The Contractor's Compass - July 2022

FEATURE

The Economics of Construction Risk Management

…and the Human and Financial Ramifications of Managing versus NOT Managing Industry and Illness Risks and Exposures

by Robert Tuman, CCR Safety Consulting

Taken from a recent osha.gov fatality and catastrophe list (note that OSHA is reporting deceaseds’ names and ages)

• 4/10/22 Salena Williams (62) suffered fatal injuries in fall onto sidewalk

• 3/28/22 Margarito Ladezma (50) electrocuted by power lines while trimming trees

• 2/27/22 Timothy Harness (54) died in trench collapse

• 2/17/22 Paramjit Deol (66) died in fall from elevated conveyor line

• 1/28/22 Carolyn Brooks (83) asphyxiated after becoming entangled in drill bit

• 1/26/22 Samuel Martin (22) died in fall from roof

• 1/10/22 William Boyer (40) died in fall from rafters

These are but a few of the thousands of construction-related fatalities.

From osha.gov: “Ten most frequently cited OSHA violations (FY 2021) Note the Estimated Cost per Employee to minimize the probability of a fall, lung disorder, ladder accident, chemicalrelated illness, scaffold accident, fall protection training, electrical shock or electrocution, eye and face injury, forklift training, and machine guarding.

1. Fall protection, construction ($60 for safety harness. Guardrail and covers for roof and other floor openings extra)

2. Respiratory protection, general industry (Half-face cartridge filter respirator: $36. Medical screening and fit testing approximately $125)

3. Ladders, construction (+/- $50 per employee for ladder safety training)

4. Hazard Communication, general industry (+/- $50 per employee for Hazard Communication/Globally Harmonized Systems training)

5. Scaffolding, construction (+/- $750 to train employees as scaffold “Qualified Persons” who build scaffolding and scaffold “Competent Persons” who inspect scaffolding)

6. Fall protection training, construction (+/- $50 per employee)

7. Control of hazardous energy (Lockout/Tagout), general industry ($100 for Lockout/Tagout station equipped with locks and tags, +/- $50 per employee for Control of Hazardous Energy- Lockout/Tagout training)

8. Eye and face protection, construction ($1 each for safety glasses- volume discount. $20 per employee for face shield)

9. Powered industrial trucks (construction forklifts and warehouse-type forklifts), general industry (+/- $100 per participant for Powered Industrial Truck training and certification)

10. Machinery and machine guarding, general industry (+/- $50 per employee for machine guarding and Lockout/Tagout training)

To get a better idea of the costs of construction-related injuries and deaths vs. the costs to contractors to reduce the probability of accidents and injuries, here are statistics from the National Safety Council’s 2020 “Work Injury Costs” (https://injuryfacts.nsc.org/work/ costs/work-injury-costs)

National Work Injury Costs

• Cost total--- $163.9 billion

• Cost per worker---$1,100

• Cost per death---$1,310,000

• Cost per medically-consulted injury---$44,000

Time Lost Due to Work-Related Injuries Days Lost:

• Total---99,000,000

• Total due to injuries---65,000,000

• Total due to injuries in prior years---34,000,000

• Total in future years from 2020 injuries---50,000,000

Indirect Costs of Work-Related Injuries

Interruption of work and loss of productivity: “Bob, can you come down. We had a bad accident.” My client, a large concrete contractor pouring 4 million square feet of concrete at a huge shopping mall under construction, had 7 guys go down when a deck collapsed. The investigation found that the ironworkers had not fully connected several “seats” holding the corrugated metal deck to the first floor load-bearing reinforced concrete columns. When the laborers started to pour, the weight of the wet concrete caused one end of the deck to collapse. Fortunately, no one was severely injured, but employees sustained cuts and bruises when they slid off the deck. EMT’s arrived within minutes, followed several hours later by OSHA Compliance Officers who camped out for 5 days investigating the accident. Local building officials joined the investigators, as did the insurer’s investigators, owner and General Contractor’s representatives, and a large area of the jobsite was closed down for at least a week, as all wanted to ensure that all “seats” were adequately secured. This created a chill, and increased the anxiety level for all workers. The owner and General Contractor were forced to extend the occupancy date at least 3 months, taking it past the busy Christmas shopping season.

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Lost opportunities and grief from the loss of a valued employee: At an OSHA Roundtable of Eastern Massachusetts monthly meeting, the Safety Director for a large 100+ year-old excavation and trenching contractor got up to give her “Lessons learned”. She related being called to the scene of a fatal accident involving the Superintendent on a large Boston excavation project. A 30’ wide by 24’ high existing wall which the owner wanted to keep fell over and on to the Superintendent, crushing him. The Superintendent, a 30-year employee, had worked his way up, starting as a laborer. He was a skilled manager, respected and liked by his team, project owners, and General Contractors, and of course by his employer. What a loss. Impossible to quantify what he meant to the company.

