Contractor Management - Managing Relationships


I was asked to write an article for Facility Management Magazine and I thought I would Blog the article as well.

Managing Contractor Relationships


Over the years many businesses have utilised contractors on an adhoc basis to fill gaps in their labour force or enable them to offer multiple services from a single location. In the past contractors have operated somewhat autonomously from the principle, but those days are changing and business are being held more accountable for any person representing them therefore our management systems need to reflect these changes.


Due to the competiveness of today's business market and the demand for skilled labour most businesses don't find it financially feasible to keep all required skills in house and look to out sourcing certain areas of their operations to ensure they manage their services to meet business objectives. As a result we see a greater use of contractors in many organisations, which translates to a greater risk to these businesses if the process is not managed successfully. The risk exposure can occur through quality of work, standard of service delivery, safety, and financial control; which ultimately affects the overall financial wellbeing and reputation of the business.


However, this can be easily managed through a systematic approach giving you visibility and a better understanding of your contractor's business practices and by ensuring you select contractors that work in-line with your business values and objectives.  The systems you put in place don't need to be technologically advanced to be effective, they just need to be structured and followed.




The first step in the entire process is selecting the best contractor that suits your requirements and meets the necessary qualification for the tasks to be completed. Every contractor engaged will open you to a certain amount of risk and you are responsible for mitigating the level of risk to your business and that of your facilities. A detailed appraisal should be carried out prior to awarding the contract or commencing work. The appraisal should include a simple checklist that gives you a full overview of the compliance of the contractor against legislation and identified risks for the tasks.


The basic items on your checklist should include business and safety questions and if you identify any gaps in the requirements don’t exclude the contractor outright, communicate with them and give them the opportunity to improve their compliance. Some smaller operators will appreciate the understanding and it will further develop an open business relationship.


Business Questions
Specialised licensing or qualifications ASIC check (Sole Trader vs Company)*
Insurance level required for the scope of work Reference checks
ABN or ACN registered with the ATO Police Clearances (if required)
Safety Related Questions
Work Method Statements Incident reporting and investigation
Hazard reporting and management Injury management
Emergency procedures Environmental management plan
Collection of information
Training and Inductions Submit a training register of all personnel and evidence of documented procedures that covers the safety requirements of the contract works.
Plant and equipment register  Submit a register of any plant or equipment to be brought on site for the contract works.
Chemical management  Submit a register for any chemicals to be brought on site for the contract works.
Subcontractor management  If subcontractors are to be used for the contract works submit details.


* Some organisations have set guidelines about selecting registered companies versus sole traders. Most of the risk of the sole trader is actually to the trader themselves, as they are personally exposed to liability. The main two areas of exposure to using a sole trader is IF they fall into the deemed worker category of workers compensation laws and thereby you must cover them for workers compensation and most sole traders are small operators and the business itself does not enjoy perpetual succession, (that is, a company is a distinct legal entity and so can survive the death of all of its members and directors) therefore your business continuity may be affected.




Many companies may have to meet requirements of engaging local contractors. Of course the scope of work will dictate the type of service required, although many overlook the benefits of local contractors. Many have a solid understanding of the local infrastructure and have developed good working relationship in the area and through working with these businesses you may find the added advantage of improved community relations and business reputation.




Once you have completed the pre-qualification process and have a short list of contractors ready for final review you need to ask yourself the final questions:

  • Has the contractor got the human resources and management structure to work to your company standards?
  • Do they have adequate insurance for the work being carried out?
  • Can they demonstrate that their employees have the skills to carry out the contracted work in a safe manner as evidenced by safety performance statistics and other documented evidence.
  • Do they have systems in place to comply with relevant legislation?


If you answer yes to all the questions and have a solid understanding of their practices through your evaluation process you have established a systematic approach to contractor management. The remaining steps are about ensuring the scope of work is completed on time, on budget and to the quality you would expect from your own work force.




Continuous monitoring is critical to the success of any work performed whether it’s an employee or contractor. Treat your contractor like you would your employee’s; include then in all relevant meetings and give them an avenue to provide feedback, this will nurture a better working relationship.


Conduct regular inspections of their work and review this against the scope of work and schedule and review the outcome in consultation with the contractor. This will ensure any deficiencies are identified and addressed quickly.


The final stage of contractor management (other than the completion of a contract) is the obligation to you to maintain records of all works. Include the contractor information in all existing systems, for example your safety management or procurement system and store and maintain all the documentation collected.


The bottom line is we all need to use contractors to ensure we provide the level of service we offer our clients or customers, and through making contractor selection and management a simple and collaborative process you will find your contractor keen to work with you and give them the benefit of understanding of you expectations.

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