Managing engineering contractors in the UK petrochemicals industry

The purpose of this paper is to investigate, at the industry level, the modes of governance used by multinational companies in the UK petrochemical industry to outsource maintenance activities to engineering contractors. The study focusses on a form of novel governance structure called an Employer Panel (EP).

The study applies an inductive case study method to investigate the contractor governance mechanisms in 19 out of the 20 major petrochemical instillations located in the UK. Data included interviews, documentary and secondary evidence gathered from the cases and also industry bodies.

The study uncovered three distinct types of governance mode: market, managing contractor, and EP of contractors. The latter relies on the governance process of “mandated collaboration” to coordinate.

The main limitation is the focus on a particular industry, albeit an important one. The research implications include extending the empirical research into other sectors which use on-site contracted maintenance such as ship and aircraft manufacturing.

The EP structure with its mandated collaboration process is of value to managers of contractual relationships as it gives insights into coordinative process and it may provide an alternative model for managing outsourcing relationships.

The mandated collaborative process requires clients to engage its contractors in longer term relationships, thus increasing corporate social responsibility and providing wider job security for contractor employees.

The EP mode, as far as can be ascertained, has not been addressed in the literature before.