Balancing in-house and outsourced overhead powerline technical expertise

May 31st, 2019, Published in Articles: Energize

Most overhead transmission line (OHTL) asset owners employ a mix of in-house and outsourced expertise for the project management, engineering (system analysis and facility design), construction and maintenance of their OHTL facilities. The use of solely one of or a mix of in-house and outsourced expertise is done in a myriad of ways and for many reasons. How this mix is managed has a direct impact on the success of the work performed by the mix of in-house staff and service providers.

This article presents the results of a survey of asset owners (AO) and service providers (SP) to assess the present conditions and trends in the overhead transmission line (OHTL) industry and discusses factors that affect the successes and pitfalls that are possible with outsourcing technical expertise in the design, construction and maintenance field of overhead power lines.

By the 1980s, the industrial countries of the world began the process of migrating the full service, vertically integrated utilities into investor-owned utility companies with more focused services and profit-minded management. AOs are becoming large, profit-based, multi-national organisations in many parts of the world. The system operator determines the need for a facility’s creation and the AOs may have all or no technical capability to provide the design, construction or maintenance obligation with its own in-house staff. Fig. 1 shows a typical project organisation structure.

Fig. 1: Typical project organisation.

Surveys undertaken

Two surveys were issued to support the subject matter at hand: one to OHTL AOs and a companion questionnaire to OHTL SPs. The surveys’ response populations were relatively small. From AOs, there were 20 responses from twelve countries. The organisations operate 600 km to 67 000 km of OHTL. From SPs, there were 19 responses from six countries. The organisations ranged in size from 20 to 13 000 staff.

Some interesting trends and differences between the two groups are apparent but quantifying these trends and differences is risky. Construction and maintenance personnel are contracted primarily for large projects and sometimes for routine work. It is less expensive and more important to keep the internal expertise of project management and engineering available from internal staff. Outsourcing project management and engineering activities is primarily to provide specific disciplines or tasks.  Almost all AO organisations plan on outsourcing at least some activities.

Outsourcing benefits and risks

The outsourcing of technical expertise is done to reap certain benefits, but it comes with certain risks from the point of view of both contracted parties: SP and AO. The benefits and risks of engaging outsourced expertise depend on the business or economic decision, appropriate knowledge of the work at hand on the part of both parties, knowledge of each party’s roles and the ability of each to quantify and communicate the nature of the services required. Risk is managed by means of a contract. Additionally, the benefits and risks are affected by the procurement process. A primary mechanism for achieving a profitability goal is constant pressure to reduce expenses. The cost of outsourcing may be higher technically but by the accounting process, it can be rendered less expensive to the company and therefore, be the preferred arrangement.

It is easy to recognise and measure when any SP fails to deliver on price, schedule or quality. Such failures can damage the financial or operational viability of the facility in question. However, it is often overlooked that this risk is not unique to outsourced SPs. When the workload in a certain field is uneven, it is often considered cost-effective to maintain only a base-line internal staff capability and cover the periodic boom with supplementing contracted personnel from SPs. The need for AOs to execute very large or very unusual projects occurs only occasionally. It therefore makes sense to seek SPs which successfully offer these services on a regular basis. When outside expertise is engaged to perform tasks that in-house staff does not understand, there is an opportunity to educate the in-house AO’s staff.

A major business challenge is to reduce staff levels without harming the minimum need to support recovery from unexpected, harmful events and to retain institutional knowledge essential to the business’ viability should a destructive event beset it. All AOs have standards and policies to guide their functions. Most SPs have standards and policies as well. Misapplication or not updating of standards and polices can result in problems ranging from inefficiencies to gross errors. In the framework of globalisation, the depth and breadth of communication skills, project management tools and skills, technical specifications and standards, procedural expectations and contract language on the part of the AO’s in-house technical staff needs to be greatly increased.

Fig. 2: Causes of professional liability claims.

It can be the case that these increased needs may themselves be provided by a SP. Communication is particularly important and challenging when the AO and SP have different cultural backgrounds and perhaps different native languages. Risk of failure will be increased by the AO’s staff not realising what the SP’s staff must be told about the particulars of the AO’s work environment, practices, preferences and facilities. It is important to bring the right people to the work from both the AO’s and SP’s organisations and it is important that they communicate. But you can have a very high risk of failure on your hands if the contract is not of a type suited to the work and is not well written.

