Power Engineering International

Welcome to the online version of our Power Engineering International (Pei) print publication. This is where to find archive magazine articles as well as our present edition. For any feedback on the content contact us here or discuss on PEi LinkedIn Group

O&M outages: Effective owner-contractor relationships


The difficulty in accurately tracking contractor hours and contract terms for hundreds of on-site contractors contributes to maintenance projects often being completed late, over budget or tied up in payment disputes. Traditional manual, paper-based processes for tracking time and payment have failed, leading to errors, disputes and lengthy and costly payment delays. There is better solution, as Bob L. Harrell explains.


Bob L. Harrell, Management Controls, USA

The lack of disciplined contractor cost management costs the typical power plant millions of dollars every year. Accurately tracking contractor hours and contract terms for thousands of contractor craftsmen on-site during an outage or routine maintenance activity is too complex for manual efforts.

Lack of timely cost and progress information is a key reason that important projects are completed late, run millions of dollars over budget and tied up in payment disputes. Traditional manual, paper-based processes for tracking time and payment often fail, leading to errors, and lengthy and costly payment delays. Contractors are not inclined to argue with the owner over timesheets and invoice disputes. They want to deliver safe, valued services and return tomorrow to do it all over again.



The need for contractors continues to grow as owners shrink their own hourly workforces, plant assets age, plants grow through capital additions and new plants are built and service specialization advances. Contractors have been the perfect solution to meet the variable resource needs for many plants, since they provide a fairly highly skilled yet cheap source of labour. Finding ways to effectively manage the owner-contractor relationship, however, has been a challenge and will continue to be a top concern for power generation companies.

When power plants conduct outages and other capital projects to upgrade or maintain equipment, there is great pressure on project teams to get the job done cost-effectively and quickly to ensure uninterrupted service to customers. Unfortunately, the real-world challenges of managing dozens of projects and hundreds of contractors simultaneously make these goals difficult to achieve. The best practices and discipline of world-class power plants demonstrate that effective plant owner-contractor relationships can positively impact the bottom line by ensuring that projects are completed successfully, and within the agreed upon budget and resource parameters.

Real-time project cost transparency and control is a key element to returning plants to full operation as planned and helping them run optimally

Proven contractor cost management systems coupled with disciplined best practices help solve these problems. Real-time project cost transparency and control is a key element to returning plants to full operation as planned and helping them run optimally. Some innovative plants are striving to achieve ‘daily cost transparency’ – real-time, information available at the end of each day and reporting the status of activities performed by contractors and associated project costs. This information enables plant management to make decisions based on the actual project status.

Today’s advanced contractor cost management systems control timesheet and contractor invoicing details, ensure contract compliance, and provide visibility into project cost and completion forecasts. These solutions automate the entire process of contractor engagements from work hour time to invoicing, and help guide the timely return of the plant to operations. On average, contractor cost management systems yield a saving of 5–15 per cent in timesheet and invoice errors. Given the magnitude and scope of power plant outages this can add up to significant sums of money.

However, it is not only the power plant management that benefits from contractor cost management solutions. Some of the United States’ largest contractors are adopting the technology for their own use after they have an opportunity to use it at plant sites. These contractors realize the benefits of increased cash flow, clean invoices that can be generated on a daily or weekly basis, and improved employee accountability.

Furthermore, the automation provided with contractor cost management systems enables supervisors to be in the field working, instead of being bogged down in payment disputes. Technology, combined with best practices, provides an effective approach for companies to achieve world-class status in contractor cost management. Here follows several key industry best practices.


Standardize business processes


Owners need standardized, streamlined business processes, such as time-keeping and invoicing, to effectively manage all aspects of engagements for the many contractors on site – everything from shift scheduling and work hours to contract compliance, invoice calculations and project management. At the same time, contractors also benefit from these standard processes. If contractors can count on identical processes as they move resources from plant to plant, it minimizes the costs of adapting processes and leads to greater efficiency.

