Contractor Management Systems – Hidden Fees from Unexpected Sources
Hidden Fees are those nasty little charges on our bills that we rarely notice are there. But when we do notice them, we feel taken advantage of, lied to, and cheated.
We have come to expect them from our cell phone service, Internet, and cable providers. Not to mention, out-of-network ATM fees, hotel check-in fees, and even overweight baggage fees. Some of these can be negotiated away, most of them can’t. So, why give up your power to those in the know? Well, now YOU know.
We almost expect that that’s the price of doing business with these companies because if we want those services, we have to pay. Wouldn’t it be nice to see those fees up front? Then we can go into the contract with our eyes wide open.
But when it comes to working with Contractor Management and Prequalification companies, you do not have to accept that.
If the contractor management company you are working with, or considering working with, quotes 29 CFR 1910.119 as the reason for you to endure audits every three years, you may be held to a much higher standard than is necessary. Are they going to tell you this? Unfortunately for you, they will not. They are in business to make money for their stakeholders. The bigger the company, the more likely they will have stakeholders… a lot of them.
A closer look at 29 CFR 1910.119 reveals that it is written for a particular segment, specifically those in the hazardous chemical industry. In fact, the whole name for this regulation is, “Process Safety Management of Highly Hazardous Chemicals — Compliance Guidelines and Enforcement Procedures.”
Our guess is, if you are in this line of work you already know this and are more than likely performing these audits in-house already. Which brings us to the point of our discussion, your company probably has a robust audit schedule because of the industry you are in. Or, you do not need to perform audits by regulation.
Our stance is that even if you are not required by law to regularly audit your operations, it is definitely a good idea to walk your floor or job sites periodically.
3 Big Concerns with Auditing Processes
Here are the three biggest concerns with the auditing process that most contractor management companies do, and what we do differently that builds an environment of trust and respect that will save your bottom line.
Audits drive up cost, both direct and indirect for the clients, contractors, and their subcontractors.
Direct costs of the audit are usually redundant because in most cases, the questions being asked during the audit have already been covered in the pre-qualification phase. Indirect costs appear in the form of staff responding to the audit’s findings and charge backs or rate increases to pay for the additional service. More on this later.
The Subcontractor can hire a third party to develop, write and implement whatever programs the Client wishes. The problem with this however, is they hire specialty companies who have joined the marketplace out of the need that the pre-qualification client companies have created.
In this real-life scenario, the Contractor often becomes disenchanted by the process and adopts a “just pass the audit” mindset. Which leads us to the next concern…
Some Contractors purchase pre-built, pass-the-audit programs just so they can win the contract. They look good on paper, but the Client will never know if they have a bad safety record. If this is the case, it is not a stretch to think the contractor’s safety program has much to be desired. Their safety audits could be nothing more than pencil-whipped, check-the-box exercises. In this case safety becomes an obstacle to negotiate rather than a culture to embrace.
Or worse, the Contractor writes into their own procedures exactly what the audit asks for with no intention of implementing. This could lead to the Contractor creating two safety plans: one for field operations and one to pass the audit, which can be confusing, frustrating, and dangerous for the employees.
The pre-qualification companies already audit the Contractors and Subcontractors. Our third concern is that these companies leverage additional audits as mark-up opportunities.
These additional audit programs have become token reviews by the third-party pre-qualification companies. Additionally, these audits come with a steep price tag and repeat a pattern that allows for more money to be added to the annual subscription rate, with no added value to the Client or the Contractors.
Resentment towards the pre-qualification companies emerges for the additional work and cost this process leads to. Often, resentment towards the Client appears for collaborating with these pre-qualification companies leading to these extra steps of work.
And what’s keeping the Contractor from invoicing the Client for these additional audits as “hidden fees”? Nothing.
A Toxic Environment
Any one of these three concerns can create a toxic environment. All three create an unproductive, untrustworthy alliance between you and the contractors you wish to work with. It may get so difficult to operate this way that you will have to look for out-of-state Contractors to work with. From there, the costs continue to rise.
CanQualify – A Better Way to Qualify and Manage Suppliers
Pre-qualification should be simple enough to establish a baseline for compliance to safety standards and regulatory compliance based on the Client’s needs. Pre-qualification should serve as an acceptance to the standards agreed upon. It is up to the Contractor to ensure those standards are being met. Is an audit once every three years going to prove anything or is it simply and opportunity to raise the fees?
Canqualify’s pre-qualification process connects hiring clients with suppliers that have been pre-qualified based on your specific requirements. Our goal is to help you improve your safety culture, reduce costs, and strengthen your relationship with suppliers… with no hidden fees.
Today we have discussed the three main concerns within our industry and how we improve it. Frustration, complacency, and resentment have been fixtures in our community for far too long. When we work together with our clients to lower their over all costs, we cultivate a work relationship out of respect and honesty, everyone wins!
Let us know how we can help at info@CanQualify.com.