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Monthly Archives: December 2017

How Blockchain Technology Will Solve The Safety Registry Problem

 

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

– Upton Sinclair

I’m going to say some things that will raise some hackles, especially among those folks who make their bread and butter performing audits on workplace health and safety programs, or helping contractors navigate the various Safety Registries that exist. In short, your industry is about to change, and in a big way, thanks to blockchain technology.

First, I’m going to take you on a journey to highlight how contractors and their clients are wasting value on due diligence platforms that are of marginal utility at best. I will then outline how this issue will soon be transformed by blockchain technology.

Killing Trees, Saving Lives

In the past (and very much still the present), many safety programs ran on paper. Every inspection, Hazard ID, Safety Meeting and signature of a safety form can be thought of as a transaction. More on that later.

For example, one drilling contractor I consulted for had up to 64 separate forms for workers to fill out, each required in some way by the HSE management system they were trying to maintain to please various clients.

Compare that with the 13 forms they actually needed to make their rigs run, and it’s evident that HSE management systems were suffering from documentation bloat.

As one Driller said to me “If we had to fill out all these safety forms, that would take away time from filling out our operations forms for mud weight, drill line wear and tear (Slip n cuts), weight indicator calibration, pipe tallies and tour sheets – these are the forms that save lives. Your safety forms just eat up man hours”.

When you consider the labour hours embedded in filling out these 64 forms over the course of drilling one well, it became apparent that documentation bloat had gobbled up so many man hours that the record-able incident frequency, by definition, came down.

Why?

Because if everyone is too busy pushing paper, nobody gets hurt. And we wonder why people pencil-whip their JSAs and safety meetings.

Due Diligence or Fraud Enablement?

By “documentation bloat”, I refer to the ever growing expansion of health and safety management systems to meet that various requirements of different clients, each operating a different contractor management platform. or Safety Registry.

I’m not going to name names, but you know the ones I’m referring to. You’ll see them advertised at the bottom of almost every contractor’s website along with the statement “We are compliant with X, Y and Z safety registries”. It’s a way to signal to potential clients that they’ve already jumped through a significant amount of vetting hoops and that their program has been reviewed by an independent third party.

For those not in the know, a safety registry is a third party vendor who acts on behalf of the owning client (Big Oil Company A). The Safety Registry will collect various documents from contractors seeking to do work for Big Oil Company A. Documents such as insurances, WCB clearances, health and safety policies, job procedures and the like are compared against Big Oil Company A’s standards.

In this example, let’s say Big Oil Company A has a peculiar standard for a Ladder Inspection Policy and daily ladder inspection forms filled out by all contractors working for it.

Here’s where fraud enablement comes into play. Facing various pressures and constraints, watch how the safety registry creates a problem where previously there was none…

The folks in the contractor’s sales team inform the Safety Manager that they are ready to pre-qualify for Oil Company A, and that he needs to upload documentation to the Safety Registry for third party vetting. As he pays the subscription fee and reviews the safety requirements, he sees that Oil Company A requires a Ladder Inspection regime.

The safety manager finds himself in a scramble as he seeks to find a ladder inspection form from his friends at other contractors in the industry. A buddy of his sends over a ladder inspection form they used, he changes the header, fills it out the form, back dates a few items, and submits it as evidence that his company does indeed have a ladder inspection process.

The Safety Registry inspects it, and concludes that yes, the contractor does indeed meet the rigorous ladder inspection criteria, and so the contract is awarded. A bit fraudulent? Of course. But it’s happening. It’s a normalization of deviance.

Safety Registries, or…. Racketeering?

One problem is, the system is funded by the contractors. The contractors, in turn, eat the cost because it’s minuscule in light of the potential value of working for Big Oil Company A.

But the cost is not insignificant. Sign up fees can be anywhere from $1,500 to $10,000 annually, depending on the size of the contractor. Hidden costs begin to multiply when you consider that the system now requires someone internally to help run and maintain the documentation so that the contractor doesn’t run afoul of any future requirements imposed by their client.

The problem comes to a head as soon as that same contractor wins a smaller contract value with a different oil company, who we’ll call Oil Company B. And guess what? Oil Company B happens to use a different Safety Registry B.

One drilling contractor I worked with actually had this happen to them. The mine they worked at was bought out by another oil company using a different safety registry. The contractor was national, but their drilling operations were all done out of an Alberta-based location.

When they went to sign up for Safety Registry B, they stated that they had 50 employees in their Alberta operations, so their sign up fee should be the minimum ($1,800). The Safety Registry looked them up on Dunn & Bradstreet, and said “It appears as though you’re a national company with 300 employees across Canada, so that’s going to be $10,000 in annual fees”.

The contractor ended up biting the bullet. The Safety Registry didn’t budge on their insistence that the Alberta business unit was no different from the national brand. The Contractor would never pre-qualify for another client through that Registry – this was a one trick pony. Poof – $10,000 gone from the HSE Manager’s budget that could have gone to other, measurable risk reductions.

