Key Criteria to Evaluate Contractor Performance from Human Resources Management Strategy

The mining industry in Indonesia significantly contributes to employment and economic growth, necessitating efficient human resource management, especially for contractor performance. This study aims to identify and prioritize key human resource management (HRM) criteria essential for evaluating contractor performance within the mining sector. By leveraging comprehensive literature reviews and focus group discussions (FGDs) with HR and safety experts, critical criteria such as safety performance, compliance with labor regulations, employee competency, and fair remuneration were identified. The Analytical Hierarchy Process (AHP) was employed to prioritize these criteria, while Pareto analysis highlighted the most impactful factors. The findings reveal that safety performance is the most critical criterion, followed by employee competency and compliance with labor regulations. Implementing these criteria ensures a balanced framework for managing contractor employees, enhancing operational efficiency, and maintaining regulatory compliance. Addressing these key areas allows the mining industry to navigate workforce challenges and sustain long-term productivity and safety.

Introduction

The mining industry plays a pivotal role in Indonesia’s economy, significantly contributing to employment and national income. According to the Badan Pusat Statistik (2023), the mining industry absorbs approximately 1.19% of the total Indonesian workforce. However, the sector is continuously challenged by global market dynamics, including fluctuating demand and supply, and volatile commodity prices. These factors necessitate adaptive strategies to maintain operational efficiency and competitiveness. One such strategy is outsourcing, which has become increasingly prevalent in the mining sector to manage workforce-related challenges effectively (Badan Pusat Statistik, 2023).

Outsourcing involves delegating certain business activities or processes to external contractors, enabling companies to focus on their core operations while benefiting from cost savings and specialized expertise. However, the growing reliance on contractors has brought to light the critical need for effective management and evaluation of contractor performance. Ensuring that contractor employees meet the required standards for safety, competency, and compliance with labor regulations is essential for sustaining operations and mitigating risks (Sivakumaret al., 2015).

Despite its importance, there is a notable gap in the literature regarding the specific human resource management (HRM) criteria that should be used to evaluate contractor performance in the mining industry. This research addresses this gap by identifying and prioritizing key HRM criteria that can be used to assess contractor performance comprehensively. The study aims to develop a framework that mining companies can use to evaluate contractors, ensuring that they not only meet regulatory and operational standards but also contribute positively to the company’s overall performance.

Literature Review

Human resource management plays a crucial role in optimizing the performance of contractor employees in the mining sector. Theoretical frameworks such as Transaction Cost Economics, Core Competency Theory, and Resource-Based View provide insights into why companies outsource certain functions and how they can manage these outsourced activities effectively. These frameworks suggest that outsourcing non-core activities allows companies to focus on their core competencies, thereby enhancing overall efficiency and competitiveness.

Outsourcing Theory

Outsourcing is the practice of delegating certain business processes or functions to external service providers rather than performing them in-house. This strategy is driven by the need to reduce costs, access specialized skills, and improve focus on core business activities (Belcourt, 2006). The Transaction Cost Economics (TCE) theory, introduced by Coase (1937), posits that companies outsource to minimize the costs associated with transactions and internal production. TCE suggests that outsourcing is advantageous when the external market can provide the services at a lower cost than internal production due to economies of scale and specialization.

The Core Competency Theory, proposed by Prahalad and Hamel (1990), emphasizes that organizations should focus on their core competencies activities that provide a competitive advantage and outsource non-core functions. This approach allows companies to allocate resources more efficiently and enhance their strategic capabilities.

The Resource-Based View (RBV) of the firm, as discussed by Barneyet al. (2021), argues that a company’s resources and capabilities are critical to achieving sustained competitive advantage. By outsourcing non-core activities, firms can concentrate on leveraging their unique resources and capabilities, thus strengthening their competitive position.

Vendor Evaluation

Vendor evaluation is a critical process in the outsourcing strategy, involving the assessment and selection of external service providers. Effective vendor evaluation ensures that selected vendors meet the required standards and contribute positively to the organization’s performance. Traditional vendor evaluation criteria include quality, delivery performance, cost, and technical capability (Dickson, 1966; Weberet al., 1991).

Recent literature emphasizes the importance of incorporating sustainability and social responsibility into vendor evaluation criteria. Guarnieri and Trojan (2018) highlight the need to consider social, ethical, and environmental criteria alongside traditional economic factors in the textile industry. Rahmanet al. (2022) advocate for the inclusion of economic, environmental, and social criteria in the supplier selection process in the textile dyeing industry. These studies underscore the importance of a comprehensive approach to vendor evaluation that includes human resource management criteria.

