C O N S T R U C T I O N
RISK MANAGEMENT
ALTERNATIVE RISK FINANCING
DISASTER RECOVERY PLANNING
1. Introduction
Risk management is a wide ranging discipline, which is not confined to insurable risks. It is estimated that for every insurance risk, there are probably eight non-insurance events, which require risk management consideration. This work deals with the insurance related risks, which arise on construction sites.
To put the subject in to perspective, insurance is just one solution to a risk management problem. The cost and frequency of insurance claims in the construction industry has resulted in insurance becoming unavailable in some areas e.g. theft of plant, theft from unattended vehicles and substantial excesses are now normal for most risks. It is essential therefore, for the construction industry to practice its own risk management, quite apart from the disciplines which insurer’s may impose.
2. The Risk Management Process
Risk management may be defined as the identification, analysis and economic control of those risks which can threaten the assets or earning capacity of an enterprise.
The following diagram shows the stages in the process.
IDENTIFY THE RISK
EVALUATE ITS IMPACT
CONTROL THE RISK
PHYSICAL CONTROL
FINANCIAL CONTROL
POST LOSS
PRE-LOSS
RETAIN TRANSFER
3. Identification of Risk
This is the first and essential step in the risk management process. Without identification the risk cannot be evaluated, and therefore cannot be controlled.
There are numerous methods of identifying risks in the construction industry e.g. organisational charts, physical inspections, check lists, flow charts, and more technical methods such as the use of fault trees, which can offer alternative causes of any particular risk which may arise. There are advantages and disadvantages with all methods, and the contractor needs to work with that which is most practicable for his situation. Check lists are quite effective in that they are speedy and low cost, as well as encouraging others to get involved in the process. Most contractors will be small enough to purchase conventional insurance, and the insurance manager will give them a comprehensive list of perils and liabilities to which they are exposed.
In a large international contracting Organization a risk manager will probably be employed, whose sole function is to carry out this process. In an ideal world, such a risk manager should always be employed, but at the end of the day the process has to be cost effective to the enterprise.
4. Analysis
It is necessary to evaluate the impact of the risk once it has been identified. Clearly a fire will have a significant impact on a construction site, as will a severe storm on an exposed site, and vandalism on a suburban site with valuable materials in store. Very expensive plant may be on site and there are risks of impact and collapse, with third party claims also possible. To evaluate any risk requires a lot of information gathering, along with an analysis of previous experience. There is a need to calculate the potential frequency and severity of losses, and various techniques are used to achieve this.
Just because a risk exists does not mean that it has to be treated in a particular manner. For examples, some risks produce frequent but low cost claims. Theft of plant from sites or from vehicles is common. Most claims are for a few hundred pounds, and as this would eat away the annual premium charged by an insurer, it is likely that the insurer will call for a compensating increase in the premium. It is sensible therefore to self insure such risks either by removing the theft risk entirely, or imposing a significant excess.
Insurance therefore is not the answer to most low cost high frequency losses. This does not mean that the contractor has to accept the situation. He can improve his security on the site or on his vehicles and seek more stringent controls on the movement and location of plant.
5. Risk Control
This comprises two disciplines – financial control, either by retention, insurance or otherwise, and physical for example improved security on site. In construction insurance the problem is compounded by the wide range of risks to be managed.
These can range from direct perils such as fire and malicious damage on site to complex legal liability claims, involving professionals, sub-contractors and future tenants and purchasers. In addition there are a range of consequential loss issues, as well as specialist risks and insolvency of contractors (performance bonds).
The contractors all risks cover alone involves numerous risks from fire, explosion, aircraft damage, riot, malicious damage storm, flood, burst water pipes, impact, and accidental damage. In some circumstance consequential losses may arise, to the contractor, the client, and the professional advisers. Legal liabilities may also arise out of the same incident.
The impact of these risks will also vary from location to location and in some parts of the world, other perils have to be considered e.g. hurricanes, volcanic eruption, and earthquake.
This is a considerable challenge to a risk manager, and the scope for risk control in the construction industry is therefore enormous, and in recent years, steps have been taken to improve the situation. Examples of recent initiatives are:
i) The local Code of Practice on the protection from fire on construction sites and buildings undergoing renovation.
ii) The Theft Scheme.
iii) The regulations (Construction Design and Management).
iv) The Construction (Health Safety and Welfare Regulations.
