Upstream energy operators are under more pressure than ever to meet increased demand amid a struggle to find skilled contractors. Energy companies often lean heavily on third-party database systems to prequalify contractors. However, these platforms aren’t without flaws and if not used as one of many tools, may lead to additional risk exposures, delays and safety issues down the line.
The Benefits of Using a Prequalification Database
Contractor prequalification software tools help fine-tune the bidding process for a project. Upstream, midstream and downstream energy companies set initial requirements for health and safety, risk level and other applicable needs. Contractors upload documentation, including safety statistics related to their Occupational Safety and Health Administration (OSHA) rates, safety programs, insurance, training records, and Experience Modification Ratings (EMR).
According to Nicole Coughlin, executive consultant for risk engineering at The Hartford, these systems can enhance efficiency and establish quality levels, filtering out contractors who do not have the capabilities to do the work or may not meet compliance requirements.
“These contractor prequalification systems function as a one-stop shop for the company to review contractors,” she explains. “All of their safety programs, records and required documents funnel into the one system to create a scorecard, which is nice. It’s just not perfect.”
Looking for Gaps in the Database
While these systems are full of useful information, energy companies are not always leveraging them in the best way to manage contractors during and after the hiring process. What’s needed, she suggests, is a deeper dive into the reported data to look for hidden exposures like:
Misrepresentation - It’s up to the contractors themselves to upload and report their safety and training programs. However, it’s not uncommon to find contractors submitting canned programs off-the-shelf to meet various requirements instead of custom plans based on their operations.
As energy companies consider contractors to hire and risk engineers examine risk exposures for insurance purposes, they should ask: Who wrote this safety program? Is it customized to this contractor’s business and operations? What safety manuals are being followed by employees?
Criteria Disparity - There are several requirements within these systems to submit safety and health documentation. Some requirements may not apply to the work the contractor will need to perform, such as working at heights or in confined spaces.
When reviewing contractors, energy companies should ask themselves if a quality candidate might be overlooked. Does a contractor need to have a certain safety program if the job doesn’t require it? Is there a valid reason an applicant did not submit a safety record on a certain qualification? Are the criteria aligned with the priorities of the job?
Unreliable Data - Mistakes happen when reporting data. And filling out forms can seem like a full-time job, especially at smaller companies without available specialists to do the work. But whether a hurried employee ignored criteria or a third-party supplier managing the account had incomplete statistics, the result is a choice made on faulty information.
To better evaluate the options, energy companies can review both leading and lagging indicators when screening contractors. They can ask if the data points are in line with industry trends and whether they align.
Variances Offer Solutions
The misrepresentation isn’t necessarily purposeful, according to Coughlin. Many times, the contractor has the best of intentions to fill in the information, even if the requirements don’t line up. This is where the energy company can review and approve variances submitted by the contractors within the system, allowing for contractors to submit alternatives.
“Asking for a variance is a win-win on both sides,” says Coughlin. “It can help save the contractor from negligence, and it can give the customer a better understanding of the risk profile of the contractor or subcontractor.”
So instead of rushing to submit canned or unreliable documents, a contractor should feel comfortable pushing back. “Using the system to document why they aren’t checking that box is key,” she says.
In turn, energy companies should consider using custom-made, internal grading systems. This can help make space for these variances.
Managing Beyond the System
As important as it is to understand and use prequal systems effectively, what happens after is just as crucial. Following a system of procedures after choosing a contractor can help mitigate any overlooked issues. Coughlin makes several recommendations:
Hold Orientations
Though a contractor or subcontractor may have a solid safety rating, it’s good practice to develop and maintain a company orientation. Setting expectations can help ensure that the energy company’s safety protocol is followed and can also identify any conflicts or concerns.
Use a Contractor Management System
Prequalifying contractors is the start of a larger process. A contractor management system can help mitigate risk and may consist of how information (incident data, lessons learned etc.) is shared between the energy company and contractors throughout the length of a contract, jobsite visits or audits. This can be managed or written in-house at the energy company or utilize an insurance partner for their perspective.
Observe in the Field
Conducting regular meetings with contractors, foremen or general managers on the site can be a useful way to check if database information is truly representative. Regular onsite visits can help illuminate any potential safety problems as well as provide updates and give guidance throughout the life of the project.
Consider All Resources
Take advantage of the benefits and resources from the company’s insurance carrier. Specialists across industries can be an extension of risk management and safety teams. They can help identify where gaps may exist in the current program in order to help reduce overall risk exposure.
The Goal Is Safety
The systems that aggregate data and connect contractors to energy companies offer efficient and reputable solutions to hiring the best company for the job. However, a closer look reveals some discrepancies. As the energy industry explores new technology to provide the country with the energy it needs, hiring the best people to do the work is a crucial piece of mitigating health and safety risk. It’s worth the extra time to dig deeper into the data, as well as look holistically at all the information to make sure projects are completed as intended.
“That’s the ultimate win,” says Coughlin. “It’s about working it all in together, not leaning on just one thing to make the best decisions.”
