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RETURN ON INVESTMENT IN CONSTRUCTION SAFETY
By
ABHISHEK BHAIRAVKAR
A THESIS PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
UNIVERSITY OF FLORIDA
2017
© 2017 Abhishek Bhairavkar
To my mother, Dr. Lalita Bhairavkar and father, Mr. Shashikant Bhairavkar
4
ACKNOWLEDGMENTS
I would like to take this opportunity to thank Dr. Andrew Wehle, my mentor,
without whose support this study would not have been possible. I would also like to
thank Dr. Raymond Issa, my committee chair, for helping us out whenever we needed
guidance, and Dr. Rui Liu for her input towards making this study successful.
I am thankful to all the respondents who took time out to respond and make this
study possible.
5
TABLE OF CONTENTS page
ACKNOWLEDGMENTS .................................................................................................. 4
LIST OF TABLES ............................................................................................................ 7
LIST OF FIGURES .......................................................................................................... 8
LIST OF ABBREVIATIONS ............................................................................................. 9
ABSTRACT ................................................................................................................... 10
CHAPTER
1 INTRODUCTION .................................................................................................... 12
1.1 Overview ........................................................................................................... 12
1.2 Aim and Objectives ........................................................................................... 13 1.3 Research Method.............................................................................................. 13
2 LITERATURE REVIEW .......................................................................................... 16
2.1 Overview ........................................................................................................... 16 2.2 Direct and Indirect Costs of Accidents .............................................................. 16
2.3 Cost of One Accident ........................................................................................ 17 2.4 Returns on Investment in Safety ....................................................................... 18
3 RESEARCH METHODOLOGY ............................................................................... 23
3.1 Study Design .................................................................................................... 23
3.2 Study Location and Study Population ............................................................... 23
3.3 Data Collection and Analysis ............................................................................ 24 3.3.1 Data Collection ........................................................................................ 24
3.3.2 Calculations ............................................................................................. 24 3.4 Assumptions ..................................................................................................... 25 3.5 Limitations ......................................................................................................... 26
4 RESULTS AND DISCUSSION ............................................................................... 28
4.1 Results .............................................................................................................. 28
4.2 Discussion ........................................................................................................ 31 4.2.1 ROI for small companies (less than 51 employees) ................................ 31 4.2.2 ROI for medium sized companies (51-200 employees) ........................... 32 4.2.3 ROI for larger companies (more than 200 employees) ............................ 32 4.2.4 General Overview of ROI for all companies ............................................ 32
6
5 CONCLUSION AND RECOMMENDATIONS ......................................................... 42
5.1 Conclusion ........................................................................................................ 42
5.2 Recommendations ............................................................................................ 43 5.3 Scope for Future Research ............................................................................... 43
APPENDIX
A QUESTIONNAIRE .................................................................................................. 44
B LETTER OF APPROVAL, INSTITUTIONAL REVIEW BOARD, UNIVERSITY OF FLORIDA .......................................................................................................... 47
LIST OF REFERENCES ............................................................................................... 49
BIOGRAPHICAL SKETCH ............................................................................................ 51
7
LIST OF TABLES
Table page 1-1 Incidence rate by year and industry .................................................................... 14
1-2 Number of reported cases by industry ................................................................ 15
2-1 Ability to affect root causes of accidents (Toole, 2002) ...................................... 20
2-2 Injury Type and Average Direct Cost (OSHA) .................................................... 21
3-1 Response Count ................................................................................................. 26
3-2 Company Type ................................................................................................... 27
3-3 Number of employees ........................................................................................ 27
3-4 Cost of PPE by Type of Accident ........................................................................ 27
4-1 Frequency of reporting of different accident types (n=90) .................................. 33
4-2 Average ROI for investment to avoid fall injuries by size of company (n=18) ..... 36
8
LIST OF FIGURES
Figure page 1-1 Incidence rate by year and industry .................................................................... 14
2-1 Sequential model of accident occurrence (Furnham, 1994) ............................... 19
2-2 Time/Safety influence curve (Szymberski, 1997) ................................................ 19
3-1 Average cost of 1 accident by type ..................................................................... 26
4-1 ROI for investment to avoid cut injuries (n=19) ................................................... 34
4-2 Average ROI for investment to avoid cut injuries by size of company (n=19) ..... 34
4-3 ROI for investment to avoid fall injuries (n=18) ................................................... 35
4-4 Potential savings after investing towards prevention of cut injuries (Companies with less than 51 employees) ......................................................... 36
4-5 Potential savings after investing towards prevention of cut injuries (Companies with 51 – 200 employees) .............................................................. 37
4-6 Potential savings after investing towards prevention of cut injuries (Companies with more than 200 employees) ..................................................... 37
4-7 Potential savings after investing towards prevention of fall injuries (Companies with less than 51 employees) ......................................................... 38
4-8 Potential savings after investing towards prevention of fall injuries (Companies with 51 – 200 employees) .............................................................. 38
4-9 Potential savings after investing towards prevention of fall injuries (Companies with more than 200 employees) ..................................................... 39
4-10 Statistical Correlation of average RIR and average EMR (n=22) ....................... 40
4-11 Statistical significance between average RIR and ROI (n=14) ........................... 40
4-12 Correlation between average RIR and ROI (n=14) ............................................. 41
4-13 Statistical significance between company size and ROI (p=0.001, n=19) .......... 41
4-14 Correlation between company size and ROI (n=19) ........................................... 41
9
LIST OF ABBREVIATIONS
NCCI National Council on Compensation Insurance
NSC National Safety Council
OSHA Occupational Safety and Health Administration
PPE Personal Protective Equipment
RIR Recordable Incident Rate
ROI Return on Investment
SPSS IBM SPSS Statistics 24
10
Abstract of Thesis Presented to the Graduate School of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Master of Science in Construction Management
RETURN ON INVESTMENT IN CONSTRUCTION SAFETY
By
Abhishek Bhairavkar
August 2017
Chair: R. Raymond Issa Major: Construction Management
The construction industry accounted for 20% of all work-related fatalities in the
United States in 2003 as per the Bureau of Labor Statistics. This number has reduced
to 17% in 2014 which is not good performance over a time span of a little more than a
decade. Occupational Safety and Health Administration (OSHA) standards are violated
very frequently leading to a large number of injuries and deaths on construction sites.
