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Electric Energy T&D - Index

Electric Energy T&D - EE Magazine March / April 2009 - Index

The rising need for outsourcing
Outsourcing is not a new concept for most
service organizations. However, today’s
challenges due to asset and workforce age,
combined with greater price pressures mean
that it’s no longer a question of if, but when
utilities will have to increase the use of
contractors to manage more of their demand
for field work. With a general shortage of
linemen and impending programs (e.g.,
plans to install smart meters), utilities
must take a hard look at increasing their
offloading of tasks to third parties – which
will in turn increase the decisions and
challenges associated with managing and
communicating with contractors.
The potential manpower and efficiency
benefits are straightforward. Companies
have a better chance of ensuring work gets
completed when contractors can plan for it,
regardless of whether demand exceeds regular
workforce capacity. However, managing these
contractors together with regular staff can
be a complex undertaking. Not only does the
company assume the added responsibility to
ensure contractors deliver on time, but also
that they do quality work – without direct
control of the workforce. Brand reputation
and customer loyalty are at stake.
While the opening anecdote was about
activities, which aren’t customer facing,
utility companies are also increasingly
bringing in contractors for customer-facing
tasks. The rise in contracting for both kinds
of work has many reasons. Sometimes it’s due
to a temporarily increased workload, such
as the rollout of smart meters. Sometimes
it’s due to increasing unpredictability of
the workload. Together with rising financial
pressures, this creates higher motivation
to use contractors to balance the peaks in
demand.
Types of contracting
We should first distinguish between badged
and non-badged contractor employees. For
most intents and purposes of planning and
scheduling, badged contractors may be
considered an integral part of the workforce.
The planners have full access to information
about their skills, certifications, location
and availability, and use this information in
detailed planning.
The employees have appropriate levels of
access to the internal systems used to access
job data and schedules, report job progress,
etc., and any required equipment and
materials are provided by the organization
that contracted for their work.
Although there are some differences that
affect planning decisions, such as union
rules and overtime costs, overall this type of
arrangement does not substantially change
the planning process. However, this model
may be less financially attractive compared
to traditional outsourcing arrangements.
In outsourcing, the whole job is assigned to
the contractor, without detailed planning –
that is, the contracting organization does not
know, or need to know, how many people will
be assigned; how long each of them will be
on site; what equipment is allocated for the
job etc. Instead, it just needs to know that
the job will be completed on time per the
March-April 2009 Issue I
All in the Family: Managing Outsourced Service Contractors
specifications and when internal resources
(e.g., inspectors) need to be coordinated.
The contractor employees, in this case, are
not badged, and they do not have access to
the internal information systems.
A distinction is often made between
guaranteed and non-guaranteed contracting.
In a guaranteed contract, the contract
specifies a minimum amount of work to be
assigned to the contractor for every time
period. In return, the contractor guarantees
that it has sufficient capacity to perform
the work. By contrast, a non-guaranteed
contract (sometimes called an “overflow”
arrangement) does not receive or make any
such commitments. The costs of any jobs
assigned to such a contractor are usually
higher than costs of assignments to a
guaranteed contractor.
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