The above initiatives have regrettably only been a response to the continuing unacceptable losses from various perils over many years.
Another method of controlling risk is transfer by means of contract conditions. A common example is the use of the Construction conditions, in relation to plant hire, which transfers most of the risk of damage to the plant, and personal injury, to the hirer. This does not however, reduce the risk. Total elimination of a risk is well high impossible, but reduction in risk is quite possible, and several initiatives are now under way. The 1992 joint Fire Code of Practice, has initially been targeted at the larger contract sites. There has been some criticism that the severe measures required, are causing financial problems to the construction industry in a difficult trading period, when profitability is difficult to achieve. However, this has to be the way forward if insurance protection is to remain available at reasonably commercial premium rates.
The fire code deals with various headings, such as:
– the design phase, imposing a duty on architects, engineers, contractors, and client.
– the construction phase-involving the appointment of a fire safety co-ordinater responsible for assessing the degree of fire risk, and for updating the site fire safety plan. The requirements go in to some detail.
– Emergency procedures e.g. signs to be erected in prominent positions, indicating the location of fire access routes, and escape routes, and also the position of dry riser inlets, and extinguishers.
– fire protection.
– portable fire extinguishers.
– site security, against arson.
– site storage of flammable liquid and L.P.G.
– electricity and gas supplies.
– hot work. Insurers have imposed conditions under third party policies for many years, where heat is applied on third party premises but have paid little attention to the same risk under contract works policies prior to handover.
– waste materials.
– plant.
The damage potential, caused by contractors on third party sites has now been recognised, and most employer’s now have strict procedures in operation, before contractors are allowed to enter a site, and during operations. It is perhaps an indictment on the industry that these measures are client and/or statute driven.
6. Local Fire Code-Prevention Checklist
Guidance is available for surveyors, construction professionals and contractors. The questions are split in to different phases of the contract.
Design Phase
i) Has a design co-ordinater been appointed ?
ii) Does the co-ordinater understand the full scope of his responsibilities ?
Construction Phase
i) Has a fire safety co-ordinater been appointed by the main contractor?
ii Has the fire safety co-ordinater:
– formulated a fire safety plan?
– ensured that the staff are familiar with and comply with
the plan?
– monitored compliance with the plan, particularly with regard to hot work permits?
– established a regime of checks and inspection of fire safety equipment, and escape routes?
– established effective liaison with security contractors or staff?
– written records of checks, inspections, maintenance work, fire patrols and fire drills?
– carried out a fire drill, and analysed the results
– checked arrangements and procedures for calling the fire brigade?
iii) On large sites has the co-ordinater appointed fire marshalls or deputies, trained them and delegated responsibilities to them?
Provided site plans for emergency services, showing escape routes, fire protection equipment and facilities for the fire brigade?
iv) Fire Safety Plan
Does the plan detail:
– the Organisation and responsibility for fire safety?
– the site precautions?
– the means of raising the alarm in case of fire?
– the procedure for calling the fire brigade?
– the means of escape in the event of fire
– the hot work permit scheme?
– the site accommodation-its use location construction
and maintenance.
– the points of access and sources of water for the fire brigade
– the control of waste materials?
– the security measures to minimise the risk of arson?
– the staff training programme?
v) Emergency Procedures
– is the means of warning of fire known to all staff
– is it checked regularly and is available in all areas above
background noise.
– are fire instruction notices prominently displayed?
– are the fire brigade access routes clear at all times?
– have specified personnel been briefed to unlock barriers when the alarm sounds?
– have signs been installed, indicating fire escape routes and the positions of fire protection equipment?
vi) Fire Protection
– have measures been taken to ensure early installation and
operation of escape stairs, lightning conductors, automatic fire alarms, automatic sprinkler systems, or hose reels?
– are fire dampers, and fire stopping provided at the earliest opportunity?
– is steelwork protected as soon as possible?
– are adequate water supplies available?
– are all hydrants clear of obstruction?
vii) Portable Fire Extinguishers
– are adequate numbers of suitable extinguisher’s provided? – are sufficient personnel trained in their use?
– are extinguishers located in conspicuous positions near
exits?
– are carbon dioxide extinguishers installed near electrical equipment
– do all mechanically propelled site plant carry suitable extinguishers?
– have procedures been implemented for the regular, inspection and maintenance of extinguishers.
viii) Site Security Against Arson.
– are adequate areas of the site including all storage areas
protected by hoarding?
