The wrong reasons people choose.
Three bad reasons dominate this decision in practice.
Because the headcount is not approved. Contract becomes a workaround for a permanent role the business will not sign off. This works briefly and then produces a contractor who has been on site for three years, costs more than the permanent equivalent, and holds knowledge nobody else has.
Because contract looks more expensive per hour. It usually is per hour, and that is the wrong comparison. The right comparison includes recruitment cost amortised over actual tenure, the carrying cost of the role between projects, leave, superannuation, training, equipment and the cost of a redundancy if the pipeline moves.
Because that is how we have always resourced it. The most common reason, and the least examined. Delivery models have changed considerably in the last five years. Most resourcing models have not.
The test that actually works.
Ask two questions about the role, in this order.
One: does the role survive the project? If the function continues after this scope closes out, it is permanent. Engineering management, asset management, development, commercial leadership, HSE systems ownership, anything carrying institutional knowledge forward. If the function genuinely ends when the scope ends, it is a contract role.
Two: is the demand curve flat or peaked? A flat requirement over three or more years is permanent. A peak, a surge, a wave, a defined window with a start and an end, is contract. Commissioning is the clearest example. You need eight commissioning people for five months and then you need none.
Where the two answers conflict, the first one wins. A role that carries knowledge forward should be permanent even if the current demand is peaked, because what you are buying is continuity.
How it usually falls out on an energy project.
Usually permanent: project director, engineering manager, development manager, asset manager, commercial manager, HSE manager, procurement manager, the project controls lead.
Usually contract: commissioning manager and commissioning engineers, testing and HV crews, site managers and superintendents on a defined build, contracts administrators, cost controllers and planners on a single project, HSE advisors on site, quality and ITP coordinators, document controllers, field and site engineers.
Genuinely either: project manager and senior project manager. This is the role where the decision is hardest and most consequential. Our rule of thumb is that if the individual will run two or more of your projects in sequence, hire permanently. If they will run this one and the next one is unknown, contract.
What the contract model has to deliver to be worth it.
The contract decision is only correct if the contract engagement is properly run. Three things separate a contract model that works from one that creates risk.
- Funded payroll. A contractor who is paid late leaves. If your own payment cycle is 45 or 60 days and your contractors are paid on that cycle, you will lose people mid scope. The partner should carry the funding and pay on the agreed run regardless of when you settle.
- Compliance held before mobilisation. Right to work, tickets, inductions, medicals and insurances checked and held, with audit ready records per contractor. This is where most self managed contractor arrangements fail an audit.
- Clean demobilisation. The whole value of contract is that the scope can close. If releasing people is painful, you have bought the cost of contract without the flexibility.
Add one commercial point that is often missed. Allowances matter more than rate on regional and remote scopes. A living away from home allowance structured correctly keeps a contractor on site to the end of the job. A rate that looks generous but leaves them out of pocket on accommodation does not.