CWT Energy, Resources & Marine now is spooling up newly consolidated business with KBR Inc. A year ago, the global engineering, construction and government services company had 13 agencies, according to officials with TCG Consulting. The TMC implementation is one of many projects contemplated by a broad outsourcing partnership in which TCG manages KBR’s card and travel programs, and some meetings. It could yet take on more.
TCG Consulting in July hired KBR’s travel and card management departments. Twelve KBR people joined the consulting firm’s new Houston office to boost its practice in corporate travel, meetings, payment and expense management, particularly for the shrunken oil and gas sector. For KBR, this team is working on program strategy, policy, expense management and supplier sourcing. KBR is streamlining corporate functions as part of a $200 million cost reduction program announced a year ago.
CWT’s energy unit offers a number of specialized services for the sector, including new logistics software. However, KBR has tasked TCG with some of what CWT typically does for clients. TCG global management practice director Philip Curran said this is one way program management savings come about in such an outsourcing arrangement.
“We looked at the agency relationship and said, ‘We don’t want what you normally give a client,’ ” said Curran. “We want to go line by line and decide whether we need it. In some cases we are already getting it because travel is outsourced through TCG. Global account management, for example — KBR shouldn’t pay for that. So we have stripped out some of those agency functions in addition to reconfiguring.
“Instead of looking at who does what, we look at what needs to be done for a program to be run optimally,” Curran continued. “It’s a client-centric concept, whereas typically we see an agency-centric approach. The management of travel, payment and expense can be internal, or they can be outsourced, or they can be co-sourced. If you outsource those critical functions, do you want to outsource those to a totally independent partner who has nothing at stake or a third party with its own agenda?”
In the first year, KBR will pay TCG a consulting-style fixed fee per project, with outsourcing work priced on a formula depending on decisions by KBR about what to pursue. After the first year, the partners will work on a fixed annual fee. KBR still directly pays its suppliers, including the TMC.
Former KBR director of global travel services Darcy Taylor introduced the outsourcing idea to KBR leadership. She’s now engagement manager for TCG.
“As the travel manager trying to keep a global program functioning, there was no way alone that I could move into a whole new strategic program,” she said. “You’re putting out fires every day. To do an organization justice and strategically develop an innovative travel program doesn’t exist in the old model of a travel manager running the show by themselves. Now I have a whole company behind me, helping drive this new strategy.”
The alternative, she said, was layoffs. KBR had cut headcount to 25,000 from 27,000 between 2013 and 2014. It hasn’t released a figure this year.
KBR CFO Brian Ferraioli during an August conference call with financial analysts said the company identified cost reduction opportunities in all areas, including real estate, IT, training and travel. “Without question and unfortunately,” he said, “the majority of the costs related to reductions in total staffing.” Taylor said many corporate support services were downsized or outsourced.
TCG had been advising KBR for eight years. “We wanted them as part of the TCG team but we knew that to deliver the cost savings we had to change processes, introduce technology and reduce the labor requirements to manage the program,” said Curran. “As we create capacity in that team of former KBR people, they’re now allocated to other TCG clients.”
In addition to cost reduction, better spend visibility using data management technology is a key tenet of the partnership, officials said.
Similar to other consultants and giants like Accenture and IBM, TCG provides outsourcing services to a number of clients. These tend to have a smaller scope than the KBR engagement.
KBR has operations in about 40 countries. It generated $6.4 billion in revenue last year, down more than one-third from 2010.