– is security lighting installed?
– has closed circuit television been installed?
– if so, are the screens monitored, and/or recorded?
– is the site checked for hazards at the end of each work period, particularly where hot work has been in progress?
ix) Temporary Buildings
– has the contractor made application for a fire certificate? -is the fire break between the temporary building and the works more than 10 metres?
– if the fire break is less than 6 metres-is the temporary building of relatively non combustible materials, and is the building fitted with an automatic fire detection system?
– if the temporary building is within the building under
(Loss Prevention Standard) or otherwise made of materials which will not significantly contribute to the growth of a fire? Is escape for personnel sufficiently easy? Is access for the fire brigade readily available? Is the building fitted with an automatic fire detection system?
– is any space under a temporary building, enclosed with non-combustible material?
– are heaters fitted with guards, and securely fixed on the walls
– if buildings contain heaters for drying clothes are they thermostatically controlled, and are drying racks fixed firmly at a safe distance?
– are all heaters and cookers properly installed and is adequate ventilation provided?
– are automatic fire and intruder alarms installed in temporary building, used for the storage of flammable liquids and gases?
– do temporary buildings contain the minimum of furniture and fittings made of synthetic materials?
– in areas of fire hazard, does a no smoking policy prevail and are there adequate ‘no smoking’ signs in place?
x) Site Storage of Flammable Liquids and LPG
– are flammable liquids and LPG stored in purpose designed compounds?
– if not, is the quantity less than half a day’s supply (about 50 litres) and is it kept in a fire resistant container?
– is the storage area at least 10 metres from temporary
and permanent buildings?
– if not, are all recommended precautions taken?
– are oxygen cylinders, chlorine and similar agents kept
separately from flammable liquids and LPG?
– are the stores properly signed
– has the store a paved on solid base, and is it kept clear
of weeds and rubbish?
– are all electrical fittings of intrinsically safe design?
– is automatic gas detection equipment installed?
– are suitable fire extinguishers provided at the entrances?
xi) Electricity and Gas Supplies
– do electrical installations comply with IEE regulations for electrical installations?
– is all electrical work undertaken by a competent electrician?
– are all installations inspected and tested regularly?
– are all circuits, turned off when work ceases? (except those controlling security functions)
– are all gas supplies installed by a registered gas installer?
– are all gas supplies in fixed piping of armoured flexible tubing?
– are gas cylinders located outside buildings, secured, and protected from interference?
– are flexible links used for LPG supplies only connected by a competent person?
xii) Hot work
– is a permit to work system in operation?
– does the system include an adequately maintained register
– is the area of operations cleared of combustible materials,
before work commences, and are the opposite sides of walls or partitions also inspected?
– is a careful watch maintained during hot work processes with suitable extinguishers of appropriate type at hand?
– is wooden flooring, and other combustible material which is not moveable covered before work commences?
– is the work area screened when welding or grinding is undertaken?
– are gas cylinders secured vertically and are they fitted with flashback arresters?
– are tar boilers supervised by experienced operatives, and only taken on to roofs in exceptional circumstances?
– is the work area thoroughly examined an hour after work has finished?
xiii) Waste Materials
– are provisions made for the safe storage and removal
of waste materials?
– are checks carried out routinely to ensure that waste materials are not accumulated?
– are metal bins with metal lids provided for oily rags?
– is collected waste, awaiting disposal kept away from temporary buildings, stores and equipment?
– is all dry vegetation removed regularly from around the site?
– is there an absolute prohibition in burning rubbish on site?
xiv) Plant
– is all plant with internal combustion engines, positioned in well ventilated, non combustible enclosures with exhaust pipes clear of combustible materials?
– are compressors, housed away from other plant?
– do notices and staff training make it clear that fuel tanks must not be refilled while engines are running?
– is plant and equipment protected from accidental impact?
– are air intakes positioned so that air is cool and free from flammable gases and vapours?
– are sandtrays provided to absorb drips of fuel and lubricant?
Any contractor following this checklist will have covered the Local Fire Code requirements very well, as it is very exhaustive. The code was revised again in 1995, and you should keep up to date with developments.
7. Security on Site
Theft and vandalism on sites is a constant problem, and a source of some concern to contract works insurers. Cover is becoming difficult to obtain for some risks, such as theft from unattended vehicles, and comprehensive security measures are almost mandatory to obtain site and depot cover. Substantial excesses are becoming common.
