Contracting Company vs. Asset Owner: Juxtaposition of Project Management Principles and Processes
In the realm of project management, the objectives and approaches of contracting companies and asset owners are distinct yet interconnected. Both entities are integral to successful project delivery, but their roles, priorities, and processes often differ significantly. This article explores the juxtaposition of project management principles and processes for contracting companies and asset owners, shedding light on their unique perspectives and approaches.
This article explores the juxtaposition of project management principles and processes for contracting companies and asset owners, shedding light on their unique perspectives and approaches.
Primary Objectives
The primary objective of a contracting company is to execute and deliver a project in alignment with the agreed contractual terms while ensuring profitability. This focus often entails meeting strict deadlines, adhering to budgets, and satisfying the client’s quality and performance specifications. Conversely, an asset owner’s goal is to develop an asset that meets long-term strategic objectives, operational needs, and lifecycle performance requirements. This includes ensuring the asset delivers value over its entire lifespan while aligning with organizational goals.
Scope Management
For contracting companies, scope management revolves around adhering to the defined deliverables as specified in the contract. Changes to the scope are typically minimized to avoid delays, cost overruns, and disputes. Asset owners, on the other hand, view scope management as a more dynamic process. They aim to ensure the project’s scope aligns with evolving business goals, operational requirements, and regulatory standards. This often requires a degree of flexibility and adaptability that contracting companies may not prioritize.
Schedule and Cost Management
Contracting companies place a strong emphasis on adhering to project schedules and budgets as these are directly tied to profitability and contractual obligations. They employ meticulous resource planning and cost-tracking mechanisms to ensure the project remains within the bid price while meeting deadlines. Asset owners, however, prioritize balancing timely delivery with long-term operational readiness and cost-effectiveness. Their approach to cost management considers the Total Cost of Ownership (TCO), which includes both CAPEX (capital expenditures) and OPEX (operational expenditures).
Risk Management
Risk management for contracting companies focuses on mitigating execution risks, such as cost overruns, delays, and safety incidents. These companies often transfer certain risks to subcontractors or suppliers through well-defined contracts. Asset owners, on the other hand, adopt a broader risk management approach. They address risks across the entire lifecycle of the asset, including design, construction, operation, and decommissioning. This holistic approach ensures the asset’s sustainability, regulatory compliance, and resilience to future uncertainties.
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Quality Management
Contracting companies prioritize compliance with client-defined quality standards and project specifications. Their success is often measured by their ability to deliver a project that passes inspections and meets contractual requirements. Asset owners take a more comprehensive approach to quality management. They focus on ensuring the asset’s quality supports long-term operational efficiency, reliability, and maintenance needs, often exceeding minimum standards to achieve lifecycle value.
Procurement and Stakeholder Management
Contracting companies typically adopt a cost-driven procurement strategy, selecting suppliers and subcontractors based on price and compliance with project specifications. Their stakeholder management efforts are concentrated on satisfying the client while coordinating effectively with subcontractors and suppliers. In contrast, asset owners employ a value-driven procurement approach, balancing cost, quality, and operational performance. Their stakeholder management includes engaging with regulators, internal business units, end-users, and the broader community to ensure alignment with strategic objectives.
Health, Safety, and Environment (HSE)
For contracting companies, HSE management focuses on meeting contractual safety requirements and ensuring compliance during project execution. Asset owners, however, develop and enforce robust HSE systems that extend beyond project delivery. Their HSE policies aim to protect stakeholders and ensure compliance throughout the asset’s lifecycle, reflecting a commitment to sustainability and corporate social responsibility.
Sustainability and Change Management
Contracting companies’ approach to sustainability is often limited to meeting the client’s requirements as outlined in the contract. Asset owners, however, are at the forefront of driving sustainability initiatives. They align their projects with broader Environmental, Social, and Governance (ESG) goals, focusing on long-term environmental and societal impacts. In terms of change management, contracting companies aim to minimize changes to avoid disruptions, while asset owners evaluate and implement changes that enhance lifecycle value, operational performance, or regulatory compliance.
Performance Metrics and Lessons Learned
For contracting companies, success is measured by profitability, timely delivery, and client satisfaction. Lessons learned typically focus on improving execution efficiency for future projects. Asset owners, however, evaluate success based on ROI, operational efficiency, and asset reliability over its lifecycle. Their lessons learned contribute to optimizing strategic planning, asset management, and future investments.
Conclusion
The principles and processes of project management for contracting companies and asset owners reflect their distinct roles and objectives. While contracting companies emphasize efficient execution, profitability, and adherence to contractual terms, asset owners focus on strategic alignment, lifecycle value, and long-term performance. Recognizing and understanding these differences is essential for fostering effective collaboration and achieving successful project outcomes.
CISA | IT Security & GRC Specialist | ISO 27001, SOC 2, PCI-DSS Compliance | Driving Risk Management & Cybersecurity Excellence
1wRightly said. Sucess for both the Contracting Company and the Asset Owner might look different on the surface level but deep down, they are both contributing to the same strategic objectives.
Engineering Management || Asset integrity & Maintenance Engineer - Rope Tech Lvl3 | NDT Lvl 2 | ex-Mechanical Technician
1wTo say the least, it sounds true but on the flip side, project charters(approval to begin work) are mostly presented but because contracting/third party as it were is handing off the said project risk from the asset owner/client (Risk transfer), issues begin to arise as project batons are passed on to third party contractors/individual call-out contractors (usually the case in this context). Information begins to dilute hence issues arising with less or no complete project information. A practical example; Mr A wins an inspection project for 5 years as the first contractor/ consultant to sublet to smaller companies/hire call-out inspectors for profit maximization, diversity, and risk transfer, at this point some project information isn't completely rolled out creating gaps reasons best known to philosophy and nature of doing business. It then degenerates badly to the point that the executing company which also thrives on call-out contractors mobilizes its first set of professionals with the information needed to get onboard for project presence, the next shift however mobilizes with lesser information than the previous hence the cycle of operations/info ditches. This is one out of a hundred causes if you critically look inward!
Your Operations Excellence Partner. Reliability Leader | Maintenance Excellence | Asset Integrity Management | CMMS Expert | Capability Trainer
1wVery enlightening! In terms of performance indicators which you have clearly outlined, contractors are more focused on leading indicators, while Asset owners are concerned about the lagging indicators ie. The long term effects/benefits of projects on the business. Thanks for sharing Adewale ADENIYI MSc. PMP® CPEM® CMRP®