According to OSHA, the top four causes of deaths on construction sites are workers
falling from heights, electrocution, workers getting struck by objects and workers getting
caught in or between objects. OSHA claims that around 508 worker’s lives can be
saved annually in the United States if its standards regarding these four alone are
followed strictly. Safety needs to be treated as an investment and not an expense.
Calculating the return on investment (ROI) is a good measure to determine the
financial impacts of investments towards safety as it would indicate that apart from an
altruistic point of view, investing in safety is also beneficial from a financial perspective
by assuming a more proactive role than a reactive one. The responses received to a
questionnaire sent out as part of this study helped us in calculating ROI for investments
in safety and the savings resulting from the investments made for the responses
11
received. The ROI was found to be much higher for smaller companies (with respect to
number of employees) as compared to larger ones.
12
CHAPTER 1 INTRODUCTION
1.1 Overview
Every year the Bureau of Labor Statistics of the United States Department of
Labor (BLS) publishes an Economic News Release which is based on employer-
reported workplace injuries and illnesses. This report shows the incidence rate and
number of nonfatal occupational injuries by industry and ownership. The incidence rate
of all industries put together and that of just the construction industry for the years 2010
to 2015 are shown in Table 1-1 and Figure 1-1.
It can be seen that the incidence rate of the construction industry has
consistently been higher than that of all other industries put together.
Table 1-2 shows the number of cases reported (in thousands) for all industries
together and for just the construction industry.
It can be seen that while the total number of cases in all the industries put
together has consistently decreased, the contribution of the construction industry to this
total has not changed by much and has increased consistently in the years 2013 to
2015 considering it as a percentage of the total number of cases.
Construction companies would benefit from a study that supports effective safety
programs that reduce workplace injuries and incidents. This study attempts at making a
financially profitable argument towards investing in safety on construction sites in an
effort to convince employers that it is in their best interest to protect their employees
from not just an altruistic perspective, but a financial one as well.
13
1.2 Aim and Objectives
The aim of this research is to calculate the return on investment in safety on
construction sites in order to understand the relation between investments made in
safety and the safety performance of the company.
The specific research objectives are to investigate:
The key factors responsible for accidents on construction sites.
The costs of the most common accidents on construction sites.
The investment needed to ensure better safety performance.
The return on investments made towards safety on construction sites.
1.3 Research Method
A survey was conducted as a part of this research to identify the most common
accidents occurring on construction sites and their costs. The participants in the survey
were owners, contractors, safety managers and others involved in safety management
on construction projects. The survey responses were analyzed using descriptive
statistics, such as frequency counts and cross-tabulation method. The most common
type of accidents was identified and the ROI was calculated based on the number of
employees as reported in the responses.
1.4 Scope of Research
The primary focus of this study is to provide statistics that would help make a
better business case for safety and convince contractors to invest in safety from a
financial perspective. The study aims at highlighting the savings made by preventing
accidents on construction sites while comparing them to the investment needed to
ensure better safety performance.
14
Table 1-1. Incidence rate by year and industry
Year Incidence Rate
All industries Construction
2015 3.1 3.4
2014 3.2 3.5
2013 3.3 3.7
2012 3.5 3.6
2011 3.6 3.8
2010 3.6 3.9
Figure 1-1. Incidence rate by year and industry
3.6 3.63.5
3.33.2
3.1
3.93.8
3.63.7
3.53.4
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
2010 2011 2012 2013 2014 2015
Inci
den
ce R
ate
Year
Incidence Rate from 2010-2015
All industries Construction Industry
15
Table 1-2. Number of reported cases by industry
Year
Incidence Rate
Number of cases
(thousands)
Number of cases
in construction as
a percentage of
total cases
All
industries Construction
All
industries Construction
2015 3.1 3.4 3470.6 199.6 5.75%
2014 3.2 3.5 3486.4 196.3 5.63%
2013 3.3 3.7 3553.9 197.8 5.57%
2012 3.5 3.6 3611.7 184.5 5.11%
2011 3.6 3.8 3649.3 190.1 5.21%
2010 3.6 3.9 3670.8 195.9 5.34%
16
CHAPTER 2 LITERATURE REVIEW
2.1 Overview
Research regarding the importance of safety in construction and methods of
improving safety performance on construction sites has been more quantitative than
qualitative as most of it was based on large amounts of data collected from companies
and safety program management. A sequential model of accident occurrence as
published by Furnham in 1994 is shown in Figure 2-1.
It shows that seemingly safe behavior also has a chance of resulting in an
accident.
Szymberski (1997) identified the early design stages of construction as an
influential factor in improving safety factor showing that it is best to plan for safety as
early in the project as possible. The time/safety influence curve developed by him is
shown in Figure 2-2.