HR Evolution

The role of HR has evolved significantly over the past few decades, shifting from administrative and operational tasks to a more strategic function that aligns with overall business goals. This evolution can be broadly categorized into several phases:

• Administrative HR (1900s–1950s): Initially, HR was primarily focused on administrative tasks such as payroll, record-keeping, and ensuring compliance with labor laws. This period was marked by the establishment of personnel departments to handle employee-related matters.

• Operational HR (1960s–1980s): During this phase, HR began to take on more operational responsibilities, including recruitment, training, and employee relations. The emphasis was on improving efficiency and productivity through better management of the workforce.

• Strategic HR (1990s-present): The most significant transformation in HR occurred during the 1990s when it began to be viewed as a strategic partner in achieving business objectives. This shift was influenced by the recognition that human capital is a critical asset that can drive organizational performance.

Ulrich’s Role Model in HR Evolution

Dave Ulrich, a prominent HR theorist, introduced the HR business partner model, which has been influential in the strategic transformation of HR. Ulrich’s model proposes four key roles for HR professionals (Fig. 1):

Fig. 1. Ulrich’s model.

1. Administrative Expert: HR should continue to excel in administrative tasks, ensuring efficiency and compliance in HR processes.

2. Employee Champion: HR should advocate for employees, addressing their needs and concerns to maintain high levels of engagement and satisfaction.

3. Change Agent: HR should drive and manage change within the organization, helping it adapt to market dynamics and internal transformations.

4. Strategic Partner: HR should align its strategies with business objectives, contributing to the overall success of the organization through talent management, leadership development, and organizational design (Ulrich, 1997).

Ulrich’s model emphasizes the need for HR to balance these roles to add value to the organization. This approach has helped shift the perception of HR from a cost center to a strategic enabler of business performance.

Sustainable HR

Sustainable human resource management is essential for achieving long-term operational efficiency and sustainability in any industry, including mining. Sustainable HRM involves developing policies and practices that respond to changes in the socio-political and economic environment, aligning HR strategies with broader sustainability goals (Dulebohnet al., 1995). It includes ensuring fair labor practices, promoting diversity and inclusion, and maintaining high standards of occupational health and safety.

Research by Zaugget al. (2001) emphasizes the integration of sustainable HR practices to achieve corporate sustainability. This involves considering the long-term impacts of HR decisions on both the organization and its employees, ensuring practices that support environmental, social, and economic sustainability. Sustainable HRM practices contribute to the overall well-being of employees, enhance corporate reputation, and ensure compliance with evolving regulatory requirements.

Copper Mark Requirements

The Copper Mark (Fig. 2) is an assurance framework developed specifically for the copper industry, promoting responsible production practices. It covers comprehensive Environmental, Social, and Governance (ESG) criteria, emphasizing labor rights, community engagement, and occupational health and safety. Certified companies must adhere to stringent standards, including:

Fig. 2. Copper Mark Framework.

1. Labor Rights: Prohibiting child and forced labor, ensuring fair wages and working conditions, and respecting freedom of association.

2. Health and Safety: Implementing robust occupational health and safety management systems, conducting regular risk assessments, and ensuring continuous safety training.

3. Social Responsibility: Engaging with local communities, providing transparent communication, and promoting human rights (Copper Mark, 2024).

Achieving Copper Mark certification requires companies to extend these standards to their supply chains, including contractor employees. This highlights the importance of evaluating contractors not only based on operational performance but also on compliance with comprehensive HR and sustainability criteria (Copper Mark, 2024).

Importance of HR Key Criteria in Vendor Performance Evaluation

Vendor selection and evaluation criteria are dynamic and can evolve over time. Various factors contribute to these changes, reflecting shifts in organizational priorities, market conditions, technological advancements, regulatory requirements, and other external and internal dynamics. For instance, regulatory changes can introduce new compliance requirements in vendor selection or evaluation criteria. Increasing awareness and commitment to sustainability can elevate the importance of environmental and social responsibility in vendor selection. Additionally, changes in organizational strategy can alter vendor evaluation criteria.

Previous studies have highlighted various criteria for vendor evaluation, including quality, delivery, performance history, compliance with labor regulations, and technical capability (Dickson, 1966; Weberet al., 1991). More recent literature emphasizes the importance of sustainability and social responsibility in vendor evaluation. For example, Guarnieri and Trojan (2018) highlight the need to consider social, ethical, and environmental criteria alongside traditional economic factors in the textile industry. Similarly, Rahmanet al. (2022) advocate for incorporating economic, environmental, and social criteria in the supplier selection process in the textile dyeing industry. See Table I, summarizes literature of criteria used for vendor selection/evaluation proses of Oil & Gas, Mining, and Textile company from 2015–2024.

