Contractor Management – Managing the Risk Potential


EHS Consultant


The contractor and client relationship is one of the most important within any business model and has ancient origins. Although we think of this relationship in our own 21st century context, contractor arrangements were referenced as far back as the Ancient Romans where the Latin term publicanus referred to a contractor who perhaps collected taxes on behalf of the state, supplied Roman legions or who oversaw public building projects.

But what do we understand a contractor to be? The term is used to describe anyone, whether an individual or a company that undertakes work for you but who is not an employee. This can cover a self-employed electrician who is working for an SME or can be a large building contractor undertaking the construction of a housing estate under a contract from a landowner.

Whilst this type of business relationship is very efficient, it also raises a number of potential pitfalls which if not recognised and controlled can lead to problems. Let’s review the advantages and pitfalls of using contracted services…

“Whilst there are significant advantages of using contractors, an organisations safety management system must be geared to manage the potential imported risk.”


Advantages include:

  • Allows specialist skill sets to be brought into an organisation without any long-term commitments.
  • Costs and deliverables for contracted works are understood by both sides before any contract is entered into.
  • Contractor relationships can be developed over the long term so that contractor staff can be effectively integrated into a client’s safety management processes.
  • Complex contractor relationships can be effectively managed using off the shelf contractor management software.


Whilst there are significant advantages of using contractors, an organisations safety management system must be geared to manage the potential imported risk. Potential issues when using contractors can include:

  • Clients may not be adequately resourced to effectively manage contractor activities from project planning through to completion.
  • Contractors may use sub-contractors which may not be apparent to the client; these sub-contractors may not be under the effective control or supervision of the principle contractor and may deviate from contractual standards.
  • It is often difficult for clients to accurately assess the extent of principle contractor control over their sub-contractors.
  • It is often difficult for clients to accurately assess principle contractor relationships with their suppliers, especially when the supplier provides safety critical components which may require specialist training and/or instruction.
  • Contractors may not have the same level of safety commitment or safety culture as the client.
  • Contractors may change experienced personnel without notifying the client for specialist or safety critical roles.
  • Oversight of day to day contractor operations can be problematic if not well planned and organised.
  • Contracts can be agreed on the lowest cost bid criteria which may not be in line with the best overall contractor safety performance.
  • If adequate due diligence is not undertaken, issues within the contractor (such as lack of resources, poor safety performance etc.) may not be identified before a contract is signed.
  • A client’s contractor safety management process must be designed to manage the risk profile that contract works introduce into an organisations operations.


It is critical that organisations understand how to manage these types of arrangements and any sizeable client should have a defined procedure within their safety management system that defines the minimum requirements for contracted services.

The basic framework to oversee contractor management can be broken down into four phases:

  1. Planning for contractor works.
  2. Assessing and choosing contractors.
  3. Supervision of contractor works.
  4. Reviewing and assessing contractor performance.


1. Planning for contractor works

The planning for projects or works that require contractors has to be carefully considered and will depend on the scope and purpose of the works, timing and schedules, pricing and penalties and the legal framework that exists where the works will be undertaken. An essential consideration at the planning stage is identifying where risk can be introduced into an organisations operations, especially where those contractors are undertaking high risk, non-routine or safety critical activities.

It is recommended that an HSE plan is developed for larger contractor arrangements that cover how safety is to be managed through all phases of the works from the initial assessment phase through to demobilisation and site restoration. In addition, where contracted works introduce specific risks, additional emergency arrangements may need to be developed and implemented.


2. Assessment of contractors

The use of contractors can cover an astonishingly wide range of work activities so any client requirements must be appropriately scoped.

Elements of this process should include:

  • A procedure for the pre-qualification / assessment and rating of contractors appropriate to the anticipated scope and scale of works. Any assessment should cover:
    • the minimum national legal requirements are fulfilled by the contractor depending on the jurisdiction, such as proof of employee and public liability insurance, provision of a safety statement, etc.,
    • qualifications, training and experience of contracted staff,
    • confirmation of valid contractor registration with competent authorities such as for asbestos removal or for electricians,
    • historical safety performance including accident history, past and current legal proceedings and any information on statutory reporting or reportable incidents,
    • evidence of a competent risk assessment process and documentation that meets the risk identification, assessment and evaluation process for the entire scope of proposed works.
  • A process to periodically assess and re-assess a contractor’s suitability which may include 2nd party audits, even when not under contract.
  • The ability to undertake a gap analysis process of a contractor operation and to develop an improvement plan to correct 2nd party audit deficiencies.


Before any contract is signed, it is vital that clients understand their own legal responsibilities for contracted works such as the legally defined duties of clients in the Safety, Health and Welfare at Work (Construction) Regulations, 2013. In addition, any procedure must address the risk of introducing change where the agreed scope of work may change during a contractual period.


3. Supervision of contractor works

The extent of contractor supervision will be dependent upon the resources and competency of the client to oversee the agreed works. For example, if a hotel chain builds a large extension it is unlikely that the hotel organisation would have the in-house competency to supervise such as project. Therefore the contract should include and specifically state the extent to which the contractor and/or client supervise the contracted works. Clients must understand their legal obligations, especially as defined in construction regulations where the term ‘client’ has a stated legal meaning and there are specified duties. If a client is not fully aware of these types of requirements, they should take on the services of a competent third party to act on their behalf.

One simple methodology that allows for the supervision of contractor works is that of inspections and audits which are tailored for the activities that are being undertaken. This process has a number of advantages:

  • Regular inspections provide assurance to the client that contract requirements are being met.
  • It promotes cooperation between the client and contractor, can align sometimes divergent objectives and promotes constructive joint participation in a project.
  • Findings from inspection can be used to drive the improvement process.

Whilst this is a useful process, the inspection regime must be suitable and sufficient for the scale and nature of the contracted works.


4. Reviewing and assessing contractor performance

A process that is frequently used offshore after a project has been completed is a review and assessment process. The objective is to “conduct a joint evaluation of the contractor’s and company’s HSE performance and to provide feedback to the contractors(s) and company which can be a reference for future work.” 90

Of course, the suitability for such a process will depend on the scale, scope and complexity of the contracted work but it is an important consideration as this can provide a useful forum to learn lessons on both the client and contractor side. As our aim in safety management is to drive the improvement process, this is another means to do that. Basic criteria for any follow up or review process can include:

  • The relevance of safety planning, assessment of the overall contractor (and their sub-contractor) safety performance and reviewing lesson learnt for future improvement.
  • Learnings for the client in regards to their own contractor assessment process as to whether it was suitable or requires improvement.
  • Identification of any new hazards encountered and assess whether these need to be captured and considered for future contracted works.

It is vital that clients understand that contractor activities nearly always increase the risk profile of an organisation. Therefore contractor management is an important risk management control for any organisation, especially for those activities that are outside the normal scope of an organisations day to day operations, such as safety critical or non-standard works.

90 – OGP – HSE Management – Guidelines for Working Together in a Contract Environment, Report No. 6.64/291, Section 10 Final Evaluation and Close-out, p19

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