Michael Toole (2002) showed the ability of certain entities to influence safety
performance and his results are illustrated in Table 2-1. It can be seen that the
subcontractors have a greater ability to influence safety performance which may be
because they are more connected with the workers on site.
2.2 Direct and Indirect Costs of Accidents
The total cost of an accident or injury can be divided into direct costs and indirect
costs (Heinrich 1931; Brody et al. 1990; Hinze 2000). The direct costs are those which
are directly applicable to the injury or accident. They are expenses made towards
medical treatments, emergency services, indemnity payments etc. The indirect costs
17
are those which are more difficult to quantify. Heinrich (1941) listed the following indirect
costs:
Cost of lost time of injured worker
Cost of lost time of other workers who stop work
Cost of time lost by foremen, supervisors, or other executives
Cost of time spent on the case by first-aid attendant and other staff
Cost due to damage to equipment, tools, property, and materials
Incidental cost due to interference with production
Cost to employer under employee welfare and benefit systems
Cost to employer for continuing wages of injured worker
Cost due to loss in profit due to reduced worker productivity
Cost due to loss in profit due to idle equipment
Cost incurred because of subsequent injuries partially caused by the incident
Cost of overhead (utilities, telephone, rent, etc.) There have been many previous studies to determine the relation between direct
and indirect costs of an accident. Construction Users Roundtable (1990) found that for
the construction industry, which is known for its higher risk, the ratio of indirect costs to
direct costs can vary from 4:1 to 17:1. Leigh (2011) stated that the indirect costs
outweigh direct medical costs by 2.73 to 1.
2.3 Cost of One Accident
According to a report published by the National Safety Council (2013), the
average cost of one nonfatal injury was $37,000 and that of a fatality was $1,390,000.
The average claim cost estimates provided by National Council on Compensation
Insurance, Inc. (NCCI) show the average cost of lost time workers' compensation
insurance claims derived from unit statistical reports submitted to NCCI for policy years
2011-2013. Their estimates by type of injury are shown in Table 2-2.
These estimates are used by OSHA’s $afety Pays Program and have been used
for calculations in this study.
18
2.4 Returns on Investment in Safety
The Construction Users Roundtable (1990) data showed that safety programs
typically cost about 2.5 percent of direct labor costs. Using eight percent reduction in
losses as a typical result of safety programs, the ratio of savings-to-safety and health
program costs would be 3.2 to 1. In Liberty Mutual Chief Financial Officer Survey (2005)
over 60% of CFOs reported that each $1 invested in injury prevention returned $2 or
more, and over 40% said productivity was the greatest benefit of an effective workplace
safety program. In a survey of financial decision-makers the average perceived return
on safety investment was $4.41 for every dollar spent on safety (Huang et al. 2009). A
recent study by Feng (2015) showed that the optimal safety investments tend to decline
with increased safety culture and with project hazard being considered as constant.
19
Figure 2-1. Sequential model of accident occurrence (Furnham, 1994)
Figure 2-2. Time/Safety influence curve (Szymberski, 1997)
20
Table 2-1. Ability to affect root causes of accidents (Toole, 2002) Factor necessary
to affect root
causes
Subcontractor General
Contractor/
Construction
Manager
A/E Owner
Task expertise High Moderate Mixed Low
Safety expertise High Moderate Low Low
Worker
interaction and
control
High Moderate Low Low
Control site Moderate High Mixed Mixed
Evaluate site
conditions
Mixed Mixed Mixed Low
Aggregate ability
to influence root
causes
High Moderate Mixed Low
21
Table2-2. Injury Type and Average Direct Cost (OSHA)
Injury Type Average Direct cost ($)
AMPUTATION 77,995
ANGINA PECTORIS 53,461
ASBESTOSIS 40,037
ASPHYXIATION 149,103
BURN 40,188
CANCER 129,624
CARPAL TUNNEL SYNDROME 30,509
CONCUSSION 59,372
CONTAGIOUS DISEASE 13,364
CONTUSION 27,511
CRUSHING 59,292
DERMATITIS 11,324
DISLOCATION 74,721
DUST DISEASE, NOC (ALL OTHER PNEUMOCONIOSIS)
31,342
ELECTRIC SHOCK 93,858
ENUCLEATION (TO REMOVE, EX:TUMOR, EYE, ETC.)
71,104
FOREIGN BODY 19,886
FRACTURE 50,778
FREEZING 30,564
HEARING LOSS OR IMPAIRMENT (TRAUMATIC ONLY)
21,045
HEAT PROSTRATION 23,495
HERNIA 22,313
INFECTION 28,301
INFLAMMATION 36,076
LACERATION 19,713
LOSS OF HEARING 17,828
MENTAL DISORDER 46,214
MENTAL STRESS 30,947
MULTIPLE INJURIES INCLUDING BOTH PHYSICAL AND PSYCHOLOGICAL
121,981
MULTIPLE PHYSICAL INJURIES ONLY
73,749
MYOCARDIAL INFARCTION (HEART ATTACK)
55,745
22
Table2-2. Continued
Injury Type Average Direct cost ($)
NO PHYSICAL INJURY 24,590
POISONING - CHEMICAL (OTHER THAN METALS)
37,565
POISONING - GENERAL (NOT OD OR CUMULATIVE INJURY)
31,176
POISONING - METAL 15,493
PUNCTURE 25,523
RADIATION 39,493
RESPIRATORY DISORDERS (GASES, FUMES, CHEMICALS, ETC.)