Table I. Literature of Criteria Used for Vendor Selection/Evaluation Process of Oil & Gas, Mining, and Textile Company from 2015–2024

Author	Title	Criteria	Industry	Country
Yudhita (2024)	Contractor evaluation and selection with analytic hierarchy process method for programmable logic controller programming services at PT Freeport Indonesia	Project comprehension (Scope of work, Workplan/Methods, Deliverables)	Mining	Indonesia
		Price analysis (Pricing structure ambiguity, Pricing value)
		Organization experience & Project performance (Contractor experience within company, Contractor experience outside company, Year of establishment)
		Workforce composition (National employees, Local Papuan employees)
Yazdi et al . (2022)	Supplier selection in the oil & gas industry: A comprehensive approach for multi-criteria decision analysis	Positive image, New products, Exchange of knowledge, commitment, Novelty, Quality, Cost, Reputation, Flexibility, R&D, Technical capability, Technical experts, Compatibility, Relation, Technology.	Oil & Gas	Iran, Brazil, Switzerland
Rahman et al . (2022)	Sustainable supplier selection in the textile dyeing industry: An integrated multi-criteria decision analytics approach	Economic criteria (Price of chemical, Meeting delivery time, Quality of chemical, Technology of production, capability to produce)	Textile industry	India
		Environmental criteria (Environmental management system, Pollution regulation, Practice of recycling, Consumption of energy and resources, Use sustainable raw material)
		Social criteria (Economic well-being and development of the employees, Employees’ interest and rights, Employees health and safety, Employees development and training, Practice of information disclosure)
Guarnieri and Trojan (2018)	Decision making on supplier selection based on social, ethical, and environmental criteria: A study in the textile industry	38 criteria of traditional and social economic criteria (effective communication, meeting customer requirements, support, compatible culture, mutual trust, geographical location, cost, quality, On-time delivery, efficiency of services, Financial stability, Technological capability, Delivery delays, Flexibility, Productivity and production capability, Technic and organization capability, Manage capacity and organization, R&D level, Human right, Philanthropy, Public disclosure, Certification, Management skill, Accordance with the law, Continues improvement, Smaller supplier, Environmental impact, Reverse logistic, Environmental friendly packaging, Emission of dangerous gases, Environmental Assessment of supplier, Management of hazardous waste, Environmental management, Project for environmental, image green, Diversity, Environmental cost, Security)	Textile industry	Brazil
Sivakumar et al . (2015)	Green vendor evaluation and selection using AHP and Taguchi loss functions in production outsourcing in the mining industry	Benefit factor (High level of flexibility, Green technology capacity, R&D capacity, Higher level reputation, Cost Reduction)	Mining	India
		Risk factor (Demand fulfillment, Environmental training, OHS policy, Environmental activity control)

Including HR key criteria in vendor performance evaluation is crucial for several reason:

1. Operational Efficiency: Contractors who comply with HR standards contribute to smoother operations and reduced downtime due to fewer labor disputes and accidents (Krauseet al., 1999).

2. Regulatory Compliance: Ensuring that contractors meet labor regulations and safety standards helps companies avoid legal penalties and maintain their licenses to operate (Sroufe, 2003).

3. Sustainability: Contractors who adhere to sustainable HR practices support the company’s overall sustainability goals, enhancing its reputation and stakeholder trust (Walker & Jones, 2012).

4. Risk Management: Evaluating contractors based on HR criteria helps identify potential risks early, allowing companies to take proactive measures to mitigate them (Giannakis & Papadopoulos, 2016).

In the mining sector, incorporating HR key criteria in vendor performance evaluation is not only a regulatory or ethical requirement but a strategic necessity. Effective HR management practices contribute to improved safety records, better compliance with labor laws, and higher overall productivity. These practices also foster a positive work environment, reducing turnover rates and improving job satisfaction among contractor employees (Abubakar & Wang, 2019).

In conclusion, the literature highlights the critical role of sustainable HR practices and comprehensive vendor evaluation in achieving operational efficiency and competitive advantage in the mining sector. By integrating these elements into their contractor management frameworks, mining companies can enhance their performance and sustainability.

Research Methodology

Conceptual Framework

The conceptual framework of this study is designed to address the business phenomenon of changing workforce composition, which is heavily on contractor employees, by reviewing contractor performance from HR perspective (Fig. 3). The framework involves several key components:

Fig. 3. Research methodology.

• Business Phenomenon: The changing workforce composition, which heavily in contractor employees, necessitate a review of contractor performance.

• Need to Review Performance Vendor from HRM Perspective: Recognizing the importance of evaluating contractor performance from an HR perspective.

• Literature Review and Focus Group Discussion (FGD): Conducting a literature review and focus group discussions to gather relevant information and insights.

• Initial Model to Review Performance Vendor from HRM Perspective: Develop an initial model based on the findings from the literature review and focus group discussions.

