2 Assignments: PAPER – Construction Management & Small Business

13 SAFETY MANAGEMENT

(NOTES FROM THE BOOK AND REFERENCE) FORBES, L. H., & AHMED, S. M. (2020). LEAN PROJECT DELIVERY AND INTEGRATED PRACTICES IN MODERN CONSTRUCTION. IN SAFETY MANAGEMENT (2ND EDITION, PP. 377–382). ROUTLEDGE.

Introduction

The construction industry has a reputation for being unsafe, due to its historically high rate of occupational accidents (Bureau of Labor Statistics 2016–2017). In the year 2017 alone, construction accounted for 9.5% of all deaths and 3.1% of all disabling injuries/illnesses in private industry in the United States. But no industry has a good record, some are just worse than others. It is often claimed that the nature of construction work makes accidents inevitable, but that is an unacceptable position to take.

The relationship between safety management and lean management has been explored and researched. Results show that safety risks can be mitigated by integrating lean principles and tools in the production planning.

Developed by Toyota in the 1950s, lean in its essence is “a way to design production systems to minimize waste of materials, time, and effort in order to generate the maximum possible amount of value.” – Koskela et al. (2002, p. 221). Lean therefore aims to produce the best quality at the lowest cost with the shortest lead time while concentrating on best safety practices and highest morale among workers. These lean principles and techniques have been adapted in the construction industry as a new philosophy of production to improve its performance and reduce the considerable amount of waste that tends to exist within the industry. “Lean principle of not releasing defective or incomplete work into the process also guides us to take care of the safety issues as a real part of production and not just do things as a camouflage.” (Maki and Koskenvesa 2012). Therefore, safety in construction can improve using the lean concepts and principles.

In the context of lean construction, injuries and fatalities have consequences that work in opposition to a lean philosophy. While lean seeks to reduce or eliminate waste and to deliver more value to the customer, accidents have many negative consequences including lost work hours. Minor injuries may cause a temporary distraction to treat the affected individuals. Not only does an injured worker reduce the capacity of the work force, but other work crews generally lose additional time in the treatment of that individual. Serious injuries and fatalities inevitably cause major work stoppages and dampen workers’ morale as well as their productivity.

Safety management is a method of controlling safety policies, procedures, and practices within a company. It is currently being implemented by many construction companies to limit their liabilities and costs, thereby making them more competitive in the construction marketplace. Safety management is a dynamic process operating in a constant state of change. Therefore, the process must be constantly monitored and adjusted to achieve the desired goals.

Most of the accidents that occur on a job site could be prevented if contractors treated safety as a priority. Safety programs can help to prevent accidents with injuries and deaths at the job site, and these programs provide an attractive return on investment through higher-production rates, lower workers’ compensation premiums, and so on. They also improve a company’s reputation and provide motivation for the Labor force. The decision to implement and run a good safety program rests solely in the hands of a company’s top management. They are the only ones responsible for designing and implementing procedures to reduce accident rates.

The total cost of occupational fatal and non-fatal accidents in 2004 was $49.7 billion representing 10.72% of the total turnover of the construction industry. The total cost of occupational injuries/illnesses and fatality incidents can threaten the survival of a construction company in a highly competitive environment. For example, a company operating at a 4% profit margin would have to increase contract prices by $400,000 to pay for a $16,000 injury, such as the amputation of a finger.

Safety improvement begins with a systems-thinking approach, using a methodology that is similar to the approach of total quality management (TQM). In fact, existing safety management systems can be significantly improved with the adoption of core TQM principles and procedures. Weinstein (1997), recommends several applications of TQM principles that are helpful to occupational or work safety.

Construction site safety is an area of concern for employers of construction workers, this concern for safety is extended to the employees of subcontractors as well. The concern for safety has intensified in the past two decades, primarily due to the escalating costs of workers’ compensation insurance (WCI), the rise in the number of liability suits, the intensification of safety regulations, and the mandate by owners to address construction worker injuries. As a result, there has been a relatively steady decline in the incidence of fatalities and disabling injuries. An issue of particular concern is the attitude that

construction work is inherently unsafe, and a project’s design has no effect on safety. This attitude must be dispelled.

How safe is construction? According to the US Department of Labor, Bureau of Labor Statistics (BLS) during 1995 through 2017 there were 5,247,711 occupational injuries/illnesses among construction workers, representing approximately 9.03% of the total injuries/illnesses involving days away from work in the private sector as shown in Table 13.1.

Dividing the construction industry into three major divisions as per the North American Industry Classification System (NAICS Code), Table 13.2 represents the statistics for non-fatal incidents and Table 13.3 shows the statistics for fatal incidents recorded for General Building Contractors, Heavy Construction Contractors except Building Contractors, and Specialty Trade Contractors. The data indicate that specialty contractors accounted for the highest average incident rates; that is, 67.11% of all injuries/illnesses and 59.33% of all fatalities.

The BLS has reported that the average number of days away from work for construction workers caused by non-fatal occupational injuries was approximately 4.5 in 2004. The average number of injuries and illnesses per 100 full-time workers can be calculated using Equation 13.1 and is termed the Incidence Rate. In construction from 1995–2004, the average incidence rate is found to be 4.1. This indicates that about 1 of every 25 construction workers had an injury/illness during this period. For the entire private sector, the average incidence rate was approximately 3.0 for the same period, supporting the earlier finding that the accident rate in construction is higher than in other industries.

