An introduction to exposure
Compliance with state, federal, and OSHA regulations is a burdensome, but very necessary, part of every construction company’s operations. Requirements like OSHA 10, OSHA 30, first aid, state contractors license, and other general compliance hurdles are ever present. Employees, contractors and subs assigned to distinct job functions need more specific certifications e.g. scaffolding, rigging, welding, forklift, and dust and silica, to name a few.
Penalties for noncompliance can be expensive, repeated penalties even more so, and cost overruns are a huge concern for all stakeholders involved. At any moment, a regulatory body can send a representative on site, request evidence of compliance, and levy a fine. Exposure to lawsuits surrounding proper credentialing is a bane of every risk manager, and using qualified personnel is crucial to the quality of work being performed.
It’s 2019, so obviously every company has a protocols and departments that are actively handling this kind of exposure with their personnel, right? In our experience, that’s not always the case.
A case study
We’ve discovered that an unknown percentage of companies will sign contractors onto a job without ensuring full regulatory compliance verification. In one particular case, a general contractor hired a subcontractor to do an undersea welding project on a shipyard platform.
The welders did a poor job, and the entire project had to be redone with a cost overrun in excess of $1,000,000.00. Upon investigation of the setback, the GC learned that the subcontractor did not possess the necessary underwater welding certifications. If the company had done their due diligence in screening out unqualified, and thus incompetnant, subcontractors, they would have avoided the entire headache and resulting profit loss.
Further complications
Another subset of companies diligently carry out worker/sub compliance verification at the start of a job, but have no idea if compliance and certifications lapse later in the contract term. Even project managers who work for industry leading GCs can and do occasionally let these details fall through the cracks of their busy day-to-day operations. The belief that a subcontractor will remain in compliance throughout the duration of a contract is an erroneous assumption.
Beyond cases where compliance verification is overlooked, many organizations track compliance, certifications, hiring paperwork and employee agreements in filing cabinets. Disputes regarding code of conduct, corporate compliance, facilities operations, site rule agreements, and employee handbook agreements may arise during the course of a contract. When these files need to be retrieved to settle employee/vendor/subcontractor-company disputes, they may be hard to find or even lost.
In short, negligence is leading a number of companies to unnecessarily expose themselves to a series of risks involving fines, penalties, lawsuits, disputation and cost overruns. At the worst end of the risk spectrum, a scenario could involve all five of these problems compounding and reinforcing one another, derailing a project and resulting in a negative balance sheet.
Compliance Management Software- Making it easy for project managers
If the fear of loss isn’t enough of a motivation for companies to fully enforce their own protocols, then compliance management software can fill in the gaps by automating and centralizing compliance. Compliance management software and credentialing software can leverage the power of digital IDs to solve compliance negligence issues.
Employees, subs, contractors and vendors can be conveniently onboarded to a construction job through the use of digital IDs. As part of the self-onboarding process, the employer or general contractor can require the new worker to upload their certifications, qualifications, and compliance along with all their other hiring documentation. Making this first change is just as much about changing organizational and risk management culture at the company as it is about using new software tools. By enforcing a hard line employment rule, and blending the rules into an automated hiring process, companies will be able to easily sidestep the first of the compliance problems- hiring non-compliant workers.
Compliance and credentialing software incorporates the expiration dates of compliance, certifications, and related qualifications. As a worker or contractor approaches the expiration of their respective qualifications, the system generates an automated reminder to both the worker and the project manager, allowing them to proactively compel the worker to renew their credentials. The project manager may even set the worker’s badge (site access) to expire if a renewal is not uploaded- the ultimate protection against the risk of having noncompliant personnel on a site. Automated real-time compliance tracking can be of critical use to distracted contractors and overwhelmed project managers, and should be on every risk management department’s roadmap.
Having all documentation electronically collected and centralized allows disputes, questions, and inspections to be easily settled. Storing compliance on readily available digital IDs allow regulatory reps like OSHA inspectors automatic proof of labor compliance when performing an inspection. Having various employee agreements and site-rule agreements electronically centralized, rather than hidden in a mountain of paperwork, can help managers quickly end disputes that involve worker expectations. Furthermore, storing such agreements electronically prevents them from being lost, which in turn protects the company from legal liabilities should a labor dispute end up in court.
Coda
It’s true that most companies today have risk management functionaries. It’s also true that most actors in the construction space are aware of the stiff penalties and risks they face for noncompliance and non certification. Yet, we know that many companies continue to be overexposed, whether through blind spots or work scheduling overload. Compliance management software and credentialing software can help project managers and construction companies shore up risk exposure by automating currently overlooked processes. With the right software in place, work can continue on schedule without intrusions from regulators, interruptions from the courts, roadblocks from disputes and distractions from managers.