Monitor Contractor Compliance in New Markets

Aug 24, 2016

Global expansion introduces many enterprises to new, complex regulatory environments that entail significant obligations and compliance challenges. These obstacles challenge both enterprises and contractors they choose to work with.

Companies seeking growth in new markets might decide to engage contractors to maximize available resources without making significant investment in infrastructure or manpower. While these contractors provide expert services in specific aspects of a project, they still require oversight by the hiring company. Owner/operators that bring on subcontractors may be at risk for fines and lawsuits if contractors fail to observe and enforce established policies and procedures. 

As a result, businesses that use subcontractors are placing greater emphasis on contractor qualification and management systems to ensure that all third-party vendors and suppliers are operating in compliance with domestic and international regulations, to avoid harsh penalties, and to mitigate delays in business or potential damage to the corporate brand and reputation. 

Federal efforts

Industry-specific regulatory bodies in the U.S. - such as the Mining Safety and Health Administration and the Interior Department's Bureau of Safety and Environmental Enforcement (BSEE) - are implementing rules and requirements on contractors to encourage corporate responsibility and avoid costly penalties or lost business. 

Recently, the BSEE issued an interim policy document updating its rules about fining drilling companies as well as the firms they contract with. Previously, site operators and lessees were usually the only ones held responsible for regulatory violations. Now, the contracted firms will also be held accountable for noncompliance.

This and other regulatory actions should resonate with companies in any industry. As a business works to advance growth in domestic or new markets, it will likely rely on contractors for some portion of its operations. Both groups will be subject to government laws and industry standards. Working in unfamiliar territory brings the risk of noncompliance, the associated fines, operational delays, and damage to the reputation. As such, it's essential for companies to use a system to vet the compliance efforts of every contractor they engage.