TrackSoftware TRACK

Best Practices

September, 2004

Tips
Optimize outsourced services; minimize contract spend.

Summary:

Best in Class Maintenance/Turn Around/Capital Project work execution is a sight to behold. Disciplined,
focused owner/contractor teams working side-by-side. Owner/contractor teams get the right work done at
the lowest cost and highest profits by collaborating on the plan, schedule of resources, and using real time
field updates. These Quartile 1 manufacturers are committed to consistent improvement. They follow a
common model, comprised of supporting processes, reviewed below.

The tips reviewed here are independent. They can be pursued in any order and to varying degrees. You
can even choose to ignore one or maybe two (for a while).

“Ruthless” Standardization is the glue that binds the supporting processes together into a program. The
results of this program are improved maintenance efficiencies, lower costs, higher profits and fewer
headaches. Best in Class manufacturers sit down with their strategic contractors and agree that the current
way is not the Best way. Only then, can progress be made. Following these tips will move you closer to
Best in Class.

“Ruthless” Standardization
in concert with 5 Best Practices, gets you closer to Best in Class
Mergers, acquisitions and joint ventures are changing the industry landscape. Enterprise standards are in
flux. It’s a daily struggle for refining, chemicals, utilities, paper, and pharmaceuticals to sort through
heritage (code for different) business rules embedded in:
• Financial systems
• Planning and Scheduling software
• Business Processes
• Cultures

Imagine the outsider, your contractors, besieged by different/heritage requirements from one plant to the
next. Contractors pray for site-to-site commonality of practices. They’re often disappointed.

Standardization pays off for your contractors and you. If the contractor can count on identical processes as
he moves his/her resources from plant-to-plant, his costs of moving and adapting are minimized, as are
yours.

Make every effort to standardize (take no prisoners!):

• On the minimum set of Regional, National or Global contractors
• Contract commercial T&C’s – develop templates; use religiously
o Time and Materials
o Unit Price
o Lump Sum
• Resource nomenclatures

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o Skill/Craft names and qualifications

o Equipment descriptions
o Materials/Consumables names
• Regional, national or global
o Safety requirements
o Security/plant access requirements
o Payment cycles
o Early pay discounts
• Systems (Enterprise standard; be ruthless)
o CMMS
o Security/Access control – 1 card goes everywhere

Consistency is the mother of all Standardization.

• Commitment to program set up; provide the front-end effort and resources (short term)
• And to sustaining (long term) efforts
• Keep all Stakeholders engaged (informed and incented).

Never give up on your efforts to standardize. The results will make your life easier, your contractors’ life
easier and move you toward Best in Class. There are other important elements of Ruthless
Standardization. We are happy to discuss each with you in more detail.

Real Time Metrics

During a major outage a large refinery, chemical plant or utility is in a blizzard:

• Thousands of open PO’s/Work Orders/Activities
• 1,000+ contract workers
• Many, many contractor firms providing resources
• On many shifts, 24 hours a day, 7 days a week

The activity matrix is chaotic; information velocity is low (job progress/cost information arrives after the
job is over). Unfortunately, you don’t know what you don’t know.

Best in Class Maintenance/Turn Around/Capital Project teams use a business model containing:
• Planned headcount for tomorrow’s activities, by contractor, by skill, by shift
• Planned labor, equipment & materials for tomorrow’s activities, by contractor, by skill, by shift
• 24 hour a day real time headcount, by contractor, skill, name at any moment of the day
• Immediate notice when there are critical “No Shows”, labor or equipment
• Cumulative (job-to-date) hours and costs, at the Work Order/Activity level, through yesterday
• Planned vs. Actual variance reporting
o PO & WO that are over plan – hours and dollars
o Forecast of final costs
o By contractor
• Easy to use, Web-based, electronic contractor time sheets and invoices
• Immediately available to all on-site and off-site Stakeholders via the Web
• 99.999% accuracy, complete confidence when approving to pay

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Best in Class Maintenance/Turn Around/Capital Project teams also:

• Have contract details at their fingertips:
o Contract Start and End dates
o Labor, Equipment and Materials rates
o Straight/Premium time pay rules
o Contractor contact info; telephone, email, etc.
• Use granular project information to improve:
o Planning and scheduling of repetitive work
o Benchmark relative contractor performance
o Evaluate contractor Crew Rates before awarding work
• Use electronic data to populate Solomon Survey

Access Control

In this day and time, there are refineries, chemical plants, and power generating plants that allow unfettered
access. Well, not unfettered. Sometimes there’s a clip board, maybe a pen and occasionally a retired
school teacher-turned-Guard.

The liability is staggering.

Best in Class access control is comprised of:

• A well conceived Security Plan
• Enterprise access requirements (standardized across all sites!)
• State of the art security hardware and software
o Smartcards, Biometric or proximity ID cards
o Fully secured, fenced and gated perimeter (docks and tank farms too!)
o Pedestrian gates with tall turnstiles and card readers
o Vehicle gates with gate arms and card readers
o CCTV monitored and recorded
o And other devices that meet each site’s unique requirements
• A well paid security guard service
• Everyone uses their badge to Enter/Exit the perimeter. No exceptions!
• Redundant backup (fail over) servers and application software

Access control can support other business processes:

• In time/Out time card reads make excellent work hour validation
• OSHA 1910 compliance
o Who’s here?
o Safety training current?
o Drug & alcohol certificate current?
• Can be part of Insurance/Risk management practices
o Contractors Liability insurance certificates current?
o Workers Comp. insurance current?

