Week W begins…
The linemen assigned to work with the contractor had worked hard all weekend to fix downed power lines and restore service. They need time off for fatigue, and besides, there is still some more work to be done to fully recover from the storm’s effects. There is no way they can work with the contractor on week W.

Consider Harry’s options. He must postpone the work by at least a week – this decision is forced, but it then opens up a long list of not-so-easy issues and questions:

• The internal-workforce crew assigned for this job has other jobs planned for next week (“Week W+1”). They will be available the following week (W+2), but this would delay the overall project by far too long.
• The digging contractor is under contract guaranteeing a certain amount of work per month. Delaying this job to the next month will place the contractor under the guaranteed quota, forcing Harry to pay twice for the work – once this month and again next month.
• The contractor may not have sufficient capacity for week W+2. Harry also has other contractors on call, but because they aren’t under a guaranteed-quota contract, their costs would be higher. Worse than that, the only way for Harry to check availability for any of the contractors, for any week, is to call them and ask – and unless he decides very quickly, the answers may be out-of-date as the contractors make other commitments.
• A delay of more than two weeks would also force Harry to re-do the complex arrangements made with the local municipality in order to minimize the disruption caused by the digging.
• Any changes to this job would not only affect the project requiring this job, but also move the dates for which this project requires resources – internal workforce, contractors, equipment, etc. – thus unleashing a snowball of re-planning, re-budgeting and re-coordination (with internal and external agencies) across multiple projects.

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 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.

Challenges of contracting
As Harry’s story illustrates, there are quite a few challenges involved in contracting. Let’s review the issues Harry needs to overcome, including some that we didn’t mention in the story out of fairness to Harry – after all, he had a tough weekend…
 

• Long-range forecasting and planning: The organization needs to establish just the right amount of guaranteed contracts to ensure sufficient work capacity for all types of outsourced work and at all locations, either under a full outsourcing model, or as fully-badged and managed resources. Errors in forecasting the work capacity that would be “sufficient” – either too much or too little – may be costly.

• Visibility into contractor status: It’s hard for the organization to know how much work the contractor can really perform, where and when. Even when the guaranteed commitment for this month has not been fully consumed, the contractor may be available in one week but not in another. Assigning another job to the same contractor may or may not be possible, depending on whether the same contractor employee (or a single of equipment) is required for both jobs – information that is not always visible to the organization. The same applies for shifting the job’s date by one week – it’s hard to tell which contractor will be able to meet the new date, and to assess the impact on other jobs already committed to that contractor. Finally, the organization does not have any visibility into the job’s progress. What sub-tasks need to be completed today? Will they indeed be completed? Does this affect estimated time of completion for the whole job? All of these require substantial voice and written communication, without automated support. This communication is error-prone, hard to track and record, and quite costly.

• Short-range planning in reaction to unforeseen events: Harry’s story is mainly about this set of challenges. As a result of the lack of visibility into contractor status, Harry does not know which changes will be feasible. If he delays the job by one week, will this contractor still be available? How about another contractor? How will the change affect other jobs? Will the effect be limited for only a short time period, or will it have repercussions extending months ahead and interfering with the long-range planning?

• Sharing information with contractors: As the contractor does not have access into the organization’s information systems, the required information needs to be manually extracted and sent to the contractor. Any changes and updates then need to be manually sent by the contractor and manually entered into the information systems. If the contractor needs more information, in the best case this causes delays and more work as the contractor requests the information. In worst cases, the contractor does not know that crucial information is missing, and this may lead to costly or even dangerous results.

• Maintaining consistency, quality and safety standards: The contracting organization needs to maintain standards for all work, whether performed by contractors or in-house employees. There are usually strong practices in place to do this for in-house employees – e.g., periodic reviews and assessments, employee and job records, audit processes – but these are hard to apply for contractors. Thus, the organization finds it hard to assess the contracted work quality and even harder to make sure that the work follows consistent processes no matter which contractor is assigned to do the work.

• Customer-facing issues: While all of the above apply to asset work as well as to customer-facing work, customer-facing work exacerbates some of these issues and introduces new issues. For example, the lack of up-to-the-minute job status updates may not be critical when assigning a multi-day digging job, but it is far more critical when setting a customer visit to install a new smart meter. Furthermore, once the contractor arrives at the customer’s premise, the customer may discover that the contractor has not been provided with the required information, leading to postponing the installation, resulting in an unhappy customer and often, bad press. The customer may also have questions about other tasks, including those performed during the previous month. In those cases, customers do not appreciate hearing, “’Sorry, sir, but I’m just a contractor; please take it up with our call center.”

