1. www.virtualriskmanager.net Chain of responsibility: Risk management of contractors, sub-contractors, and spot hire transport in the supply chain Dr Will Murray Interactive Driving Systems

2. www.virtualriskmanager.net Debate Transport (sub-)contractors are a road fatality waiting to happen?

3. www.virtualriskmanager.net Aims & Background

4. www.virtualriskmanager.net Aims Background Why is (sub-)contracting important? Poor practice in managing (sub-) contracting Good practice research Shell India case Sample tools: –(Sub-)contractor audit –SHEM committee Terms of Reference

5. www.virtualriskmanager.net Background Contracting, sub-contracting and use of de-, un- or poorly- regulated ‘flexible labour’ common in transport sector around globe –includes (Sub-)contractors, owner drivers, spot-hire & agency Has many business benefits: –off balance sheet, custom & practice, flexible & low cost But can also bring ‘safety issues’ Presentation based on: –University of Huddersfield research –On-going business to business projects –NIOSH ‘White Paper’ research

6. www.virtualriskmanager.net Why important?

7. www.virtualriskmanager.net Why important? Transport contractor’s yard Client head office

8. www.virtualriskmanager.net Why (sub-)contracting important? Work- Related Fatalities 20022003200420052006 Employees 10221 Contractors 151215411 Total 161217612 Global FMCG companyGlobal oil company

9. www.virtualriskmanager.net Why important? Agency (Contract) = 10% of shifts

10. www.virtualriskmanager.net Why important? % of drivers % of incidents 10%25% 20%39% 50%64% 90%93% 100%

11. www.virtualriskmanager.net Why: Contract versus employed drivers

12. www.virtualriskmanager.net Why: Sub-contractor example Oil company appoints transport contractor and manages really tightly through strict contractor management procedures: –Rejects 3 other contractors partly on grounds of poor safety record –Main contractor later sub-contracts majority of work to 2 of the rejected contractors who have many near misses in dust on dirt roads – trying to meet tough schedules – before major rollover costs oil company $9.3 million –Oil company had NO policies in place to manage sub- contractor safety performance Could this be one of your sub-contractors?

13. www.virtualriskmanager.net Poor practice By users and suppliers

14. www.virtualriskmanager.net Poor practice - ‘users’ Not developing/applying any contractor management policy Focus on cost Poor communication - senior and local managers Limited management systems in place - open to ‘gifts’ No advanced planning of contractor needs - ‘last minuteism’ Playing off contractors against each other to cut costs Not properly assessing vehicles, drivers & journeys Giving minimal work instructions or debrief to temporary drivers

15. www.virtualriskmanager.net Poor practice - ‘suppliers’ Taking work on at very low rates Little focus on customer service ‘Small print’ terms and conditions and ‘get out’ clauses Poor safety, fuel use and vehicle care No clear written policies Very limited risk assessment Supplying unsuitable, inexperienced drivers Keeping no records or performance data Evidence of using inducements and gifts

16. www.virtualriskmanager.net Research on good practice Including Shell India case

17. www.virtualriskmanager.net Summary of good practice Users and suppliers work closely to: 1.Plan ahead 2.Understand each other’s requirements and give regular feedback on fulfilment 3.Ensure all (sub-) contracted operations are appropriately risk assessed, implemented, managed, audited and reviewed

18. www.virtualriskmanager.net Good practice operations Build safety into contract tender process Buy on quality and value – rather than lowest price Treat contract drivers equally Provide contractors with clear requirements for safety management Assign realistic workloads Ensure systematic recruitment/training procedures Keep and use detailed operational statistics Undertake regular audits and reviews

19. www.virtualriskmanager.net Shell India case Shell India, GRSP & local agencies implemented contractor initiative in 2006 to raise the safety standards of truck operations including: –Business case –Pilot phase to develop contractor systems audit and process –Stakeholder workshop involving Shell, GRSP, police, doctors, administrators, trainers, traffic engineers, highway experts, politicians, licensing authorities, regulators & enforcement agencies, government officers, politicians, AIMTC & 6 contractors running approximately 1,500 trucks –Voluntary, but auditable, 20-element Code of Conduct signed for safe fleet management to be piloted in Bangalore and Chennai –Code covered organisational, driver, vehicle & journey management

20. www.virtualriskmanager.net Shell India case Other outcomes included: –Production, delivery and evaluation of training for owners, managers, drivers & helpers –Engagement with stakeholders & authorities to influence: road design, planning and construction licensing system to prevent unlicenced driving wage rates & working conditions drug and alcohol abuse Overloading –Ongoing performance monitoring of outcomes KPIs including fuel use, maintenance costs, downtime and safety

21. www.virtualriskmanager.net Shell India case Phase 2 began in late 2006, managed by consortium including Shell, GRSP & AIMTC –aimed to expand program to 100 transporters in southern India –5 training modules had been developed No more recent evaluation data available Shows: –Benefits of partnership approach –Focus on better management of informal transport contracting sector Worthy of further development and evaluation Methodology has potential as good practice model

22. www.virtualriskmanager.net Good practice tools Self audit for users & suppliers * Shem committee *

23. www.virtualriskmanager.net Contractor Management Audit Source: www.fleetsafetybenchmarking.netwww.fleetsafetybenchmarking.net

24. www.virtualriskmanager.net Contractor and Sub-contractor SHEM Committee Terms of Reference 1.Promote safe & environmentally acceptable practices & procedures 2.Review (sub-)contracting safety & environmental statistics & incidents 3.Develop and implement recommendations to improve (sub-) contractor safety and environmental performance 4.Provide a forum for learning and sharing of safety and environmental information, initiatives, problems and issues 5.Represent all stakeholders, including union and front line worker representatives in developing policies, processes and procedures 6.Meet quarterly, with formal action minutes & follow-up items allocated 7.Committee will include senior representatives from company, contractors and sub-contractors

25. www.virtualriskmanager.net Conclusion Transportation ( Sub-) contracting has many benefits & risks Improvements in standards required from users and suppliers –Proactive, committed MANAGEMENT is most important issue –Partnerships and ‘managing process’ –Auditing and data analysis –Code of practice –Regular formal and informal dialogue between users and suppliers In UK agency sector collision rate decreased from 4X to 1.5X employed drivers when such good practice applied Contact for guidance documents and assistance: –will.murray@virtualriskmanager.net