With the current down market, operators are looking for ways to maintain their competitive edge. Operators may be wary of sustaining costs of new personnel. However, the current environment is tailor-made for using consultants on a short-term, worry free basis. By following an established set of consultant management principles, operators can optimize the experience and add value to their company.

Desirable consultant qualities

The two most important skill sets — expertise and experience — are interrelated but are exclusive qualities that must be addressed separately.

Operators must first ensure the consultant has the necessary technical skills to execute the specific project. Educational background and certification should be considered, such as education from a top engineering school and a professional engineering license.

Operators should also ask consultants to provide experience data that is specific to the job for which they are contracted. Qualified consultants should have proof of similar projects completed with a high degree of success.

Deliverability is also imperative. Consultants should illustrate the ability to execute in accordance with the client’s schedule and cost expectations, along with any other mandates.

Lastly, the consultant must provide added value to the operator. They should be able to add a tangible knowledge component that remains at the company after they are gone. To ensure this, operators must choose a consultant that possesses a degree of knowledge that is not present within their staff. The consultant’s responsibilities should include initiating knowledge transfer into the client’s organization.

Understanding consultant cost

Expert consultants demand higher hourly rates than staff engineers, but a thorough understanding of the true cost of employees versus consultants can ease operator concerns.

The annual US wage for a drilling engineer with 21-25 years of experience, including benefits, was US $260,000 in 2008, according to the Society of Petroleum Engineers. Add in sustained costs of sick time, training and learning curve, office expenses, severance packages, etc., and the cost reaches much higher.

Expert consulting fees are usually market driven, so operators should expect to pay adequate consulting fees to ensure high quality services. Although the consultant’s higher hourly rate may appear more expensive, consultants actually help operators manage the impact of sustained fixed costs by:

• Controlling overhead: Hiring a staff employee means fixed overhead costs in regard to expenses, payroll, benefits, and other overhead. Using a consultant allows the operator to convert these costs to short-term variable costs.

• Eliminating health benefits: The fluctuating cost of staff health benefits can pose a large burden on operators.

• Facilitating ‘work on demand’: Hiring consultants offers flexibility in the operator’s evolving work demands. The operator has the ability to take advantage of added opportunities as they arise and have greater cost control during down markets.

Consultant management

When hiring consultants, most operators expect to pay higher rates, but even when the rate is known, projects often run over budget by closure. One of the most common culprits of this phenomenon is scope creep. No matter how experienced a consultant, no matter how low the hourly rate, their project runs the risk of failure or cost overrun if a clear scope of work is not defined and included in a project management plan (PMP).

When using a consultant — as with any project — operators should create and adhere to a PMP. The PMP is a formal approved document (or collection of documents) used for project planning, execution, monitoring and controlling, and closure. The PMP should be kept in a central location for all concerned personnel to review throughout the project. It may be used in a detailed or summarized capacity, but some components, such as project scope, must be included for the PMP to work properly.

Project scope of work defines the project and sets the goals, requirements, and processes necessary to complete the project. It also explains what is not included in a project. It should include project drivers, stakeholders, and major milestones. The scope should be agreed upon by all stakeholders and strictly adhered to. It should be clearly recorded in a universal format (MS Word, etc.) and communicated to all pertinent parties. Changes to the final scope should be avoided if possible.

The scope should include a description of the goal for consultant knowledge transfer. This allows the consultant to understand the transfer of intellectual components that must be provided to the operator. It also mandates operator staff to assist in that knowledge transfer.

The operator should prepare a work breakdown structure (WBS) for inclusion in the PMP. The WBS is a strict set of guidelines that breaks down the large goals of the project into manageable tasks. This helps consultants stay on task and keeps them from fixing other “problems” they might find while consulting.

By adding together the work packages, the operator can determine a schedule for project completion and determine the time necessary to use a consultant. Major milestones identified in the project scope can be placed on this timeline.

To properly monitor consultant progress, time and daily activities must be recorded and communicated to all stakeholders. Schedule, percentage of budget spent, and percent physically complete should be reported on a regular basis set by the operator. Any changes in the deliverables or deviations from the scope of work should be clearly communicated and approved by operator management. All this data should be included in the PMP.

Lastly, the PMP should contain a checklist of tasks or milestones that signal project closure. The project is not completed until these items have been accomplished, including release of resources, collection of all associated project records and documenting “lessons learned.” This allows operators to avoid mistakes (or exploit positive scenarios) on future consulting projects.