Post-accident “safety stand downs”: Many of you have participated in “safety stand downs” after accidents and when a General Contractor wants to make a point- such as when subcontractors’ workers are observed not complying with the General Contractor’s safety guidelines- i.e. poor housekeeping, spotty compliance with required PPE, unsafe operation of equipment such as when a rough terrain forklift operator hit and damaged a main electrical panel, knocking out the power to the entire jobsite.

A client’s employees’ perspective: Safety stand-downs are good reminders, but we are already doing what we have to do to keep ourselves safe. A waste.

OSHA citations, fines and legal fees: There are multiple costs incurred when a contractor is cited by Cal OSHA or OSHA- management time spent strategizing how to best respond to OSHA, time spent at Informal Conferences and administrative hearings, time spent developing, implementing, executing and sustaining corrective actions, legal fees, and lost business due owners’ and General Contractors’ negative perceptions of subcontractors’ attention (really inattention) to safety. Just a few keystrokes (OSHA.gov and “Establishment search”) and there before your eyes is the contractor’s entire OSHA rap sheet.

For the past number of years, owners

and large companies have engaged outside companies to pre-qualify contractors. This pre-qualification process requires contractors to complete extensive questionnaires, upload their safety programs and practices, their experience modification rate, their “loss runs”, their Cal OSHA or OSHA history, and prove that they are executing their safety programs and practices. Having now completed numerous questionnaires and uploaded dozens of safety programs, I can tell you with certainty that this is a time-consuming, expensive process which can tie managers up for weeks. And forget about working for that large General Contractor or owner if your “mod” is above its cutoff point, if you can’t substantiate that you are executing your safety programs and practices, and/ or you have had multiple recent OSHA “serious”, “repeat” or “repeat and willful” high gravity citations.

Competitive disadvantage when bidding work: Owners and General Contractors unfortunately perceive that history might or will repeat itself, and judge contractors using historical data and their execution or lack thereof of generally-accepted and exposurespecific (i.e. roofing contractors and fall protection) safety practices. If trend lines and historical data (i.e. experience modification rates, injury loss runs), show inattention to safety, owners and General Contractors shy away. For example, a large concrete contractor was not even allowed to toss his hat in the ring on a $10 million concrete construction contract because of a 1.21 experience modification rate. The owner and General Contractor had decided to permit only subcontractors with an experience modification rate of 1.05 or lower to bid on work. No ifs, ands, buts, or letters explaining why the “mod” was 1.21. Too bad, as many of the concrete contractor’s workers’ compensation claims were questionable, had been denied, and were in litigation.

Experience modification rate increase: The dreaded “mod” or “xmod”. Like love and marriage (I’m kind of oldfashioned), your mod and workers’ compensation premium will increase following frequent and/or severe injuries. For example, prior to a freak accident involving an employee who fell off

his ladder while trying to catch a tool that slipped out of his hands, a client’s experience modification was .62, down from 1.37. Due to this one claim, the client’s experience modification rate increased to .92 for each of the next three years.

Damage to reputation: “It is like having a big red A on your back”, a client told me after they were told they couldn’t bid on a big project- due to their unfavorable loss experience and high experience modification rate. Many of their claims were questionable, had been denied, and were in litigation. I suggested that the client write the General Contractor, providing details on each questionable claim. I even drafted a letter for their review. We sent it to the General Contractor, who replied “Sorry, but we’re sticking to our 1.00 mod cutoff”. The client resigned itself- “We have to bid on work with General Contractors who don’t ask too many questions”.

What can you do?

The media, especially after dramatic events, tell us the personal and financial ramifications of NOT preemptively managing risk, but seldom describe success stories. The following is one. It describes how one contractor effectively used risk management tools in its efforts to be injury-free.

Five years ago, a large electrical contractor called: “Bob, our client, a large utility, just called to tell us they will be terminating the contract unless we complete its required safety questionnaire right away. Can you help?”

In reviewing their workers’ compensation injury reports and loss run, it was apparent that numerous preventable accidents and a 1.41 experience modification rate were the source of the utility’s concerns. Further, the contractor’s inconsistent attention to safety had resulted in the temporary and permanent loss of valued employees due to injury and disability, $100,000+ in additional premium, and given the introduction of 1.00 or below “mod” cutoffs, disqualification from bidding on large projects.

The owners agreed to elevating safety and accident prevention to be on par with its corporate priorities- employee retention and satisfaction, quality,

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