Research Methodology

This research employs a mixed-method approach to identify and prioritize key HRM criteria for evaluating contractor performance in the mining sector. The methodology includes a comprehensive literature review, FGD with HR and safety experts, and the application of the Analytical Hierarchy Process (AHP) and Pareto analysis.

• Literature Review: A synthesis of existing studies on HRM and vendor evaluation provides a foundation for identifying potential criteria.

• Focus Group Discussions: FGDs with HR and safety experts offer practical insights and validation of the criteria. Participants include experts from Manpower Management, Learning and Development, Industrial Relations, and Mining Safety Divisions.

• Analytical Hierarchy Process: AHP is used to prioritize the identified HRM criteria, involving pairwise comparisons and mathematical calculations to derive weighted scores (Saaty, 1990).

• Pareto Analysis: This analysis identifies the most impactful HRM criteria, focusing on key factors that contribute to the majority of issues in contractor performance (Pareto, 1964).

Data Collection Methods

Data collection involves gathering both primary and secondary data to support the research. Primary data refers to information collected directly from the source for the specific purpose of the study. In this research, primary data was collected through focus group discussions with HR and safety experts. The FGDs aimed to gather practical insights and validate the HRM criteria identified in the literature review. Participants included experts from Manpower Management, Learning and Development, Industrial Relations, and Mining Safety divisions. This approach ensured that the criteria were relevant and applicable to the mining sector’s specific context.

Secondary data refers to information that has already been collected and published for other purposes. In this research, secondary data was gathered through a comprehensive literature review of existing studies on HRM and vendor evaluation. This included academic articles, industry reports, and best practice guidelines. The literature review provided a theoretical foundation for identifying potential HRM criteria and supported the development of the evaluation framework. By combining both primary and secondary data, the research ensured a robust and comprehensive evaluation of contractor performance.

Data Analysis Methods

The data analysis method involves using the Analytical Hierarchy Process (AHP) and Pareto analysis to identify and prioritize key Human Resource Management criteria for evaluating contractor performance. The Analytical Hierarchy Process is a structured technique for organizing and analyzing complex decisions.

The first step in AHP is criteria identification, which involves pinpointing key HRM criteria from the literature review and focus group discussions. Next, pairwise comparisons are conducted to determine the relative importance of each criterion by comparing them in pairs. Based on these comparisons, weights are calculated for each criterion, forming a pairwise comparison matrix. A consistency check is then performed using the consistency ratio (CR) to ensure the pairwise comparisons are reliable; a CR value of less than 0.1 indicates acceptable consistency. Finally, the HRM criteria are prioritized according to their calculated weights, providing a clear hierarchy of importance. The AHP method used in the research study is an AHP online software developed by BPMSG (Goepel, 2018).

Following AHP, Pareto analysis is employed to refine the evaluation process further. In the first step of Pareto analysis, the weights calculated from AHP are used to identify the most significant HRM criteria. The second step involves applying the Pareto principle, which asserts that a small number of causes often account for a large proportion of the effect, to determine the criteria that account for the majority of issues in contractor performance. By focusing on these top criteria, organizations can implement targeted improvements to enhance contractor performance. This focused improvement is the final step, ensuring that efforts are concentrated on the most impactful areas identified through the combined use of AHP and Pareto analysis.

Data Analysis

This research aims to identify and design appropriate key criteria for evaluating the performance of contractor companies. The findings of this study will serve as recommendations for the HR Division, particularly for the Contract Group, to refine and adjust the current HR criteria used in assessing contractors. Through this research, the goal is to establish a comprehensive set of key HR criteria that enhances the evaluation process and aligns with the Company’s priorities in managing its workforce, with a specific focus on contractor employees.

By developing these criteria, the author believes the Company seeks to ensure that the performance evaluation process is thorough, fair, and reflective of the contractors’ contributions and the Company’s strategic goals. This initiative aims to improve the overall management of contractor employees, fostering a work environment that supports their development and aligns their performance with the Company’s objectives.

The subsequent section of this document will delve into the proposed strategies for implementing these standardized criteria. It will outline both short-term and long-term plans, detailing the steps necessary to integrate these criteria into the existing evaluation framework effectively. The discussion will cover the methodology for rolling out these standards, potential challenges, solutions, and the anticipated impact on the Company’s HR practices and contractor management.

By establishing and implementing these comprehensive evaluation criteria, the Company aims to enhance its HR processes, ensure consistent and objective performance assessments, and ultimately achieve better alignment between contractor performance and the Company’s strategic goals. This approach benefits the contractors by providing transparent and fair performance metrics and supports the Company’s mission to optimize its workforce management practices.

Analytic Hierarchy Process

The Analytic Hierarchy Process is a structured technique for organizing and analyzing complex decisions using mathematics and psychology. It allows users to model a complex problem in a hierarchical structure and then systematically evaluate various elements by pairwise comparisons, leading to a prioritized ranking of options (Saaty, 1990).

