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Evaluate Contractors’ Unit Rates

A cynic is a man who knows the price of everything and the value of nothing.

Oscar Wilde

Author: Mahen Das

Location:2.2.1 Liquified Natural Gas Plant

Background

In my capacity as an internal maintenance and reliability consultant, I visited this LNG plant to review their performance. Contracting efficiency and value for money obtained was one of the items reviewed. The company was a fairly mature operation and had a number of contract companies for maintenance work. These contractors had been established during the construction of the facility and had grown with it.

The company had set up norms for the effort required to carry out various types of maintenance work. These included man-hours required for or cost of:

  • • Manual excavation of 1 m3 of earth
  • • Thermal insulation of 1 m of 4" pipe at ground level
  • • Building tubular scaffolding from ground level, per m3
  • • Inserting a 4" 150# spade
  • • Grit blasting per m2 of steel surface at ground level
  • • Painting per m2 of steel surface at ground level

There was a tiered quantity-discount scheme in place for all types of work. They also had agreed rates per man-hour for different trades, including

  • • Pipe-fitters
  • • Welders
  • • Scaffolders
  • • Grit-blasters/Painters/Insulators

The unit-work rates had been established some years earlier. These had never been reviewed. The man-hour rates had also been established some years ago and regularly increased, based on inflation. For the past two years, however, the contractors had voluntarily foregone inflation correction, claiming that inflation would be neutralized by improved productivity of their workers. The management was pleased with this position.

 
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