Managing Contractors in the Oil Industry – Part 2

Part 2 – Respect your contractor’s technical knowledge.

There are two reasons why oil companies subcontract work.

The first is when you know how to do a job, but you don’t have the manpower to carry it out.  For instance, no oil company has enough engineers and draftsmen to design even a small oil and gas facility, even if they have the technical expertise to actually do so.

The second is when you don’t have the necessary technical expertise (mainly because the area concerned does not fall within an oil company’s core business) and so you need to engage somebody who does, and it is this latter case which I will talk about now.

You must start by understanding that the reason you have hired this contractor is because he knows how to do the job and you don’t.  He is an expert in his field, and you barely know what field you’re standing in or if there is a bull lining itself up behind you.  Therefore, if you are sensible, you will listen to what he advises and restrict your role to identifying a vehicle by which his advice can be put into practice at an acceptable cost.  You may and you should ask clarification questions, and you may ask him to explain in precise detail every aspect of his proposal, and if he is any good he will be quite happy to oblige.

Now in these cases you do run the risk of being ripped off by a contractor who realises that you don’t know his business.  You could end up being sold a far more expensive solution than you actually need, but there are various ways to minimise (note I didn’t say eliminate) this.  For instance:

  1. Tender the work.  If you know enough to put a scope of work together, then get several companies to bid.  Unless all the contractors have formed a cartel, what you get would be around about a market price.
  2. Find out whether a similar job has been done before, and see what it cost.  But be sure to identify any major differences between that scope and yours.
  3. Phase the work: tell the contractor that you will give him Phase 1, which is to prepare a scope of work document for Phase 2; and that Phase 2 will most likely go to him but might be tendered if you feel the proposed workscope is excessive or you are being ripped off.  This will give the contractor a strong incentive to give you a fair proposal in terms of scope and cost.  I’ve done this on a job recently, and it allowed us to obtain crucial information about the works without committing the whole project cost.
  4. Best of all, use a contractor you know and trust.  Nothing can beat working with people you know who have done the job before to your satisfaction.  Or at least, try to get feedback from colleagues in the industry about the performance of potential contractors.

So in summary, what you should do is to listen to what your contractor proposes but remain on your guard, especially if you are not familiar with the contractor in question; you should ask pertinent questions about various aspects of the proposal, and listen to the answers; and you should structure the contracting process through which the work will be awarded in such a manner as to minimise the risk of your contractor exploiting your relative lack of knowledge.

What you should not do is smugly sit there assuming that because he works for a contractor he must be as thick as pigshit compared to you who, working for an oil company, must be ten times smarter on all subjects because that is what you were told during your graduate induction.  You should not second-guess every piece of technical advice he is giving you, and make condescending comments like “Well, I don’t think that is really necessary” or “You need to demonstrate…” when you have not the faintest idea what you’re talking about and your contractor, who has been doing this all his life, advises you do something so mundanely commonplace that he can’t believe it’s even being discussed.  All you will do is run a flag up the pole saying you are either to be ripped off magnificently or left well alone.

I have personal experience in being grilled by a manager of an international oil company regarding equipment I was proposing to mobilise for a job.  This took the form of him reviewing my list of equipment (all of it pretty basic), none of which he could identify, demanding a justification of why it was required, and then sneering at my justifications with the heavy implication that it wasn’t needed.  This wouldn’t have been so bad, but he had with him a trade supervisor from his own department who knew his stuff inside and out, had reviewed the list with me the day before, and was strongly advising his boss to stop fannying about and go ahead.  Had I been that manager, I’d have gone along with whatever the supervisor said.  But most of them, driven by pure ego and an inflated idea of their own understanding of a situation, wouldn’t lower themselves to acting on the advice of a mere supervisor.  The meeting ended with the supervisor being as frustrated as me.

What you also should not do is start telling the contractor how to do his job.  You should make clear the project intentions and expected outcomes or deliverables in the scope of work, and identify applicable standards and any specific peculiarities you want incorporated.  And then you should leave him to do his job.  After all, he’s the expert, which is why you hired him.  Unfortunately, there are a lot of people working for oil companies who hire an expert and then go on to dictate to him how he should execute the work.  I know one instance whereby somebody, who didn’t know very much about the subject in question but assumed he did, hired a contractor to carry out some very specialist work – and then proceeded to issue instructions as to how the calculations should be done, what factors to include, and what materials to specify.  Had I been that contractor, I’d have been tempted to ask “Why did you hire me if you’re the f***ing expert?!”  Unsurprisingly, the job ran into serious problems later on as the deliverables were found to represent a mixture of specialised engineering by experts and the interference and unwise inputs from a client who didn’t have a clue.

There are ways of making sure your contractor does a good job; second-guessing their proposals, telling them how to do their job, and assuming you are superior by virtue of your position in the contracting chain are not among them.

(Part 1 is here.)


3 thoughts on “Managing Contractors in the Oil Industry – Part 2

  1. Indeed. Don’t forget the part where they hire you for your expertise, ignore it, and THEN BLAME YOU when things go pear shaped because they didn’t listen. It’s YOUR FAULT for not being convincing enough. (As an IT consultant this has happened to me too many times to count.)

  2. Duffy,

    That’s exactly what happened in the case I mentioned. The client just blamed the contractor for being incompetent, despite the fact that it was the former’s idiotic interference that cocked it up. Rarely will you see an oil company representative admit he’s fucked up, even if it’s as clear as day. The contractor always ends up getting kicked, right or wrong.

  3. Absolutely fascinating, Tim, both parts. And understandable to someone who knows bugger all about the industry.
    Even more fascinating because, in the infinitely smaller projects I become involved in with their comparatively trivial scope & outcomes, almost everything your advising is what I would expect to be doing anyway. Perhaps because at my level, the safety is my safety & those I work with, the money, my money, the projects my livelihood, the reputation my reputation & the consequences likely to bite me in the arse smartish.
    Can’t help but wonder, in your world, the players see their industry’s purpose is to provide them with their career paths & their own function, to steer their way to their own personal advantage. The oil being an unfortunate inconvenience

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