AHP is widely used for decision-making because of its structured and systematic approach. AHP incorporates qualitative and quantitative data through pairwise comparisons, ensuring a nuanced evaluation of each criterion and alternative. Its built-in consistency check enhances logical soundness while calculating priority weights provides clear rankings. AHP also facilitates group decision-making by encouraging stakeholder involvement and consensus building, making it versatile and applicable across various fields.

AHP has found extensive applications in various fields, including human resource management. AHP assists in decision-making processes such as employee selection (Kusumawardani & Agintiara, 2015), performance evaluation (Abubakar & Wang, 2019), and prioritizing training programs (Flood & Shepherd, 2021).

The first step of AHP is Criteria Identification. Based on literature review and FGD result of the HR and safety expert, four criteria and 16 sub criteria safety and HR identified (Fig. 4). Further definitions of the criteria and sub criteria can be seen in the Table II.

Fig. 4. Conceptualized of criteria and sub criteria.

Table II. Definition Criteria and Sub Criteria

Criteria and Sub-Criteria	Definition
Safety
Fatality	Zero fatalities occurred during the year, which emphasizes everybody’s commitment, including contractors, to making the employee’s safety the priority.
Total Recordable Incident Rate (TRIR)	The actual TRIR of the contractor is defined as lower than the target that has already been set. The TRIR target follows each division where contractor employees work.
Safety policy & Compliance	Safety Policy & Compliance is defined as requiring all contractors to have a safety policy that is in accordance with Company’s safety policy and implement that policy. Example: Submit mandatory internal audit reports in a timely manner and comply with requirements such as standards or using certified auditors. In case of any accident/incident, the contractor must complete all follow-up actions on time.
Fatal Risk Management (FRM)	This is defined as all contractor/company employees who must follow the standards of the FRM division where the employees work at Company.
Speed limit infraction	It is defined as no speed limit infraction.
Industrial relation
ODS ticket case handling time	It is defined as the number of ODS tickets raised/opened, and the target should be 0 ODS tickets. Handling time is the time spent by the contracting company in handling the case. The handling time must be less than or maximum the same as the Company policy.
Reward & Punishment policy	Defined as a contractor company must have a policy of reward and punishment in line with Company and implemented.
MCU attendance	It is defined that a contractor company must ensure that its employees fulfill 100% MCU attendance and MCU follow-up.
Grievance mechanism	It is defined that a contractor company must have a grievance policy and mechanism to handle it, aligned with Company Policy.
Competency & Development
Job description	Defined as a contractor company must have a clear job description for each employee who works at Company.
Competency and grading system	Defined as a contractor company must have a clear competency and grading system. The contractor employees must meet the minimum standard competency set by Company for each job in Company.
Training program	Defined as a contractor company must have training needs analysis and provide training programs to employees according to their need.
Workforce management
Papuan composition	It is defined as the percentage of the number of Papuan employees compared to the contractor workforce. The target of Papuan composition is 40%.
Female composition	It is defined as the percentage of female employees compared to the contractor workforce. The target is 12% female composition.
Compliance to regulation	Defined as compliance with government regulations such as participating in government mandatory programs such as minimum wages, fair pay, having salary range, remuneration transparency (pay slips), paying overtime, all payments paid on time, providing leave/rest, no child labor, and severance pay.
Adequate human resources policy	Defined as a contractor company required to have a human resource policy that covers all human resource areas. The policy should be transparent and able to be accessed by contractor employees.

Once the criteria and sub-criteria have been well-defined, a structured interview is performed with the HR and operations leaders of company. These participants were specifically chosen for this task as they possess a more holistic and comprehensive view of both the management of the mine’s operations and the workforce. The objective of this step is to gain an understanding of the preferences of each stakeholder regarding the proposed criteria based on the focus group discussions with subject matter experts in their respective areas.

The next step of the AHP method lies in pairwise comparisons between criteria and sub-criteria to determine each level of importance and each alternative’s relative preference. Use a 9-point scale of judgments, ranging from 1 (equal importance) to 9 (extreme importance), to quantify these comparisons. This scale allows decision-makers to express the degree of preference between two criteria or alternatives in a more nuanced manner, leading to a more robust analysis.

Then followed by weight calculation, consistency check using the consistency ratio (CR), and prioritized of HR criteria. A CR value of less than 0.1 indicates acceptable consistency. AHP resulting the weighted scoring system as shown in Fig. 5.

Fig. 5. Prioritized HR criteria for vendor performance evaluation.

The overall consistency ratio of the judgments is 1.7%, indicating a high level of consistency and reliability in the evaluation process. The AHP group consensus is very high at 93.6%. Generally, a CR below 10% is acceptable, making this 1.7% CR exceptionally trustworthy.

