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CONTRACTING STRATEGIES FOR ASSET-INTENSIVE INDUSTRIES

Posted on Dec 31, 1969

Asset intensive manufacturers, particularly those in the process industry, rely heavily on contractors. Contractors execute routine maintenance and specialized tasks no longer performed by company employees, and serve as daily work force or project labor. They report to work daily - some on-site at your plant, some off-site in their shop, or in engineering offices around the globe.

Less than 50 years ago, maintenance department workforces were employees of the Owner. Today, contractors perform most of that work and virtually all of the turnaround and construction work.

There is an inherent power shift during the inevitable give-and-take of contract negotiations. Global economics, governmental requirements, and labor availability influence the relative power from year-to-year. While contractors and owners may have different motivators, they also share several, such as safety, reliability, and quality. One other thing they have in common is the need for well-written, comprehensive, and risk-balanced contracts/agreements. Unfortunately, these two parties can have divergent incentives manifested in the prolonged, often frustrating efforts to arrive at a signed agreement. All too often, agreements are poorly written, confusing, and then placed in a filing cabinet never to be seen again. Contracts can be written in clear, unambiguous language and serve as a guide to reduce disputes. 

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