cost analysis for accident in site construction

1. 9. Cost of Accident (4 hrs.)
9.1 Visible costs and Invisible costs
9.2 Cost of Accident to the contractor
9.3 Cost of Accident to the employer
9.4 Cost of Accident to the society, Cost of
managing safety at construction site
9.5 Provision in the tender document.

2. 9.1 Visible costs and Invisible costs
Concept of accident costs
• Costs that may be generated from
accidents are lot.
• Employer loses production and
productivity from accidents.
• Employees losses their wages and may
face severe injuries, permanent
disability, and fatality.

3. 9.1 Visible costs and Invisible costs
Concept of accident costs
• If accident arises, employer also need to
spend a lot of time for legal consequences
and to pay compensation to injured person as
per the statutory requirements.
• Contractors and workers agree that money
energies health and safety conditions in
construction.

4. 9.1 Visible costs and Invisible costs
Concept of accident costs
• Accidents in construction cost the
industry 6.5 percent of the total costs
(Business Roundtable USA, 1980s).
• Cost of safety in construction is neither
included as an individual item nor is
taken into account at the construction
stage.

5. 9.1 Visible costs and Invisible costs
Concept of accident costs
• While making bids, contractor do not
generally consider the cost of safety in
ensuring safety of workers.
• Cost of safety is not reflected in the
estimates of projects.

6. 9.1 Visible costs and Invisible costs
Concept of accident costs
• Often there is no separate unit having the sole
responsibility to oversee safety in construction.
• However, it is seldom realized that non-
inclusion of safety expenditure on safety in
construction may result in high cost to the
contractor in the event of unforeseen mishaps
and accident.

7. 9.1 Visible costs and Invisible costs
Concept of accident costs
• There are direct losses in terms of temporary
stoppage of works and payment of
compensation etc. and indirect losses in terms
of disputes and delays in the execution of
projects.
• Therefore, it is always in the interest of all to
ensure safety in construction.

8. 9.1 Visible costs and Invisible costs
Direct cost of accident
• Direct costs are those costs that are accrued
directly from the accident and are quite easy
to calculate.
• Direct cost of accident are those costs
covered by workers compensation insurance
and other minor medical costs for the
accident.

9. 9.1 Visible costs and Invisible costs
Direct cost of accident
• Direct costs include the medical costs incurred,
and the compensation payments made to the
injured workers.
• Direct costs are usually insurable by company.
• Visible cost of work injury include wages loss,
expense of medical care, overhead cost of
compensation insurance.

10. 9.1 Visible costs and Invisible costs
Visible or direct cost of accident
• Loss or damage to assets and equipment.
• Loss of production.
• Medical cost of injured persons.
• Compensation to injured persons.
• Legal costs.
• Insurance costs.
• Loss of life or limbs.
• Cost of man days lost of injured persons.

11. 9.1 Visible costs and Invisible costs
Indirect cost of accident
• Indirect costs of accidents can be even greater
than the direct costs.
• It is difficult to calculate indirect costs of
accidents.
• As a conservative estimate, on average for
every $1 in direct loss costs per accident there
are $3 of indirect costs.

12. 9.1 Visible costs and Invisible costs
Indirect cost of accident
• Some studies indicate the indirect costs
can be 4 to 10 times the direct costs.
• Incidental or hidden costs have been
found by research three times as great as
compensation and medical expenses.

13. 9.1 Visible costs and Invisible costs
Indirect cost of accident include
a. Cost of lost productivity due to the absence of
an injured worker or workers.
b. Cost of lost productivity of employees who
assist in the rescue, cleanup, and repairs
caused by an accident.
c. Cost of repair or replace damaged property,
equipment or vehicles.

14. 9.1 Visible costs and Invisible costs
Indirect cost of accident include
d. Rental costs while equipment/vehicles are
repaired.
e. Cost of damage to an organization's public
image.
f. Cost of overtime expenses incurred by
additional staff needed to make up for the lost
worker or workers.

15. 9.1 Visible costs and Invisible costs
Indirect cost of accident include
g. Cost of time lost by foreman, supervisors, or
other executives are as follows:
• Assisting injured employee.
• Investigating the cause of the accident.
• Selecting, hiring, and training a new employee to
replace the injured employee.
• Preparing accident reports, or attending hearing
before state officials.

16. 9.1 Visible costs and Invisible costs
Indirect cost of accident include
h. Cost of first aid attendant and hospital to treat the
injured when not paid by insurance.
i. Cost to employer under employee welfare and
benefit system.
h. Cost to employer in continuing the wage of
injured employee.
j. Cost involvement of management in any lawsuit.

17. 9.1 Visible costs and Invisible costs
Indirect cost of accident include
k. Cost of negative impact on customer relations
due to reduced quality or service.
l. Cost of loss of customer loyalty due to negative
publicity.
m.Cost of overhead cost per injured employee - the
expense of light, heat, rent, & other such items
which continue while the injured employee is a
non-producer.

18. 9.1 Visible costs and Invisible costs
Invisible or indirect cost of accident
• Loss of earning power of injured person.
• Economic loss to injurer’s family.
• Lowered employee morale.
• Time lost from work by engineers and
supervisors.
• Man hour spent in cleaning up accident area.