29,137
RUPTURE 73,057
SEVERANCE 122,091
SPRAIN 29,989
STRAIN 33,140
SYNCOPE 34,654
VASCULAR 141,818
VDT - RELATED DISEASE 32,488
VISION LOSS 65,751
ALL OTHER CUMULATIVE INJURIES, NOC
39,728
ALL OTHER OCCUPATIONAL DISEASE (Changed from ALL OTHER OCCUPATIONAL DISEASE OR INJURY
49,104
ALL OTHER SPECIFIC INJURIES, NOC
43,860
23
CHAPTER 3 RESEARCH METHODOLOGY
3.1 Study Design
The first stage of the study was to examine the recent number and types of
accidents and fatalities in the construction industry as compared to others and conduct
a comprehensive literature review of the research done in the field of safety on
construction sites. Previous research by Jaselskis et al. (1996), Hinze and Harrison
(1981), Törner and Pousette (2009), and Levitt and Parker (1976) was studied to help
better design the study. The next stage was to design and distribute a questionnaire
which would be distributed to safety professionals working in the construction industry
using the Qualtrics system provided by the University of Florida. The responses to this
questionnaire were analyzed to identify the most common type of accidents on
construction sites, calculate the cost of protective equipment and the cost of
enforcement of safety protocols on site. The approximate savings and return on
investment were calculated using frequency counts and the number of employees as
provided in the responses. Some recommendations were made based on the
responses received to the questionnaire distributed. The questionnaire comprised of 25
questions targeted towards obtaining information about the respondent’s company,
safety culture, safety performance, and types and frequency of the most common
accidents occurring on their construction sites.
3.2 Study Location and Study Population
The questionnaire was distributed among safety professionals working in the
construction industry in the United States of America using an anonymous link which
would not allow us to trace the responses back to the respondents thereby keeping
24
them confidential. The questionnaire was distributed among professionals from active
companies supporting the Rinker School of Construction Management. Table 3-1 shows
the number of questionnaires sent out and the types of responses that were received.
Table 3-2 shows the count of various types of companies that participated in this study
while Table 3-3 shows the range of number of employees of the companies that
responded to the questionnaire.
3.3 Data Collection and Analysis
3.3.1 Data Collection
The responses received were recorded by the Qualtrics system. As all of the
data received was through an anonymous link, none of the responses could be traced
back to the respondents. All received data was using analytical tools provided by
Microsoft Excel and IBM SPSS Statistics 24 (SPSS).
3.3.2 Calculations
Hallowell (2011) stated that the optimal investment strategy for safety on
construction sites can be identified through a formal analysis depending on the
frequency and cost of injuries. Based on the responses received to the questionnaire
sent out, two most common types of accidents were identified and their likely
occurrence was calculated based on the frequency of their mentions in the responses.
The cost of any type of accident was taken from the estimates provided by OSHA’s
Safety Pays Program which were based on data provided by National Council on
Compensation Insurance, Inc. (NCCI) from unit statistical reports submitted to NCCI for
policy years 2011-2013. Cost of protective equipment was assumed based on a range
of prices for similar products. The salary of a safety manager was assumed based on
25
the national average as reported by employment websites. The ROI was calculated
using the following formula:
ROI = Savings / Total Investment (3-1)
Savings made as a result of the total investment were calculated using the
following formula:
Savings = Number of employees * Likely occurrence * Average
cost of 1 accident
(3-2)
The investment needed in order to prevent accidents and result in savings was
calculated using the following formula:
Total Investment needed = (Number of employees * average
cost of equipment required per employee) + Average annual
salary of safety manager(s) (if needed)
(3-3)
The calculated value of ROI gives a return per $1 invested.
Kendall’s Tau Test was used to find the correlation between certain answers in
the responses received to the questionnaire. The calculated values for ROI were
checked for statistical significance using Mann-Whitney U Test against the OSHA RIR
and size of the company that was reported in the response to the questionnaire.
Kendall’s Tau Test was used to check the correlation between statistically significant
data.
3.4 Assumptions
The following assumptions were made in calculating the ROI
1. All employees are involved in construction activities.
2. A safety manager is not required by companies with less than 50 employees. 1 safety manager is required for companies with 51-200 employees. 1 safety
26
manager is required for every 200 employees for companies with more than 200 employees.
3. Average cost of 1 accident was estimated based on data submitted to OSHA by NCCI. Figure 3-1 shows the assumed costs of 1 accident.
4. Average cost of Personal Protective Equipment (PPE) was assumed as shown in Table 3-4.
5. The average annual salary of 1 safety manager was assumed to $70,000.
3.5 Limitations
In all the calculations in this study, it is considered that all the employees as
reported are involved in actual construction work while this may not always be the case.
The probability of an accident occurring is calculated based on the responses received
and may be different for different types of companies. Since cuts and lacerations were
more frequently reported, the ROI calculated for prevention of cuts was used in
statistical analysis.
Figure 3-1. Average cost of 1 accident by type
Table 3-1. Response Count
Quantity Count
Number of questionnaires sent out
257
Number of responses received 51
Number of non usable responses
6
Number of usable responses 45
Type of Accident Cut/ Laceration
Avg. of other occupations
For roofers For carpenters For roofers For carpenters
$106,000 $97,000 $68,000 $62,000
Falls from elevation Falls from ladders or scaffoldsAverage cost of 1
accident
Fall
$19,713 $50,000
27
Table 3-2. Company Type
Type of Company Count Percentage
Owner 4 9%
Contractor 30 67%
Sub-contractor 6 13%
Specialty Trade Contractor 5 11%
Total 45 100%
Table 3-3. Number of employees
Responses Received 45
Minimum 5
Maximum 4300
Mean 2863
Table 3-4. Cost of PPE by Type of Accident
Type of accident Cuts Falls
PPE Gloves Harness + Lanyard
Average Cost of PPE $15 $248
28
CHAPTER 4 RESULTS AND DISCUSSION
4.1 Results
Table 4-1 shows the types of accidents and injuries that were reported to be the
most common on their construction sites by the respondents. 28 responses were
received where respondents reported 1 to 5 of the most common accidents on their
construction sites. A total of 90 entries were registered. ROI was calculated for the two
most common types reported.