While it is difficult to justify the investment in an access control system, the costs to remediate a security
breach are beyond calculation. It is, however, relatively easy to justify the multi-hundred thousand dollar
investment when the other benefits are quantified. Such as,
• Permanent knowledge of who worked in your plant when a personal injury lawsuit is filed.
• Hard copy records of worker safety training, drug & alcohol and other certifications in one
system.

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• Validated on-site hours for contractors and your employees.

Smart Contracts

Smart contracting, oddly enough, begins with your corporate strategy. Fundamental decisions about:
• O&M employee staffing level vs. contract staff levels
• Consolidate vendors/contractors into fewer, deeper relationships

Smart contracts match work risk to contract type.

• Good scope; perhaps Lump Sum
• Not-so-good scope; T&M
• European operation; Unit Rate

Regardless of the contract type, the contract must be evenly balanced, Win/Win. Squeezing too hard on a
contractor is much like squeezing a hand full of Jell-O. Don’t waste your time.

Best in Class T&M contracts are:

• Fair day’s work for a fair day’s pay (contact us to hear more)
• Based on the Owner’s fully-standardized template (contact us to hear more)
• Competitively bid; every two or three years without fail
• No variations to the template (remember, you started with Win/Win)
• Simple rate structures for labor, equipment and material. If you can’t understand it, you’ll have a
hard time deciding to approve the invoice.
• Skill based, not individual based rate
• Equipment rate structure that allows daily settlement
• Material rate structure that supports catalogued and casual purchase materials
• Flexibility to cover the unusual

Best in Class Lump Sum contracts:

• Scope is everything; exhaustively written
• Clear rules for Changes and Extras
• Full-fledged T&M rates for Changes and Extras
• Timely progress payment with retention
• Electronic Requests for payments
• Easy to use review and approval of payments
• Auto-pay retention at final acceptance

Best in Class Unit Rate contract:

• Crew rates x accepted standard x efficiencies = Base Unit Price (contact us to hear more)
• Unlimited service conditions
• Unlimited, conditioned rates
• Electronic Requests for payments
• Easy to use review and approval of payments

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Best Practices

Work Planning and Scheduling

“Plan the work, work the Plan”. That’s the philosophy of Best in Class process manufacturers. The other
end of the spectrum is: “Yes, we plan the work our employees will perform; we don’t bother to plan
contractors’ work”. What?

Plan when? For turnarounds, a two year (minimum) look ahead is recommended to fully synch the owner
and contractors around requirements, capabilities, continuity, replacements plans, and training for
craftsmen and supervisors.

Performance measurement is meaningful when it is against plan. Maintenance, turnaround and project
work is complex. There are simply too many variables, any one of which can affect the outcome.
Measurement is meaningful with a plan in place. Besides, there is so much to do, how can rational priority
decisions be made without plans and schedules?

While planning, the quantity and duration of resources are estimated. Now we have a benchmark against
which to do rudimentary evaluations of effectiveness, costs, and future engagements. Without a plan, this
evaluation is difficult if not impossible; certainly not Best in Class.

Best in Class

The choice of CMMS is important:

• What CMMS is in use at each site in our Company?
• Does our ERP have a fully integrated planning and scheduling module?
• Do you plan in one system and schedule in another?
• Routine or turnaround, capital or expense, it’s all work and can be planned in one CMMS.
• Once answered, standardize on one CMMS and phase in compliance over 1-2 years.

More important than which CMMS; When and What

• T/A planning late start; missed opportunity for feedback from contractors.
• Communicate next week’s schedule of WO’s 2-3 workdays in advance.
• Provide a 2-week and a 4-week Look Ahead to all interested parties.
• It is impossible to inform too many folks of the Plan and Schedule!

Contents of a WO are critical

• Person accountable for the safe, on-time and on-budget completion.
• All the Business Unit/Plant/Asset descriptions you can think of
• Start date and shift; End date and shift.
• Hours and costs estimates
• Other critical tracking data (contact us to hear more)

Use real time feedback to adjust the

Expense or Capital; it is still cash!

Plan the work; work the Plan (consistently)!

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Best Practices

ERP Integration

Enter once; share everywhere is mantra with Best in Class Maintenance/Turn Around/Capital Project
teams. Widely adopted ERP systems, like SAP R/3, while not always easy to work with, do allow
integration. Best of Breed bolt-ons can be integrated with SAP tools or third party integration software.

For example, an SAP PM WO (being planned) can be downloaded to another CMMS for scheduling then
back to PM for release. That same order can be downloaded to TrackSoftware where it will be progressed
with hours and dollars. Shift-by-shift actual craft hours and costs are automatically uploaded to PM many
times a day where the Planner/Scheduler can see real time activities and earned values. Entered once,
shared many places.

Rather than repeat the content of another White Paper (enter once; share everywhere), here is a link to an
in-depth discussion of ERP integration.

http://www.reliabilityweb.com/rel/track.htm

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