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THE TRANSFIELD SERVICES BUSINESS MAGAZINE18transfieldservices.com“To work successfully, the onus is on serviceproviders to be discerning about which clientsthey take on. They must focus on quality, ratherthan volume of work.”MOBILWhile these types of contracts still exist, the increasinglyglobal and competitive market has created a new setof paradigms which are changing the operator/serviceprovider relationship, including:Demands of growth on talent – unprecedented globaldemand for resources and management energyare forcing prioritisation and redefinition of whatconstitutes core management responsibility.Better use of capital – increased mobility of capital hasplaced pressure on established assets to free up capitalfor growth. This has led in particular to ‘build, own,operate’ outsourced contracts.Global standardisation by major corporations – majorcorporations are rationalising their supply of goodsand services on a global basis. This facilitates theapplication of consistent high standards in utilisationand significant cost decreases.Increasing capability of service providers – these changeshave been matched by increasing sophistication andcapability by industrial service providers. There is nowrecognition that service providers can add significantvalue to a business that owners themselves would nothave been able to achieve.New technologies – particularly in business systemsand electronic data capture and managementreporting, have enabled ‘core’ managers to delegaterisk and activity to third parties.Located 13 kilometres westof Melbourne and operating24 hours a day, 365 days ayear, Mobil’s Altona refinerysupplies half of Victoria’s fuelneeds. In November 2011 therefinery was shutdown formajor planned upgrade worksto increase its efficiency andimprove its environmentalfootprint. A shutdown toan asset of this scale andimportance is high risk and requires meticulous planning and precise execution.Mobil’s 15-year ISM agreement with its maintenance service provider was criticalto the successful delivery of the shutdown. The model facilitated:Asset life-cycle maintenance scheduling from the outset of the contractallowed for a long project lead time to plan.A collaborative, skilled and flexible on-site workforce significantly reduced theneed for additional one-off hiring demands for the shutdown.Well entrenched safety systems in shutdown workforce.As a result, the shutdown was successfully completed without a recordable injury,at 5 per cent under budget cost and with an incident free start-up.Systems and learnings can be applied across industries– many services providers now work in multipleindustries. This supports knowledge sharing, innovationand more efficient ways of operating.The development, in leading outsource providers, ofsophisticated safety and operational managementsystems that ensure performance is often on par with,or better than their clients.These new paradigms are changing the way operatorsand service providers work together and force a rethinkof the traditional master/servant approach. There is now agreater willingness to share risk, establish mutual businessgoals and to reward performance and distribute the gains.To facilitate this evolved perspective, there has beena dramatic expansion in the range of commercial andcontractual mechanisms. The Integrated Services Model(ISM) is one such mechanism.THE INTEGRATED SERVICESMODEL (ISM)An ISM governs the contractual agreement betweenoperator and service provider to define their workingrelationship. Its aim is to establish a constructive,trusting and mutually beneficial partnership to increaseproductivity and efficiency across multiple sites andprojects. The model is reliant on a mutual commitment toa sophisticated asset management strategy and ensuresthat agreements incorporate the following characteristics:A process by which operators and service providersrespect the core competencies that each party bringsand do all they can to allow each other to identify andfocus on delivering them.Performance based criteria and incentives whichencourage safety, continuous improvement andinnovation.A contract management plan and program of worksusing an integrated and coordinated shutdownand planned work schedule that covers all workrequirements.Site wide resource management and work executionbased on thorough forecasting and delivery strategies.To work successfully, the onus is on service providers tobe discerning about which clients they take on. They mustfocus on quality, rather than volume of work, and in doingso trade-off short-term margin ‘fat’ for long-term securityof revenue. A critical mass of management talent must beavailable, together with business systems and processesthat can match and integrate with those of their clients.Service providers must also understand and endorse theclient’s strategic business objectives, be prepared to sharerisk and invest significant sums to ensure operationalcompatibility.The key benefits of a properly implemented ISM aresignificant:
transfieldservices.comTHE TRANSFIELD SERVICES BUSINESS MAGAZINE19Reduced labour requirementsThe program of works approach to project managementidentifies and links the skill-sets and resources requiredto complete a planned sequence of work, such asshutdowns. This reduces the stress on the same labourpool by ‘smoothing’ human resource demand peaks andtroughs, while optimising the use of other side-wideresources such as machinery and sub-contractors.SafetyThe rationalisation of sub-contractor use (together withsafety performance incentives) has the important flowoneffect of improving safety performance because acore competence of the lead contractor is the selection,engagement and on-boarding of sub-contractors. Thisensures that all sub-contractors are trained to a high standardand, importantly, key processes applied consistently.ProductivityProductivity and availability improvements are achievedfrom:The operator having more management time freeto focus on strategic asset management (given theservice provider is looking after the detailed planning,scheduling and execution).The service provider implementing ‘root cause’ analysisand other systems to eliminate maintenance induceddefects and repeat failures.The service provider supporting the operator with datamanagement and procurement services.Less unscheduled maintenance as the service providergathers data, builds library files and frees up theoperator to plan preventative maintenance schedulesrather than being caught in the reactive spiral.Financial incentives for the service provider to achieveavailability, safety and innovation targets.CostCost reductions are achieved from:Sub-contractor rationalisation which reducesduplication and overheads.Site wide scheduling which ensures optimisation andefficient use of site wide resources.Performance based contracting which focusessub-contractors on key performance indicators ratherthan man hours.Detailed planning and reporting which contributes toproductivity improvements.Reduction in breakdown/schedule break in work, andincreased focus on achieving planned work schedule.A shift to increased predictive and pro-activemaintenance, allowing greater planning time andresource levelling.The ISM approach to operator/service providerrelationships is proven to increase productivity, reducecosts and improve safety using fewer resources. Morewidespread and coordinated use of the model, bothwith individual operators and across different operators,would make a considerable contribution to overcomingAustralia’s labour resource shortages.SANTOSLast year, Santosconsolidated four majormaintenance servicecontracts into a singlelong-term agreement withone lead contractor for itsoperations across its Cooperand Eromanga Basins. Theregion, which covers a vastexpanse of north-east SouthAustralia and south-westQueensland, is some of themost prolific onshore oil and gas producing regions in Australia.The new agreement uses an integrated services contracting framework. It hasestablished a centralised resource pool of labour, equipment and consumables,together with a program of works approach to schedule maintenance activitiesacross the site.Operator and contractor now collaborate closely. Knowledge and skills arecombined and project risk is shared by linking contractor fees to overall projectperformance outcomes and key performance indicators.While the new model has only been in operation since October 2011, operatingperformance has already improved, using fewer human resources. Significantimprovement is expected over the long term.BLUESCOPEBlueScope Steel’s PortKembla steelworks is thelargest manufacturer andsupplier of flat steel inAustralia by volume. It has anannual production capacityof approximately 5.3 milliontonnes of crude steel and isone of the world’s lowestcostproducers of steelproducts.Throughout the 1990s, BlueScope Steel embarked on major structural reformto improve the steelwork’s efficiency and productivity. In 2000, they hadexhausted traditional improvement initiatives in maintenance productivity andneeded to take a quantum step to deliver savings and improvements in plantmaintenance and shutdown productivity.In 2001, BlueScope formed an alliance style agreement with a service providerusing an integrated services model. The alliance recently celebrated its 10-yearanniversary.As part of the agreement, key performance indicators are reviewed andupdated annually to ensure continual alignment of operator and serviceprovider goals. The service provider also participates in strategic meetingsto ensure maintenance improvements are identified and implemented. Thebenefits included:A 30 per cent reduction in staff levels through more efficient task allocationand scheduling.Multi-million dollar savings through a range of initiatives over the life of thecontract including through the “Better Ways” program and rigorous financialmanagement on overheads. Rigorous financial management, saving $2.8 million on overheads in the2007-08 financial year.
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