Real-time project cost transparency and control is a key element to returning plants to full operation as planned and helping them run optimally

Plants can standardize many different practices in their operations, including: implementing contracts with localized commercial terms and rates; developing standard contract commercial terms and conditions templates; using consistent nomenclatures and definitions for labour skills and qualifications, equipment and materials; and implementing consistent enterprise-standard systems such as computerized maintenance management systems (CMMS) and security/access controls.

Plants should apply the same safety requirements, security and plant access requirements globally and adopt standardized payment cycles, which often can help them take advantage of early payment discounts.


Real-time metrics

World-class companies are using the visibility provided by automation to obtain real-time metrics. For example, daily transparency into cost and project status enables companies to uncover potential issues and take necessary action before they develop into major problems.

Some key metrics that can be measured include: planned headcount by contractor, skill and shift; equipment and materials required for the day’s activities, by contractor and shift; and real-time, all-the-time, headcount by contractor, skill and individual. Plant management will also want real-time information that enables them to immediately see when critical labour and equipment are absent.

Additionally, real-time information enables owners to accurately assess the current status of a project. By reviewing cumulative hours and costs, and other variables at the work order and activity level, owners can see how much money they have spent, how much they have left in their budget, determine the variance between planned versus actual budgets and assess whether the project is still on track to meet cost and schedule projections.

Project Forecasting

World-class companies are not only using the visibility provided by automation to obtain real-time metrics, but they are also using the data to forecast the scope, costs and resources required for future projects based on the history of completed projects. The use of business analytics is rapidly growing in a variety of industries and it will become pervasive in effective plant project maintenance.

For example, Management Controls’ project cost forecasting (PCF) solution contains drill-down dashboards of historical and real-time data, including costs, resources required and contingency plans of previous or ongoing projects, to very closely anticipate the requirements of planned projects and learn from best practices or prior mistakes.

Smart Contracts

Companies typically use different contracts based on work risk. For example, lump sum contracts may be appropriate where there is a tight scope; unit rate contracts improve productivity and control costs; and time and materials contracts are best when the scope is flexible. It is important that companies have the flexibility to engage in the type of contracts that best meet the needs of the project, and use an automated solution that can manage this process regardless of the contract type.

Work Planning and Scheduling

Progress, cost and status measurements are only meaningful in the context of an up-to-date plan. Best-in-class plant managers understand that complex projects contain multiple variables, including requirements, capabilities, continuity, replacements plans, long-lead-time items and indirect activities and costs. Since a change to any of these could affect the project’s outcome, plans and schedules are needed to enable owners and contractors to make the best business decisions.

ERP Integration

By entering data once and sharing it in as many places as possible, best-in-class project teams are able to minimize data entry to streamline processes, reduce errors and cut costs. Through integration with enterprise resource planning (ERP) systems, contractor cost management systems can accomplish this goal and enable plant owners to benefit from productivity gains

Advanced contractor cost management systems control timesheet and contractor invoicing details, ensure contract compliance, and provide visibility into project cost and completion forecasts

For example, a work order can be downloaded from an ERP to a contractor cost management solution, where it can be populated with contractually compliant hours and dollars. This solution automatically updates the ERP with purchase order and work order project progress status and costs throughout the day. Labour, equipment and materials invoices, calculated by the contractor cost management system, are interfaced to the ERP system where they are set up for payment.


A major coal fired power plant in the southwest of the United States provides a great example of a power company that is benefiting from new, disciplined contractor cost management best practices.

The utility was concerned about growing contractor labour costs incurred during outages, and the lack of automation that prevented it from effectively monitoring contractor time and payments. The hours that were billed were not being reconciled to actual on-site billable hours from contractors. Timesheets contained mathematical and data entry errors. Inaccurate contractor invoices delay the payment process and created confusion.

As a first step in addressing the less than satisfactory state of affairs, the company decided to evaluate Track software from Management Controls. To compare it to the current paper-based process and to accurately determine if cost savings could be achieved through automation, the company ran the software while it continued using its standard manual processes.