The percentage of reporting an accident was considered as the likely occurrence
for that type. Cuts and lacerations were the most frequently reported type of accidents
followed by falls.
Figure 4-1 shows the ROI calculated for the respondents who mentioned cuts or
lacerations in the most common accidents occurring on their construction sites based
on their number of employees and the assumptions mentioned in section 3.4.
Figure 4-2 shows the average ROI calculated for the respondents who
mentioned falls in the most common accidents occurring on their construction after
sorting companies by number of employees.
Figure 4-3 shows the ROI calculated for the respondents who mentioned falls in
the most common accidents occurring on their construction sites based on their number
of employees and the assumptions mentioned in section 3.4.
Table 4-2 shows the average ROI calculated for the respondents who mentioned
falls in the most common accidents occurring on their construction after sorting
companies by number of employees
29
Figures 4-4 to 4-6 show the savings that can be made by the companies based
on their number of employees by investing towards prevention of cut injuries.
Figures 4-7 to 4-9 show the savings that can be made by the companies based
on their number of employees by investing towards prevention of fall injuries
considering various types of falls by various occupations.
Statistical analysis was done after these calculations to check for statistical
significance and correlation.
Figure 4-10 shows the correlation of the following data obtained from 22
responses to the following questions:
Q1.2 What would best identify your company type?
Q1.6 On an average, how many projects does your company undertake in a year?
Q1.7 What was the reported OSHA RIR of your company for the following fiscal years (2013-2014, 2014-2015, 2015-2016)?
Q1.8 What was the reported EMR of your company for the following fiscal years (2013-2014, 2014-2015, 2015-2016)?
Q2.3 Does your company have a companywide safety plan?
Q2.4 How often are safety awareness programs held at your project sites?
Q2.5 Who conducts these programs on the site?
Q2.6 Does top management attend these sessions?
Q2.8 Are the employees tested after these sessions?
The following list provides information on how the previous questions were formulated:
Q1.2. Was a multiple choice question where the choices were Owner, Contractor, Sub-contractor, and Specialty Trade Contractor.
Q1.6 Was a numeric entry question.
Q1.7 Was a numeric entry question with three fields.
30
Q1.8. Was a numeric entry question with three fields.
Q2.3 Was a multiple choice question where the choices were Yes, and No.
Q2.4 Was a multiple choice question where the choices were Daily, Weekly, Biweekly, and Monthly.
Q2.5 Was a multiple choice question where the choices were Company Personnel, and Third Party Consultants.
Q2.6 Was a multiple choice question and the choices were Always, Most of the time, About half the time, Sometimes, and Never.
Q2.8 Was a multiple choice question and the choices were Always, Most of the time, About half the time, Sometimes, and Never.
The responses to these questions were coded into SPSS in order to perform the
analysis.
22 responses were received for these questions and their correlation was
determined.
While the values for average RIR and average EMR did not show any significant
correlation to the others, there is significant correlation between Q1.6 and Q2.4, and
between Q2.6 and Q2.8. This implies that companies where top management attended
safety awareness/ training sessions more frequently tested employees more frequently
after these sessions and that companies undertaking larger number of projects annually
held safety awareness sessions more frequently. The test used was Kendall’s Tau-b in
SPSS Statistics.
Figure 4-11 shows the results of Mann-Whitney U test for ROI and RIR.
Statistical significance is evident from (p = 0.033).
Figure 4-12 shows a significant negative correlation between RIR and ROI (p =
0.033). This would imply that the RIR is lower for companies with higher ROI.
31
Figures 4-13 and 4-14 show the same results for ROI and company size (number
of employees)
This would imply that the ROI is higher for smaller companies.
4.2 Discussion
To be able to better interpret the results of the ROI calculations, some
assumptions were made based on the size of the company as reported in the response
to the questionnaire. The companies were classified as small, medium sized and large
based on their number of employees. The following trends were observed which relate
the calculated ROI to the reported number of employees.
4.2.1 ROI for small companies (less than 51 employees)
To calculate the ROI for companies with less than 51 employees, it was assumed
that it was not necessary to employ a dedicated safety manager which has resulted in a
much higher return than larger companies by number of employees. This high return is
also a result of a very low value of total investment needed for prevention of accidents.
This shows that smaller companies, which often overlook safety measures for their
employees, stand to earn the highest return on investments made towards safety. On
the other hand, the savings which were calculated can also be considered as potential
costs of noncompliance. This would be what the companies stand to lose if they
overlook the safety of their employees. These costs would come directly out of the
profits the company makes and could, at times, be overwhelming enough to make the
company go bankrupt, making them the most vulnerable to costs of accidents.
32
4.2.2 ROI for medium sized companies (51-200 employees)
ROI for companies with 51 to 200 employees also show a high value for return
on investment in safety even after employing a safety manager whose average annual
salary was assumed to be $70,000. This shows that these are companies that can
easily afford to be very careful and have a proactive approach towards safety. They can
hire a person whose sole responsibility is to enforce safety measures and monitor
safety performance of the company. While they tend to get lesser returns per dollar
invested than the smaller companies, their profit is enough to cover a few hits due to
accidents or fines.
