Can You Trust a Low-Bid Contractor to Work Safely?
By Scott Schneider
The low-bid system forces contractors to cut corners. Safety is often the first corner cut. One insurance company representative has called the low-bid system the “biggest safety problem we have.”
Injuries are costly. They can add tens of thousands of dollars to the cost of a project, and the indirect costs (delays, accident investigations, OSHA inspections, etc.) can quadruple those costs. No one wants to pay more for a project than necessary, and the low-bid system often ends up costing more, a lot more.
Best Value Contracting (BVC)
There is an alternative, one that more and more owners, including state and federal governments, are using for bidding. It goes by various names – “Best Value Contracting,” “Responsible Contractor” laws and “Contractor Pre-qualification.” The idea is that owners set a past and predicted performance floor for bids and, then, check into the background of the bidders so that inept, unscrupulous contractors with low bids do not win contracts. Instead, projects are awarded to bidders that have good records, including performance on issues of safety and health.
“Best value contracting is a boon to union contractors,” says Noel C. Borck, Management Co-Chairman of the LHSFNA and Executive Vice President of the NEA – the Association of Union Constructors. “It evens competition in the bid process by requiring bidders to put all their cards on the table. The generally better performance records of union contractors stand out against the poorer safety records of non-union competitors. Project owners and developers can clearly see what they are getting for their construction dollar.”
To assist those interested in BVC, the Laborers-Employers Cooperation and Education Trust (LECET) has a web resource on best value contracting.
Identifying Safe Contractors
In BVC bid specifications, the bidders are required to submit evidence of their safety performance record. One requested item is the company’s EMR (experience modification rating) from its insurance provider. An EMR below 1.0 means it is better than average. An EMR below 0.8 or 0.7 is even better. Many owners will not allow contractors to bid if their EMR is above 1.0 or 0.8.
A second request can be the company’s OSHA records. Every contractor must keep an OSHA Log 300 of all its work-related injuries for the past several years. If the records show a large number of injuries, particularly lost work-day injuries, further detailed questions are justified to determine what the company is doing to prevent future injuries.
Another safety source is the company’s history of OSHA inspections. If it has been inspected by OSHA, the results are posted on the OSHA website (search by company name). Serious citations (which could, by definition, result in serious injuries) and willful citations (where the employer knew it was in violation and did nothing) are cause for alarm.
All of this information and more can be requested as part of the bid package. Owners and developers can also ask for copies of companies’ general safety programs and other specific safety programs (e.g., fall protection program, hazard communication program, confined space program) for important hazards relevant to the upcoming project. Even more importantly, owners can request information on job hazard or job safety analyses (JHAs, JSAs) that show company pre-planning for safety on the jobs. Documentation of safety training programs can also be requested. If the contractor is going to subcontract parts of the job, it should be asked what it plans to do to make sure all the subcontractors have an equivalent safety program.
When it comes to safety, an owner should be as careful as any worker on the jobsite. A cheap price is no gain if the project ends up including serious injuries. That is a black eye no owner can afford. As the federal acquisition regulations state:
The award of a contract to a supplier based on lowest evaluated price alone can be false economy if there is subsequent default, late deliveries or other unsatisfactory performance resulting in additional contractual or administrative costs. While it is important that Government purchases be made at the lowest price, this does not require an award to a supplier solely because that supplier submits the lowest offer. A prospective contractor must affirmatively demonstrate its responsibility, including, when necessary, the responsibility of its proposed subcontractors.
Best value contracting helps owners hire contractors that offer the best value for the money, ones that are responsible performers with great safety programs. This approach saves money and a lot of headaches.
[Scott Schneider is the LHSFNA's Director of Occupational Safety and Health.]