Workers Comp

Cost-Benefit Analysis for Accident Prevention in Construction Projects

Elias Ikpe, Ph.D., M.ASCE1; Felix Hammon, Ph.D.2; and David Oloke, Ph.D.3

Abstract: Construction is the most dangerous land-based work sector in Europe and the United States The cost of accidents has received much attention in the recent past, and online interactive tools were developed to assess the cost of accidents to organizations. Online tools and other sources of information on costs of accidents in the construction industry were a useful development but failed to support the decision- making process in regard to construction health and safety measures. A cost-benefit analysis (CBA) methodology is presented that would enable contractors to assess the true cost of accidents prevention and the associated benefits of accident prevention as part of pre- and postcontract project evaluation. The research investigated the cost and benefit of accident prevention, with a view to drawing attention to the economic consequences of effective/ineffective management of health and safety by contractors. A quantitative research methodology was employed in investigating these costs and benefits within the UK construction industry. The results of ratio analyses indicate that the benefits of accident prevention far outweigh the costs of accident prevention by a ratio of approximately 3∶1. Further, the results demonstrate that for every £1 spent on accident prevention, contractors gained £3 as benefits. The results also show that small contractors spend relatively higher proportions of their turnover on accident prevention than medium- and large-sized contractors and that small- and medium-sized contractors gain relatively higher proportions of their turnover, in total, as benefits of accident prevention than large contractors. It is con- cluded that the CBA method can provide a guide to contractor’s decision making in regard to accident prevention. When acted upon, the method has the potential to contribute to a reduction in costs, deaths, and injuries in the UK construction industry and possibly in other areas internationally. DOI: 10.1061/(ASCE)CO.1943-7862.0000496. © 2012 American Society of Civil Engineers.

CE Database subject headings: Accidents; Safety; Construction industry; Benefit cost ratios.

Author keywords: CBA; Accident prevention; Construction industry.

Introduction

The construction sector is defined as one that embraces the con- struction materials and products; suppliers and producers; building services manufacturers; providers and installers; contractors, sub- contractors, professionals, advisers and construction clients; and those organizations that are relevant to the design, building, oper- ation, and refurbishment of buildings [Department of Trade and Industry (DTI) (2007), now Department for Business Enterprise and Regulatory Reform (BERR)]. Construction is hugely important to the economy of most developed and developing nations. For ex- ample, in the UK the industry represents some 10% of the gross domestic product (GDP) and employs 2.2 million people with out- put at £104 billion [Health Safety Executive (HSE) 2005; Ferret and Hughes 2007; BERR 2008].

The figures quoted previously are significant and underline the industry’s real importance. This industry is concerned with the provision of a country’s essential infrastructure and back- bone. On the basis of the standard industry classification, this essential infrastructure includes: water, roads, bridges, airports, and buildings including schools, hospital retail developments, and housing, which are all designed and produced by the con- struction industry. Although in the delivery of these projects, the construction industry of many developed countries and devel- oping countries has produced a worldwide reputation for quality, it was also noted that it remains one of the most dangerous industries (Suazo and Jaselskis 1993; Ferret and Hughes 2007; Kheni et al. 2010).

In the United States, there were 1,225 fatal occupational injuries in the construction sector in 2001 with an incidence rate of 13.3 per 100,000 employed workers [Bureau of Labor Statistics (BLS) 2002]. For the same year, the construction industry experienced 481,400 nonfatal injuries and illnesses at a rate of 7.9 per 100 full-time workers in the industry. Construction has approximately 6% of U.S. workers, but 20% of the fatalities—the largest number of fatalities—reported for any industry sector, although construc- tion safety and health management in the United States has im- proved significantly following the Occupational Safety and Health Act of 1970 (Hallowell and Gambatese 2009). In the United States and Australia, a major responsibility of the occupational health and safety (OHS) professional is to keep company directors and managers aware of the issues that they face in regard to OHS principles and legislation (Paton 2008). However, in Europe, it has been shown that this is where they are lacking. Nearly half of senior managers and company directors do not have an up-to-date

1Researcher, Univ. of Wolverhampton, School of Engineering and Built Environment, Wulfruna Street, Wolverhampton, West Midlands WV1 1SB, United Kingdom (corresponding author). E-mail: [email protected]

2Researcher, Univ. of Wolverhampton, School of Engineering and Built Environment, Wulfruna Street, Wolverhampton, West Midlands WV1 1SB, United Kingdom. E-mail: [email protected]

3Researcher, Univ. of Wolverhampton, School of Engineering and Built Environment, Wulfruna Street, Wolverhampton, West Midlands WV1 1SB, United Kingdom. E-mail: [email protected]

Note. This manuscript was submitted on May 3, 2010; approved on October 11, 2011; published online on July 16, 2012. Discussion period open until January 1, 2013; separate discussions must be submitted for individual papers. This paper is part of the Journal of Construction Engineering and Management, Vol. 138, No. 8, August 1, 2012. ©ASCE, ISSN 0733-9364/2012/8-991–998/$25.00.