The company found that significant savings could be achieved using Track. It determined that it could reduce its $80 million-plus annual contractor costs by about 10 per cent, or $8 million per year. In addition to financial benefits, during the testing phase the plant noticed increased contractor shift and schedule compliance, as well as rapid generation of real-time personnel security and safety reports.


This power generator now uses Track on a regular basis. The plant has been able to effectively manage the earned hours for hundreds of contractors on site during outages. Track software now provides the visibility into actual hours worked and alerts project teams to cost overruns before they get out of hand.

The solution eliminates the need for contractors to complete paper-based time-sheets and electronically generates invoices based on accurate hours and contract-specific terms, conditions and rates. Because it accurately calculates contract labour, materials and equipment charges, the software has significantly decreased the number of costly timesheet errors, and stopped inconsistencies between the invoice and the contract. It also has ensured timely, accurate payment to contractors. Additionally, the software fully integrates with the company’s ERP and legacy systems.

Effective outages and other maintenance projects depend on real-time transparency to enable power plants and their contractors to meet project deadlines, and get plants back on-line quickly and efficiently, while ensuring accurate contractor payment. Today’s advanced contractor cost management technology, combined with effective processes and best practices, enable owners and their contractors to accomplish this so their customers can receive reliable service with minimal downtime.

More Power Engineering International Issue Articles
Power Engineering International Archives
View Power Generation Articles on PennEnergy.com

Follow Power Engineering International on Twitter

Editor's Picks

 Schleswig-Holstein Climate Minister Robert Habeck

Federal states applying pressure on Merkel government over subsidies to nuclear

States with green party representation in Germany are calling on the German government to take action against the prospect...
Mike Baston of Euracoal

Future global power generation mix – the coal-fired power perspective

In our inaugural PEi Google Hangout, Mike Bostan, Policy Officer at Euracoal tells Power Engineering International's Diarm...

Austrian PM confirms lawsuit against Hinkley decision ready in weeks

Austrian Chancellor Werner Faymann has confirmed that his country will be registering its lawsuit against the European Com...
Projects of the Year 2015

One week left to enter Pei EMEA Projects of the Year

Power Engineering International has launched the EMEA Projects of the Year, which will seek to highlight the best in power...
Slovak Economy Minister Pavol Pavlis

Enel on collision course with Slovakia

Italian energy giant Enel’s plans to offload its share in Slovak electricity producer Slovenske Elektrarne AS, or SEAS loo...

Latest Wire News

NW Natural Announces Dividend and Schedules Conference Call to Review Results for the Three and Six Months Ended June 30, 2015

NW Natural Announces Dividend and Schedules Conference Call to Review Results for the Three ...

Vantage Drilling Responds to News Reports Regarding Petrobras

Vantage Drilling Responds to News Reports Regarding Petrobras

National Grid Drives Innovation Through REV Demonstration Projects

National Grid Drives Innovation Through REV Demonstration Projects

Cardinal Resources' $28.8 Million Cameroon Red Bird Contract Advances; Company Expects Financing Completed, Implementation, in Q3-15

Cardinal Resources' $28.8 Million Cameroon Red Bird Contract Advances; Company Expects Finan...

Letter From CGE Energy (McKenzie Bay Intl.) President Bryan Zaplitny

Letter From CGE Energy (McKenzie Bay Intl.) President Bryan Zaplitny

Editorial Guides

Lubrication Challenges for the Biogas Industry in 2015

The biogas industry is growing in importance as the world continues to look for alternative, clean energy sources. However...

Maximising Power Plant Efficiency

The need for power plants to operate at maximum efficiency and flexibility while cutting emissions is greater than ever be...

How to cut your OPEX

How to cut your OPEX In a constantly evolving electricity market, factors such as over capacity and low coal costs can pu...