The type of security devices required will center on high quality standards for locks bolts for thief resistant door locks. This is a minimum standard and some doors may warrant an even more substantial lock. Mortice deadlocks are inferred but if that is not physically possible a rimlock of the correct standard would suffice.
Other means of securing doors are hinges, padlocks (which should be of the close shackle type, and used with a strong locking bar) key operated bolts, door reinforcement (sheet lining, with coach bolts) and frame reinforcement e.g. a rigid steel strap to the full length of the post, to spread the load.
Window security may be by key bolts or screws, or by bars or grilles, shutters, or even bricking in. Much depends on the particular situation. Contract works are difficult to secure, and much of the above security would be more applicable to existing structures, such as in refurbishment contracts, or building extensions.
A more recent requirement is for the telephone line to be constantly monitored by use of systems of such as B.T. Redcare or Red A.B.C. Many alarm systems are either non-NACOSS, or have audible signalling only, or police only, or with a digital communicator to a central station. A direct line is another method which is acceptable to many insurers, although it is expensive. Alarm bells only, or security systems are generally not approved by insurers, unless the risk is very low hazard.
Site security is possible, with a combination of one or more of the following devices:
Security Fencing – a first line of defence, which can be used in conjunction with guards and for security lighting. The fencing is usually of the chain link or welded mesh type topped with barbed wire, or steel palisade. The standard required is BS 1722 specification for fences parts 10 and 12.
Security Lighting-this can be vandal resistant, and if carefully planned and installed can be a very good deterrent. The lighting may be linked to a CCT camera and/or an alarm system.
Guards-an expensive alternative, which should be done by a member of security companies and patrol section. Such guards should be well trained with good communication arrangements. The guards can be supplemented by use of CCTV and security lighting.
Security Glazing-in an enclosed hazard area, such as wages distribution points. A glass screen can be fitted and the glass should be anti bandit or even better bullet resistant. It would be as well for the whole area including base beneath the glass to be the same resistance as the glass.
Closed Circuit Television-good for day-time surveillance, but equally good nowadays for overnight detection. The cameras can be monitored on site, and/or connected to video recorders.
The main problem in the construction industry, however, remains that of plant theft from site. Some operators have now had their plant and vehicle fleets fitted with the police tracker device, which is fitted to the vehicle in a secret location, and gives out a signal, to enable the stolen vehicle or plant to be followed. It has been very successful so far with a very high detection rate, including the rounding up of a few criminal gangs, responsible for such theft. Immobilisers, and locking devices would be a requirement of all plant insurers, and cover for plant which is not in a locked building, or alarmed compound overnight, is rapidly becoming unavailable.
Apart from the above devices, a contractor can help to reduce the incidence of losses such as:
(a) Tighter control of keys. Many items of plant are stolen with the keys still in them! Keys are also often left in site huts, which are easy to break in to.
(b) Paint the plant a more unusual colour. The large majority of plant in the EUROPE is still bright yellow.
(c) Improving the quality of locks – many manufacturer’s own locks are of very poor specification.
(d) Use of security marking devices, such as etching.
(e) High tensile chain towing eye locks.
(f) Wheel clamps.
(g) Mercury tilt switches, to activate an audible alarm
(h) Telescopic leg fixed to the underside of a machine which extends downwards if the machine is lifted off the ground.
(i) Fuel locks hydraulic locks and battery isolating switches. Electronic access control systems to site with I.D cards with photographs
(k) Materials to be logged on to site
Most items of plant are not registered for road use, and therefore have little other identification. Most plant still does not have a vehicle identification number.
8. Site Safety
Perhaps one of the biggest problem areas for contractors remains that of safety. The industry has dragged its heels for a long time on safety issues, but have now had to take corrective action, in the wake of a deteriorating accident record, various reports on the industry, and now in legislation such as the Construction Design Regulations 1994, and the Construction (Health Safety and Welfare Regulation.
9. Local Regulations
The Regulations impose duties on all parties involved in the construction and design process, including the client. The clients duties are extensive, although some of these duties may be passed down to contractors and consultants. The duties include the appointment of a planning supervisor, and of a principal contractor. The client must also ensure that the planning is carried out as soon as practicable. This may require a further appointment, that of a consultant to carry out an environmental audit. Where existing buildings are involved, their current, and previous use should be made known to the planning supervisor
A health and safety phase must also be built in to the construction programme, and this should describe the project, identify the risks to persons carrying out construction work, and set out proper precautions. A health and safety file must be made available, and be kept updated. The file will ultimately be passed to the purchaser or tenant of the completed building. Suitable insurance arrangements are also required.