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understanding of their health and safety-related duties and respon- sibilities (Paton 2008).

To be able to compete with the best in the world market, to at- tract the best talent, and to have an attractive image and reputation, the well-being of the industry is essential. For this reason, it is in- cumbent on employers and other duty holders to ensure that the health and safety and general well-being of workers within the industry are safeguarded at all times. By any relevant measure, con- struction is a not a safe industry (Everett et al. 1996; Gyi et al. 1996) and as a result has gained an unenviable reputation in relation to the health, safety, and welfare of its workers (Egan 1998; Bomel 2001; Edwards and Nicholas 2002; HSE 2005; Paton 2008).

Literature Review

To reduce and eventually eliminate construction accidents, re- searchers have explored techniques implemented by different con- struction parties to realize zero-injury objective (Huang and Hinze 2006). It is observed from the studies below that investment in health and safety measures had been neglected in the past, and this has had a significant impact on safety management in the context of construction operation and performance. The study concluded that investment in health and safety measures was neglected in the past, and this has had a significant effect on safety management in the context of construction operation and performance.

Lancaster et al. (2003) conducted a study for HSE to assess whether the costs of compliance with regulations were disappropri- ate across different sizes of organization, what the nature of expenditure was, and how effective the activities were in improving health and safety performance. The research identified that costs of compliance were disappropriate across different sizes of organiza- tion. The finding from the study indicated large contractors, with greater than 250 employees, reported considerably less expenditure for accidents compared with small and medium organizations of less than 250 employees. The study further identified main moti- vators underlying the development of health and safety systems as legal obligation (particularly large contractors), and the main frus- trations were time restriction, costs, lack of information, and skill.

Tang et al. (2004) examined costs of safety incurred by building contractors on sites in Hong Kong and used a mathematical model by dividing the total equivalent day loss by the total staff-hour. Tang et al. (2004) provided a method for safety cost optimization and presented the relationships as curvilinear and labeled the two relationship curves as safety investment ratio (SIR) and accident costs ratio (ACR). The ratio aspect was introduced so that both costs could be compared in their percentage. The underlying assumption, that an investment in personnel is associated with im- proved performance, is central to Tang et al. theory. However, Tang et al. (2004) acknowledge intangible benefits could be realized through increased investment in safety.

The HSE (2005) developed online interactive tools for contrac- tors to assess the cost of accidents to their organizations. Although with a potential to provide good guidance, the tools were not de- tailed enough to specifically assist contractors and designers in de- veloping effective and efficient health and safety management systems. The tools currently available lack the ability to utilize con- struction information relating to health and safety, which could en- able the identification of benefits to contractors of improved health and safety performance. Without the identification of benefits alongside the costs of accident prevention, consideration of the eco- nomic case for accident prevention becomes impossible.

Although these previous costing studies may have added valu- able insight into different costs of accident, there is little work in the current literature in which costs of accident prevention and benefits

of accident prevention can be compared to choose the best option. Given the response from business surveys, which indicated that 10% of UK businesses would be more inclined to do more for health and safety management if they were provided with evidence business benefits would arise from better health and safety manage- ment (Shearn 2003), it can be argued that the dimension of benefits, which has been largely overlooked in past research, represents an- other key frontier in research in which health and safety knowledge can be improved. If construction businesses are more likely to do more for health and safety management if the benefits of accident prevention are brought to their awareness, then there is no logical reason why a gap in knowledge on the benefits of accident preven- tion should exist. It is against this background that a CBA approach is conceived as a means of complementing current efforts. It is sug- gested that CBA can help determine if the benefits of accidents prevention outweigh the costs of accident prevention.

