BP Deepwater Horizon was a disaster on many, many fronts.  Clearly for the families of those who died and were injured. For those whose livelihoods in the Gulf of Mexico were affected. For the wildlife in the region. For the shareholders and employees of BP.

But it also was a disaster in terms of outsourcing and process management.

Firstly, I need to be clear that BP and Transocean are not clients of Nimbus. So my comments are as an external observer rather than someone who is intimately involved. Therefore, this is blog not intended to make specific comments or recommendations on this particular incident. There is no shortage of people lining up to do that.  The Economist this week listed the books in an article Writings from the Black Hole that have been published,

Fortune Magazine in January ran an in depth expose, called BP: An accident waiting to happen.

Firstly BP outsourced the operation of the rig to Transocean, and I am sure that Transocean outsourced or subcontracted part of their work to 3rd parties.  When everything is going fine, there is enough money (and oil) sloshing around to make it profitable for everyone. But when it all gets nasty then, not matter what the contracts say, rapidly the spotlight shines on BP and it is clear that the public still holds BP responsible.

But, in talking to some very experienced oilmen, there were several clear failures in operational processes over time which led up to the ultimate disaster. Now whether these were cross organisation process issues, which often occur with outsourcing arrangements, or just within Transocean I am not clear. But what is very common is that outsourcing or subcontracting gives a very clear boundary. Often end to end processes, which should normally run seamlessly across any boundaries, are truncated with disastrous results. The interface between the companies is captured in a legal document which focuses on metrics and risk, not in any process related documentation.

The Fortune article makes fasscinating, if somewhat morbid reading. But small section got my highly-tuned “BPM” senses buzzing:

The centerpiece of Hayward’s new approach was a sweeping plan called the Operating Management System, known as OMS. Even today Hayward calls OMS “my most long-standing legacy.” On paper it had much to recommend it. In much the same way as Exxon successfully did after the Valdez spill, OMS aimed to integrate safety into every aspect of operations, theoretically making each employee responsible for safety. Fully implementing this system was a massive undertaking that would take years. Hayward viewed it as a structure that would identify and correct flaws in the way BP did business companywide and, ultimately, prevent disasters.
 
Indeed, it was the OMS system that led BP to identify grave deficiencies in its Gulf of Mexico operations. Its December 2008 strategic plan identified six “priority gaps.” The No 1. priority: mitigating serious risk. “There are many risk processes in action,” the plan stated, “but they have become too complicated and cumbersome to effectively manage.” One chart pointed out that a failure to address the issues could result in “multiple injuries/fatalities,” “major environmental damage,” “catastrophic loss of the facility,” and “damage to corporate reputation.” In January 2010, BP’s gulf team completed a plan that was supposed to tackle those problems.
 
But just such a “catastrophic loss,” of course, came only three months later — in part because OMS had flaws of its own. It did a good job of integrating process safety into the planning stage, according to a presidential commission investigator, but it lacked effective procedures for guiding decisions during operations.
 

BP has taken a huge financial hit in terms of payouts and potential lawsuits.  But just this week, they have announced that they have filed lawsuits against the maker of the failed blowout preventer on the Macondo well, the operator of the Deepwater Horizon drilling rig, and the well’s cement contractor, saying they were largely to blame for the accident one year ago that killed 11 and spilled 4.9 million barrels of oil into the Gulf of Mexico. Time to get the contracts out and go to court. Sadly this is how many, many outsourcing arrangements end. Normally they are not so visible to the general public.

The current issues of Transocean are compounded by the (callous / greedy / insensitive  – you choose your adjective) actions of the executive to award record bonuses to themselves.  They could and probably will claim that the bonuses are justified and are contracted performance bonuses.

They may be, but it is worth digging a little deeper to understand the basis of the reporting and therefore calculation of those bonuses. It appears that the metric was based on the rate of incidents per 200,000 hours worked.  On that basis the Deepwater Horizon disaster would not have had a significant impact on the statistic.  The problem is that it was an inadequate metric to determine management bonuses based on safety.  It doesn’t pass the smell test.

In a filing on executive pay, Transocean said, “Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record.” Based on the total rate of incidents and their severity, “we recorded the best year in safety performance in our company’s history.”

So, what we potentially have here is an outsourced contract with multiple parties involved and no clearly documented end to end processes with metrics which do not reflect the fuller picture or encourage the correct behaviour.

No wonder outsourcing needs BPM –and quickly.

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One thought on “Contracts or conscience? Deepwater Horizon – 1 year on #bpm #bpo #deepwater #disaster #oil

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