Using Contractor Scorecards: What you need to know

Why data-driven scorecarding matters

Businesses like yours face increasingly tight margins these days, which means there’s no room in decision making for hunches or gut feelings. Data is the name of the game, and you need to be able to back up your recommendations and decisions with reliable numbers.

That can be tricky in the heavy industry, construction, mining, manufacturing, and oil & gas sectors for one simple reason: you rely heavily on contractors and vendors to ensure your projects are successful. 

Contractor performance is the cornerstone of successful projects. However, since contractor relationships often rely on intangible and hard-to-measure factors, tracking performance can be a challenge.

That’s where contractor scorecards come in. These handy tools give businesses like yours a means of measuring contractor performance based on real-world, real-time data, in turn ensuring you can make strategic decisions and maintain smooth operations. 

In this blog, we’ll explore:

• Why you should use contractor scorecards
• The importance of taking a data-driven approach and its benefits
• Examples of metrics you can track
• Getting started with contractor scorecards

‍Before we dig in, if you are ready to get started you can access our FREE Contractor Scorecard Template here.

Why should you implement contractor scorecards?

When you choose what contractors you work with, what criteria do you take into consideration? 

Chances are it’s a pretty broad mix of variables; after all, contractor management intersects with compliance data, safety reporting, and budget considerations, to name a few. There are things you can easily measure sorted in with a range of hard-to-quantify details—but you get a feel for those elements with time and experience. 

Yet that’s not to imply you’re winging it with any of your business decisions. Far from it; you’ve got access to a wealth of information about your job sites and the contractors working on them. 

Contractor scorecards are a way to put all this information to work so you can make better business decisions and ensure smooth operations on all your projects. They let you evaluate and assess contractors to guarantee you’ve got the right people working on the right jobs. 

That’s not all. Scorecarding can also help you: 

• Drive better supplier performance by setting clear expectations and monitoring performance.
• Increase profitability by identifying areas of improvement. 
• Spot and act on trends early, giving you a strategic advantage.

Of course, this depends on using accurate, relevant data and metrics. 

Why you should take a data-driven approach to contractor scorecards

Consider all the information that flows through your operations and job sites at any given moment. Gate entry and exit data, safety reports, labor rate data, invoices, schedules, worker classifications, change orders, shipments…

…it’s a big list. 

Even with the growing adoption of digital tools, businesses in the oil & gas, construction, mining, and manufacturing industries are still remarkably tied to traditional, manual processes. Evaluating contractor performance is no different—hence the trend towards scorecarding. 

Taking a data-driven approach to contractor scorecards means removing manual processes and guesswork from what has traditionally been a heavily involved set of tasks—not to mention letting the data speak for itself. 

Let’s look at some of the benefits of this approach.

You eliminate subjectivity

This approach means your focus shifts towards collecting, analyzing, and leveraging the contractor data at your disposal to make decisions based on what’s actually occurring versus any existing perceptions. This approach removes bias and anecdotal experience from the equation. 

Say you’ve got a high-performance contractor that consistently delivers work on time and well within your budget, but they have a reputation for being difficult. Taking a data-driven approach to evaluating this contractor could reveal their reputation is based on an invoicing hiccup from early in their tenure with your business. 

Without looking at the data, you could have been sacrificing an exceptional partnership based on a misunderstanding that was already sorted out ages ago. 

Put simply, data-driven scorecarding relies on measurable, objective criteria, ensuring fair and consistent evaluations that guarantee you get the best work possible.

Enhanced decision making

Once you’ve removed any subjectivity from your evaluations, you’re in a much better position to make informed decisions.

The insights you’re able to glean from contractor scorecards make it much easier to make decisions about your business. Whether you’re looking to invest in training, renew contracts, or terminate partnerships that have run their course, being able to look at a record of reliable data dramatically streamlines the decision-making process. 

Greater accountability and transparency

Accountability and transparency go hand-in-hand with each other. These topics are a big deal on both sides of the contractor agreement. As much as you want to ensure your contractors are delivering on the services they’ve promised on time and within budget, they also want some assurances you’re able to pay them on time. 

Research shows that a large number of capital projects go over budget—highlighting the importance of tools like scorecarding. Scorecards benefit both parties by setting clear expectations and fostering mutual trust. By outlining the criteria you use to evaluate your partnerships and sharing it with your contractors, you’re setting clear expectations around what matters to your organization. 

On their end of the bargain, your contractors can rest easy knowing what to expect on your end—a huge relief for businesses so reliant on relationships. In fact, scorecarding can help you identify star players that’ll let you tackle more strategic projects with confidence. 

Benchmarking performance

Tracking and documenting contractor performance data creates a record you can use to establish benchmarks for greater insight into performance over time. 