As far as designers and contractors are concerned, their duties are also complementary.
– except for in house designs, the designer cannot allow its employees to prepare a design for any project, unless reasonable steps have been taken to ensure that the client is aware of the duties it has to perform under the Local Code.
– designers must co-operate with the planning supervisor to ensure that the designs take in to account all considerations and include adequate information, to avoid health and safety risks.
– contractors must cooperate with the principal contractor and comply with his directions, and the notes of the health and safety plan.
– contractors are also required to be pro-active with information to the principal contractor, including data which they do not yet have. Any existing requirements on health and safety, may need modifying by the client, setting out the contractors new duties under the Local Code.
– warranty agreements may now be extended to the principal contractor, and planning supervisor, and any obligations under the contract or collateral warranties should be backed by suitable insurance.
Local Codes does not give third parties any extra legal rights, except where:
– the principal contractor fails to take reasonable steps to prevent unauthorised persons from having access to the site.
– where the client does not ensure, as far as is reasonably practicable that a health and safety plan is prepared before construction commences. Directors and responsible executives of the client who are found liable may find themselves facing a limited fine in a magistrates court or unlimited if taken to a higher Court, and for imprisonment for a maximum term.
The regulations will include a much wider scope of work than previous regulations, including for example works of engineering construction and minor maintenance contracts.
Some of the more significant areas which will appear in the new legislation are:
• Prevention of fall. This account for an estimated 60% of all construction accidents ie falls of over 2 meters or being struck by vehicles on site. Suitable steps will have to be taken therefore to prevent such falls, such as provision of working platforms, intermediate guard rails, and where appropriate, crawling boards, or crawling ladders.
• Fragile Material e.g. roofing, some means of support will be required to avoid such falls.
• Falling Objects -positive measures will be required to prevent people being struck by falling objects. Materials on site will have to be stacked or laid out in such a way as to prevent them collapsing or overturning.
• Collapse of Structures-adequate support must be provided for any structure which may be in a weakened state or unstable, to avoid collapse. The duty to diagnose such weakness or instability will be on the designer and contractor. Consideration will have to be given to the effect of temporary loadings imposed by construction methods, and natural forces, singularly and in combination.
• Safe Means of Support-the safety performance of scaffolds ladders, or other means of support will be dealt with in detail.
• Demolition and Dismantling – areas to be covered will be the demolition plan. No demolition work will be allowed to start unless steps have been taken to prevent any danger from specified hazards.
• Excavations-risks connected with falling, flooding or instability will be considered. Provisions for the excavation of any excavation in the event of fire or inundation will be paramount.
• Traffic-the planning and Organisation of traffic routes on or adjacent to the site.
• Doors and Gates -all to have safety devices to meet relevant criteria.
• Vehicles – excavating and handling machinery will be required to be fitted with devices to protect the driver from being crushed if the machine topples.
• Plant and Equipment-the design use and maintenance of plant and equipment will in future be influenced strongly by safety factors.
• Fire Precautions – fire fighting devices, fire detectors and alarm systems will be the order of the day, on construction sites.
• Emergency Routes -every construction site will have to have a sufficient number of escape routes, which must be kept clear of obstruction and provided with emergency lighting where relevant.
• Ventilation-fresh or purified air must be available on all sites. This is obviously required in restricted spaces or enclosed environment such as in tanks or boilers.
• Temperature-this must be reasonable at any point of activity on the site, and the requirement will be interpreted in conjunction with the provision of protective clothing or equipment.
• Lighting – the colour of any lighting on a site must not adversely affect or change, the perception of warning signs or signals.
• Good order-a proposed statutory requirement to maintain a construction site in good order, and in a state of cleanliness.
The regulations will also be looking at inspection of certain hazards by a competent person e.g. where work is carried on at a height of more than two metres. Welfare provisions will also be considered at some length whether on or off site or for offices or works. The regulations will include facilities for washing, changing clothes and eating.
10. Environmental Issues
The environmental aspects of risk management have now been brought to the fore, as a result of the Environmental Protection. Contractors may have responsibilities for land which has been contaminated, and which has been purchased for development purpose.
