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Quality Subcontractors Are Good for Business Tips for Mitigating Subcontractor Risk

The effectiveness of a safety process at a construction site depends on the active support and involvement of all the general contractors’ and subcontractors’ employees.

Good communication is vital to maintain safety at construction sites, especially among subcontractor groups that must identify safety hazards and implement prevention practices that each bring to the worksite. There are ways a general contractor can mitigate subcontractor risk.

OSHA Citations

Under OSHA’s citation policy on multi-employer worksite inspections, more than one employer may be citable for a hazardous condition that violates an OSHA standard. OSHA classifies employers into one or more of four categories (creating, exposing, correcting and controlling) to determine if a citation will be issued. In some circumstances, if a violation is created by a subcontractor, the general contractor also may be cited.

General contractor Responsibilities When Hiring Subcontractors

The general contractor has specific safety responsibilities when hiring subcontractors to come onto the worksite, onto the grounds or into the buildings or facilities to perform work. The general contractor’s responsibilities when hiring subcontractors include:

  • taking steps to protect contract workers who perform work on or near a potentially hazardous process;
  • obtaining and evaluating information regarding the contract employer’s safety performance and programs;
  • informing the contractor of known potential fire, explosion or toxic release hazards related to the contractor’s work and the process;
  • explaining the applicable provisions of the emergency action plan to the contractor and require that the contractor disperse that information to all workers who will work at this site;
  • developing and implementing safe work practice procedures;
  • maintaining a contract employee injury and illness log;
  • periodically evaluating the contract employer’s fulfillment of his or her responsibilities; and
  • hiring and using only contractors that meet contractor selection criteria.

Prequalification

Prequalifying subcontractors prior to contract award ensures they meet established and acceptable safety and health criteria. For example, upward incident trends, Experience Modification Rates (EMR) exceeding 1.00 and generally poor information obtained during reference checks could indicate an unacceptable subcontractor.

The EMR is an insurance premium rate that anticipates future performance based on past experience. EMRs are available on request from the subcontractor’s workers’ compensation carrier, and reflect the subcontractor’s experience in terms of numbers and costs of accidental injuries. An EMR of 1.00 indicates average performance, EMR’s greater than 1.00 reflects poorer than average performance and EMR less than 1.00 indicates better than average performance.

EMRs should be requested for the last three years. Subcontractors without three years of data should be asked for the data for the period they have been in business under the current company name.

Request, at a minimum, the following information from the subcontractor during the bid or qualification process:

  • injury and illness rates for the past five years;
  • loss experience (including fatalities) for the past five years;
  • EMR for the past three years;
  • the subcontractor’s safety and health program;
  • certificates of insurance including additional terms and conditions;
  • references from similar jobs;
  • resume of onsite safety person responsible for the job (if size warrants); and
  • OSHA citations for the past five years.

Insurance

General contractors need to consider insurance requirements from subcontractors. They generally require suppliers, subcontractors and other parties to maintain insurance coverage. Proof of coverage is normally required in the form of a certificate of insurance that indicates these requirements have been fulfilled.

Contractors’ standard agreements should contain a description of the required insurance and an indemnification clause. The indemnification clause automatically takes effect when the contract is signed, but the required insurance does not take effect automatically. It comes into existence only when the other party’s insurance company issues the required insurance policies or endorses existing policies to conform to the contractors’ requirements.

A certificate of insurance does not accomplish these changes; issuance of a certificate does not guarantee that the implementing changes have actually been made.

As the required insurance is not automatic, contractors should require proof that the insurance is in effect before the contract is accepted. Specify that the subcontractor and all its subcontractors (second- and third-tier subcontractors) must meet all safety and health requirements, OSHA standards and all local or state safety and health regulations. A documented survey should be submitted by each subcontractor during the bidding phase.

The purpose of this process is to identify measures that can be used to help control hazards and risks associated with the use of subcontractors on projects. Each general contractor should consider a proactive approach when using subcontractors to help eliminate injuries and illnesses, fatalities, equipment and property damage, and regulatory citations.

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