4.2.3 ROI for larger companies (more than 200 employees)
ROI was found to be even higher for companies with more than 200 employees
but not higher than that for companies with less than 51 employees. This calculation
does not consider the discounts the larger companies will get when they order their PPE
in bulk. The cost of PPE per employee has been assumed to be that of 1 item rather
than a wholesale rate per number of items. Considering this, the total investment of
these companies will decrease, thereby increasing their ROI. These companies are
seen to invest the most towards safety awareness even though they can easily cope
with any losses caused due to accidents on their construction sites.
4.2.4 General Overview of ROI for all companies
The calculated values for ROI show the financial benefits of investing in safety.
The exact amount of the profits varies from company to company based on their
number of employees and may also be subject to various other factors such as the
savings made by buying in bulk and savings made by maintaining and reusing
equipment. The calculated values for all the companies that participated in this study
33
and provided adequate information show that the returns are much greater than the
investment for any company, irrespective of its size. This goes to show that a proactive
approach towards safety in terms of initial investment to prevent accidents is not only a
better choice from an altruistic point of view but from a financial perspective as well. It is
better to take preventive measures than reactive ones as this study shows it is better for
business to invest at an earlier stage in the form of purchasing PPE, training, and
enforcing workers to use that than to pay more in terms of medical expenses, legal fees,
higher insurance premiums and other direct and indirect costs which are a result on an
accident on the construction site. ROI is an indication of the profitability of an investment
and high, positive values for investing in construction safety make it suitable for a
profitable business model.
Table 4-1. Frequency of reporting of different accident types (n=90)
Accident type Count Percentage
Cut/ Laceration 19 67.86%
Fall 18 64.29%
Fracture (Slip, trip) 13 46.43%
Strain 12 42.86%
Sprain 10 35.71%
Electric Shock 5 17.86%
Eye injury (Foreign body) 5 17.86%
Burn 2 7.14%
Contusion 1 3.57%
Heat 5 17.86%
Total 90 100%
34
Figure 4-1. ROI for investment to avoid cut injuries (n=19)
Figure 4-2. Average ROI for investment to avoid cut injuries by size of company (n=19)
No. of employees Cost of gloves for all employees Total Investment Needed Savings ROI
6 90$ 90$ 80,252$ 891.7
10 150$ 150$ 133,753$ 891.7
21 315$ 315$ 280,881$ 891.7
30 450$ 450$ 401,258$ 891.7
30 450$ 450$ 401,258$ 891.7
35 525$ 525$ 468,134$ 891.7
70 1,050$ 71,050$ 936,269$ 13.2
85 1,275$ 71,275$ 1,136,898$ 16.0
110 1,650$ 71,650$ 1,471,280$ 20.5
125 1,875$ 71,875$ 1,671,909$ 23.3
150 2,250$ 72,250$ 2,006,291$ 27.8
150 2,250$ 72,250$ 2,006,291$ 27.8
200 3,000$ 73,000$ 2,675,054$ 36.6
200 3,000$ 73,000$ 2,675,054$ 36.6
200 3,000$ 73,000$ 2,675,054$ 36.6
1200 18,000$ 438,000$ 16,050,325$ 36.6
1400 21,000$ 511,000$ 18,725,379$ 36.6
2400 36,000$ 876,000$ 32,100,649$ 36.6
2400 36,000$ 876,000$ 32,100,649$ 36.6
Average ROI for companies sorted by no. of employees
891.7Companies with 1-50
employees
36.6
26.5Companies with 51-200
employees
Companies with more than
200 employees
35
Figure 4-3. ROI for investment to avoid fall injuries (n=18)
Avg. of fall from
elevation for
roofers and
carpenters
Avg. of fall from
ladders or scaffolds
for roofers and
carpenters
Avg. of fall for other
occupations
Avg. of fall from elevation
for roofers and carpenters
Avg. of fall from
ladders or
scaffolds for
roofers and
carpenters
Avg. of fall for other
occupations
6 1,488$ 1,488$ 391,465$ 250,692$ 192,840$ 263.1 168.5 129.6
21 5,208$ 5,208$ 1,370,128$ 877,422$ 674,940$ 263.1 168.5 129.6
30 7,440$ 7,440$ 1,957,326$ 1,253,460$ 964,200$ 263.1 168.5 129.6
30 7,440$ 7,440$ 1,957,326$ 1,253,460$ 964,200$ 263.1 168.5 129.6
30 7,440$ 7,440$ 1,957,326$ 1,253,460$ 964,200$ 263.1 168.5 129.6
35 8,680$ 8,680$ 2,283,547$ 1,462,370$ 1,124,900$ 263.1 168.5 129.6
35 8,680$ 8,680$ 2,283,547$ 1,462,370$ 1,124,900$ 263.1 168.5 129.6
50 12,400$ 12,400$ 3,262,210$ 2,089,100$ 1,607,000$ 263.1 168.5 129.6
60 14,880$ 84,880$ 3,914,652$ 2,506,920$ 1,928,400$ 46.1 29.5 22.7
70 17,360$ 87,360$ 4,567,094$ 2,924,740$ 2,249,800$ 52.3 33.5 25.8
120 29,760$ 99,760$ 7,829,304$ 5,013,840$ 3,856,800$ 78.5 50.3 38.7
125 31,000$ 101,000$ 8,155,525$ 5,222,750$ 4,017,500$ 80.7 51.7 39.8
150 37,200$ 107,200$ 9,786,630$ 6,267,300$ 4,821,000$ 91.3 58.5 45.0
150 37,200$ 107,200$ 9,786,630$ 6,267,300$ 4,821,000$ 91.3 58.5 45.0
200 49,600$ 119,600$ 13,048,840$ 8,356,400$ 6,428,000$ 109.1 69.9 53.7
1200 297,600$ 717,600$ 78,293,040$ 50,138,400$ 38,568,000$ 109.1 69.9 53.7
