By Dean B. Wisecarver
During our consultations, we often ask if someone knowledgeable in operations goes out and monitors the work practices of contractors. Too often we are told, “We can’t go out and spot check or monitor safe work practices. We can’t supervise the contractor’s crews. That would be a violation of IRS independent contractor status. Besides, our legal counsel says we’d be taking on a liability we want the contractor to assume.” Well, I’m not an attorney, but I’m not sure that those who say these things to us have the whole picture. So, here’s another perspective.
Here’s a hypothetical situation. Your company has hired an electrical construction contractor to build a new 5-mile stretch of three-phase distribution line along route 90. In the middle of the 5-mile stretch, route 53 crosses route 90 at an oblique angle. One of your staking engineers happens to drive past this project and notices that the contractor’s crew, for some reason, is setting poles along route 53 some 500 feet south of where the two highways cross. Clearly, the crew has made a mistake. Your staking engineer radios in and tells you what he sees. What would you do?
You’d stop the job. You’d get on the horn to the contracting company’s management and tell them their crew has goofed. You’d tell them that they need to contact their crew and get the project back on track, and quickly, or you’ll have to pull the whole project.
At this first moment, when you discover the error, are you really concerned about the formal provisions in the written contract? Probably not. What you are concerned about is the wasted time and hassles you and your company will face to get things corrected. You are concerned that the work you need to be done will not be done on time. Who cares if the contract will force the contractor eventually to make things right, including paying for any overages? Their error will set you back in ways the contractor will never have to pay. It’s an operational setback, not just a contractual violation.
Blatant as this example may be, isn’t it an example of why you monitor the progress of any contractor you hire? You want and need the job to be done right and on time. You can’t afford to wait until the job is “finished” to discover it isn’t done right. If you wait that long you know you’ll spend many hours getting things fixed. Your company may even have to take legal action against the contractor (a truly huge amount of time) to get things sorted out. Who needs the hassles?
If I ask you what gives you the right to monitor the outside contractor’s progress and work, you’ll tell me the formal contract has provisions the contractor must adhere to. You’ll tell me that if the contractor is violating the provisions, your company has the right to stop the job and even yank the project, if necessary. You’ll tell me you don’t have to wait until the work is done to test it against the contract provisions. And, you’d be right about all these things.
Let’s change the example. Let’s say the contractor’s crew takes a few shortcuts to speed up the job. Because of this, one of their lead lineman gets hurt and can’t work. It takes the contractor a day or two to find a replacement or free up another lineman from another project. Or, maybe the crew doesn’t use good traffic control measures and some third party comes over the crest of the small hill and rams into the back of the contractor’s digger derrick. In either case, the work stops. The project gets delayed. More shortcuts may be taken later to “catch up.” In terms of how these situations may affect you and your operations, how are they any different than the one I opened with?
They are really no different. Anything that degrades the quality of the work or delays its completion will directly affect your company. You know that. That’s why your company does things like requiring contractors to be pre-qualified and approved by you to even have a shot at bidding on your projects. That’s why you plan and carefully write bid specifications. That’s why you have pre-contract conferences with the contractor. And, that’s why you have a formal contract – to force the issue on things like the quality and timeliness of getting the project done.
And, if your company uses a sound, standard contract, there are also provisions in it that require the contractor to follow all regulatory and industry recognized safety standards. If the contractor’s crew fails to follow proper safety procedures, is that not just as much a contractual violation as building your lines in the wrong place? It is, indeed. But then, how will you know either of these things if you don’t go out and spot check from time to time?
So, that’s the point. Spot checks and monitoring the contractors’ work in progress is both a sound business practice and a contractual right. Furthermore, if you are going to monitor one aspect of the contractual provisions, you should monitor all of them, including safe work practices.
Still uneasy about this? Okay, let’s say one of your people goes out to see how well the project is progressing – not to monitor the actual work procedures, just to see how far along the project is. The crew is working right beside a highway and they have been very sloppy in their traffic control techniques. Of course, your person isn’t out there to monitor that aspect of the contractor’s work, so he says nothing and reports nothing back to you about their poor traffic controls. Later that day, a car comes along and, not expecting a line truck to be right on the edge of the highway, strikes the truck, spins across the road and slams into another vehicle. Both drivers are seriously hurt. Who do you think will be faced with the resulting claims? If you believe this is the contractor’s entire fault and your company won’t be named in any eventual lawsuit, think again. I assure you, your company will be named as a defendant. What’s more, once the plaintiff’s attorney finds out that your contract includes provisions that require the contractor to abide by recognized safety rules and that one of your people visited that site and didn’t say or do anything about the contractor’s sloppy controls, your company will have a tough time avoiding a judgment for damages.
The bottom line: It is good business and a contractual right for your company to monitor the work of any contractors it hires. It isn’t about supervising the contractors’ employees. It is about making sure the work is being done according to the provisions of the contract. If you spot unsafe work practices or conditions, it’s a violation of the contract’s provisions, just like any other deviation from the agreement. You call the contractor’s management and tell them to fix the situation or the project stops. Not only is it your right to do so, it’s just plain good business.
Author’s note: I’m not an attorney. If you still have questions or concerns about monitoring the activities of outside contractors, talk to your company’s legal advisors. Take along a copy of this article, if you wish. If you have another perspective you believe we should know about, please contact me directly at dean@synebar.com.