It’s not a new concept, but it’s one that bears repeating: Healthy relationships and transparent communication between capital project owners and contractors are sustaining trends that ensure any project’s success.
“Transparency is absolutely essential,” said Bob Tinn, manager of capital projects procurement for Chevron Phillips Chemical. “I can assure you that if you have really good, solid relationships and a bond of trust at key levels within companies, you can get a lot done.
“We have to understand that we’re all in it to win, right? In our minds, if we have a contractor that fails or if anybody through that supply chain fails, we will fail, so it’s not an option. It’s not even in our vocabulary.”
“Relationships are absolutely paramount,” Tinn stressed, addressing delegates to the Energy Construction Forum held recently in Galveston, Texas. “I can put a contract together and be firm around the four corners of that contract, but I guarantee those relationships are what’s going to drive us forward rather than invoking a clause in that contract.”
S&B Engineers & Constructors’ Vice President Randy Walker agreed, pointing out contracts containing vocabulary like “general industry practices” and other specifics that reference “performance standards” can hinder success.
“Who knows what a ‘general industry practice’ really is?” Walker posited. “What good does that do you? We’re back to relationship enterprise and your ability to operate as an independent contractor.”
Tinn added the scope of work must be explicit and avoid ambiguity.
“We can’t say ‘industry standards.’ What is an ‘industry standard?’” he asked. “I don’t care if it’s on the owner’s side or the contractor’s side. Scope of work is a challenge that needs to be continuously monitored, vetted and insured so those scopes go out very clear and concise.”
The key word, IHI E&C International Corp. President Glyn Rodgers repeated, is “relationship.”
“I don’t know of any EPC contractors that want to go into a project knowing, because of the way the contract is structured, the relationship is going to be damaged beyond repair,” he said.
Rodgers said it is sometimes more beneficial to walk away from poorly or vaguely structured contracts in order to salvage the relationship.
“Ultimately,” he said, “that is the value in that contract — the relationship you have with the customer.”
Pathfinder LLC President Stephen Cabano noted the value of quality relationships cannot be underestimated should owners find themselves dealing with claims.
“That’s one trend I caution everybody on in our industry right now as projects slow down or change from schedule-driven to cost-driven,” he said. “Issues start to occur. If we don’t have these relationships and contracts that define what you do in these situations, we start getting in these arguments. Obviously I don’t think anybody wants to be in that mode. It’s not healthy for our projects, so be careful how you put these strategies together in this time when our project drivers are changing.”
Another predominant trend commanding owners’ attentions as they compete for contractor resources, Cabano said, concerns incentives for assuring speed, quality and, to some degree, safety.
“There’s nothing new there, but as we shift from schedule-driven to cost-driven projects, you see the conversations starting again on how to incentivize our engineering and construction contractors,” Cabano said. “The thought process there is not that we’re necessarily trying to reduce cost but how we can apply that cost to attract the better contractors to execute our projects.”
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