Contractors and vendors face greater scrutiny through prequalification

Prequalification of contractors and vendors is becoming increasingly popular as more companies look to indemnify themselves against workplace accidents. Host companies vet contractors and vendors to make sure they’re capable of doing the job at hand while ensuring there’s a low chance of an on-site injury.

“Host companies don’t want Occupational Safety and Health Administration (OSHA) inspectors scrutinizing their business after a serious accident happens at their facility that a contractor or vendor caused,” says Richard Artino, vice president at Spooner, Inc.

The processes, however, may preclude many contractors and vendors from landing, or maintaining, business with prospective and current clients.

Smart Business spoke with Artino about the consequences of greater screening for contractors and vendors.

What is the reasoning behind the new prequalification trend?

Following a serious accident, OSHA sometimes views job sites as multiemployer worksites, which means the contractor and the host company can both be cited after an accident reveals violations of the OSHA standards. When a contractor’s employee is severely injured or killed on the host’s property, the family of the person involved can seek redress through the workers’ compensation program. They can, in certain circumstances, also attempt to file a civil suit against the host, which could bring the company into a wrongful death lawsuit.

Contractors and vendors, such as plumbers, roofers and janitors, are all subject to prequalification as are companies that lease equipment. Publicly traded companies also utilize prequalification services to reassure their stockholders that they are providing safe working conditions.

What’s involved in prequalification?

When companies want to qualify contractors or vendors, they require vendors to participate in a third-party’s prequalification service. The prequalification service sends a questionnaire that explores the contractor’s safety history and asks for supporting materials such as OSHA logs, copies of training records, written safety plans and experience modifier rate. The prequalification service bases the contractor’s grade on that information. If a contractor scores below a certain grade, it could lose the business or no longer remain in consideration if bidding on a job.

What happens when incident frequency rates exceed the national average?

Let’s say a contractor with an accident frequency rate exceeding the national average for its industry is working with a long-time client that represents 40 percent of its business. Seeking a way to reduce its risks, the host company asks the contractor to submit a report to the prequalification service. The host company discovers the higher-than-average rate and asks the contractor to explain why its accident rate is so high. If it can’t be explained, say because the contractor mistakenly over reported on logs, the host company would have little choice but to terminate the relationship.

There can, however, be even greater consequences. Every year the Bureau of Labor Statistics (BLS) sends out a mandatory survey to all businesses that are required to keep an OSHA log. From that, the BLS calculates the company’s OSHA recordable rate, then takes those statistics and publishes the results by North American Industry Classification System codes. Once the BLS publishes those national averages, OSHA puts any company that exceeds the average on their target list for inspection. That increases the chance that the company could receive an inspection and possibly steep fines.

How can companies improve their safety performance to score better?

A service provider can do mock OSHA inspections that include a physical inspection and complete records review. The provider can look at your written OSHA records, management systems and record keeping and provide recommendations for improvement.

Many contractors don’t know their OSHA recordable frequency rate, or some of the basic regulatory requirements with which they are required to comply. It’s better to find this out during a mock OSHA inspection than after a client requires them to go through the prequalification process.

Insights Workplace Health & Safety is brought to you by Spooner, Inc.