Contract Risk

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Contract Risk

In any situation where contractor management is on-site, we need clearly to define what safety systems we expect them to apply, and how these should interface with our own systems. While each case must be determined on its merits, a broad categorisation is helpful.

The approach of the International Safety Rating System (ISRS) is to use 3 categories of risk, low, medium and high. The factors used to differentiate include contract cost and duration, as well as the risks involved in the work and the level of skill required to carry it out.

The table of Figure 19.2 is taken from the guidelines for use of ISRS, and shows these factors, and how contractor selection and client systems should vary depending on the risk class. Much more rigorous risk differentiation is used in the International Contractor Safety Rating System (ICSRS), with an Index system taking into account more factors.

Use of this table needs a little explanation. To be categorised in Class A (Low Risk), a contract must register low for all of our four factors. If any one of the factors is classed as "medium", the contract is not in Class A. Contracts of Class B (Medium Risk) may register "medium" for one or two of the four factors, but if three or more are medium risk it should be considered as Class A (High Risk). Any one factor considered as "high risk" automatically puts a contract into Class A.

	CONTRACT CLASS A	CONTRACTOR CLASS A	CLIENT COMPANY CONTROLS
I	High Risk	Advanced Safety Management System	Conduct Full Pre-Selection Audit.
	High Financial Value	Suitable Resources and Insurance	Check Resources, Finances, Insurance, Business Plan, Workforce Etc are suitable by Audit, Reference Checks, Visits and Meetings.
	High Duration	Stability and Suitable Business Plan
	Highly Skilled	Skilled, Trained, Motivated Workforce
S	CONTRACT CLASS B	CONTRACTOR CLASS B	CLIENT COMPANY CONTROLS
M	Moderate Risk	Appropriate Safety Management System	Conduct Appropriate Level of Pre-Selection Audit to Ensure that Contractor can comply with Defined Standards, Requirements and Scope of Work
	Medium Financial Value	Suitable Resources and Insurance
	Short/Medium Duration	Appropriate Business Plan
	Medium Skill Requirements	Workforce Suitable for Work Scope
E	CONTRACT CLASS C	CONTRACTOR CLASS C	CLIENT COMPANY CONTROLS
C	Low Risk	Basic Safety Management System	Pre-Selection Checks, Meeting, Questionnaire, Reference Checks
	Low Financial Value	Minimum Insurance Required
	Short Duration	Available as Required	Define Rules and Standards Required
	Basic/Semi-Skilled	As Required	Monitor

Figure 19.2