Global industry trends indicate a continued growth of outsourcing non-core business activities to third-party contractors, ranging from construction and maintenance activities to security and catering functions. This "contractorization" of operations has become a key strategy pursued by both private and public sectors and is even embraced by the military in some countries. Decades of data compiled by the International Association of Oil & Gas Producers on the Upstream Oil and Gas industry1, for instance, indicates that while employee work hours have doubled over the past 25 years, contractor work hours have increased more than sevenfold.
Outsourcing services to third-party entities inevitably comes with risk exposure, which may include harm to human beings, the environment, property, business reputation and continuity as well as to nearby local communities. Data from several industries show that contractors and subcontractors have higher incident rates than employees of the outsourcing company. The 2010 incident in the Gulf of Mexico is a stark reminder that responsibility for health, safety and environmental stewardship cannot simply be transferred to third-party contractors. It remains the prime duty of the client company to ensure that operations are undertaken in a safe and sustainable manner, and only qualified contractors are identified, selected and utilized throughout the life of a project.
Despite this, contractorization in itself is not necessarily a negative trend for safety and sustainability. Contractorization allows for more qualified, competent, well-equipped and specialized contractors to undertake tasks or projects in a much safer and sustainable manner than could be achieved when simply relying on in-house resources. The challenge and opportunity lies in establishing a robust contractor management strategy to effectively mitigate risk exposures from contractorization, while allowing the client company to streamline its operations and focus on its core competencies. The following attributes are essential elements to assist to make that happen.