Tips and best practices
Possibly the most important common theme to all of these challenges is information sharing. That is, how much demand is expected and with what confidence? What is the progress on currently contracted work? How much additional capacity is available, and for what crew types?

If Harry and his contractors had a way to pool their information about jobs, projects, customers, capacity and availability, they could reach much better decisions – and do it more quickly. However, there are substantial difficulties involved in sharing information. The organization needs to protect commercial information and to avoid exposing customers’ private records. The contractors also have their own commercial information, including their employee records and the work they do for other contracting organizations.

In some cases, a good approach is to provide the contractors with some limited access, via a “contractor portal”, to the organization’s planning and scheduling software. That way, that they can record and update more details of their day-to-day availability (in terms of work hours, skills, equipment, etc.); have access to the most up-to-date information they need to perform their job; and collaborate with the internal workforce on coordinating and updating progress for ongoing and planned projects.

The above practice enables the contracting organization to have one shared work management solution and expose just the information that can, and should, be exposed. Subcontractors gain from process improvements, opportunities to bid for more business, and access to highly sophisticated planning and scheduling. However, contractors also see some downside by exposing their internal information and possibly the headaches of having to work with the information systems of several different organizations for with which they contract.

Alternatively, contractors may elect to use their own work management solution and arrange for frequent exchanges of information. This way, they can store all of their information in their own system, while choosing which information to share with others. This may not be as difficult as one may think, as it is possible to start with simple and basic integration.

Since many small contractors don’t invest in their own information technology infrastructure, they may wish to investigate work and project management solutions that are available under the Software as a Service (SaaS) model. Such solutions are often industry-specific and provide a wealth of capabilities. Some of these services allow simple integration, which may be used to share information with the contracting organizations.

Both of these models – “Portal” and “Integrated Work Management” – enable timely communication of critical information that enables both the utility and its contractor to work in a more predictable, efficient, and effective complement to each other. The result of flushing out and facing these challenges holds huge potential for utilities as contractor usage increases. For example:

• Long-range planning becomes possible as visibility to the future workload, and all resource availability increases for the utility and the contractor.
• Current job status from the contractor enables more effective usage of internal employees that must be coordinated, including proactive intervention, when needed.
• Short-term planning becomes easier for the utility with visibility into contractor availability. In turn, contractors with greater visibility into potential demand can be more flexible to meet short-term needs.
• Work between contractors and utilities’ internal workforce becomes safer and more efficient based upon the sharing of safety procedures, job information, and schedules.
• Greater communication and information sharing enables a more aligned and informed face to the customer, regardless of the resource’s direct employer.

Over time, we’ll see a tendency by organizations to prefer selecting contractors who facilitate information sharing and planning collaboration. This may trigger the next phase, where the sharing and collaboration will occur within an electronic “marketplace” where many utilities and utility contractors interact on contracts, bids and agreements. Until that day, their critical need for information will be served by a utility-centric solution (where each contractor is given limited access via the portal), or by integration of the utility’s and contractor’s work management solutions.

The shared information will be used for long-range planning, setting times and plans for lengthy projects; short-range planning, updating plans and fleshing them out with more detail; execution monitoring and collaboration guiding the cooperation of all involved parties; and business analytics to assess the quality of each contractor, refine the estimates of job durations and costs, and enable feedback into long-range planning for improving operational aspects such as the mix of in-house employees and contractors.

For customer-facing tasks, these mechanisms will work side-by-side with periodic assessments of customer satisfaction, generating valuable feedback on the consistency and quality of work provided by internal and external employees.

Do you still remember where we left Harry? Being the capable and experienced professional that he is, he is surely able to bring the story to a happy ending, but it may take him substantial effort, inhibit his ability to react to changes in a timely manner, and cause undue stress on work and life to get the job done.

He would certainly prefer to see the software automatically notice the non-availability of the linemen who should have worked with the contractor and find the most efficient solution – delay the dig by two weeks, assigning it to another contractor (the software knows that contractor has the required availability, skills and equipment); and assign another job to the first contractor – a job that wasn’t as urgent, but that still needs doing.

After a weekend that was stormy in more ways than one, Harry deserves such ease and convenience, and so does his employer, his contractors and – most of all – his customers.

About the Author
Dr. Moshe BenBassat is Chairman and CEO of ClickSoftware. Following a long and successful academic career with positions at USC, Tel Aviv University and UCLA, Dr. BenBassat established himself as one of the world’s leaders in the area of optimization and decision support software for a wide variety of applications. His research work was supported by DARPA, NIH, Ballistic Missile Defense Agency (via TRW), ARI (U.S. Army Research Institute), NASA and NSF. Dr. BenBassat has been published in leading professional journals, led many executive training workshops and has lectured in numerous industry events worldwide.