How can you prevent the “Contractor Contempt Cycle”?

Can you prevent the “Contractor Contempt Cycle”? | Goodnight Consulting

Based on our observations, Benjamin Franklin’s quote often applies to long term contractors at power plants around the world. After conversations with thousands of power industry managers, employees, and contractors, we have identified a pattern that summarizes how this relationship typically unfolds. We call this pattern the “Contractor Contempt Cycle.” Read the description below to see if it sounds familiar, and to learn what you can do about it.

“You’re hired”

The story often begins when a problem is identified and management decides that a contractor is the right way to solve that problem. A new contractor is hired to perform a specific scope of ongoing or long term work. The circumstances surrounding their hiring can vary. It could be anything from a large competitive tender, to a small sole-source engagement. Sometimes a new, incoming senior manager will have a preferred group of contractors they like to use.

Can you prevent the “Contractor Contempt Cycle”? | Goodnight Consulting

“You’re great!”

The contractor quickly and efficiently takes care of lingering problems within their assigned scope of work. This is also known as the “Honeymoon Phase” of the contractor/client relationship. Site staff can finally focus on their core duties instead of the distractions associated with the work performed by the contractor. Management rejoices. Terms such as “us” “we” and “team” are thrown around like confetti. Ideas about new projects for the contractor begin to creep into management meetings.

“We need more help”

Due to initial success, site leadership and staff see the contractor as a problem-solver, and increase their scope and workload. In this phase the contractor often becomes more visible to site staff. The contractor might bring on more staff and start spending more time on site. In many cases, they begin to feel like another employee. Confusion and resentment between the contractor and employees sometimes begins to manifest itself.

“What is it you do here?”

Site staff might start to resent the work the contractor is performing and the praise they are receiving from management, resulting in an “us vs. them” dynamic. Both the contractor and the client become confused about scope of work or reporting relationships. Because familiarity breeds contempt, this phase is often when site management starts asking questions about how much the contractor is costing them.

“You are too expensive”

Over time the contractor will continue to take on work and add more people. As the contractor’s scope grows and (often) becomes more ambiguous, their financial performance is scrutinized due to a range of factors including:

New incoming senior management who questions the size and scope of the relationshipGaps in the contractor’s performanceIssues with site/fleet budgetsSignificant deltas as compared to the contractor’s original scope of work

To further exacerbate the problem, many sites struggle to keep track of how many contractor staff they are using. This is often due to the “line item mentality” which results in tracking contractors as financial line items rather than treating them as headcount. While there is nothing inherently wrong with tracking contractors strictly as a line item, it often leads to ambiguity, which is the most common root cause of problems in relationships with long term contractors.

“You’re fired” (and why you should care)…

Eventually every contractor relationship must end. However, it is better for both parties if the relationship ends on good terms. Departing on bad terms risks alienating good contractors if the word gets out that your organization is unfair or hard to deal with. This can make it much more difficult and/or expensive to get the support required when a problem is identified. Firing a good contractor might also require you to start the bidding process over, resulting in lost time and opportunity.

If the parties part on good terms it is easier to use the contractor again, or even to bring them on as an employee. For this to occur, the client needs to be satisfied that their objectives have been met, and the contractor must be compensated per the terms of their agreement.

How can you prevent this problem at your site?

Fundamentally, the Contractor Contempt Cycle is a “human” problem. Like most “human” problems, it is a result of mismanaged communications and missed expectations. The best way to prevent this negative cycle is by asking, and being able to answer, the right questions. Some of those questions include:

Is there sufficient communication between key contractors and site management?Are the terms of the contact clear?Are applicable site staff and key stakeholders aware of the contractor’s scope of work?Is there an established process in place for changing the contractor’s scope of work?

How many people is this vendor using to complete the work we hired them to perform?How does this compare to the rest of the industry?

Is this work better-suited for an employee?A long-term relationship with a contractor can work so long as the boundaries and objectives are clearly-defined and maintained

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