Maintenance contracting: 6 steps to success

Variable costs. These two little words wreak havoc with a plant manager’s desire for predictability in both the maintenance and capital projects budget. When plant operating capacity is high, the maintenance support can be used fully with little down time. 

In cyclical markets, when plant use fluctuates, managers often look to outsource some or all of their maintenance support. A cost-effective and efficient solution is to choose a qualified maintenance contractor and keep the internal team focused on predictive and preventive maintenance.

An experienced maintenance contractor can more easily accommodate changing needs for craft and staff. Contractors can pull from a pool of qualified people who can be deployed quickly, where it may take a plant manager many months to get a new hire fully productive in the plant.

Some managers try to counter fluctuating markets by having their underused work force take on tasks beyond their maintenance core competency, such as capital project work. 

This approach just shifts the wage cost from the maintenance budget to the capital budget. However, the skills needed in maintenance work do not always align with those needed in capital projects. For example, the maintenance worker’s mechanical or electrical aptitude is translatable but their work processes and behaviors are not. Typically, this increases costs and extends schedules so the capital project no longer meets the financial objectives under which it was originally approved. More cost-effective results are achieved when maintenance and capital work teams operate in their own lanes.

Managers who are reluctant to embrace this model tend to believe that direct-hire employees will care more about the plant and its uptime than a contractor will. However, an experienced maintenance contractor knows that its reputation and ability to grow depend on its ability to earn it every day by optimizing worker productivity and sharing industry best practices. 

An in-house workforce may not act with the same sense of urgency, particularly in a down cycle. Focusing the internal team on efficient plant processes creates a predictive, preventive maintenance culture. When these in-house plant experts anticipate or detect a defect, they can execute requests for the contractor to do the repair or replacement work while they continue to focus on optimizing capacity.

With all of this said, what should a manager do to select the best maintenance partner? 

    1. Look for capabilities and relevant experience. Size matters. The selected contractor must have a staff and craft base that can respond quickly to needs for off-hours support, increases in qualified short-term staffing, and build-up for outage support. Look for a contractor with internal subject matter experts on predictive and preventive maintenance processes to support and drive their team to bring continuous improvement to your plants up-time.

    2. Plan on a long-term relationship. Contractors want to create value for their customers, and they need time to do it. A three-year contract with the potential for a two-year extension based on performance helps the contractor and plant team build a trusting, win-win relationship. Plant knowledge improves over time, and the contractor has an opportunity to bring real innovation to the plant. 

    3. Consider a performance-based contract. Performance-based contracts drive behaviors of the management team and the contractor’s management and execution teams. If a contractor’s performance does not meet expectations, their fee can be reduced. Conversely, if the contractor over-performs, and delivers cost savings or avoidance to the plant, it would share in those savings. A contractor willing to put its fee at risk has proven its ability to control budget, schedule, scope, and labor.

    4. Develop mutually-agreed KPIs. The performance-based contract only works when the criteria is both realistic and clearly defined. Key performance indicators must be business drivers that can be measured objectively. Measurement criteria must be challenging, yet achievable. Both parties must agree to an established methodology whereby the contractor can share in documented savings. 

    5. Establish an executive governance committee. Both parties must compel senior management to align on goals, resolve issues, and oversee progress. A hands-on executive team is another indicator that the maintenance contractor is fully engaged and able to bring reliability and predictability. 

    6. Understand low price is not always low cost. Evaluate the contractors on value provided not only on cost. Talk to their customers to determine the value delivered. Although cost is an important component of value, it is not the only factor. Low cost is no assurance of long-term success.

Bill Wasilewski is president of Process and Industrial for Day & Zimmermann.