Alstom Editorial Guide: Thailand to showcase latest upgrade of Alstom's GT26 in combined-cycle

Read all about Alstom's new advanced GT26 gas turbine in the North Bangkok CCPP expansion project online with the Power En...

PLEXOS® Integrated Energy Model – Leading the Field in Energy Market Modelling

PLEXOS® Integrated Energy Modelling is an advanced software tool that employs the latest mathematical programming methods ...

Buyers Guide Companies

ComRent International LLC

Offers rentals, sales, and services of load banks for testing generators...

Advanced Energy

Advanced Energy is a global leader in innovative power and control techn...


ACOEM is a supplier of Fixturlaser's innovative and user-friendly equipm...

Fluid Energy Controls Inc

CCI Thermal Technologies Inc

A leader in the development and manufacturing of industrial heating and ...

AKG of America Inc

AKG is a worldwide design leader and manufacturer of high performance co...

Acromag Inc

CU Services LLC

Manufactures plug resistant orifices for steam line drains, recirculatio...

FLSmidth Inc

Designs and supplies pneumatic conveying systems for power, cement, and ...

Frenzelit North America Inc

Frenzelit manufactures fabric, rubber, and metallic expansion joints. F...

Buyers Guide Products

Fixturlaser NXA Pro

This laser alignment system features many ...

Bore Measurement

Typical applications are full bore measure...

Expansion Joints

Braden Exhaust Expansion Joints provide a ...


Braden is uniquely qualified to provide ou...

Exhaust Systems

Leader in Exhaust Bypass, Simple Cycle, Ex...

HydroJet®-Retractable Boiler Cleaning System

A major breakthrough in furnace water clea...

IK-700® - Retractable Sootblower

Designed specifically for low maintenance,...


Braden's retrofit strengths are divided in...

Air Filtration

Braden filtration offers a wide range of f...

Spare parts manufacturing / Re-engineering / CNC / CMM / Machining / workshop service

CMM/laser scanning technology (workshop, r...

Power Engineering International


AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New challenges and opportunities are continually appearing thanks to dramatic developments in technology...

The bottom line: engine oil impact on engine reliability

A reliable and well-maintained gas-powered engine performs consistently and continuously, which can lead to a healthier bottom line for plant operators. There is a raised awareness around the need ...

Understanding Moisture Dynamics in Power Transformers

In this webinar recording "Moisture Dynamics in Power Transformers" (held originally in September 23, 2014) you will have a chance to learn about the phenomena and its importance to your ...

How to lower your total cost of ownership on DC Control Power

In this whitepaper, we look at implementing battery management solutions and how smart battery management effectively lowers the total cost of DC Control power systems and the risk of their failure...

Portfolio Optimization by PLEXOS

To achieve Portfolio Optimization, PLEXOS performs the Security Constrained Unit Commitment and Economic Dispatch using Mixed Integer Programming (MIP) to minimize a cost function subject to all op...

Evaluating cogeneration for your facility: A look at the potential energy-efficiency, economic and environmental benefits

The energy-efficiency, economic and environmental benefits of cogeneration are the subject of this in-depth white paper. The paper argues that producing electricity and heat/cooling from the same f...

The Effect of Moisture on the Breakdown Voltage of Transformer Oil

Power transformers utilize oil as a heat transfer medium and a dielectric material, together with cellulose. Breakdown voltage (dielectric strength) is one of the most important parameters of trans...

Improving Mission Critical Cooling Systems With More Reliable Level Sensing

The choice of coolant level sensor may seem like an insignificant detail when designing complex machinery such as emergency generators and cranes, but if this sensor fails, the operator has no warn...

Steps Towards a Low Carbon Future: Solutions and Technologies That Will Support the Global Revolution Required

A smart grid is becoming more and more essential as clean energy becomes more dominant. In addition, the demand for electricity is expected to treble the ability to supply it over the next decade. ...

Latest Digital Edition

Look Inside >
Current Issue

Article Archives for Power Engineering International Magazine