Generating High-Quality Contracts At Reduced Costs
Authors: McEachern D.O. , Clarke M.J. 
Published: March 2010

This paper gives a brief overview of how Esso utilizes computer systems to generate contracts in Drilling Services. The benefits of the system include an immediate reduction in support staff, job enhancement, reduced process time, the ability to share contract information among users, an increased ability to respond to peak loads and an effective promotion of contract standardization and procedural consistency. These benefits make it possible to produce high-quality contracts while reducing costs.

Introduction

Companies today are facing demands for improved performance from their limited resources. Esso Resources Canada Limited is constantly searching for methods to increase productivity. One way is to attain the best value for the services required to execute development programs. In contracting, the guiding principle for getting the lowest over-all cost (considering quality, safety, service and reliability) is competitive bidding. The full benefits of competitive bidding can only be realized if there is an efficient contracting process to support it. This paper gives a brief overview of how one organizational unit, Drilling Services, has utilized computer systems to expedite the execution of its contracts 20% faster with one-half of the staff.

The Environment in which we Operate

In a two-year period beginning January 1986, Drilling Services issued more than 500 contracts for services, representing a value of more than $140 million. These totals include contracts for drilling rigs and sundry services such as logging, cementing, coring. drilling fluids, transportation, and lease construction. To take advantage of land sales, government incentives, associate relationships and marketing opportunities, contracts must be executed promptly. The volume and complexity of this business require Esso to have a drilling contracts group dedicated to the timely execution of contracts while adhering to the company's standard of ethics in dealing with outside parties (Fig. 1).

Requirements

For the competitive bidding process to be effective, it is imperative that the savings generated are not consumed in the administration of the process. At the same time, contract quality, which lies in the clear definition of responsibilities of the owner and contractor, must not be compromised whilepursuing reductions in the costs of administration.

Costs. Cost effectiveness is the most important requirement of the contracting process. Maximum benefits are received if:contract documents are consistent and easy to understand. This limits the overhead the contractor must incur to bid on contracts. (Both the owner and contractor share in thesebenefits);cost of contract generation is minimized;fixed costs for work force, equipment and office space are Minimized.Timeliness. The contracting process must be streamlined to be responsive to project schedules. The primary time consumers that inhibit responsiveness are:multiple levels for document approval (e.g. management, legal and audit);administrative tasks such as word processing and photocopying.The least time is spent if:customization of the documents is limited to the financial section and the technical job specification;pre-approved standard document formats are utilized to limit the number of approvals to generate a contract;