2400 595,200$ 1,435,200$ 156,586,080$ 100,276,800$ 77,136,000$ 109.1 69.9 53.7
4300 1,066,400$ 2,606,400$ 280,550,060$ 179,662,600$ 138,202,000$ 107.6 68.9 53.0
Savings ROI
No. of
employeesCost of fall protection
Total Investment
Needed
36
Table 4-2. Average ROI for investment to avoid fall injuries by size of company (n=18)
Average ROI Avg. of fall from elevation for roofers and carpenters
Avg. of fall from ladders or scaffolds for roofers and carpenters
Avg. of fall for other occupations
Company Size
263.1 168.5 129.6 Companies with 1-50 employees
73.4 50.3 38.7 Companies with 51-200 employees
108.7 69.6 53.6 Companies with more than 200 employees
Figure 4-4. Potential savings after investing towards prevention of cut injuries
(Companies with less than 51 employees)
$80,252
$133,753
$280,881
$401,258
$468,134
$- $50,000
$100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000
$90 $150 $315 $450 $525
6 10 21 30 35
Savi
ngs
($
)
InvestmentNo. of employees
Companies with no. of employees < 50
37
Figure 4-5. Potential savings after investing towards prevention of cut injuries
(Companies with 51 – 200 employees)
Figure 4-6. Potential savings after investing towards prevention of cut injuries (Companies with more than 200 employees)
$936,269
$1,136,898
$1,471,280
$1,671,909
$2,006,291
$2,675,054
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$2,000,000
$2,200,000
$2,400,000
$2,600,000
$2,800,000
$71,050 $71,275 $71,650 $71,875 $72,250 $73,000
70 85 110 125 150 200
Savi
ngs
($
)
InvestmentNo. of employees
Companies with 50-200 employees
$16,050,325 $18,725,379
$32,100,649
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$438,000 $511,000 $876,000
1200 1400 2400
Savi
ngs
InvestmentNo. of employees
Companies with more than 200 employees
38
Figure 4-7. Potential savings after investing towards prevention of fall injuries
(Companies with less than 51 employees)
Figure 4-8. Potential savings after investing towards prevention of fall injuries
(Companies with 51 – 200 employees)
$391,465
$1,370,128
$1,957,326 $2,283,547
$3,262,210
$250,692
$877,422 $1,253,460
$1,462,370
$2,089,100
$192,840 $674,940 $964,200 $1,124,900
$1,607,000
$100,000
$600,000
$1,100,000
$1,600,000
$2,100,000
$2,600,000
$3,100,000
$3,600,000
$1,488 $5,208 $7,440 $8,680 $12,400
6 21 30 35 50
Savi
ngs
($
)
InvestmentNo. of employees
Companies with 0-50 employees
Avg. of fall from elevation for roofers and carpenters
Avg. of fall from ladders or scaffolds for roofers and carpenters
$3,914,652 $4,567,094
$7,829,304 $8,155,525
$9,786,630
$13,048,840
$2,506,920 $2,924,740
$5,013,840 $5,222,750 $6,267,300
$8,356,400
$1,928,400 $2,249,800
$3,856,800 $4,017,500 $4,821,000
$6,428,000
$1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000
$10,000,000 $11,000,000 $12,000,000 $13,000,000 $14,000,000
$84,880 $87,360 $99,760 $101,000 $107,200 $119,600
60 70 120 125 150 200
Savi
ngs
($
)
InvestmentNo. of employees
Complanies with 51-200 employees
Avg. of fall from elevation for roofers and carpentersAvg. of fall from ladders or scaffolds for roofers and carpentersAvg. of fall for other occupations
39
Figure 4-9. Potential savings after investing towards prevention of fall injuries (Companies with more than 200 employees)
$78,293,040
$156,586,080
$280,550,060
$50,138,400 $100,276,800
$179,662,600
$38,568,000
$77,136,000
$138,202,000
$35,000,000
$85,000,000
$135,000,000
$185,000,000
$235,000,000
$285,000,000
$335,000,000
$717,600 $1,435,200 $2,606,400
1200 2400 4300
Savi
ngs
($
)
InvestmentNo. of employees
Complanies with more than 200 employees
Avg. of fall from elevation for roofers and carpentersAvg. of fall from ladders or scaffolds for roofers and carpentersAvg. of fall for other occupations
40
Figure 4-10. Statistical Correlation of average RIR and average EMR (n=22)
Figure 4-11. Statistical significance between average RIR and ROI (n=14)
41
Figure 4-12. Correlation between average RIR and ROI (n=14)
Figure 4-13. Statistical significance between company size and ROI (p=0.001, n=19)
Figure 4-14. Correlation between company size and ROI (n=19)
42
CHAPTER 5 CONCLUSION AND RECOMMENDATIONS
5.1 Conclusion
Based on the calculated ROI for the responses received to the questionnaire
sent out, it can be seen that an investment in safety is a good investment from a
financial perspective. The returns that were calculated represent returns per $1 invested
towards safety and the calculated values are very high considering that all construction
workers are exposed to more risks than those in other industries.
The values were very high for smaller companies (with less than 51 employees)
as the investment required was very low compared to the risk they are exposed to and
the possible expenses resulting from any number of accidents. Their investment also
did not include the salary of a dedicated safety manager which resulted in a much
higher return. These companies are those that stand to benefit most from an investment
in safety.