Examples of the consequences of failure would include:
– civil liability, including payment of damages or clean up casts as well as affecting the future of the site such as an injunction or abatement order.
– criminal sanctions such as imprisonment as well as fine.
– environmental statutes, imposing personal criminal liability on directors and officers, or controlling parent companies.
Remedies to avoid such problems would consist of:
i) Development of a corporate policy on environmental matters with eventual adoption of an environmental standard such as.
ii) Staff qualification under environmental management schemes.
iii) Greater corporate disclosure, via corporate and environmental compliance audits, which should identify actual or potential shortcomings.
iv) Proper selection, training and supervision of staff and outside agencies
v) Documentation is vital. Attention should be concentrated on audits and reports, employee manuals and instructions, contract documents, financial documents, and not least insurance policy wordings. Document retention policies are important, in view of the nature of legal liability, which may arise many years in to the future, based on pollution created many years ago.
vi) Care in dealing with regulators. If regulators call in their own experts, a consultant should be appointed.
vii) In some areas e.g. chemical works crisis management procedures may need to be in place the manual being updated constantly.
viii)Consideration of the insurance levels required. Public liability policies may vary in the cover they provide. Older policies may provide cover against pollution generally, but newer policies have specific pollution wordings, which (a) define the extent of pollution liability covered, and (b) specifically restrict the cover to sudden identifiable unintended and unexpected incidents which take place at specific times and places. Pollution claims occurring are excluded entirely, and need special consideration. The Environment Act has now further extended the responsibilities of site owners and operators.
11. Terrorism Damage
Due to continuing acts of terrorism, commercial insurance is now only available in respect of buildings, contents and consequential losses. If full protection is required, it must be paid for by applying to Pool Re, a Government backed cover, or a similar scheme. It is vital to be aware and take appropriate action therefore to minimise the chances, and the effects of such damage. Such measures are difficult to apply, because bomb attacks are indiscriminate. Complete security is not possible, but with agreed plans and procedures and pre-planning for disaster, the effects can be reduced.
12. Pre-attack Procedures
i) Vigilance-to be alert at all times for suspicious objects, or people, whether inside or outside a building. Clear instructions to all staff on the action plan to be circularised.
ii) Responsibility-many buildings are multi-tenanted and responsibility for security should remain with the owner. Regular liaison with all tenants is vital and an agreed procedure adopted.
iii) Tidiness-to keep disruption to a minimum. This may mean the provision of suitable secure cabinets for the storage of all material. Desk tops, floors, and shelves can then be kept free.
iv) Control of entry to buildings. This involves the control of ingress and egress preferably by limiting the number of such points. A security patrol is recommended.
v) Visitors-to pass through a reception area designed to prevent further access without approval. All visitors should sign for and receive a security tag and even be accompanied by an employee at all times. The departure should also be logged.
vi ) Other visitors such as contractor’s on site, or delivery personnel should be checked and authorised. Arrivals and departures should be recorded carefully.
vii) Premises should be searched at the end of each working day, including communal areas. The search should be thorough, including all space up to ceiling level, and include cloakrooms, passageways, car park areas and stairways. Results need to be collated. Any suspicious object should be left untouched and the police alerted.
viii) Someone must be appointed to co-ordinate the above functions, to be based at a well established point, with good communication access.
13. Post Loss Measures
From the moment that a device is discovered, or a warning given, or a device goes off, urgent decisions need to be taken. Evacuation of the premises is an obvious consideration, but it may not be sensible for all situations. Evacuation may be total or partial, depending on the size and shape of the premises, and the size and type of bomb. The latter can vary from a letter bomb, to a suitcase bomb, or vehicle packed with explosives.
The decision to evacuate must come from the owner or tenant of the properties concerned. the police do not have such authority.
It may be more appropriate to relocate staff to a safer part of the building such as a basement or underground car park, depending on where the bomb is located. Designated areas should be arranged beforehand, so that staff are not tempted to go out in to the street, where they may be injured by flying glass and other fragments. Such areas should be checked beforehand by structural engineers.
These areas are known as “bomb shelter areas.” They should be sited away from windows, external doors and external walls, away from the perimeter structural bay, away from stairwells, or in areas with access to lift shafts. They should also be in areas surrounded by full height masonry, or concrete walls e.g. corridors, toilet areas, or conference rooms.