Guide to successful outsourcing

Every stakeholder may have a unique definition of success. Success to the AO will be low cost, schedule compliance and proper facility operation. This can be represented by the word “value”. To the SP, success is better defined by profit and enhanced reputation. The AO’s business model must accommodate the presence of a SP for the planned work.

However, the AO must ask:

  • Will our in-house staff embrace their presence?
  • Do we have the processes and knowledge to perform our responsibilities associated with the engagement?
  • Can our business contract a suitable SP?

When considering the outsourcing of technical expertise, costs and benefits should be measured. When the services required are easily described as a definable commodity, the contracting format could be fixed price and the selection could be based on the lowest bid. As the complexity of the service increases or the ability to define its scope decreases, the format of bids must move away from low price and trend towards a way of seeking the expertise based on other factors than price.

  • Quantifiable management tools are budget, schedule, scope of work and quality.
  • Qualitative measures of the work can be information/data, roles and responsibilities, communications, staff interactions and knowledge sharing.

Figs. 2 and 3 are from a major US insurer of large projects and note the leading causes of professional liability claims and contract negotiations. Data affirms the importance of communications, defined scopes of work, appropriate experience and documentation. The absence of a well written scope of work for a project could be described as the biggest risk taken on the project.

The first step to take to ensure quality is engaging the right service provider. A high quality and functional information and data control system is increasingly essential as project complexity increases. The AO and engaged SP must define roles and responsibilities early in the process and must make every effort to adhere to them. High quality communication skills are essential. Aside from possible language and cultural differences that can be very severe challenges to being understood, some individuals are simply poor communicators.

Fig. 3: Causes of contract negotiations.

Establish regularly scheduled meetings between key people to provide better service to the benefit of the project. Work is well done if executed by people who know what is needed and who know how to deliver it. On large or complex projects, that knowledge is not inherently with all of the people involved at the beginning or as the work progresses. It must be shared to benefit the work. After a significant outsourcing experience, both parties should attempt a measurement of the engagement’s successes and failures. This will identify the strengths and weaknesses exhibited during the engagement and identify areas of improvement for subsequent engagements and to support a valued Continuous Improvement Programme that every organisation should have.

Quantifiable measures

  • Budget
  • Schedule
  • Scope of work
  • Quality
  • Information/data

Qualitative measures

  • Roles and responsibilities
  • Communications
  • Staff interactions
  • Knowledge sharing
  • Satisfaction (yours and theirs)

Scoring requires the assessment of the SP’s performance by the AO and vice versa. In doing the scoring, each party must remain aware that the interactions between the AO and the SP undoubtedly make one party somewhat responsible for performance of the other. The goal of measuring the success of the engagement between the AO and the SP by a scoring system is to learn what should be done differently to achieve a better success next time an AO and a SP engage in service to a project.

Conclusion

The discussions above point to two reasons why an AO should retain some amount and type of in-house technical expertise. In-house expertise is considered essential to provide an adequate response to unplanned outage events on the system such as triggered by storms. Secondly, considerably enhanced in-house expertise is required to properly define the scope and quality of work, direct and manage the increasingly distant and potentially inexperienced SP resources that are available given the globalisation of the electricity delivery sector. The significant use of SPs is a fact and perhaps on the increase. The use of SPs with decreasing knowledge of, or a vested interest in, a particular AO’s needs and interests is on the rise. These are changes that have been going on for more than a decade and it should not be expected that the industry is heading for a stable condition but rather, change will continue. The work that the AO must do to maintain the system quality as the SP/AO relationship changes, requires a greater and more complex effort than required a decade or two ago. That increased effort is required in the fields of communication, project management, technical guidance, procedures, contract language and institutional knowledge.

Acknowledgement 

This article was published in Electra, December 2018 as is republished here with permission.

Contact Prince Moyo, Cigrè, Tel 011 800-5546, moyop@eskom.co.za

 

 

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