In recent years, as industry has worked to tame expenses by outsourcing certain labor, this process has created new risks. No longer are all onsite personnel under the employ and control of the industry’s companies, known as ‘the hiring client.’
Each contractor, therefore, is required to verify their qualifications (such as HSE training/certifications, leading and lagging indicators, etc.), insurance, bonding, and training. As a result, this can make dealing with onsite issues more complicated than when everyone was an employee.
Further, to repeat this vetting process for every individual contractor can require hours of time for both clients and hiring companies, creating delays and adding cost upon cost during the evaluation period.
In response to this situation, the late 1990s and early 2000s saw the rise of pre-qualification companies across many sectors, including oil and gas. Their purpose was to be clearinghouses, pre-qualifying a long list of service providers and their subcontractors. In so doing, both sides of the equation would see important savings in dollars and work hours while assuring high standards of training, safety and liability.
Pre-qualifying would also give hiring clients a vetted list of contractors to choose from for a wide range of jobs involving many needed skills and specialties, removing the need to extensively interview each potential hire.
In the beginning, this model worked well. A contractor could fill out a few concise forms, pay a nominal fee and be ready to work for any hiring client that used that pre-qualifying firm. Efficiency improved for everyone concerned.
But over the years many of the major pre-qualifying companies began adding requirements, each of which cost money and time. These additions include:
- Charging the contractor separately for each hiring client they work for;
- Charging the contractor a high rate for any additional subcontractors they need;
- Requiring certification and operations manuals for all possible kinds of work—HSE, EHS, Safety and Health—regardless of whether the contractor does that work;
- Regular, costly, audits of those manuals, when the manuals were not needed in the first place; and
- Charging fees based on total employee count, when only a few of those ever appear on site, so the contractor pays fees unnecessarily for those who only work in the office or in other sectors.
When the qualification process requires a manual for work a contractor doesn’t do, such as Confined Space Entry, the company often must hire out the creation of that manual to another company—a fourth party, so to speak. This creates yet another cost that is of no real benefit to the contractor. Entire companies have been created to develop these manuals.
These unnecessary audits add even more expense without adding value. Pre-qualifying companies often cite OSHA 1910 PSM as the requirement for these extensive manuals and audits. However, this rule, which mandates communication about safety procedures, is aimed at hiring clients, not contractors and subs. The hiring client is the only entity obligated to make sure that all manuals, training and risk assessments are done in accordance with the needs of the workplace.
For small contractors being considered for short-term jobs, the costs can exceed any profits to be made from the work. An additional concern is that the application process precedes being hired—in other words, after the time and expense of signing on with a standard pre-qualification firm, the contractor might spend large amounts of money and not be selected for the work in question.
During an extended pre-qualifying process, the contractor must delay starting work, and the hiring client is delayed in getting important tasks finished. Some contractors have complained that it would take the equivalent of one fulltime person several weeks to complete the process.
In sum, many people feel that the pre-qualifying industry has added many of these requirements in order to increase profits instead of to serve the needs of the industry.
A growing number of oil sector companies, both hiring clients and contractors, have decided the costly and time-eating pre-qualification process has defeated its own purpose—becoming more burdensome and costly than it is worth. Many contractors have raised serious complaints, and at least one oil and gas major is considering eliminating pre-qualifying companies altogether and returning to the old ways of in-house qualifying.
There is another alternative besides giving up on third party pre-qualifiers. A new business model is arising, which is actually aimed at fulfilling the intent of the original concept.
CanQualify’s procedure is to first evaluate the situation: the contractor and their typical range of work along with the hiring client and their requirements. From there they identify what training, manuals, insurance/bonding and any other documentation that the contractor needs to submit.
If CanQualify’s experts identify an area in which the contractor’s application needs improvement, they can advise the contractor on how to proceed. If specific safety manuals and audits are needed, they proceed with that. If not, unnecessary costs and hours are avoided.
Adding new hiring clients to a contractor’s list does not automatically incur a fee—it may add a nominal fee, only if the new client has different hiring requirements—and adding subcontractors can be done at reasonable cost and timeliness.
By focusing on the needs of all clients concerned, this business model comes closer to accomplishing the original purpose of consolidating the vetting process in order to make the process time and dollar efficient. It does this while at the same time verifying exactly what each party is qualified for, helping them understand and remedy any issues in the process.
To learn more about a customer-friendly reset for prequalifying, visit CanQualify’s website at CanQualify.com.
About the Author:
Aaron Harker is the COO for CanQualify, who cofounded the company in 2017. He has 15-plus years of experience in building and maintaining world-class supplier/contractor pre-qualification and screening programs. Harker has specialized in managing a state-of-the-art internet-based website for collection and sharing of data.
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