Safety is a critical item on all construction projects. Protecting the welfare of employees, providing a safe work environment, and controlling construction costs are all important factors. However, the importance of safety as a cost-control measure is often overlooked by owners. Contractors are in a unique position to help owners understand the importance of safety. Not only must owners be concerned with potential risks to their employees, tenants, or property, but they must also be concerned about the risks that the contractor bears. As a means of reducing the risks associated with construction, a commitment to safety by both the owner and the contractor can significantly impact a project's overall cost.
Safety works to the owner's benefit
Owners should understand that all of the contractor's risks, or even the threat of them, will either add considerable cost to the contract or decrease the potential profit a contractor can make on any specific contract. Since every contractor is in business to bring profit to the bottom line, overhead would naturally take into consideration the “costs of doing business.” Accordingly, expected losses have to be accounted for in these costs and included in the estimate if the contractor wants to stay in business.
Contrary to common perception, there is little upfront cost to the owner for implementing and maintaining the safety programs required since the contractor is already mandated by law to comply with local, state, and federal regulations. To take advantage of this safety benefit, all the owner has to do is demand that the contractor document and execute the proper safety programs.
The various safety procedures that contractors must have include fall protection, hazcom, respiratory protection, confined space entry, competent person, and other programs that control the causes of injuries. If the contractor is successful in preventing these injuries, the actual and hidden costs of accidents are significantly reduced—bringing more profit dollars back to the contractor. Hidden costs of an accident are four to ten times the actual cost of the claim and account for items such as employee replacement, OSHA citations, loss of use, increased insurance costs, and damaged products. The direct costs of accidents only include items such as doctors, ambulance, indemnity, and prescription and medication costs.
If the contractor has a great workers' compensation safety record, then the firm is more efficient in reducing risks, more profitable, has more on-time completion of contracts, less rework and is, in effect, actively working to reduce the construction risks to the owner of the project. Owners who want to recognize the advantage a contractor's good safety program can bring to a project should hire and demand contractors that actively and successfully control their risks through comprehensive safety programs.
Owners can work with the contractor
Owners sometimes hesitate and feel that they are interfering with the contractor's way of doing business if they express concerns over safety at a jobsite. In reality, owners have the absolute right to mandate that a good quality safety program be an important part of the selected contractor's culture. The contract documents are a very effective tool in conveying the owner's safety requirements to the contractor. In addition, there are many benefits to pre-qualifying a contractor by comparing the firm's safety record and other company statistics with the competition. A contractor with a good safety program is often a better choice even if the initial bid package is higher than the firm's competitors. Poor safety compliance increases the owner's risks and often inflates the final costs of a completed contract, and it is the final costs that need to be factored into this decision-making process.
Owners must view the contractor as a partner in the construction process. After all, the owner needs to have the project completed and the contractor needs the work. Neither one can be successful without the other. Although it takes a little more effort for the owner to become part of the process, his or her involvement is rewarded with a smooth-running, low stress, on-time, and on-budget project. Without participation in the process, the owner is passively giving control to the contractor. This course of action can create greater risks and the owner will often spend more time struggling to cope with challenges rather than ensuring that expectations are met. Significant dollars are at stake during construction projects, and owners can either choose to control risks or let the contractors add money to their contracted price to cover the ultimate or expected losses.
The bottom line
In order to reduce overall construction costs, decrease completion time, and improve the job quality, owners have learned that it is important to take an active role in the contractor's safety and training programs. Examining the contractor's current and past safety performance history allows an owner to see how successful the contractor has truly been with their safety and health programs.
A safe contractor wins because he understands that safety affects the successful completion of the contract and adds to bottom-line profits. Insured losses as well as the hidden costs of accidents are significantly reduced—additional factors which positively impact project revenue. The added bonus is a reduction in the contractor's worker's compensation, auto, and general liability premium rates. The owner wins because his/her involvement helps to promote quality workmanship, prevent third-party lawsuits, and reduce general liability and property damage claims that would otherwise inflate the overall costs of the contract.
Perhaps the most beneficial aspects of owners and contractors working together with a joint venture safety program is that it provides for the safety, health, and well being of the owners' clients and employees, the contractor's workers and those who live and work in or around the project. What a great way to give back to the community!
— Jim Emmons is the safety director for Structural Group, Baltimore, Md. He can be reached at email@example.com