Communications between co-ordinater and staff must be comprehensive and clear. Portable powered communication equipment should be available, in case the mains electricity supply is interrupted e.g. hand held transmitters / receivers, or other stand alone audio communication links.
14. Security Measures and Contingency Planning
The effects of a blast can be reduced by fitting a special transparent polyester film to the inside of windows or hanging special net curtains. The film provides a good bond which reduces the hazard of flying glass. The fitting of a blast curtain limits the internal effects of an explosion. The curtain is designed to billow out, absorbing the energy of the blast and retaining glass fragments.
Closed circuit television is very useful, provided it is actively monitored, and has a recording facility. Such devices are now widely used to combat daily crime as well as terrorism. CCTV also needs to be used in conjunction with other security aspects, such as communications, personnel and staff training.
It is not sufficient just to purchase and install any old equipment. The following criteria are important:
– carefully draw up a specification of what exactly is needed
– employ a CCTV specialist to install the equipment
– commissioning procedure to be included
– cameras to be in sound working oder, with clear lines of vision
– ensure recording devices are in good order, and that tape heads are regularly cleaned, and maintained
– recording tapes to be of good quality, and recordings retained for 28 days or longer.
Contingency planning is essential to minimise the disruption to the business. A business can be severely interrupted by any number of contingencies, not all of which need be high profile such as terrorist bombs, and not necessarily relating to insured damage. It might for example involve closure of the premises because of infection or foreign bodies in the product.
In the event of a bomb, however, the contingency plan should anticipate that a building may be so badly damaged as to be inaccessible. The plan must therefore look at alternative accommodation for staff, restoration of communications, back up arrangements for vital records, off site, and notification of all necessary arrangements to customers and suppliers.
Key individuals must to appointed, with clear responsibilities on procedure. A sound plan is to appoint one overall supervisor of the plan, with two teams reporting to them one which manages the business itself until things return to normal, and the other which manages the disaster itself.
15. Risk Management for Professionals
Arguably this subject should be at the beginning of this work, as much of what happens at the design stage, will have an influence on the whole construction process.
The main points to be considered by the architect and engineer are as follows:
i) Do not certify anything without having carried out a proper site inspection.
ii) Insist on an equitable written contract. Such a contract outlines the duties and responsibilities of the parties, so that it is easier to pinpoint the cause of the problem when it arises.
iii) They must have a specific project plan
iv) They should not make any exaggerated claims about their design or specification
v) They must keep the client informed at all stages
vi) Any problems should be faced squarely
vii) written records should be maintained of any changes in the contract terms, designs, scheduling, materials, site meetings, instructions and after any incident or accidents. Such records should be kept for a mininum of 15 years.
viii)Never guarantee performance or accept uninsurable risks e.g. a contract or collateral warranty, with an express fitness for purpose clause.
ix) Think carefully before suing for outstanding fees. There may be a reason for the non payment. Only if the claim for fees looks perfectly valid, proceed.
16. Contractors on Third Party Sites
The basic rules of risk management apply equally to activity on other peoples premises, as well as the contractor’s own site. Many contracts consist of work on existing premises, much of it involving “hot work” ie use of heat such as blow torches and welding appliances. Not surprisingly, many major fires have been caused by contractors on other peoples premises and the more enlightened employers have now laid down very strict procedures, regarding access to the site and rules whilst on site. Such procedures cover not only the fire risk, but site security, and health and safety matters in particular.
A common procedure is to issue any contractor entering the premises with an entry permit, or booklet which incorporates all the procedures to be followed. This commences with entry procedures, and states that no contractor will be allowed to commence activities, until they demonstrate that they understand and will comply with the regulations.
The contractors health and safety policy should be supplied before work commences, and all employees must report to the correct entry point, and sign in. The health and safety procedures will need to cater for employees of the contractor, as well as employees of the customer, and to third parties.
If any of the work is to be sub-contracted, the contractor must ensure that the subcontractor has a copy of the health and safety document, and that they will comply with its provisions.
Fire precautions are laid down, on much the same lines, as the contractors public liability insurers may apply e.g.
– apparatus to be regularly checked
– apparatus to be extinguished when not actually in use
– no storage of flammable liquids on the site
– permission from the customer before work commences
– no burning of waste on site
– fire proof screens to be erected around the work to be carried out
– fire extinguishers to be immediately at hand
– site to be checked half an hour or an hour after the work has finished.
