Three Questions You Must Ask When Vetting Contractors

Author: Jared Smith, Co-Founder

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Identifying the right contractor is a serious commitment and it isn’t something to be taken lightly. If you bring the wrong contractor to the job, it can be a huge risk that has the potential to disrupt a smoothly running supply chain.

When a business employs contractors, especially ones that offer high-risk services (tower climbing, for example), it's critical to ensure that the contractors are prequalified. If they are not screened properly against the organization’s safety and risk criteria, the hiring company may quickly be placed in a bad position – it will need to find a new contractor to do a very specific job, and if it can't do so quickly, the company's supply chain risks service disruptions.

So, how can companies vet these potential new contractors to ensure they’re a good fit for their supply chains?

Here are three important elements to consider:

Regulatory Compliance

Do they have written procedures and are they following them? Has the company been investigated or cited by OSHA or other federal agencies?

From health and safety programs to standard operating procedures to even HR policies (drug and alcohol testing), these are leading indicators that auditors must look for when screening potential contractors.

The reality is, some contractors may avoid fulfilling regulatory requirements in order to cut costs. Alternatively, they may not even know about certain regulations or rules. However, it’s important to look at regulations that impact every industry — from safety to training requirements — to ensure contractors are knowledgeable and compliant. If they’re not keeping up with compliance, an audit may provide the contractor the information they need to become compliant and therefore not miss out on a lucrative contract.

Safety Performance

How have they performed in the past? What can they show to indicate how they’ll perform in the future? Do they have accident records and what is their TRIR (total recordable injury rate)?

By looking at the number of accidents the contractor has reported and the degree and nature of those accidents, companies can investigate the root cause. Certainly there are accidents that are true accidents; however, far too often there are some that have a root cause that could have been prevented, whether it’s not following rules and procedures or not updating equipment on a regular basis.

These indicators, along with regulatory compliance, help paint a picture of how well the company performs.

Management Engagement

Does their management have a commitment statement? Are they committed to reducing/mitigating workplace accidents?

This indicator can be difficult to measure, but can be done by openly conversing with employees and holding frontline interviews with HR. By conducting a company “questionnaire” with questions such as: “do you feel empowered to stop work and identify a hazard if it doesn’t feel safe?” and “what types of staff meetings are there and who attends?” auditors can get a good idea of how engaged management is with their employees and business. Hearing from management and employees themselves can provide the hiring company a more accurate pulse on the contractor they’re looking to work with.  The gold standard is the example of Alcoa’s new CEO in 1987, Paul O’Neill, who transformed Alcoa’s business in 10 years by focusing on safety culture first.

While supply chain risks can't be eliminated entirely, there are ways an organization can lessen them – Investigating its contractors beforehand is one small step that can hugely reduce business risk and prevent unexpected supply chain disruptions.

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