For example, looking at past data will typically show that contractor performance improves over time, thanks to focused interventions. This perspective isn’t just useful for assessing current performance but in determining potential for future projects. 

What’s more, that benchmark data can help you create useful training or onboarding documentation to get contractors up to speed that much faster, in turn enhancing performance across the board. 

Finally, these benchmarks give you a means of comparing performance from contractor to contractor. If you’ve got multiple crews working on the same project, this data lets you quickly evaluate performance side-by-side, letting you spot trends that could indicate problems and take appropriate action. 

Drive continuous improvement

With all this in mind, it should come as no surprise that the chief benefit of a data-driven approach to scorecarding is how it helps you continuously improve your operations and meet your project goals. 

The sheer fact that you’re gathering a host of data on your contractors and applying analytics means you’re in a prime position to identify trends early. These insights are critical for continuous business growth and improvement, whether through initiatives with your contractors or in leveraging their capabilities to help you achieve your strategic goals. 

Examples of metrics for contractor scorecarding

So now that you have a better understanding of just how important scorecarding is, let’s dig into some sample metrics you can use in scorecards of your own.

Remember, there is no one-size-fits-all method to generate contractor scorecards. At the end of the day, these are suggestions to help guide you as you develop your own metrics—you know your business best, after all!

Generally, there are five major categories for most of these metrics: 

• Health and Safety
• Finance
• Scheduling and Deliverables
• Quality and Efficiency
• HR and Social Governance

We could write whole chapters on each of these topics (and we have), but we’ll keep it brief here to give you a sense of what data points you might want to consider. 

Health and Safety metrics

These metrics measure contractor adherence to safety policies and procedures. This means tracking everything from training through to injury rates and even gate data. Everyone wants to make it home safe at the end of the day, and tracking this information can help you spot indicators of future incidents. 

Common health and safety metrics include:

• Total recordable incident rate (TRIR)
• Days away, restricted, or transferred (DART) rate
• Total injury frequency (TIF)
• Excessive daily/weekly hours
• Gate data
• Worker classifications

These metrics are the most critical as promoting a safe and secure environment should be everyone's top priority.

‍Financial metrics

Financial metrics boil down to how you measure the cost of working with your contractors. In theory, this is straightforward: you want the lowest prices possible. In practice, this is a much bigger topic than keeping the price low. You’ll want to measure potential cost avoidances as much as any cost reductions you encounter.

Common finance metrics include:

• Standard labor rates
• Equipment rates
• Markup/third-party expenses
• Credit score
• Claims

Gathering insights from this data is the first step in understanding the true costs of your contractors.

‍Scheduling and Deliverables metrics

These metrics focus on the expectations around (you guessed it) schedules and deliverables—as such, they’re a crucial component of measuring contractor performance. The things you track should help you ensure alignment on your timelines and project milestones just as much as the deliverables your contractors provide. 

Being able to track this data is a huge help when it comes to keeping your projects on track and avoiding delays. 

Common scheduling and deliverable metrics include: 

• Timeliness of LEM submissions
• LEMs past due
• Timeliness of invoice submissions
• Response time
• Contract compliance

By properly aligning expectations you can reduce risks and improve your project outcomes.

‍Quality and Efficiency metrics

Quality and efficiency metrics focus on determining whether the work was done correctly and on time. These data points can become quite detailed as you assess timesheets, documentation, and rework. If any work needs to be redone, it’s important to track this as well, as it directly impacts both quality and overall project efficiency.

Quality and efficiency metrics commonly include: 

• Schedule adherence
• Rework trends
• Documentation standards

Finding the proper balance between quality, speed, and efficiency is always going to be a challenge. However, incorporating real-world data into your evaluations will help make it easier.

‍HR and Social Governance metrics

HR and social governance metrics focus on aspects like Environmental, Social, and Governance (ESG) initiatives, as well as other efforts that help foster a workforce that aligns with your organization's values.

HR and social governance metrics may include: 

• Total local spend
• Locally employed workforce
• Indigenous representation

If your business has corporate social responsibility initiatives, it's important to measure how these translate to the contractors you work with.

Getting started with contractor scorecards

If you’re ready to take the plunge and create contractor scorecards of your own, then you’re going to need data. Chances are you already have some of this information, but getting it into a centralized spot for easy analysis and action can be a sticking point for some businesses. 

New tools and technology can help you accomplish this, letting you gather necessary information from your projects and contractors via automation. The PayShepherd platform is designed to help businesses like yours gather this important data, generating data-driven reports to give you up-to-date insights on your projects. 

From there, you can start developing your own contractor scorecards based on the metrics that matter to you. 

If you’re still not sure where to begin, though, don’t worry—we’ve got you covered.

Our latest ebook, The Ultimate Contractor Scorecarding Guide, covers everything you need to know about contractor evaluations. Get your copy here.