I’m Jason Firth.
So, now that oil has dropped dramatically, oil companies are discovering something I’ve always said: You need your own competent people.
The oil and gas industry has found out in a very abstract way: They’ve realized huge cost overruns on projects since they decided to let other companies monopolize engineering competence. When they had their own people working on the projects, they didn’t have the same cost overruns.
There’s a number of reasons why this is the case.
Let’s start off with what I like to call institutional memory. This is the effect of having people who have worked in your facilities for years making decisions about those same facilities. You can’t outsource institutional memory. It’s something that either belongs to you, or is lost. When you’re making decisions that affect the short-term viability of a project or the long-term viability of a facility, there’s a million tiny facts which you need to know, and you won’t learn in a 2-day site visit. Those folks don’t know about the fifteen other solutions that were tried on a problem until the sixteenth worked. They’re stuck asking why something is done a certain way. Sometimes this means they’ll be going back to the failed solution 1.
Then, there’s the pure question of “Who do you work for?” — An outside company will always be looking out for their own bottom line. If a conflict arises between the interests of your company and theirs, they are going to be more likely to act in their best interests.
Along those same lines, if you’re dealing with your own talent, then you can make sure you’ve got the best talent on the most important jobs. I’ve seen it in the past where an outside firm will wow a client with the A-team, then once the contract is signed, send in the Z-team.
Speaking of contracts: Of course everyone agrees that scope creep is dangerous. However; there’s a certain flexibility that comes with dealing with your own people that allows economies. For example, I was working on one big project with an engineering firm, and another different project was going on at the same time. The engineering firm refused to do anything that wasn’t part of the plan without negotiating a scope change and fee increase. Meanwhile, I plugged two cables in, successfully connecting the projects together, and changed a couple lines on a CAD drawing.
The formality of dealing with another company can also be a danger when you rely on other firms to have your competence. While working for a company, there’s been a number of times when I’ve been working on some skunkworks for a company alongside the main, official jobs. Skunkworks is a term that comes from Lockheed Martin’s Skunk Works development group, which developed the U-2, the SR-71 Blackbird, the F-117 Nighthawk, and the F-22 Raptor. The designation is widely used in business, engineering, and technical fields to describe a group within an organization given a high degree of autonomy and unhampered by bureaucracy, tasked with working on advanced or secret projects. The concept of that autonomy and relaxation of bureaucracy is incompatible with the formality of a business to business arrangement.
All of these problems reduce economies and prevent innovation within companies, and facilities. You can’t outsource your institutional memory to another company. Your employees will always be the most aligned to your interests. You are only in full control of your own employees. Contract work can be inflexible and cause large cost increases. You can’t give other companies autonomy the way you can give your employees autonomy.
Thanks for reading!