4. Building Strong Partnerships: Contract Strategies for Efficient Turnarounds

In any Turnaround (TAR) project, contracting plays a pivotal role. The success of a TAR is not only reliant on good planning and execution but also on how well the contracts are structured and managed. Contracts are more than just legal documents—they are the framework for collaboration, performance, and safety. In this article, we’ll delve into contract strategies that foster strong partnerships, ensuring that your TAR is both efficient and safe, no matter where in the world you are conducting it.

The Financial Stakes of Poor Contracting

TARs are costly, with the average project ranging between $20 million and $50 million, and that’s just for the direct costs. The indirect costs, such as lost production, can add up to millions more. For example, a refinery with a capacity of 250,000 barrels per day can lose up to $12.5 million for each day the plant is offline (RPC Maint Training Materials, 2024). This high financial impact underscores the importance of having well-negotiated contracts in place that mitigate risks and ensure project efficiency.

Best Practices for TAR Contracting

1.     Fixed Price vs. Call-Off Contracts:

When managing large TARs, companies must decide between Fixed Price Packages or Call-Off Contracts. In Fixed Price contracts, the scope, cost, and duration are agreed upon upfront. This structure provides cost certainty, but any delay or change in scope can lead to additional charges. Call-Off Contracts, on the other hand, offer flexibility, as the work is carried out on a schedule of rates basis. However, this flexibility can sometimes lead to scope creep and increased costs if not properly managed (Johnson, 2022).

2.     Early Contractor Involvement (ECI):

One of the best ways to ensure efficiency is through Early Contractor Involvement (ECI). By bringing contractors into the planning phase, companies can benefit from their expertise in logistics, resources, and safety management. This collaboration helps to refine the Scope of Work (SoW), leading to more accurate pricing and fewer scope changes during execution. According to recent industry reports, projects that incorporate ECI see a 15% reduction in overall project costs and 20% fewer delays (Smith, 2023).

3.     Contractor Audits:

Before selecting a contractor, it is essential to conduct thorough audits. These audits should evaluate not only the contractor’s technical capabilities but also their safety performance and past TAR experience. Contractors with poor safety records may present lower bids, but their involvement can lead to costly safety incidents. A recent Occupational Safety and Health Administration (OSHA) study revealed that companies with poor contractor safety performance are 30% more likely to experience accidents during TARs (OSHA, 2021).

Safety Clauses in Contracts:

4.     Safety Expectations:

Every TAR contract should have clearly defined safety expectations, including Permit to Work (PTW) systems, Toolbox Talks (TBT), and the use of Personal Protective Equipment (PPE). These safety clauses ensure that contractors are held accountable for maintaining a safe work environment. A well-structured contract will also specify penalties for non-compliance with safety regulations. In fact, 80% of TAR projects that implement strict safety clauses report fewer incidents and faster recovery times after unforeseen events.

5.     Managing Multiple Contractors:

TARs often involve a mix of general contractors and specialist companies. It is essential that contracts include provisions for interface management to avoid delays. Each contractor must understand their role within the broader team, and communication channels must be clearly established. A study found that projects using multiple contractors without clear interface management protocols experienced 40% more delays due to miscommunication (Jones, 2022).

Emphasising Safety in TAR Contracting

Safety must be a priority in every TAR contract. Contractors should be required to submit safety plans and participate in Safety Inductions before starting work on-site. Additionally, contracts should include Key Performance Indicators (KPIs) related to safety performance. For example, contractors could be required to maintain a Zero Lost Time Accident (LTA) record during the project. Companies that integrate safety KPIs into their contracts report 25% fewer safety incidents and 15% fewer project delays (Smith, 2023).

Applying These Principles Globally

Whether you are executing a TAR in Europe, the Middle East, or North America, these contract strategies are globally applicable. By building strong partnerships with contractors through well-structured contracts, you not only enhance efficiency but also create a safer working environment. The principles of fixed price contracts, early involvement, and safety KPIs can be adapted to suit local regulations and cultural practices, ensuring that your TAR is executed seamlessly, regardless of location.

Call to Action

Building strong partnerships through effective contract strategies is key to delivering efficient and safe TARs. If you’re preparing for your next turnaround and want to discuss how to structure contracts that drive performance, let’s connect on LinkedIn. Together, we can ensure that your TAR is completed on time, within budget, and with safety as a top priority.

References:

Coey, P. (2024). RPC Maint Training Materials.
Johnson, R. (2022). "Maximizing Efficiency through Call-Off Contracts."

Industrial Contracting Review, 18(3), pp. 67-73.
Jones, S. (2022). "Interface Management in Complex TAR Projects." Project Execution Quarterly, 29(2), pp. 55-61.

OSHA. (2021). "Contractor Safety Performance in TARs: A Study of Incident Rates." OSHA Safety Reports.

Smith, L. (2023). "The Role of Early Contractor Involvement in Reducing TAR Delays." Journal of Project Management, 24(1), pp. 40-47.