Operator Qualifications & Contractor Safety Compliance as a Service (CaaS) Investing in Contractor Qualification and Management Solutions Western Regional Gas Conference | August 23-24, 2016 Vincent Spadafora, JD, MBA March 17, 2016 Texas Gas Association Safety Roundtable

Contractor Outsourcing Trends 60% to 70% of total work hours completed by contractors Based on information reported by the International Association of Oil and Gas Producers at http://www.ogp.org.uk/pubs/2013s.pdf

Safety Myth – Fact or Fiction? Contractors are just as safe as Operators What do you believe ?

Quote from Retired Operator veteran and short-term contractor employee “The contractor job just really never fit me, since I'm more of a "do it the right way" guy and this contractor, like all contractors, I assume, is more about get in fast and get out fast. Sometimes things are done right and sometimes not. That doesn't work for me.”

TRIR & FAR for Operators vs. Contractors Contractors and Sub-contractors have higher incident rates Based on information reported by the International Association of Oil and Gas Producers at http://www.ogp.org.uk/pubs/2013s.pdf

Agenda Contractor Qualification and Management Solution Business conditions that make a compliance management solution an imperative Assessing the economic value of a compliance management solution Direct and indirect costs of “doing nothing” Process for outsourcing to a Compliance as a Service (CaaS) vendor

Reasons to Invest in a CaaS: Why It Makes Sense Reasons to Invest in a CaaS: Reduced Risk Upstream Accountability Litigation & Liability Sarbanes Oxley Measurement Matters Errors Form Manual Data Time-Consuming Inefficient Costs More

Economic Value Studies show an investment in compliance management will yield returns. Same costs can have different values to different organizations based on: Risk tolerance Size Age of business Industry

Cost of Compliance Management if Kept In-House Companies must not overlook: Adequate Staff & Resources to Manage the Program Records Storage & Retrieval System Auditing Costs Software Packages to Manage Processes Staff to Address Contractor Compliance Questions Resources to Notify of Expiring Documentation/Deficiencies

The “Do Nothing” Alternative (Direct Costs) Potential Direct Costs of an Incident Fines & Penalties Damages & Repair Costs Lost Time Ligation Costs & Civil Damages Increased Insurance Costs Potential Direct Costs of an Incident - related to not managing contractor compliance:

The “Do Nothing” Alternative (Indirect Costs) Potential Indirect Costs of an Incident: Strained Employee Relations Overtime to Offset Production Down-Time Management & Supervisory Investigative Time Reputation Damage Poor Employee Morale Psychological Impacts on Affected Employees Future Difficulty Hiring New Employees Potential Indirect Costs of an Incident related to not managing contractor compliance:

You Don’t Have to Manage Alone Do Your Homework Implement Best Practices Software Alone is Not Enough Understand the Pricing Beware of Hidden Fees Communicate With Contractors Building Organic & Living Processes

Critical Components To ensure contractor compliance you need processes in place that will enable you to: Prequalification Monitoring Requalification Contractor compliance information needs to be verified at the: Data Level Information Level

Dig Into the Software At a Minimum the Software Should Feature: SaaS/Web-Based Delivery Uptime Guarantees (Disaster Recovery) Hosting in High Quality Data Center An User-Friendly Interface Multi-Lingual Capabilities Data Integration With Existing Systems (ERP) Customization Options Value Added Services: Training & Customer Service

Conclusion Research has shown that a compliance management solution does correlate to reductions in the long-term costs of non-compliance.

ENERGY worldnet, Inc. 1210 S. Bus. Hwy 81/287 Decatur, TX 76234 Vincent Spadafora, JD, MBA Email: info@energyworldnet.com Website: www.energyworldnet.com Toll Free: 1-855-396-5267 (EWN-LCMS) Thank you for participating in the TGA’s Safety Roundtable