Measuring Contractor Performance

Measuring Contractor Performance

Safety and risk professionals use various metrics to help assess their organization's safety and health program effectiveness. These metrics include, but are not limited to, OSHA injury and illness recordkeeping data, insurance modification rates, and worker's compensation claim losses. These metrics are often adopted into pre-screening techniques for evaluating contractor and supplier risk levels. For instance, Experience Modification Rates (EMR), a rate assigned by an organization, contractor, or supplier's worker's compensation insurance provider, is used to multiply claim costs depending on previous numbers of worker's compensations claims made by the organization. An EMR value of "1" is equivalent to what is typically found to be an average industry rating and translates to "no gain or loss" (Brahmasrene & Smith, 2008). This number is multiplied by the organization's worker's compensation claim premium costs. Therefore, a contractor or supplier with an EMR higher than "1", would experience higher costs, while a rating lower than "1", would yield lower premium costs.

The Bureau of Labor Statistics (BLS) conducts an annual Survey of Occupational Injuries and Illnesses (SOII). This survey is designed to provide an estimate of the number of work-related injuries and illnesses and a measure of the frequency rate in which they occur (BLS, 2016). The injury and illness rates from the SOII are collected and published with their coinciding NAICS industry classifications. The BLS data is a collection of non-fatal injuries and illnesses for each calendar year from a sample of employers but is regarded as industry averages and sometimes used as a comparison tool for screening outside employers. According to federal regulations 29 CFR 1904, many employers with more than ten employees are required to keep a record of serious work-related injuries and illnesses except for specific "low-risk" industries. OSHA explains that minor injuries requiring only the treatment of first aid are not subject to the recordkeeping requirement. These recorded documents help employers, workers, and OSHA evaluate the safety of a workplace, understand industry hazards, and implement worker protections to reduce dangers and future risks (OSHA, n.d)

Organizations can compare BLS non-fatal injury data and their own statistics calculated in conjunction with an organization's OSHA 300, and 300A forms. Incidence rates are compared to the number of hours all employees worked. Non-fatal Incidence rates are generally collected and categorized as cases with days away from work, job restriction, or transfer (DART), and the total recordable rate (TRR) which includes OSHA's "other" recordable injuries. The incidence rate of injuries and illnesses is calculated using the following formula: (Number of injuries and illnesses x 200,000) / Employee hours worked = Incidence rate). The "200,000" hours in the formula is equivalent to 100 employees working 40 hours per week, 50 weeks per year and provides a standard base for incidence rates for data collection purposes. The BLS provides the following table to help illustrate how detailed comparisons can help an organization evaluate the effectiveness of their health and safety efforts.

BLS Example of How to Compare Firm Performance with National Averages

According to a study conducted by Truitt (2012), to effectively avoid losses associated with multi-employer environments, a proper pre-work evaluation must be performed. Truitt explains that objective criteria should be used to evaluate contractors and that determining loss history is an essential step in that process. Three years of safety statistics (i.e., EMR, TRR, DART, and fatalities) will act as a benchmark that can help the host-employer establish expectations, measure current performance, and drive continuous improvement (Truitt, 2012).

During a survey of industry leaders, the National Safety Council's (NSC) Campbell Institute compiled best practices in contractor management. Part of the Campbell Institute's discussion encompassed prequalifying contractors based on their safety records/statistics and comparing them to competitors. The Campbell Institute also found that most of the organizations that were surveyed responded that their contractor networks were required to submit injury and illness statistics for a given amount of time (i.e., the past three years). Additionally, respondents also analyzed injury logs, environmental reports, and the presence of continuous improvement programs (Lally, 2015).

While this screening is just one way to measure contractor performance, it is part of a well-balanced job safety and health plan. Learn how Appruv can help measure your contractor's performance here.

References

Truitt, D. (2012). Contractor prequalification. Professional Safety, 57(3), 34-35. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/928448905?accountid=27203

Lally, Siobahn. (2015). Best practices in contractor safety management. Professional Safety, 60(12), 14. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1744735932?accountid=27203

OSHA. (n.d.). OSHA injury and illness recordkeeping and reporting requirements. Retrieved from https://www.osha.gov/recordkeeping/

Tantatape Brahmasrene & Sarah Sanders Smith. (2008). Empirical evidence of factors affecting experience modification rate used by the U.S. insurance industry. Journal of Transnational Management, 13:3, 244-258, DOI: 10.1080/15475770802400400

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Jason Kelts is the Director of Communications @ Appruv.

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