March 2018, Vol. 245, No. 3
Features
Part 2: Roadmap for Best-In-Class Utility Contractor Relationships
In P&GJ’s January’s digital roundtable we heard from gas utility and conractor leaders on key challenges, what works well, and how the industry has changed with regard to their contracting relationships.
These industry leaders shared insights on how they use performance scorecards, share more transparently complete early stage work planning, and build alliances that allow energy providers and their contractors to build mutually beneficial relationships. In this part, we delve more deeply into the “how” of developing best-in-class relationships that achieve outstanding results.
Why develop best-in-class relationships?
During our 2017 Construction Users Roundtable (CURT) study on what sets high excellence projects apart, we repeatedly found that the relationship between a utility and a contractor played a significant role in project success. At the CURT National Conference, we convened two separate roundtables – one for large organizations buying construction services and another for contractors, to provide an open opportunity to candidly share their insights on their relationships.
Not surprisingly, when the focus was on relationship excellence, we heard many of the same answers from both groups. In our advisory team’s experience, we have found that leading organizations understand this concept and spend significant time working on relationships to the mutual benefit of both parties.
This was reinforced when our firm recently partnered with the Construction Industry Institute (CII) to convene three industry workshops comprised of leaders from utility organizations, contractors, and experts in law and transformational change to identify and problem solve on the burning issues related to the delivery and business outcomes of capital construction programs. Three key themes emerged that apply to the relationship between utilities and contractors – effective resourcing, collaboration, and continuous improvement.
In our experience, the recurrent framework for delivery of construction programs, projects, and engineering services falls along a continuum of planning, buying, management, and delivery. The solutions can be clear from the onset – but an assessment such as a “Capscore” can provide insight into the most efficient way to tackle it and plan for risk along the way.
This is analogous to conducting an annual physical at your doctor’s office – you come away with data and metrics on how you are doing and if you have any serious health issues. The key to success is in determining the areas of greatest need and working towards making improvements that yield the highest impacts.
Understanding how best to improve utility-contractor relationships is a critical aspect of this evaluation. What follows are key tips for strengthening these relationships that build upon industry leader insights.
Plan
Careful planning can enable you to operate safely, on schedule, and on budget.
Get the best talent on your contractor teams by planning ahead. In Part 1 of this series, Cheryl Campbell, SVP Gas, Xcel Energy, shared her insights on the need to involve their contractor partners in the process of planning an effective capital program.
Utilities in markets where there is intense competition for talent benefit from planning ahead in collaboration with potential and existing partners. Develop an awareness of contractor constraints on staffing and deployment to help you better partner with them to understand their flexibility. This presents an opportunity for contractors retain or plan to recruit new members of their teams.
When planning out a multi-year capital program, leading edge utilities are thinking about how to effectively bundle multiple projects in to programs. This creates many advantages, including the ability to partner with contractors on larger programs and reduce the administrative costs of bidding multiple projects. This approach can also create efficiency in execution, reducing both cost and schedule.
Buy
Align utility and contractor team resources to deliver the greatest return on your effort: Reduce management costs through clear expectations and trustworthy partners.
Contractors must demonstrate their ability to execute on work safely, in a timely manner, and within reasonable costs. Beyond controls and procedures on the utility side, your degree of trust relates to how you manage the relationship.
It is no surprise that trust repeatedly came up in the digital roundtable. Steven Covey’s description of high trust as a force multiplier and the absence of trust as a transaction tax is a useful way to describe overhead costs linked to adversarial relationships.
In the “buy” portion of contracting, alliances are considered “high trust” relationships. Regardless of the contract method used, make sure that you are being clear about what your expectations are going to be – from both parties.
Balance how work is purchased so you can retain staff who know your work, culture, and priorities. As utilities purchase and authorize work, recognize that this prompts contractors to figure out a workload balancing schedule and plan to retain their talent.
Repeated turnover among your contracted workforce results in higher overhead costs due to having to spend additional time and resources in hiring talent, and it also increases risk as the turnover reduces the effectiveness and cohesiveness of the workforce.
Manage
The management of effective utility-contractor relationships relies upon several key factors. Promote open communication and listen carefully.
We have repeatedly found that the most effective contractor/utility relationships build in a structure continuous improvement process that identifies and solves key challenges in the relationship. As Eric Habecker, project director at Piedmont Natural Gas, shared, open communication is critical. And it cannot be a one-way street from the utility to the contractor. As Cheryl Campbell said, utilities must be willing to listen to their contractors.
Build transparency on roles, responsibilities, and performance. In effective utility/contractor teams, roles and responsibilities must be clear so that accountability remains a top priority.
As Jeff Tuttle, CEO, Heath Consultants shared in Part 1 of this series, data sharing is an important aspect of effective relationships. Deciding what to measure, how to measure it, and how to report it leads to a team that understands how to effectively manage performance.
Cheryl Campbell mentioned this as well – that sharing data leads to more productive relationships and, more importantly, higher levels of performance. When we spoke to Ben Bosco, VP at Quanta Services, he also said “At Quanta, we believe that the key to our long-term client relationships is transparency of information sharing and a focus on flawless execution with price certainty.”
Deliver
The deliver phase of program execution is where internal utility resources and external contractor resources work together effectively in the field to put work in place.
Create a consistent rhythm for sharing both the good and problem-solving the bad: Bring project teams together and develop a consistent rhythm for communication and timely information sharing. Identify existing and potential problems by running meetings with an explicitly stated goal of collaboratively fixing problems and managing risk.
As Doug Reeves, president of Q3 Contracting, shared it’s important that contractors are honest about shortcomings, and that the team focuses upon how to overcome these shortcomings together. This is intuitive to high-performing teams, but we have repeatedly found that this simple behavior sometimes drops off in organizations that are encountering challenges.
Check in often and examine the metrics that matter most: Structured information sharing can take the form of a scorecard or formalized evaluation, but the content gathered needs to be meaningful and fair to both parties. Take the time to evaluate how you are working together, where improvements can be made, and if your management processes need changes to meet any new requirements or increased demands.
At the April 3 Pipeline Opportunities Conference, we will convene a panel of utilities and contractors to continue the conversation. We invite you to participate, ask questions, and leave with takeaways on how you can improve your own approach to contracting relationships. P&GJ
For further information, please contact: Mona Haggag at mhaggag@continuumag.com or Gretchen Gagel, ggagel@continuumag.com.
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