Cost of occupational injury/illness accidents The costs associated with fatal and non-fatal occupational accidents can be classified as economic costs and non-economic costs (Dorman 2000). Non-economic costs are associated with the deep human emotions that arise when life is unnecessarily shortened or impaired. It is hard to quantify these costs in numbers.

Many studies have been conducted to estimate the real cost of accidents for the construction industry. In 1979 the Department of Civil Engineering at Stanford University, under contract with the Business Roundtable (BR), found that accidents cost the construction industry $8.6 billion or about 6.5% of the $137 billion spent on industrial, utility, and commercial construction (Fullman 1984). The researchers estimated that adequate safety programs could reduce annual accident costs by approximately $2.75 billion. The probable cost of such programs would be about $86 billion, making them cost effective by a ratio of 3.2–1. Everett and Frank (1996) estimated that the cost of occupational accidents to the construction industry in 1994 was $31.94 billion, representing 11.9% of the total turnover of the construction industry in that year.

Direct costs Workers’ Compensation Insurance (WCI) premiums represent the greatest direct cost of accidents paid by any industry (Fullman 1984). The premiums can vary for each state and also among insurance companies. A contractor who is concerned about the high cost of such insurance premiums must recognize that these costs are directly related to each company’s safety records. Insurance companies are usually willing to give substantial discounts to contractors who maintain good safety records. These discounts are often higher than the cost of a good safety program (Wilson and Koehn 2000).

Other direct costs associated with an occupational accident in a construction company include: an increment in liability insurance premiums, replacement or repair of lost or damaged equipment, and loss of key personnel time (laborer, foreman, superintendent, project manager, and others). Worker’s compensation premiums come from the experience rate plans, based on the following formula: (13.2)

The base or manual rates are the average cost of accidents plus administrative costs and profit for insurers per $100 of straight time wages paid for each of 600 work classifications. The payroll units can be calculated by dividing an employer’s straight time direct Labor costs by $100. The experience modification ratio (EMR) of a company is based on its own accident records and is calculated by rating bureaus or advisory organizations. Depending on the frequency and severity of the injuries suffered by the contractor’s employees during a given year, the EMR can vary dramatically. Most states accept the EMR ratings provided by the National Council on Compensation Insurance (NCCI) but a few states have their own rating bureaus. The NCCI is a private corporation, created and funded by member insurance companies. California, Delaware, Hawaii, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Texas, and Wisconsin have their own government-run rating bureaus that are separate from the NCCI.

Direct costs are defined as the benefits paid to and on behalf of injured employees by WCI (Everett and Frank 1996). According to worker’s compensation data tabulated for Engineering News Record (ENR) by broker Marsh USA Inc., New York City, the national average premium for the three key crafts – carpenters, masons, and structural ironworkers per $100 payroll in the year 2004 was $23.74 (Bureau of Labor Statistics 2006).

In a report obtained by Everett and Frank in 1996 from the NCCI, the mean EMR for the 37 states was 96.3%. On an average, 25% of the total project costs were attributable to Labor.

Therefore: (13.3)

Where $463.6 billion is the construction volume of work in the year 2004 (Bureau of Labor Statistics 2006), 25% is the percentage of construction volume that is direct Labor, 23.74% is the average manual rate for the three key trades, and 96.3% is the mean EMR. However, the insurance benefits received by injured workers represent only about 65% of the insurance costs (Fullman 1984). Everett and Frank (1996) evaluated the BR report that established this percentage and they found that this value still remains the same (65/35).

Indirect costs Indirect costs of accidents in the construction industry are normally expressed as a function of the direct costs (Hinze et al. 2000). Everett and Frank (1996) estimated that the indirect costs are roughly double the direct costs; a research study at the Stanford University indicated that this ratio is 1.6 (Fullman 1984), and the Hinze and Applegate (1991) found this ratio to be approximately 4.2.

The indirect costs are all costs resulting from the injuries that are not covered through insurance coverage. Some indirect costs normally borne by a construction company are:

• 1Lost productivity: a. Job shutdown at the time of injury b. The injured worker’s reduced capacity upon return to work c. Coworkers at the time of the injury: watching and helping the injured d. Coworkers who are shorthanded following the injury e. Coworkers who must train a replacement worker f. Supervisor/management time hiring or retraining a temporary or permanent

replacement worker g. Management time lost in investigating and reporting the incident (to government,

insurance, and news media representatives) • 2Fines • 3Extra wage costs • 4Damaged equipment and the costs of repairing or replacement • 5Clean up • 6Lawsuits • 7Damage to the company’s image and reduced competitiveness • 8Reduced workers’ morale • 9Transportation costs • 10Cost to reschedule the work • 11Liquidated damages for rescheduling the work

On the other hand, lean has the goal to deliver successful projects by maximizing value to the project owners. Adapting the lean principles in construction can help reduce the overall cost of the project by reducing the number of accidents, wasted time and lost work days.