The key HR criteria and their respective priorities and ranks are as follows (Fig. 6):

Fig. 6. Decision hierarchy.

1. Safety: With a priority weight of 44.7%, safety is identified as the most critical criterion. This reflects the industry’s commitment to ensuring a safe working environment and minimizing risks.

2. Competency & Development: This criterion holds a priority weight of 29.8%, underscoring the need for contractors to possess and continuously develop their skills and competencies.

3. Workforce Management: Ranked third with a priority of 16.1%, effective workforce management is essential for productivity and operational efficiency.

4. Industrial Relation: With a weight of 9.5%, industrial relations, although important, are given less priority compared to the other criteria.

The analysis clearly highlights safety as the most critical criterion in contractor performance evaluation, consistent across all participants. This reflects the industry’s top priority of maintaining a safe working environment. Competency and development also emerge as significant factors, emphasizing the need for skilled and continuously improving contractors. Workforce Management and Industrial Relations, while important, receive relatively lower priorities, indicating that they are essential but secondary to safety and competency.

Detailing breakdown of criteria is as the following:

1. Safety (44.7%):

• Fatality: 19.3%

• TRIR (Total Recordable Incident Rate): 18.2%

• Safety Policy: 17.4%

• FRM (Fatal Risk Management): 37.5%

• Speed Limit Infraction: 7.6%

2. Industrial Relations (9.5%):

• ODS Ticket & Case Handling Time: 38.0%

• Reward & Punishment Policy: 26.3%

• MCU Attendance: 15.6%

• Grievance Mechanism: 20.1%

3. Competency & Development (29.8%):

• Job Description: 30.0%

• Competency & Grading System: 35.2%

• Training Program: 34.8%

4. Workforce Management (16.1%):

• Papuan Composition: 41.5%

• Female Composition: 9.4%

• Compliance with Regulation: 26.3%

• Adequate Human Resources Policy: 22.8%

The results indicate that safety is the most critical criterion, with a weight of 44.7%. This underscores the importance of ensuring that contractors adhere to strict safety standards to minimize accidents and enhance overall operational efficiency. The detailed breakdown within the safety criterion shows that FRM is particularly significant, accounting for 37.5% of the safety criterion.

Competency and development is the second most critical criterion, with a weight of 29.8%, highlighting the importance of ensuring that contractor employees are well-trained and competent in their roles. Within this category, the competency and grading system is the most significant factor, accounting for 35.2%.

Workforce management and industrial relations are also important, with weights of 16.1% and 9.5%, respectively. Within workforce management, Papuan composition is the most significant factor, indicating the importance of maintaining a diverse and representative workforce.

The consolidated global priorities chart (Fig. 7) reveals the weighted importance of various criteria based on group results. The criteria and their respective global priorities are as follows:

Fig. 7. Sub-criteria global weights summary.

1. Fatal Risk Management (FRM): At 16.8%, FRM is identified as the most critical criterion. This underscores the paramount importance of managing fatal risks to ensure the safety and well-being of all personnel involved in the project.

2. Competency & Grading System: With a priority of 10.5%, this criterion highlights the necessity of a systematic approach to assess and grade the competencies of contractors, ensuring that they meet the required standards.

3. Training Program: At 10.3%, the training program is crucial for continuous skill enhancement and development of contractors, emphasizing the need for ongoing education and training.

4. Jobs Description: This criterion holds an 8.9% priority, stressing the importance of clear and accurate job descriptions to define roles and responsibilities effectively.

5. Fatality: With a priority of 8.6%, preventing fatalities is a key concern, reflecting the critical need to ensure life safety in contractor performance.

6. Total Recordable Incident Rate (TRIR): At 8.1%, TRIR measures the frequency of recordable incidents, highlighting the importance of monitoring and reducing such incidents.

7. Safety Policy: This criterion, with a priority of 7.8%, emphasizes the establishment and adherence to comprehensive safety policies that guide contractor practices.

8. Papuan Composition : At 6.7%, this criterion reflects the importance placed on the inclusion of Papuan workers in the workforce, highlighting diversity and local representation.

9. Compliance with Regulation: With a 4.2% priority, compliance to regulation emphasizes adherence to legal and ethical standards, which is critical for maintaining lawful operations.

10. Adequate Human Resources Policy: At 3.7%, this criterion underscores the need for comprehensive and effective HR policies to manage the workforce efficiently.

11. ODS Ticket & Case Handling Time: This criterion holds a priority of 3.6%, reflecting the need for efficient handling of ODS tickets and cases to resolve operational disruptions swiftly.

12. Speed Limit Infraction: At 3.4%, this criterion addresses the enforcement of speed limits, which is crucial for preventing accidents related to speed violations.

