Vetting and managing subcontractors – avoiding the bear traps Wayne Hughes HQN

Role of subcontractors in a modern maintenance service – a client’s perspective Support the main contractor in the delivery of agreed service objectives: Time Cost Quality Customer satisfaction Enhance the operational capacity and competency of the main contractor Provide specialist services Provide Value for Money through the supply chain And……..

to protect and project the image of the client organisation……………..

Role of subcontractors in a modern maintenance service – a contractors perspective Support operational delivery of agreed service objectives Enhance operational capacity and competency Provide specialist services Reduce exposure to specific risks Provide Value for Money through the supply chain Enable easy and rapid downsizing in deteriorating market Increase margins and profitability

Current trends and characteristics (1) Strategic use of subcontractors becoming the norm for larger maintenance contractors No longer limited to specialist trades Growing number of contractors using subcontracting as the principle means of delivery (is this management contracting dressed up as partnering)? Relationships between contractors and subcontractors predominantly informal Subcontractor selection remains unsophisticated

Current trends and characteristics (2) Little evidence of subcontractors being part of integrated supply chain Cost still the main criteria for selection in many cases Little evidence of subcontractors being aware of clients requirements or service philosophies (DLO subcontractors an exception) Payment terms enjoyed by contractors not passed onto subcontractors Operational management of subcontractors patchy Performance management of subcontractors across the sector a real problem Use of nominated subcontractors (other than via a DLO) rare

‘Slip ups’ – a few examples Subcontractors being used to make good inefficiencies of directly employed staff – client paid for this through open book arrangement Subcontractor used that had been removed from client’s approved list for fraudulent activity Subcontractors employed without assessment or approval prior to commencing work Failure to obtain CRB clearances Failure to provide job completion information in a timely manner Quality of work poor and unchecked

Characteristics of effective subcontract arrangements Clients play active role in selection and performance monitoring There is transparency and clarity of which subcontractors are being used where and for what purpose Formal agreements exist between main and sub contracts Subcontractors have high degree of awareness of contractor’s methods of working and client’s service expectations Key subcontractors attend client/contractor progress meetings Subcontractors are encouraged and rewarded for innovation Key subcontractors have access to and use contractors business support systems, eg, handhelds, etc Formal systems exist for: Selection Quality assurance Dealing with underperformance Checking currency of insurances and qualifications

Vetting subcontractors (1) Degree of influence dictated by Type of relationship (DLO or contractor) Nature of relationship Attitude of client Contractual framework Degree of control being sought

Vetting subcontractors (2) Start at the procurement stage if possible Questions to ask the main contractor What proportion of the proposed works will be subcontracted? What are your assessment and approval arrangements? How is general competency assessed? How do written contracts or agreements with subcontractors detail expected performance and monitoring arrangements? Who are the named managers who lead on monitoring and review arrangements with subcontractors?

Vetting subcontractors (3) Questions to ask the main contractor How are your quality systems applied to your subcontractors? How do your subcontractors keep you informed of progress against all jobs in their possession? How do you keep your subcontractors informed of client requirements? How do you measure the effectiveness of your subcontractors? How do you ensure that subcontractor related problems are resolved swiftly? How do you check external reports of subcontractors (Corgi inspections, etc)? How do you seek continuous improvement? How do you deal with under-performance? How will you ensure that your subcontractors protect and project our image?

Basic information you need to evaluate suitability of subcontractors Company details History and capability Relevant experience Financial standing (if working through a DLO) Management, staff, operatives and training CRB clearances if required Quality and environmental accreditation Approach to risk management, value management, continuous improvement and customer satisfaction Details of any health and safety breaches over past five years References (including details of all current and recently dissolved client relationships?)

Managing subcontractors (1) Principally the role of the main contractor but there are things you can do: Test that subcontractors are aware of your requirements Quality Timeliness Customer care Complaint handling Continuous improvement

Managing subcontractors (2) Agree with the main contractor a subcontractor approval process – no surprises Agree how subcontractor performance will be measured and how you will receive this on a scheduled basis Agree ‘trigger points’ for corrective action Insist that you receive copies of minutes of subcontractor progress meetings Insist that you receive copies of post inspection reports Insist that key subcontractors attend your contract progress meetings Ensure that subcontractor performance is a standing agenda item Encourage shared learning and reward innovation Deal with problems swiftly – via the main contractor

Over to you! From a subcontractor management perspective, and drawing from your own experience 1. What has worked well? 2. What hasn’t worked well? 3. How do you measure success in this area?

Thank you!