Skilled craft labor shortages negatively impact the budgets and schedules of current and planned energy projects in the U.S. The Gulf Coast region has particularly been hit hard as multibillion-dollar mega-projects overlap with smaller expansions, turnarounds, maintenance and infrastructure projects.
Smart owners are adapting their traditional contracting strategies to mitigate the risks posed by current skilled craft labor shortages. Shifting the risk to the contractor is no longer effective, and new creative strategies must be employed to meet project objectives.
Why scrape the bottom of the first barrel?
Imagine contractors have two barrels of labor to draw from for construction projects. Both barrels have labor that are trained and skilled for the work to be done. Historically, contractors have drawn most of their labor from one of the barrels, and now, as demand for labor has increased, that barrel is getting close to the bottom as labor is being drawn faster than it can be replenished. As known resources are exhausted, current projects are getting lower-skilled, inexperienced labor and supervision to staff projects. This is resulting in less productivity, high turnover, lower quality and an increase in safety violations.
While the market has hesitated in the past to blend labor resources, a quiet trend in the market is emerging. Over the past 40 years, the building trades unions on the U.S. Gulf Coast have upgraded training programs and facilities, rewritten contracts to be market-driven and competitive, and built a highly skilled, safe and productive workforce ready to work.
Owner and contractor project leadership is breaking tradition to implement dual-labor postures on project sites and draw from both labor resource pools. With the safest, most productive workers from both pools employed on-site, projects implementing this strategy are reversing negative project trends and improving project results.
A real trades union case study
In Baytown, Texas, a project team was struggling to identify the resources needed to meet schedule, quality and budget on piping activities. The owner encouraged its EPC firm, which was directly hiring the labor, to hire trades labor union pipefitters and welders on-site. The first 80 trades union pipefitters and welders on-site replaced the lowest 300 ranked open-shop workers. The owner continued to add trades union labor and release underperforming open-shop workers until the project reached a balance of 297 trades union pipefitters, welders and machinists and over 2,000 open-shop workers. The trades union craft workers completed two compressors, steam piping, a lube oil system and heavy wall chrome welding with an average weld rejection rate one-third of the open-shop rate. As the work completed, the trades union workers were maintained on the crew to support start-up and testing activities. The trades union workforce was mobilized and completed its work without incident. In addition, the trades union tested and certified all welders at its own expense and not the expense of the contractor or the owner.
For more information, visit www.magnus-us.com or call (936) 588-0886.