13. Reward & Punishment Policy: This criterion holds a 2.5% priority, highlighting the importance of a balanced reward and punishment system to motivate and regulate contractor behavior.

14. Grievance Mechanism: With a 1.9% priority, this criterion underscores the need for effective systems to address and resolve complaints and issues raised by contractors.

15. MCU Attendance: With a priority of 1.5%, this criterion measures the contractors’ attendance at medical check-ups, which is important for monitoring their health and fitness for duty.

16. Female Composition: Also at 1.5%, this criterion addresses the representation of female workers, promoting gender diversity in the workforce.

The group results and individual priorities of the participants (Fig. 8) provide further insights into the evaluation process. The overall CR for the group is 2.0%, indicating high reliability. The group consensus is strong at 85.4%, with a relative homogeneity of 87.9%.

Fig. 8. Individual Priorities.

• Participant 1 prioritized FRM at 23.3% and Competency & Grading System at 18.2%, indicating a focus on critical safety and competency measures. Other significant priorities include Papuan Composition (7.0%) and Compliance with Regulation (7.0%), reflecting an emphasis on diversity and regulatory adherence.

• Participant 2 also emphasized FRM at 23.3% and Safety Policy at 25.7%, highlighting the importance of comprehensive safety policies. Jobs Description (14.4%) and Compliance with Regulation (3.4%) were also prioritized, underscoring the need for clear role definitions and regulatory compliance.

• Participant 3 showed a strong preference for FRM at 6.5% and Competency & Grading System at 9.6%. Other notable priorities include Jobs Description (9.6%) and Compliance with Regulation (1.7%), indicating a balanced approach to safety, competency, and regulatory adherence.

The analysis reveals that FRM is consistently the highest priority across all participants, emphasizing the critical importance of managing fatal risks in contractor performance. Competency & Grading System and Training Program also emerge as significant criteria, reflecting the need for continuous skill development and systematic assessment of competencies.

Jobs Description, Fatality, and TRIR are moderately prioritized, indicating their importance in defining roles, ensuring safety, and monitoring incidents. Papuan Composition and Compliance with Regulation also important, highlighting a focus on diversity to support sustainability of operation and maintaining lawful operations.

Criteria like Female Composition, Grievance, and Adequate Human Resources Policy, while essential, are given relatively lower priority. This suggests that while these factors are important, they are considered secondary to managing fatal risks and ensuring competency.

Pareto Analysis

The Pareto Principle, a heuristic derived from the observations of Vilfredo Pareto, has widespread application in quality control and management. Commonly known as the 80/20 rule, it suggests that a small number of causes typically drive a significant portion of effects. Organizations can optimize resource allocation by identifying and addressing the vital few causes responsible for most of the impact. By applying Pareto Analysis to these AHP-derived priorities, organizations can focus improvement efforts on the most impactful criteria. This ensures that resources are strategically directed toward the factors that exert the greatest influence on contractor performance, thereby maximizing efficiency and effectiveness (Kharubet al., 2022).

With the help of output from global weighted from AHP approach, sub criteria listed from the lowest score to higher score and cumulative of global weight calculated as shown in Table III.

Table III. Global Weight (GW) and Cumulative Global Weight (CGW)

No	Sub criteria	GW	CGW
1	MCU attendance	1.5%	1.5%
2	Female composition	1.5%	3.0%
3	Grievance mechanism	1.9%	4.9%
4	Reward & Punishment policy	2.5%	7.4%
5	Speed limit infraction	3.4%	10.8%
6	ODS ticket & Case handling time	3.6%	14.4%
7	Adequate HR policy	3.7%	18.1%
8	Compliance to regulation	4.2%	22.3%
9	Papuan composition	6.7%	29.0%
10	Safety policy	7.8%	36.8%
11	TRIR	8.1%	44.9%
12	Fatality	8.6%	53.5%
13	Jobs description	8.9%	62.4%
14	Training program	10.3%	72.7%
15	Competency & Grading system	10.5%	83.2%
16	FRM	16.8%	100.0%

A Pareto chart was generated, as shown in Fig. 9, and the 80% cut off from the chart was used to identify the vital few factors as distinct from the trivial many factors.

Fig. 9. Pareto chart.

The top criteria that contribute to approximately 80% of the total impact:

1. Fatal Risk Management (FRM): 16.8%

2. Competency & Grading System: 10.5% (27.3% cumulative)

3. Training Program: 10.3% (37.6% cumulative)

4. Jobs Description: 8.9% (46.5% cumulative)

5. Fatality: 8.6% (55.1% cumulative)

6. Total Recordable Incident Rate (TRIR): 8.1% (63.2% cumulative)

7. Safety Policy: 7.8% (71.0% cumulative)

8. Papuan Composition: 6.7% (77.7% cumulative)

9. Compliance with Regulation: 4.2% (81.9% cumulative)

From the cumulative percentages, the top nine criteria fall slightly over 80% but offer a clear picture of the major contributing factors. Applying the Pareto Principle to these priorities, Company can focus on the criteria that have the highest impact on contractor performance evaluation. This approach ensures that resources are allocated efficiently to areas that will yield the highest return on investment in terms of performance improvement.