A little back and forth happened as the Contractor’s management team figured out they’d already spent money on an Alberta COR certificate, an ISO certification and a subscription to Safety Registry A, coupled with part time admin costs to feed data into these systems. Management said “But we already qualified for that other oil company on that other safety registry, and now we have to fork out another $10,000 to feed data into Safety Registry B!!!???”.

Wait, it gets better.

In order to satisfy Oil Company B’s contractor pre-qualification process, the contractor had to demonstrate that they had the following: 1) a random alcohol and drug testing regime, 2) a thorough preventative maintenance policy, 3) in vehicle monitoring systems and 4) all vehicles equipped with torque wrenches so that vehicle lug nuts can be checked every 100 kilometers and documented on a lug nut inspection form.

If the contractor didn’t have this in place, the client expected them document the gap and show progress towards meeting it over the lifecycle of the contract.

But here’s the challenge: The contractor wants some degree of consistency in its policies, and will be inclined to roll these policies out across their entire fleet.

Personally, I’ve seen one drilling contractor’s Health and Safety Manual absolutely explode from 110 pages to 700 pages, all because they are trying to comply with the various policies imposed by multiple clients running multiple registries.

On and on it goes for the contractor. In order to win contracts and pre-qualify, they incur the following:

  • Subscription fees to multiple safety registries (sometimes up to 5).
  • The indirect costs of administering and auditing these separate platforms.
  • The additional costs of integrating all the policies of all their clients into one safety manual (and paying a consultant to do it).
  • The costs of enforcing the extra policies across their fleet to ensure consistency (torque wrenches for their trucks, torque wrench training, in vehicle monitoring systems, etc fleet wide).

This raises an important question: does any of this appreciably reduce risk, or does it simply force contractors to allocate resources towards issues their clients deem appropriate?

If the contractor is spending money to roll out ladder inspections, torque wrenches and fleet tracking systems to please all their clients, that leaves less money in the budget for what matters to the contractor. Maybe they need new fall protection gear, or to invest in some training.

Marginal vs Cumulative Effects

Safety Registries survive because of marginal effects, and die due to cumulative effects.

At the margin, a contractor will bite the bullet and submit their data to yet another Safety Registry, because the benefit/costs are apparent: Pay the fee, submit the data, win the contract. It’s a short term pain for long term gain. Actually, it’s the opposite.

Cumulatively, though, this duplication of effort raises long-term costs for the contractor, because it takes additional expenditures to sustain these registries for multiple clients. Budgets and resources are diverted away from other purposes, presenting a clear opportunity cost. Next thing you know, the company is skimping on fall protection because of the expenditures they are devoting to maintain the Safety Registry.

As soon as work is done for that client, or the contractor doesn’t think the client has future work for them, they will begin to assess the cumulative impact of maintaining their presence on that safety registry.

The Blockchain Solution

In order to wrap your head around this, you’ll have to read up on blockchain technology. I suggest this website:

http://www.blockchaintechnologies.com/blockchain-definition

All you really need to know, however, is that a blockchain is a ledger of transactions that are recorded across multiple points. The blockchain solves an issue of trust insofar as it brings transparency. The minute a transaction occurs, it is broadcasted to the network, recorded in the blockchain by other network nodes, and recorded for all eternity.

Now, consider how Safety Registries solve an issue of trust. The Buyer (Oil Company or Client) is forcing the contractor to eat the transaction cost for a third party (Safety Registry) to perform some validation on elements of the contractor’s safety program (ledger). If the Safety Registry is satisfied that the contractor’s ledger is more or less sound, they issue a green code for compliance and a red code for non-compliance or corrective action.

All this data collection and verification by multiple parties will vanish with the right blockchain technology. The cumulative value that is being poured into Safety Registries will be diverted towards either lowering costs (and hence price), or to reducing risk. It will free up a massive amount of capital for training, PPE and engineered solutions for improving the physical safety of the workforce.

The implications for people in the world of auditing HSE management systems are tremendous. While the digitalization of HSE systems is still in its infancy, we aren’t far off from every Hazard ID, Safety Meeting and safety form becoming a real-time data point in a digital system, as opposed to an archival document for future audit.

As more and more companies lower their HSE management costs by going digital, the issue of trust will come up as soon as someone hacks a database to alter their records for an upcoming audit. Auditors will need to be able to audit databases rather than piles of paper, a skill not many Safety Consultants have.

Blockchain technology, however, will solve these problems. Remember that HSE manager who faked his Ladder Inspection program? Sorry buddy, that form entered the blockchain after Oil Company A requested it.

Remember all those auditors you used to have to hire every three years to maintain your Alberta COR, ISO, OHSAS and Alberta Transportation certificates? They’re on the unemployment lines, because the blockchain self-audits.

Remember how you used to think you’d have to comply with every client’s policies, all the time across the fleet? Take a breather, contractors, the blockchain shows that all your rigs who work for Company A are in compliance with Company A’s policies.

In a future where blockchain technology solves the issue of trust, what good are the safety registries?

If you don’t believe me now, you will later.


Author: Aaron Braaten, President, Xi Safety

Email me at abraaten [ a t ] xisafety [ d o t ] com