19. 9.1 Visible costs and Invisible costs
Invisible or indirect cost of accident
• Loss of prestige.
• Social costs and liabilities.
• Cost to employer under employees
welfare and benefits scheme.
• Transport costs.

20. 9.1 Visible costs and Invisible costs
Invisible or indirect cost of accident
• Cost of employer to pay the wages to the
injured employees.
• Cost of training a new employee for the
position falling vacant.
• Settlement of dependents.

21. 9.2 Cost of Accident to the Contractor
• Top management can be motivated by
economical interests to become actively
involved in accident prevention of their firms,
prima facie through the uninsured accident
costs, is investigated.
• However, findings show that average
uninsured accident costs only 100 man
hours, equivalent to merely 0.76% of a
project's labor cost.

22. 9.2 Cost of Accident to the Contractor
• Size of site, type of construction and
cause of accident do not affect accident
costs while nature of injury, injured organ
and the casualty's occupation do affect it.
• The correlation between lost days and
uninsured accident costs is low.

23. 9.2 Cost of Accident to the Contractor
Some of the direct costs to contractor
• Payment for work not performed.
• Medical and compensation payments.
• Repair or replacement of damaged
machinery and equipment
• Reduction or a temporary halt in
production

24. 9.2 Cost of Accident to the Contractor
Some of the direct costs to contractor
• Increased training expenses and
administration costs.
• Possible reduction in the quality of work.
• Negative effect on morale in other
workers.

25. 9.2 Cost of Accident to the Contractor
Some of the direct costs to contractor
• Increased training expenses and
administration costs.
• Possible reduction in the quality of work.
• Negative effect on morale in other
workers.

26. 9.2 Cost of Accident to the Contractor
Some of the indirect costs to contractor
• Injured or ill worker has to be replaced.
• A new worker has to be trained and given time
to adjust.
• It takes time before the new worker is
producing at the rate of the original worker.
• Time must be devoted to obligatory
investigations, to the writing of reports and
filling out of forms.

27. 9.2 Cost of Accident to the Contractor
Some of the indirect costs to contractor
• Accidents often arouse concern of fellow
workers and influence labor relations in a
negative way.
• Poor health and safety conditions in workplace
can also result in poor public relations.
• Overall, the costs of most work-related
accidents or illnesses to workers and their
families and to contractors are very high.

28. 9.3 Cost of Accident to the employer
• A research on 2100 construction
accidents was carried out in April,1987
in all areas of UK regarding detailed
costing of accidents to report on safety
and health at workplace.
• Objective of the research was to derive
cost estimates of accidents within
construction industry.

29. 9.3 Cost of Accident to the employer
• Result of the research concluded that
only the very largest firms can hope
incentive to invest in greater accident
prevention.
• Direct costs include workers'
compensation payments, medical
expenses, and costs for legal services.

30. 9.3 Cost of Accident to the employer
• Indirect costs include training
replacement employees, accident
investigation and implementation of
corrective measures, lost productivity,
repairs of damaged equipment and
property, and costs associated with
lower employee morale and
absenteeism.

31. 9.3 Cost of Accident to the employer
• In addition to the social costs, workplace
injuries and illnesses have a major impact on
employer's bottom line.
• The costs of workplace injuries and illnesses
include direct and indirect costs.
• It has been estimated that employers pay
almost $1 billion per week for direct workers'
compensation costs alone.

32. 9.4 Cost of Accident to the society, Cost of
managing safety at construction site

33. 9.5 Provision in the tender document
• Successful tenderer will implement all the
safety processes and procedures in
accordance with the “safety manual” to
ensure safety and health at workplace.
• Provision in the tender document could
be the provisional sum for the fulfilment
of occupational safety and health
requirements.

34. 9.5 Provision in the tender document
• Provision in the tender document could be
appointment of a full-time competent person
to act as a site safety and health supervisor at
the place of work throughout the entire period
of the construction phase.
• Provision in the tender document shall be the
health and safety insurance for all workers
and other persons involved in the construction
project.

35. 9.5 Provision in the tender document
• Provision in the tender document shall be the accident
insurance for all workers and other persons involved in the
construction project.
• Employees are required to wear appropriate personal protective
equipment in all operations where there is exposure to hazardous
conditions.
• Protective equipment, including personal protective equipment
for eyes, face, head, and extremities, protective clothing,
respiratory devices, and protective shields and barriers, shall be
provided for works, used, and maintained by the Contractor in a
sanitary and reliable condition wherever it is necessary by reason
of hazards of processes or environment, chemical hazards,
radiological hazards, or mechanical irritants encountered

38. 9.5 Provision in the tender document
• Construction site Safety Manual is mandatory for all
construction works contracts undertaken by contractors.
• Contractor shall submit a safety plan with details of safety
management system to implement on the site that ensure
safety and health during the execution of the works.
• Independent Safety Audit Scheme is applicable to mega
capital works contracts (i.e. estimated contract sums
exceeding $1,000 million) or capital works contracts
involving unconventional construction method.
The Contractor shall prepare the Safety and Health Plan.
• Site security,