Other requirements would concentrate on such areas as:
i) Protective clothing and equipment
ii) Noise and environmental pollution
iii) Electricity regulations
iv) Housekeeping
v) Welfare and first aid activities
vi) Fencing of machinery
vii) Control of Substances Hazardous to Health.
viii)Insurance requirements -usually a mininum third party cover of say along with suitable employer’s liability cover, and any other relevant cover and on more specific areas:
ix) Scaffolding and means of access
x) Lifting operations
xi) Excavations
xii) Asbestos regulations
17. Self-insurance
This is the planned assumption of risk. It should not be confused with non-insurance, which is not planned, and where a catastrophe could arise without the buyer even being aware of the risk. Most large buyers will accept a degree of self insurance, and certain criteria may be adopted such as 1% to 5% of working capital in any one year, or 0.1% of sales per occurrence. Factors which may influence the actual level of self-insurance are the cost of the insurance premium, claims handling costs and loss control. The obvious advantages are improved cash flow on loss payments, no insurance overhead contribution, more focus on loss control, improved control over claims, and improved scope of excess insurance.
There are disadvantages, such as heavy losses in any one year, and cost of handling the self-insured losses including tax implications.
Insurers are also slow to offer good discounts for higher deductibles, so that many buyers are settling for lower deductibles than they could actually absorb.
18. Preparing the Plan
A committee should be set up for the specific task in hand, and this should consist of representatives from all areas of the enterprise -production, development, financial, personnel, technical.
To be effective, the team selected must, be right for the job, selected from senior management, and commitment must be shown from the top.
The leader of the team, should act as a coordinator, and again needs to be a senior figure in the company.
The team would look at the worst possible scenario, say a total devastation of the premises, and decide how they would continue to operate the business, and how to progress back to normal working in the shortest possible time. Some disaster have different effects on a business. There may be a loss of production, as on a contract site, on inability to trade because of lost drawings or documents.
Back up is vital. A key member of the team may be on holiday or away ill, at the time of a disaster, and reserve personnel must therefore be trained up, as part of the team.
A list of names, addresses and telephone numbers must be available, including emergency numbers, in respect of:
Bankers
Insurers
Loss adjusters
Plumbers, electrical
Material suppliers
Local police
Emergency services
Sub-contractors
Consultants
Detailed plans of the premises, including location of all services must be available, and liaison with loss adjusters may well repay the company, as they will have useful information contacts and resources.
It is vital to keep such lists and plans up to date on a regular basis.
The division of responsibility may include:
– communication and public relations
– computer systems
– salvage and debris removal
– production
– administration.
Good public relations is vital in some industries, and the public do need to have their confidence restored. On a major new construction contract the client does need to know where he stands, to avoid substantial trading losses due to delay. A sound two way communication system is required.
Salvage specialists may be needed and again contact with loss adjusters will assist in this area.
19. Keeping the Plan Up-to-Date
This is an essential function. An out of date plan is almost as bad as having no plan at all. Regular meetings will therefore be necessary to ensure that the plan remains relevant to the current situation. Flexibility must be built in to the plan. Regular meetings also mean increased familiarity with the plan. The plan should also be tested occasionally in parts and as a whole, so that any hitches can be ironed out ahead of any real emergency.
The document itself should be simple to follow. Personnel do change, and new people taking on such responsibilities should be able to look at the document, and pick up the main points readily. This will involve some thought on the lay out of the document, colour coding and summarising. Copies of the document need to be available at the time of the disaster. If they are all destroyed by the disaster they are not of much use. Copies must therefore be kept off site, say at the homes of directors.
22. Benefits of a Disaster Recovery Plan
- Apart from the fundamental benefit of providing the basis of a speedy recovery, the other advantages are:
- Market Position – possible loss of market in the event of a long delay.
- Legislation – a plan will focus on legislative matters, such as safety procedures, and fire protection.
- Problem Areas -already addressed within the plan
- Education and Training – identifying and dealing with the problem is one thing but lessons can then be learnt and incorporated in to training programmes.
- Prevention-the plan enables different views to be taken on how the work is done in the future. Different working practices may improve the risk for the future, as well as bringing about improvements in the industry generally. One of the problems there was the presence of combustible site huts and materials sited under the main building. One of the outcomes was the introduction of the Local Code of Practice for Construction Sites now in its third edition.
- Finally, the presence of a good disaster recovery plan, may be helpful to the insurance overhead on certain risks where some discount may be available from certain insurers.