A useful framework that facilitates the investigation of benefits within the context of the costs expended to secure those benefits is the CBA framework. It is possible to integrate these elements into a framework that theoretically reflects the dependency of any poten- tial benefits on the measures of accident prevention actually imple- mented, as shown in Fig. 1. The framework in Fig. 1 highlights the interdependencies that exist between the costs of accidents and the costs of accident prevention [which according to Fellows et al. (2002) together constitute the cost of health and safety] and as well as the benefits of accident prevention. The figure suggests inverse relationships between accident costs and prevention costs and be- tween accident costs and benefits whereas there is a positive rela- tionship between prevention costs and benefits.

Costs of Accident

The costs of accident (direct and indirect) arise from the occurrence of accidents, despite the fact that safety measures were in place. The cost of accidents can be understood by contractors and repre- sents a tangible measure that can be related to project financial ac- counts and both the income statement and balance sheet of a contractor (Tang et al. 2004; Booth and Panopoulos 2005). The costs of accident also affect the workers and society, as illustrated in Table 1. Thus, this category of cost is very often at the fore ground of considerations of the costs of health and safety.

Costs of Accident Prevention

The costs of accident prevention are represented by the money ex- pended by contractors to prevent accidents, which are forgone to generate benefits. The costs of accident prevention are not normally included in the project cost and would, therefore, be additional ex- penses for contractors. The costs that are associated with accident

Prevention Costs

A cc

id e

n t

C o

st s

B e

n e

fits

Benefits Accident

costs

Fig. 1. Relationships between health and safety costs and benefits [adapted from Fellows et al. (2002) and Tang et al. (2004)]

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prevention include first aid facility, personal protective equipment (PPE), safety training, safety promotion, safety personnel (Everrett et al. 1996; Tang et al. 2004; Oxenburgh and Marlow 2005). It is important that all of these costs of accident prevention are taken into account.

A distinction must be made between the costs of accident and the costs of accident prevention. The costs of accidents result after the occurrence of accidents and the costs of accident prevention are those which are incurred as a result of an emphasis placed on safety measures (Tang et al. 2004). However, when undertaking a CBA of accident prevention, the relevant costs to consider are the costs as- sociated with the preventative measures implemented by contrac- tors to eliminate accidents or minimize their effects. Therefore, the emphasis is placed on accident prevention costs.

Benefits of Accident Prevention

Benefits can be gained by contractors in reduced fatalities, major injuries and ill health through prevention of accident occurrences in the construction industry (Brent 2003). According to Shearn (2003), Lancaster et al. (2003), HSE (2005), and Ferret and Hughes (2007), these benefits can be perceived to offer both direct and indi- rect implications for the construction company’s bottom line, as shown in Table 2. It is suggested that when contractors are aware of these benefits of accident prevention, it may encourage them to spend more on health and safety issues.

The construction industry is definitely a business and accidents affect the bottom line (Howarth and Watson 2009). However, con- tractors need to be convinced of these business benefits in their decision making to invest more on health and safety measures. It may, therefore, be argued that to demonstrate these benefits, it would be useful to undertake a CBA of accident prevention by using ratio analysis within the context of current approaches for delivering construction projects.

Size of Contractors

Generally, there are three main categories of contractors when classified by size. These are small, medium, and large contractors (Lancaster et al. 2003; DTI 2005). The DTI ( 2005), now known as the BERR categorize organizations as small (< 50 employees), medium (50–249 employees), and large (> 250 employees), as shown in Table 3. The contractors within the three categories are civil engineering, building, building and civil engineering, spe- cialist subcontractors, demolition, house builder, roofers, and others.

According to Lancaster et al. (2003), each of these organizations implements health and safety measures in a different way.

Research Methodology

The research adopted a quantitative approach to investigate the costs and benefits of accident prevention. Naoum (1998), Creswell (2003), Anderson (2004), and Punch (2005) described the quanti- tative research as an inquiry into social or human problem on the basis of testing a theory composed of variables, measured with numbers, and analyzed by using statistical procedures to determine whether the predictive generalization of the theory holds true.

Table 1. Costs of Accidents Affected by Stakeholders

Stakeholders Nontangible Tangible

Worker Pain and suffering, moral and psychological

suffering (especially in the case of death and

permanent disability)

Loss of salary, reduction of professional capacity, loss

of time (medical treatment), site compliance of health,

and safety issues

Family and friends

of the affected worker

Moral and psychological suffering, medical

and family burden

Financial loss, extra costs, loss of time to take care of

the injured worker

Coworkers Bad feeling, worry, or panic (in case of serious

or frequent accidents)

Loss of time, increase of workload, and training of

temporary staff

Employer Bad reputation, litigation cost, insurance cost,

and compensation cost

Decrease in production; damages to machinery,

equipment, and material; quality losses; recruitment

and training of new staff; increase of production costs;

increase of insurance premium; administrative costs;

litigation costs; and absenteeism

Society Reduction of the human labor potential, and

reduction of the quality of life

Loss of production, increase of social costs, medical

treatment and rehabilitation costs, and decrease of

standard of living

Note: Developed from HSE (2006) and Ferret and Hughes (2007).