Impact for Contractor Management

The author has conducted a mapping between the proposed criteria again the existing criteria used by the Contract Department. The result and the recommendation are summarized in Table IV.

Table IV. Mapping HR Key Criteria to Existing Criteria

No	Sub criteria	Study result	Existing parameter	Recommendation
1	Fatal Risk Management (FRM)	v	v	–
2	Competency & Grading system	v	Not available	Added
3	Training program	v	Not available	Added
4	Jobs description	v	Not available	Added
5	Fatality	v	Not available	Added
6	Total Recordable Incident Rate (TRIR)	v	v	–
7	Safety policy	v	Not available	Added
8	Papuan composition	v	Not available	Added
9	Compliance to regulation	v	(not in detail)	Added

The findings from the AHP analysis have several implications for contractor management in the mining sector:

• Enhanced Safety Measures: Mining remains one of the most hazardous occupations globally, with underground coal mines being especially notorious for their high accident rates. Fatalities often result from inadequate safety measures. Saleh (2011) identified insufficient safety training as a significant shortfall in safety protocols. Recent reports indicate that poor safety culture is a major contributor to most serious mining accidents. To enhance safety culture, it is crucial to strengthen safety knowledge, which includes understanding production processes and equipment, machine handling, safety awareness, skills and competencies, and self-protection training (Ismailet al., 2021). Emphasizing safety performance in contractor evaluations can lead to the implementation of more robust safety protocols and training programs, reducing the likelihood of accidents and enhancing overall workplace safety.

• Competency Development: Incorporating clear job descriptions, comprehensive training programs, and competency grading is essential. Clearly defined job descriptions that outline responsibilities, duties, and performance standards help identify competency gaps and inform necessary training interventions (Waturandang, 2024). The significance of job competency and grading in contractor companies, along with the development of employees and training practices, is also emphasized (Rahman, 2022). Focusing on employee competency can lead to better training and development programs, improving the quality of work and productivity of contractor employees.

• Workforce Diversity: Papuan composition and regulatory compliance are important aspects of workforce management. Strategies to increase the representation of Papuans in company, including in contractor companies, are thoroughly discussed by Saba (2024). These strategies involve optimizing the apprenticeship program for Papuans and expanding partnerships with government and training institutions. Yudhita (2024) also identifies Papuan composition as a critical factor in the vendor selection process, highlighting its role in developing a sustainable and effective workforce strategy in the mining industry. Ensuring compliance with regulations is crucial for the long-term sustainability of company operations (Rahman, 2022) (Guarnieri & Trojan, 2018). Ensuring a diverse workforce, particularly in terms of local and gender representation, can enhance social responsibility and community relations.

The study found that only two out of the nine recommended criteria are currently in use, leaving seven sub criteria yet to be implemented. The proposed solution is to implement these seven sub criteria in vendor performance evaluation. Given the complexity and time required for vendor companies to meet these criteria, it is suggested that the new parameters be implemented simultaneously, with a phased grace period for contractors to comply. The implementation timeline will be divided into two phases based on the time needed for vendors to address the criteria. Phase 1 is defined as less than 6 months, while Phase 2 spans from six months to one year. This classification considers the criteria’s complexity, the population to be covered, and the resources of both the contractor company and the organization.

Conclusion

The analysis conducted in this study identifies the key criteria for evaluating contractor performance at a mining company, with a focus on human resource management aspects. This study examines the importance of integrating AHP and Pareto Analysis into the contractor performance evaluation process. The findings reveal that the most critical criteria include Fatal Risk Management, Competency & Grading System, Training Program, Job Descriptions, Fatality, Total Recordable Incident Rate, Safety Policy, Papuan Composition, and Compliance with Regulations. These criteria were selected based on their significant impact on enhancing contractor performance and addressing the specific challenges faced by a company.

The study demonstrates that implementing these criteria will improve the contractor evaluation process by ensuring a more objective, fair, and comprehensive assessment. The prioritization of these criteria aligns with Company’s strategic goals of maintaining a safe working environment, fostering skill development, and promoting diversity within the workforce. By focusing on these critical areas, company can better manage contractor performance, reduce operational risks, and enhance overall productivity and safety.

The insights gained from this analysis underscore the need for a strategic and data-driven approach to contractor management. By leveraging AHP and Pareto Analysis, organizations can move beyond subjective evaluations and make informed decisions that enhance safety, competency, and overall project outcomes.