Contract maintenance update

Every plant outsources some maintenance services. It frankly doesn't make sense — financial or otherwise — to try to do everything yourself. But when we talk about contract maintenance, we're talking about a long-term commitment to have nonemployees take over substantial responsibilities for normal maintenance operations, perhaps even all of them.

12/15/2002


Sections:
Advantages
Challenges
Common goals
Contracts
State of the business

Sidebars:
Keys to successful contract maintenance


Every plant outsources some maintenance services. It frankly doesn't make sense — financial or otherwise — to try to do everything yourself. But when we talk about contract maintenance, we're talking about a long-term commitment to have nonemployees take over substantial responsibilities for normal maintenance operations, perhaps even all of them.

The concept of contract maintenance is an old one. But it was not until the 1970s that it came into its own. The driver then was financial as plants sought to cut every conceivable cost. Out of that experience grew the philosophy of outsourcing everything that wasn't a "core competency," and few plants put maintenance into that category. More recently, quality has become more of a factor; so, the mantra now is "better maintenance at lower cost."

Maintenance contractors say they can deliver on that promise because maintenance is their core competency. To retain their contracts and secure new ones, contractors are under pressure to ensure that their workers are fully qualified, that their organization and management are effective, and that they use the best methods and technologies available. And all of this must be accomplished at a cost that is acceptable to the customer.

That business proposition appears to be working.

Advantages

Contractors cite many advantages to contract maintenance. Among those most often listed are:

  • Allows client to focus on its core business

  • Maintenance is contractor's core business

  • Provides highly qualified maintenance workers, supervision, and management

  • Tends to develop higher commitment to maintenance

  • Can lower overall maintenance costs

  • Tends to encourage a highly motivated maintenance workforce

  • Offers flexibility in workforce

  • Customers' cultures change because they have made a financial and organizational commitment to maintenance

  • To stay competitive, contractor is dedicated to providing highest possible maintenance quality at lowest possible cost

  • Encourages training and development of maintenance workforce.

    • Challenges

      Despite this impressive list of strengths, there are difficult challenges to be overcome. Most relate in some way to the relationships between the contractors and their clients.

      Except for new plants (and sometimes, even in those), bringing in contract maintenance will unquestionably create culture shock. Plant management and contractors alike must be ready to deal with the upheaval. Sometimes it is best to make the conversion to contract maintenance in stages; sometimes it's best to change "cold turkey." Whatever the case, the plant must be as committed to making the arrangement work as the contractor is.

      One of the biggest reasons for turning to them, the contractors say, is that plants come to the realization their maintenance operations need fixing, but they don't know how to do it. The contractor is brought in to resolve the situation.

      While this is a perfectly legitimate reason for turning to contract maintenance, customers need to understand that they can't just get rid of problems by turning them over to someone else. Plant management must be committed to helping the contractor succeed and to integrating the contract workforce into the plant workforce.

      Plant engineers and contractors agree that management of the plant/contractor relationship is a difficult but essential aspect of outsourced maintenance activities. Members of the Foundation for Industrial Maintenance Excellence, for example, put a high priority on how well this is accomplished in evaluating applicants for the North American Maintenance Excellence (NAME) Award. And contractors report that this management is often key to their ability to provide the desired level of maintenance effectiveness.

      The integration of plant and contractor workforces is an indicator of how successful management efforts are. The old problems of conflict between maintenance and operations groups are, if anything, exacerbated when maintenance is outsourced. Bringing these two groups together into a fully integrated workforce requires the best efforts of managers on both sides of the contract.

      This integration does not end at the shop floor level. It must continue through the supervisory levels to the management level. Developing a partner relationship between client and contractor is a challenge for all involved, but it is essential to the win/win condition that both desire. Mutual trust, confidence, and the sharing of ideas, philosophies, and information are vital ingredients.

      Nor is contracting a panacea for training and workforce skills problems. While it is true the contractors bear a heavy burden for ensuring the knowledge and skills of their workers, there is typically much to be learned by contract personnel about the specific plant they work in and the equipment they must maintain. The plant shares a responsibility to provide the requisite orientation and training for contract personnel.

      In addition, contractors list manpower and training issues as among their biggest challenges — a problem they share with the plants they seek to serve. So, while the burden may shift largely from the plant to the contractor, outsourcing is not necessarily the complete answer for plants having difficulty in those areas.

      Finally, some plants discover that it's difficult to give up control of various resources and procedures to the contractor. While oversight and management of the contract is essential, contractors and their personnel do not want to be micromanaged. They are brought in to provide more than just maintenance labor, and they must be allowed to exercise appropriate authority.

      Common goals

      For contract maintenance to be successful, the goals of the contractor must be aligned with the goals of the plant. These goals should be discussed and agreed on before the contract is signed.

      As with any other maintenance organization, the maintenance contractor and the plant management must understand how it contributes to the business of the plant.

      There must also be agreement on how performance will be measured. These agreements should be made part of the contract. Simply naming the performance measures is not enough. Terms should be defined and formulas provided.

      Control of personnel can be a difficult matter.

      Contractor personnel are legally employees of the contractor, of course. But the issue of co-employment arises if the customer supervises and directs the contractor personnel in their day-to-day work. Thus, it is necessary to maintain clear lines between contractor and plant employees while at the same time encouraging teamwork and integration of the workforces.

      Contracts

      The three most common types of contracts are cost-plus, fixed fee, and incentive. Lately, at-risk incentive contracts have also come into play. Every contract is different, and the details of each must be individually determined.

      Lengths of contracts also vary widely, of course, with a major factor being the kinds of services contracted. For a contractor to take over all, or nearly all, maintenance, a 10-yr agreement is desirable, and 6 to 7 yr is typical; 5 yr would be considered minimal.

      State of the business

      Most contractors contacted for this article estimated that overall business in this sector would grow 20% over the next 3 yr, with estimates ranging from 15% to 25%.

      Yes, maintenance contracting services are expanding. Unfortuately, the workforce of qualified, skilled, maintenance craftspeople isn't. Frequently mentioned as the greatest challenge in maintenance today, it is a problem for plants and contractors alike. The difficulties of finding, training, and retaining qualified personnel may be a good reason to consider contract maintenance. But doing so won't necessarily solve the problem.

      Contracting for maintenance is both a philosophical and financial issue — and one to be considered with great care.



      Keys to successful contract maintenance

      Customer and contractor must want the relationship to succeed

      Agreement that performance indicators are attainable

      Agreement on measurements and key indicators. Must be published and communicated on regular basis

      High level of trust and cooperation must exist between contractor and customer

      Customer must want the maintenance contractor to succeed and be profitable

      Contract agreement must be designed to be flexible and easily understandable

      Both parties must be willing to modify the agreement when needed

      Contract agreement and program must be reviewed on a regularly scheduled basis

      Source: Aramark Service Master

      Services

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