Table 2. Direct and Indirect Benefits of Accident Prevention

Direct benefits Indirect benefits

Savings in insurance premium Productivity improvement

Saving on medical expenses Saving on sick pay

Saving on compensation claim Saving on working day lost

Saving on damage materials Savings in lost time

Saving on litigation Saving on cleaning/waste disposal

Saving on accident investigation Saving on hiring of tools and plants

Saving on safety training Saving on image improvement

Savings in loss of life Staff morale

Job satisfaction

Note: From Shearn (2003), Lancaster et al. (2003), HSE (2006), and Ferret and Hughes (2007).

Table 3. Size of Contractors

Type of organization Number of employees

Small 0–49 Medium 50–249 Large > 250

Note: From Lancaster et al. (2003) and DTI (2005).

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Naoum (1998) provided an example of quantitative methods as par- ticularly important in businesses in which managers often talk about improving productivity, increasing return on investment, scheduling production, forecasting demand, and increasing cus- tomer service. Another major factor that influenced the choice of the quantitative survey strategy was the large and diverse nature of the research population (contractors) across the United Kingdom.

Design of the Survey Questionnaire

The questionnaire survey was designed primarily to elicit informa- tion from health and safety managers and similar personnel on costs and benefits of accident prevention so that the relationship between them could be explored by using appropriate statistical techniques. These personnel were chosen because they are responsible for health and safety performance in the construction industry and are most knowledgeable on issues concerning health and safety performance.

The questionnaire consisted of multiple choice questions (both dependent and independent variables) requiring ticked-box responses and open-ended questions. In the questionnaire, contrac- tors were asked: to estimate how much their organizations spent on health and safety measures, to estimate the cost incurred by their organizations after all accidents, and to estimate the total benefits accrued to their organization as a result of the actions taken to pre- vent accidents. Within the scope of research, it was not possible to consider social costs, such as death, pain and suffering of the af- fected worker, and other costs or damage associated with human feelings. These costs are significant losses to contractors. The re- search was limited to financial benefits of accident prevention. It was not also possible to consider social benefits, such as savings in fatality, pain and suffering, job satisfaction, staff morale, and stress, so as to provide further evidence to guide contractors in their de- cision making on health and safety measures. Benefits from such a research could be wide ranging. Steps were taken to ensure that the designed questionnaire was respondent-friendly to increase the rate of response, which is widely recognized as particularly low in construction management research (Xiao 2002; Ankrah 2007).

Data Collection

To encourage a good response, the questionnaires were mailed out with an accompanying personalized and signed cover letter and a self-addressed envelope. Another step that was taken to maximize response involved mailing out a second set of questionnaires to all the nonrespondents 3 weeks after the first mail shot, as recom- mended by Creswell (2003). This was undertaken in the same way and manner as the first mailings were carried out but making a special appeal to them this time for their assistance. The data col- lection exercise was conducted from September 1, 2007 to January 30, 2008 and was followed by data analyses. The sample of re- spondents used in the survey was drawn from a database of con- tractors listed in the U.K. Kompass (2006) register. A total of 500 (small 35% n ¼ 175, medium 35% n ¼ 175, and large 30% n ¼ 150) were selected randomly across the United Kingdom. With randomization, a representative sample from a population provides the ability to generalize to a population (Babbie 1990). In addition, the exact number of contractors (population size) in this research is large and unknown. The mathematics of probability proves that the size of the population is irrelevant and can be ignored when it is large or unknown (Cheng 2008). Population size is only likely to be a factor when working with a relatively small and known group. This means that a sample of 500 is equally useful in examining

the opinions of a population of 15,000,000, as it would a population of 100,000 ibid. (see Cheng 2008).

