Contract Maintenance or not? (part 2)

(part 1)   (part 2)

Over the 30 years I have been in this business, I have been frequently asked about whether to contract maintenance or not. I would hear these questions more frequently when less capital work was available and supplier companies began seeking work other than capital project work.

In the last two years, the push for maintenance work among suppliers has been strong. Only the future will show how many will remain in this business long term. In this column, I would like to continue to elaborate on what kind of maintenance you should or should not contract out and the reasons why, as well as the characteristics of a good maintenance contract.

INCENTIVES AND GOALS. If you consider outsourcing maintenance, I advise you to set up a contract that includes an incentive for the contractor to continuously perform better.

SERVICE. If your contract is based on buying service alone, there is no real incentive for the contractor to perform better. The more hours they sell, the more money they make, and they can sell more hours if your maintenance needs are reactive. Only the fear of losing the contract will motivate the contractor to perform better.

RELIABILITY. If your contract is based on delivering results, you can create a win-win situation for yourself and the contractor. In most mills, results should be in the following order of priority after safety and environmental issues:

1. Reliability of equipment.
2. Cost of delivering reliability.

If there is an incentive for a contractor to deliver reliability, it naturally follows an incentive to prevent maintenance and to perform preventive maintenance, plan maintenance, schedule maintenance, and so forth. In summary, they need a disciplined process in place and a good system to support it.

In selecting a contractor, I suggest that you not only look at their rates, but that you spend the most time evaluating their maintenance philosophy (if they have one), what reliability and maintenance process they will implement, and how they will measure results. Go into detail on the basics of how they would decide whether to prevent—or not prevent—component failures, how planning will be done, how scheduling will be done, which key performance indicators will be used, continuous training of their people, and so forth. This is important, because you must remember that the only thing a contractor can do differently than you is that they can implement a more efficient work system. They can often do this quickly, or at least they can promise to do it quickly. Seldom will a contractor bring in a crew with superior skills to your own.

LONG-TERM CONTRACTS. A maintenance contract should be long term—no less than five years and preferably longer than that. There are many reasons for this. Two of them are included in what Dr. Deming called the seven deadly diseases common to U.S. management. They are “Lack of constancy of purpose” and “Mobility of top management.” My observation is that one phenomenon leads to the other. New managers are called in for fast and, unfortunately, often temporary results. They often change the organization, perhaps only because they want to bring in their buddies, make some cut backs, and then move on to another place before the long-term effects are noticed. The front line of the organization, where the actual actions of new directives have to take place, sees this as a constant change of direction. They start talking about the program of the month and, consequently, they do not change anything and the results of management efforts will be absent.

If this goes on for some time, no sustainable results will be achieved. In this situation, I think a long-term maintenance contract offers a possible solution. The contract has to be founded on the right principles and work processes, because, when these are not changed for a long period of time, your contractor can help eliminate the “lack-of-constancy-of-purpose phenomenon.” With good leadership, the work processes and your results should continuously improve. It could be done without a contractor, but not in a system where a new mill manager or maintenance manager means a new program.

HEALTHY COMPETITION. Almost without exception, maintenance departments have never had true competition. They have monopoly on most work in the mill. A contractor should be seen as a competitor to your own organization. As long as you are competitive, outsourcing of maintenance is not a valid alternative.