the time, headcount by contractor, skill and individual. By reviewing cumulative hours and costs and other variables at the work order and activity level, owners can see how much money they have spent and how much work and how much money remains in the original budget. Owners can also determine the variance between planned vs. actual budgets and assess whether the project is still on track to meet cost and schedule projections. Armed with this information, they can then determine what truly needs to be done to move projects forward.

On average, contractor cost management systems yield savings of 5-15 percent. By providing visibility into the real-time status and costs of turnarounds/shutdowns/outages and complex maintenance projects, contractor cost management automation helps project teams make course corrections and better decisions using real-world information. The end result for both owners and contractors is keeping these critical projects on time and on budget so that they can return to operation quickly.

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