Response Rate

A total of 79 questionnaires were received from the target sample representing a 15.8% total response rate. From the results of the survey, 33 (42%) represented response from small contractors, fol- lowed by 25 (approximately 31%) large contractors, and 21 medium contractors (approximately 27%). It was reported in Takim et al. (2004) that the response rate norm for postal questionnaire surveys is 20–30%. Other sources that support this view include Black et al. (2000), who reported a response rate of 26.7% for a questionnaire survey conducted, stating that response rates in this region in construction surveys are not unusual at all. Although the response rate obtained in this survey appears to be low compared with the standard response rate norm for a postal questionnaire, indeed, lower response rates in the region of 14.7% (Soetanto et al. 2001) were described as the normal for comprehensive question- naires. Sutrisna (2004) even reported a response rate of 8.8%, and Ankrah (2007) achieved a response rate of combined pilot and main survey of 15.42%. Owing to the sensitive nature of the research, a response rate of 15.8% can be considered adequate.

Ratio Analysis

To obtain insight into costs and benefits, the basic data were con- verted into ratio analysis. The ratio aspect was introduced so that both costs and benefits of accident prevention could be compared as a fraction or percentage (Tang et al. 2004). Pizzey (1994) de- scribed ratio as a comparison between two different things or be- tween one and another that can be expressed as a fraction or a percentage. Relating this to the construction health and safety con- text, different sizes of contractors expend different amounts on ac- cident prevention and derive different levels of benefits from these expenditures. The ratio was adopted to provide a uniform basis for comparing the costs and the benefits of accident prevention across the three sizes (small, medium, and large) of contractors when turn- over was taken into account.

The ratios were calculated by dividing the turnover by the relevant costs or benefits as follows (see Blaikie 2003):

R ¼ T Yi

where R = ratio; T = turnover; and Yi ¼ ith cost or benefit. This approach was applied to the data to establish the compar-

ative economic costs and benefits of accident prevention across the various categories of contractors.

Findings

Costs of Accident Prevention

From the median values shown in Table 4, small contractors spend £1.00 out of every £143.87 (see column 2) turnover (0.69%), whereas medium and large contractors spend identical proportions of £1.00 out of every £170.22 (see column 3) (0.59%) and £241.96 (see column 4) (0.41%) turnover, respectively. It can be inferred from these results that small contractors spend relatively higher proportions of their turnover, in total, on accident prevention than medium and large contractors, and medium contractors spend a

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higher proportion of their turnover, in total, on accident prevention than large contractors.

There is widespread belief that large contractors spend more on accident prevention. From Table 4, it is indicated that large contrac- tors spend more on accident prevention than the medium and small contractors because of their size but not as a ratio of turnover than medium and small contractors. The findings on their relative expenditures (as a direct proportion of turnover), however, appears to contradict this belief. Although in the actual expenditure, large contractors spend more than medium or small contractors but not as a ratio of turnover, clearly small contractors are spending more (as a proportion of their turnover) on accident prevention than medium and large contractors, with the large contractors spending the least.

What is further evident on Table 4 is that different company size categories of contractors place similar emphasis on the different measures required for accident prevention. For instance, all three categories of contractors (small, medium, and large) spend higher proportions of their turnover on safety training and personnel sala- ries than PPE, first aid facilities, and safety promotion. This may indicate an awareness or belief among contractors of all sizes that safety training and safety personnel are the two most effective mea- sures for accident prevention. This seems to suggest that the levels of awareness of hazards, risks, accident prevention strategies, and the personnel to monitor safety are considered by contractors to be most critical to accident prevention on construction projects. There is merit to this conclusion given the knowledge that most accidents occur as a result of human error (see Aston 1998; Abdelhamid and Everret 2000), with the role of training to raise consciousness so that human error can be minimized and the role of personnel to monitor the activities of workers and conditions onsite so that haz- ards and potential human error can be identified early and mini- mized. The least proportion of turnover is spent on first aid facilities and safety promotion. Perhaps this may reflect the belief that if accidents are prevented in the first instance, there would be no need for first aid facilities and that with the right training pro- vided there is little need for safety promotion, which will then just be provided to supplement the training.

Direct Benefits of Accident Prevention

Table 5 summaries the values of the turnover to direct benefit ratios by size of companies.

