In an article published on Friday November 18, 2016, Morning Star reports Blacklisting Firms Still Given Public-Sector Contracts.
This is a story that goes back to 2009 when the now defunct “Consulting Association” (a trade organization operating in the UK) was raided by the British government uncovering a list of 3000 blacklisted construction workers. Workers were blacklisted for being active in trade unions and for promoting and reporting health and safety violations on construction sites.
The Morning Star reports that Laing O’Rourke (a major construction firm at the heart of the scandal) was recently awarded a £212 million contract to build a new Royal Infirmary in Scotland.
This is an egregious story showcasing the ugliest side of the construction industry.
Blacklisting in construction is still a common practice and while this story is about blacklisting individuals, a more common practice is blacklisting of entire companies.
It happens more often than you might think. It’s typically subtle, not overt and certainly never sanctioned by anyone with high authority, but it does happen.
As a procurement professional, I have to maintain a neutral position on all vendors. Vendors can never be disqualified on the basis of a personal experience or a “gut” feel.
Now, let me be clear! Owner’s of private Companies have the right to exclude anyone for any reason. They also have the right to award work to anyone for any reason. There are some exceptions.
The number one exception is anytime a Company performs work for the government. Under those circumstances, procurement regulations are very strict and exclusions must be based on objective criteria.
Another common condition affecting the way private businesses award work is when the Company is subject to SOX compliance. These are typically publicly traded Companies with stockholders to answer to.
I certainly don’t fault Owner’s from choosing not to work with a firm again if they have previously had bad experiences, but the circumstances that cause bad experiences aren’t always one sided. Some Owners create situations that contribute to their own bad experiences and never recognize their contributions.
If you are building a home or have the occasional odd job done on your home, there’s no reason why you need to work with home improvement contractors you’ve had bad experiences with. There are hundreds of home improvement contractors to choose from, but if you work for a large Company or you are a consultant that routinely contracts larger firms, blacklisting may be the wrong approach.
There are a number of alternative approaches for addressing bad experiences. Many of these alternatives actually have the net effect of enhancing future performance. Instead of blacklisting firms for bad performance, I recommend the following:
1. Evaluate what went wrong.
Taking the time to meet with the contractor to discuss how the work went is a great way to clear the air and evaluate how to improve. Top tier contractors are always willing to meet to review past performance. Some even have their own tried and tested ways of recapping projects and measuring how they did. Keep an open mind and be ready for the possibility that there were things you could have done differently.
2. Establish Service Level Agreements
Service Level Agreements (SLA’s) are metrics for evaluating performance. It’s a good practice to set SLA’s and communicate the SLA’s to the contractor ahead of the start of the work. SLA’s can be basic performance metrics like schedule and budget, or more specific goals like Disadvantaged Business Enterprise participation. Set these standards up front and then track them through the project. Document performance with your close-out documents and keep track of performance over time.
3. Evaluate individual performance
Ultimately, construction services are only as good as the team you have. Be open and honest about the performance of each individual. If there was an obvious poor performer, speak with an executive about making a change. While this kind of honesty can be difficult because no one relishes singling anyone out, this is preferable over disqualifying a firm completely.
4. Nurture Executive Level relationships
Make sure that you have an executive relationship you can call on when things go bad. It’s a good practice for both parties to have executive level relationships that are far from the day to day management of the work to help sort out performance issues. This can be a great first line of defense for addressing issues unemotionally.
These are just a few of the strategies I have used to prevent and address performance issues. In the end, if you work for a private company, you have the right to award work to anyone you like.
There are circumstances where blacklisting a firm may be the right choice. Firms implicated in corruption schemes should never be considered for award. Insolvent or high risk firms with poor financial ratings also raise major concerns. Do your homework. Research firms carefully before you award but if you do decide to exclude someone, make sure you do so for the right reasons.