Navigating the Obstacles of Shutdowns, Turnarounds, and Outages in Manufacturing Operations

BlogContract Compliance AuditRisk
Updated on: April 16, 2024

Many large-scale manufacturing and refining operations deal with shutdowns, turnarounds, and outages. On the one hand, routine maintenance and improvements often require occasional closures of major industrial operations to accommodate upgrades, maintenance, and inspections. However, savvy companies can recognize that these events are opportunities, as well. Short-term closures can provide competitive advantages, especially in high-cost, high-risk industries where stability and dependability are at a premium.

Rather than mere regulatory or maintenance efforts, these stoppages are chances to improve services, reduce waste, and shore up productivity. Since shutdowns, turnarounds, and outages are also tremendously expensive and complex, they might even come to the attention of shareholders and board members. These are all-hands events and therefore require the utmost care, foresight, and thoughtful execution.

Above all, you want your facility back online and operational as quickly as possible. If you’re upgrading a major manufacturing facility and need to close it down to perform the work, every hour represents lost productivity. The contractors engaged to do the work require significant outlays for labor, parts, and equipment. If your facility is undergoing this work at the same time as another company nearby, the labor shortage can drive costs up further. And any mistake or setback during construction or testing compounds the price tag.

It is imperative to craft smart contracts and monitor the contractor’s compliance with the terms and conditions. Generally, contracts for these projects are cost-reimbursable, not lump-sum. The labor wage rate is often a direct pass through with additional actual or fixed build-ups for:

  • Taxes  
  • Benefits 
  • Small tools
  • Overhead
  • Profit

Time is of the essence, so contractor and company personnel must act quickly to adapt to unforeseen obstacles or delays.

It is a struggle to maintain detailed oversight of the contractor’s numerous charges as a massive, expensive, and fast-moving project pushes along. That is why many companies rely on third-party auditors to provide added peace of mind.

Third-party auditors can tailor their work and approach according to a client’s needs and budgets. They can review contracts and give advice prior to signing. They can also audit costs at various times in the life of the contract—as invoices are submitted, at various milestones, after completion, or all of the above.

Engaging a third-party to review the contracts and expenses might seem like an additional, unnecessary outlay. However, consider that most shutdown, turnaround, and outage work is cyclical:

  • All factories need to be continually maintained and upgraded, and regulatory requirements must be met. 
  • Your company can prevent financial leakage and save money in the long run by validating the accuracy of your contractor’s charges through in-depth examinations of their underlying details. 

Third-party auditors, like the contractors engaged to perform the work, are on-demand skilled resources that augment company personnel. Engaging experienced auditors is a cost-effective way to ensure quality, affordability, transparency and compliance while also generating ROI.

To learn more about how to pursue an audit of your contracts during a shutdown, turnaround, or an outage, contact us to speak directly with a team member from SC&H Group’s Contract Compliance Audit Services practice.

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