From Table 5, across the sample, out of every £114.34 turnover, £1.00 (0.87%) represents a total direct benefit of accident preven- tion. Comparatively, £1.00 out of every £57.00 turnover (1.75%) represents the total direct benefits gained by small contractors,

whereas medium and large contractors gain a total direct benefit of £1.00 out of every £55.00 (1.82%) and £190.00 (0.53%) turn- over, respectively. From these results, small and medium contrac- tors gain relatively greater direct benefits in proportion to their turnover than large contractors. This finding is consistent with their relative expenditures on accident prevention. Looking closely at the individual direct benefit variables, it can be observed that whereas small and medium contractors gain relatively greater direct benefits in proportion to their turnover than large contractors for the vari- ables savings in insurance premium, productivity improvement, compensation claims, medical expenses, and safety training, the converse is true for damaged materials, litigation costs, and acci- dent investigation in which medium and large contractors derive greater benefits than small contractors. Perhaps it may be indicative of the fact that the costs associated with these variables in the event of an accident are similar regardless of the size of contractors and therefore, represent a smaller proportion of turnover for medium and large contractors than small contractors.

From Table 5, overall (and even within the three categories of contractors), the greatest direct benefits are in the three areas of productivity improvement (504.00 or 0.2%), compensation claim savings (800.00 or 0.13%), and savings on medical expenses (800.00 or 0.13%). This suggests that although very often the em- phasis is on insurance premiums (Ferret and Hughes 2007), it ap- pears that overall, the greatest savings are rather on productivity improvement, compensation claims savings, and savings on medi- cal expenses. The direct benefit profiles across the three categories of contractors are fairly similar, implying that this finding is appli- cable regardless of size.

What is further evident from Table 5 is that savings on damaged materials contribute the least to overall direct benefits. The median turnover to savings on damaged materials ratio is 5,000.00, imply- ing 0.02% of turnover. This is not surprising and may be indicative of the fact that not all accidents result in damaged materials, mean- ing that there is less scope for savings in relation to damaged materials when accidents are prevented.

Indirect Benefits of Accident Prevention

Table 6 summaries the median values of the turnover to indirect benefit ratios by size of companies.

From Table 6, across the sample, out of every £833.00turnover, £1.00 (0.12%) represents a total indirect benefit of accident preven- tion. Comparatively, £1.00 out of every £833.00 turnover (0.12%) represents the total indirect benefits gained by small contractors, whereas medium and large contractors gain a total indirect benefit

Table 4. Costs of Accident Prevention Ratio

Contractor T∕Yfirstaid T∕YPPE T∕Ypromotion T∕Ytraining T∕Ypersonnel T∕Ytotal cost

Small 5,000.00 5,000.00 5,000.00 454.59 454.59 143.87

Medium 3,273.02 1,454.68 3,273.02 600.01 600.01 170.22

Large 3,333.39 2,100.04 3,333.39 800.00 800.00 241.96

Total 5,000.00 2,100.03 5,000.00 600.01 600.01 205.97

Table 5. Direct Benefits of Accident Prevention Ratio

Contractor T∕Yinsurance T∕Yproductivity T∕Ycompensatio T∕Ymedical T∕Ydamage T∕Ylitigation T∕Yinvestigation T∕Ytraining T∕Ytotal di benefit

Small 454.59 454.59 454.59 454.59 5,000.00 5,000.00 5,000.00 454.59 57

Medium 800.00 504.00 315.00 600.01 3,273.02 3,273.02 1,454.68 600.01 55

Large 3,333.39 2,100.04 800.00 3,333.39 3,333.39 3,333.39 3,333.39 3,333.39 190

Total 1,454.68 504.00 800.00 800.00 5,000.00 2,100.04 3,273.05 1,454.68 114.34

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of £1.00 out of every £643.00 (0.15%) and (£939.00 0.11%) turn- over, respectively. From these results, medium contractors gain rel- atively greater indirect benefits in proportion to their turnover than small and large contractors. This finding is consistent with their relative expenditure on accident prevention.

From Table 6, overall (and even within the three categories of contractors), the greatest indirect benefit is in the area of company image improvement (£500.00 or 0.2%). Following this, the two areas that benefit the most are working days saved (£1,454.00 or 0.10%) and savings on sick pay (£1,454.00 or 0.10%). This find- ing confirms the suggestion in HSE (2005) and Ferret and Hughes (2007) that improvement in company image is very often the great- est indirect benefit a company can gain from accident prevention. Beyond that, however, there are more benefits also to be gained from working day savings and savings on sick pay. Similar to the direct benefits, the indirect benefit profiles across the three cat- egories of contractors are fairly similar, implying that regardless of size, similar indirect benefits would be gained across the various measures.