While companies with more than 50 employees had comparatively smaller
values, the returns on their investment were represented by high numbers. These
values can be much higher than calculated as these companies can get the PPE at a
much lesser price because of the size of their purchase. Investment towards safety can
be seen as a profitable investment for all companies irrespective of their size. Based on
the responses, training and awareness of safety programs and the consequences of
non-compliance were the most reported recommendations.
The findings of this study keep with the trend of returns increasing with the years.
This may be on account of increasing direct and indirect costs of accidents and
decreasing cost of PPE. The results show that it is profitable to invest in safety for
43
companies of all sizes, especially the smaller ones. Considering the limitations
mentioned in this study, the ROI may differ from the calculated values but will always be
a positive value showing the benefits of investing in safety. This study makes a strong
case for proactive measures involving an early investment towards reducing the number
of accidents and thereby the payouts resulting from them. This strategy will ensure
safety of the workers and keep the business profitable at the same time.
5.2 Recommendations
Based on the scope of this study, it can be seen that it is cost effective to buy
PPE for all the workers and employ a safety manager, if needed, for enforcement and
monitoring the use of PPE. Effective training programs can ensure a positive attitude of
the workers towards safety procedures and the safety culture of the company.
Attendance of top management of companies at safety meetings and testing the
workers after safety instruction sessions needs to be done as frequently as possible to
develop a good safety culture within the company and ensure a good safety record.
5.3 Scope for Future Research
Calculating ROI requires considering as many factors influencing it as possible.
Future studies can involve monitoring the actual number of accidents typically on one
project, tracking the costs resulting from these accidents, and the cost of efforts that
could have been taken to avoid it. Different types of projects under different types of
companies can be studied to calculate ROI that is specific to that type of project or
company. These kind of studies can also be done for specific sectors to determine the
ROI for them. More research into the exact value of ROI will present a stronger case for
investing in safety on construction sites.
44
APPENDIX A QUESTIONNAIRE
About the study Hello, My name is Abhishek Bhairavkar and I am a graduate student at the University of Florida. I am working on estimating the return on investment (ROI) for investments in safety on construction sites. This questionnaire is part of the data collection process for my graduate thesis. All the answers you submit will be recorded anonymously and cannot be traced back to you. I understand that your time is valuable but so is your response. This survey will not take more than 10 minutes to answer completely. Your responses will help me with my research and increase my understanding of the issues related to safety on construction sites. I kindly request you to help me with my research by filling out this questionnaire. Your response will be greatly appreciated by me and the University of Florida. Thank you in advance for your time.For any further information, questions or suggestions please feel free to contact me at [email protected] . Thank You Abhishek Bhairavkar Graduate Student University of Florida, M.E Rinker, Sr. School of Construction Management Q1.1 What is your job title? Q1.2 What would best identify your company type? Owner
Contractor
Sub-Contractor
Specialty Trade Contractor
Q1.3 What is the approximate annual revenue of your company? Q1.4 What is the size of your company? (Approximate number of employees) Q1.5 Which sector would best describe most of your company's projects? Residential
Commercial
Heavy Civil
Energy
Industrial
Q1.6 On an average, how many projects does your company undertake in a year?
45
Q1.7 What was the reported OSHA RIR of your company for the following fiscal years?
Reported OSHA RIR
2013-2014
2014-2015
2015-2016
Q1.8 What was the reported EMR of your company for the following fiscal years?
Reported EMR
2013-2014
2014-2015
2015-2016
Q2.1 What is the estimated annual safety budget for your company? Q2.2 What is the estimated safety budget per project ? (As % of total project budget) Q2.3 Does your company have a companywide safety plan? Yes
No
Q2.4 How often are safety awareness programs held at your project sites? Daily
Weekly
Bi-weekly
Monthly
Q2.5 Who conducts these programs on the site? Company personnel
Third party consultants
Q2.6 Does top management attend these sessions? Always
Most of the time
About half the time
Sometimes
Never
46
Q2.7 Are these sessions mandatory for new employees? Yes
No
Q2.8 Are the employees tested after these sessions? Always
Most of the time
About half the time
Sometimes
Never
Q3.1 List 5 types of accidents that in your opinion were the most common on your jobsites.
(1) (2) (3) (4) (5)
Q3.2 What in your opinion was the primary cause for these most common accidents as listed earlier (Q3.1)? Q3.3 What type of accidents are the most costly other than those involving fatalities? Q3.4 In your opinion how much does one accident (without fatalities) cost the company on the average? Q3.5 In your opinion what percentage of the most common accidents as listed earlier (Q3.1) caused damage to equipment? Q3.6 What is the estimated overall budgeted cost to replace or replace equipment damaged due to accidents? Q3.7 What estimated percentage of this budgeted cost is spent on equipment damaged by the 5 most common accidents as listed earlier (Q3.1)? Q4.1 What in your opinion are the most influential factors affecting a company’s safety performance? Q5.1 Please provide recommendations for better job site safety performance by preventing the most common accidents.
47
APPENDIX B LETTER OF APPROVAL, INSTITUTIONAL REVIEW BOARD, UNIVERSITY OF
FLORIDA
48
49
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BIOGRAPHICAL SKETCH
Abhishek Bhairavkar was born in Pune, India in1989. After graduating from
Loyola High School & Junior College he completed his Bachelor’s degree in Civil
Engineering from Savitribai Phule Pune University (formerly University of Pune). He is
now a graduate student at the University of Florida pursuing a Master of Science degree
in Construction Management.