From Table 6, savings on cleaning/waste disposal contribute the least to overall indirect benefits. The median turnover to savings on cleaning/waste disposal ratio is 5,000.00, implying 0.02% of turn- over. This is not surprising and may be indicative of the fact that not all accidents result in cleaning/waste disposal, meaning that there is less scope for savings in relation to cleaning/waste disposal when accidents are prevented.

Comparing Costs and Benefits of Accident Prevention

From Table 7, the total costs and total benefits are compared across different categories of contractors taking turnover into account by using the benefit-cost ratio (BCR). The BCR was defined as the ratio of the present value of the benefits relative to the present value of the costs (Preez 2004), more formally

BCR ¼ P

n t¼0

Bt ð1þiÞt

P n t¼0

Ct ð1þiÞt

¼ B∕C

To facilitate the comparison between total costs and benefits in line with Preez (2004) for criteria decision making process, benefits to cost ratios are calculated as follows:

T∕Ytotal cost T∕Ytotal benefit

¼ Ytotal benefit Ytotal cost

¼ B C

where B = total benefits; C = total costs; and T = turnover. From the values shown in Table 7, total benefits of accident pre-

vention outweigh costs of accident prevention by a ratio of approx- imately 3∶1 (62% benefit gain to 38% benefit loss). This means that it benefits contractors three times (62%) more, financially, to prevent accidents. In other words, for every £1 spent on accident prevention £3 is gained as benefit.

This insight into the costs and benefits of accident prevention sets out the business case for accident prevention and provides an opportunity for contractors to take these into account when mak- ing decisions on health and safety measures. Clearly, expenditure on accident prevention will lead to higher financial benefits for con- tractors in the construction industry. Therefore, from the viewpoint of benefits and costs, it can be argued that it is more efficient to spend more on accident prevention than to let an accident occur.

The ratio analysis in Table 7 also reveals that large contractors have the lowest benefits compared with their costs (1:6∶1) than small and medium contractors. Alternatively, their costs are 62% of their benefits. Second, the medium contractors have the highest benefits relative to their costs (3:6∶1). Alternatively, their costs are 27.6% of their benefits. Small contractors are fairly similar to medium contractors in their BCR (2:7∶1). These results are not sur- prising because small contractors, for instance, may not have ex- perienced an accident in a year (Lancaster et al. 2003), whereas large contractors with more than 250 employees and an annual turnover greater than £26 m (DTI 2005) would have a greater like- lihood of accident occurrence in any particular year. However, given that the majority of small and medium contractors manage their in-house training and use external consultants to assist them in meeting their health and safety requirements, whereas large con- tractors adopt an internal policy on health and safety management and have an in-house specialist that can provide training on health and safety, it would have been expected that large contractors would perform their health and safety tasks better and also have a better method of improving health and safety performance than the medium and small contractors. The findings contradict this expectation.

Discussion of Results

This finding further reinforced the notion that different categories of contractors incur different costs of accident prevention. Although in actual expenditure, large contractors spend more than small or medium contractors (with small contractors spending the least), the ratio analysis shows that actually, in proportion to their turnover, small contractors are spending more on accident preven- tion than medium and large contractors (with the large contractors spending the least). However, this paper acknowledges that con- tractors in developed countries need to be able to demonstrate their investment in health and safety as part of the bidding process. This

Table 6. Indirect Benefits of Accident Prevention Ratio

Contractor T∕Yimage T∕Yworking man T∕Ysick T∕Ylost time T∕Ycleaning T∕Yhiring T∕Yindben

Small 454.59 1,454.68 454.59 454.59 5,000.00 5,000.00 833.33

Medium 266.67 600.01 1,454.68 2,100.04 3,273.02 3,273.02 643.00

Large 504.00 3,333.39 3,333.39 3,333.39 11,455.59 3,333.39 939.00

Total 500.00 1,454.68 1,454.68 3,333.39 5,000.00 3,333.39 833.33

Table 7. Comparison of Total Costs and Total Benefits of Accident Prevention

Contractor T∕Ytotal cost T∕Ytotal benefit C∕B B∕C (%)

Small 143.87 53.00 2.71 36.9

Medium 170.22 47.00 3.62 27.6

Large 241.96 134.00 1.61 62.11

Total 205.97 78.13 2.64 37.9

996 / JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT © ASCE / AUGUST 2012

finding provides a basis for challenging commonly held views that small contractors are not doing enough by way of accident preven- tion. If the general consensus is that small contractors need to do more, then it is important for the industry and policy makers (e.g., HSC) to consider the possibility of providing the additional financial support required for small contractors to improve their health and safety measures because the findings of this research seem to suggest that a greater proportion of their turnover (relative to medium and large contractors) is already going to accident prevention.

The analysis on accident prevention costs further revealed that the greatest emphasis in spending was on safety training and safety personnel salaries. This finding appears to suggest that the human element is the most significant component of accident prevention and therefore, requires the most resources to address through train- ing and proper supervision or monitoring of risks and hazards. Im- plied in these results is a tacit recognition that if knowledge, awareness, and monitoring are improved, there will be less need for spending on measures, such as first aid facilities, which are required after the fact, with safety promotion provided as a supplement to the training.

With regards to the benefits of accident prevention, the ratio analysis revealed that there are both significant direct and indirect benefits. Although surprising, this result is nevertheless consistent with the corresponding expenditure levels on accident prevention, as already recounted in the previous paragraphs. When direct ben- efits are compared with indirect benefits, direct benefits are greater than indirect benefits, indicating that any benefits, which arise from accident prevention, are more likely to be felt directly by contrac- tors than indirectly. This, therefore, makes a compelling case for encouraging contractors to take necessary preventive measures be- cause these would lead to benefits that they are readily aware of.

When the total costs of prevention are compared with the total benefits of prevention, the benefits of accident prevention far out- weigh the costs of accident prevention by a ratio approximately 3∶1. The average ratio of preventive costs to benefits of 3∶1 found in the research gives a conservative rule of thumb to use in estimating accident preventive costs. For a number of reasons, this figure is probably an underestimation of what would be obtained from a more extensive study of both moral and economic benefits, difficult to measure variables, such as saving in death, job satisfaction, or employee morale that were not included. This finding clearly sets out the business case for accident prevention. It demonstrates unequivocally that there is a net benefit arising from accident pre- vention and by so doing, provides justification for a more proactive approach to accident prevention. There is a strong moral case for accident prevention. Clearly, on the basis of these results, there is also an equally strong business case for accident prevention.

Recommendations

The result of the research indicates that any expenditure on costs of accident prevention will spring up enormous benefits to contrac- tors. If contractors spend more on health and safety measures, there will be less accidents. Conversely, an insurance premium may be reduced if there is improvement in health and safety. This means that an accident claim can dramatically change the insurance pre- mium rate. No additional premium will be paid if no direct cost results from the insurance claim, i.e., the new premium will be sig- nificantly lower than the current one. Thus, the money spent on accident prevention would have a significant effect on insurance. It can increase or decrease depending on health and safety perfor- mance. These findings are recommended for planning and design- ing for safety by contractors and designers at the early design stage to incorporate safety in the project delivery process. The research

findings should assist contractors and designers in decision making regarding health and safety issues in the construction industry. Con- tractors and designers should not view health and safety in a compliance-oriented reactive strategy. In the light of this, contrac- tors and designers can use these quantitative results to establish ef- fective health and safety in achieving improved construction site safety performance. The analysis undertaken suggests that there is a potential for contractors to improve on their health and safety performance, as perceived by the respondents. This aspect is rec- ommended as a potential area for further research in the construc- tion industries of both developed and developing countries. The findings of the study could also serve as some useful lessons given the similarities in other industries/regions.

Conclusion

This paper presented ratio analysis of the data on costs and benefits of accident prevention. The evidence from the analyses clearly in- dicates that costs and benefits of accident prevention across con- tractors within the sample and by inference across the UK construction industry, vary on the basis of the size of contractors. From the results, small and medium contractors spend more than large contractors and derived greater benefits as well. Direct bene- fits are greater than indirect benefits and total benefits far outweigh the costs of accident prevention. Large contractors have the greatest costs of accidents, whereas small contractors have the least. From the ratio analysis, in proportion to their turnover, small contractors spent more on accident prevention than medium and large contrac- tors, with large contractors spending the least. This finding pro- vides a basis for challenging commonly held views that small contractors are not doing enough by way of accident prevention. The ratio analysis further revealed that when total costs of accident prevention were compared to the total benefits of accident preven- tion, the benefits far outweigh the costs of accident prevention by a ratio of approximately 3∶1, which means that when contractors, ir- respective of their sizes, spend £1.00 on accident prevention, they gain £3.00. This clearly set out a business case for accident preven- tion. It further demonstrates that there is net benefit arising from accident prevention.

Supplemental Data

A sample of the survey questionnaire is available online in the ASCE Library (www.ascelibrary.org).

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