Last month a terrible accident happened aboard the Deepwater Horizon oil rig, killing 11 workers on the platform and creating an oil leak that is still no fully contained. The investigation of what happened is no where near complete, but with the full weight of billion dollar companies, the US government, and plenty of interested parties (fishermen, enviormentalists, tourism boards), there will be no rock left unturned in the discovery process. So what can an oil rig disaster teach construction subcontractors?
There are a lot of lessons that we can learn from this unfortunate incident.
Accidents don't just happen
Currently it appears that there were safety devices that were not working properly or needed maintenance for as much as a month prior to the incident. Couple that with eye witness reports that supervisors were saying "don't worry about it" and it becomes clear that this accident was preventable. The engineering that goes into building and operating one of these rigs is a monumental task. Each of the components in the system serves a purpose and when some of the components breakdown, it is imperative to address these problems immediately.
In the construction trade, the equipment we install and the designs have undergone a similar process. If we install inferior products or not to design as shown, there might be failures. Granted the consequences to the world may not be as grave, but a building that catches fire or something that falls from the structure will have significant ramifications on your business.
Just Because The Government Signs Off Doesn't Mean it is Right
For these rigs to do their job there are hundreds if not thousands of people within the US government that are paid to review everything they install and every proceducre they work under. They are not only there during the construction, but continually during the operation of the rig. For the taxpayer and maybe for the remote executives running the rigs it would appear that unless the government had them shut down, everything was running properly.
How many times have you heard, I know it is installed right, the inspector signed off on it. That doesn't mean anything. Any government agency is there as oversight only and should not give a false sense of security. I agree that it would be nice to have someone provide quality control for your work at no additional expense, but it is not going to happen. Quality control and adherence to operating and installation procedures is your responsibility and just because a inspector signed off on it or didn't catch it does not make it right.
Consequential damages can Kill Your Company
The legal theory around consequential damages may be foreign to some of us, but this appears from my untrained legal brain to be a perfect example of it. The oil company had hired a company to operate the rig. I am sure they had a contract and the entity that was operating the rig was probably legally responsible if anything went wrong to make good the damage caused. If they didn't have an exemption for the consequential damages they might be filing for bankruptcy. In fact I read one of the companies has been to court filing papers that their exposure is limited, because they understand the overall magnitude of this issue. The direct damages will most certainly include the cost of the rig, the inventory lost, the damages for death and injury to personnel and similar items, but the consequential damages or indirect damages could go on forever. They would include lost potential profits from the rig until a replacement is operating, lost profits to fishermen, lost tourism dollars, pain and suffering for families planning vacations in the region, etc.
Lawyers will settle the claims on this disaster and it will take years if not decades. If you are signing a contract that does not specifically exclude consequential damages or limit it in some way, your company could be out of business if an accident occurs. Direct damages are easy to account for and have a basis for calculating the impact. From a moral standpoint, it is also easy to see the direct relationship and thus the responsibility. Indirect are not so easy and it really comes down to who has the best lawyer and who is on the jury. Most of your clients will not sign contracts that open them up to indirect damages, you should not either. Be careful, one incident can ruin a business that has taken a lifetime to build.
I encourage you to think about this tragic event so that you can learn from it and build a better business. Have a great week!
There are a lot of lessons that we can learn from this unfortunate incident.
Accidents don't just happen
Currently it appears that there were safety devices that were not working properly or needed maintenance for as much as a month prior to the incident. Couple that with eye witness reports that supervisors were saying "don't worry about it" and it becomes clear that this accident was preventable. The engineering that goes into building and operating one of these rigs is a monumental task. Each of the components in the system serves a purpose and when some of the components breakdown, it is imperative to address these problems immediately.
In the construction trade, the equipment we install and the designs have undergone a similar process. If we install inferior products or not to design as shown, there might be failures. Granted the consequences to the world may not be as grave, but a building that catches fire or something that falls from the structure will have significant ramifications on your business.
Just Because The Government Signs Off Doesn't Mean it is Right
For these rigs to do their job there are hundreds if not thousands of people within the US government that are paid to review everything they install and every proceducre they work under. They are not only there during the construction, but continually during the operation of the rig. For the taxpayer and maybe for the remote executives running the rigs it would appear that unless the government had them shut down, everything was running properly.
How many times have you heard, I know it is installed right, the inspector signed off on it. That doesn't mean anything. Any government agency is there as oversight only and should not give a false sense of security. I agree that it would be nice to have someone provide quality control for your work at no additional expense, but it is not going to happen. Quality control and adherence to operating and installation procedures is your responsibility and just because a inspector signed off on it or didn't catch it does not make it right.
Consequential damages can Kill Your Company
The legal theory around consequential damages may be foreign to some of us, but this appears from my untrained legal brain to be a perfect example of it. The oil company had hired a company to operate the rig. I am sure they had a contract and the entity that was operating the rig was probably legally responsible if anything went wrong to make good the damage caused. If they didn't have an exemption for the consequential damages they might be filing for bankruptcy. In fact I read one of the companies has been to court filing papers that their exposure is limited, because they understand the overall magnitude of this issue. The direct damages will most certainly include the cost of the rig, the inventory lost, the damages for death and injury to personnel and similar items, but the consequential damages or indirect damages could go on forever. They would include lost potential profits from the rig until a replacement is operating, lost profits to fishermen, lost tourism dollars, pain and suffering for families planning vacations in the region, etc.
Lawyers will settle the claims on this disaster and it will take years if not decades. If you are signing a contract that does not specifically exclude consequential damages or limit it in some way, your company could be out of business if an accident occurs. Direct damages are easy to account for and have a basis for calculating the impact. From a moral standpoint, it is also easy to see the direct relationship and thus the responsibility. Indirect are not so easy and it really comes down to who has the best lawyer and who is on the jury. Most of your clients will not sign contracts that open them up to indirect damages, you should not either. Be careful, one incident can ruin a business that has taken a lifetime to build.
I encourage you to think about this tragic event so that you can learn from it and build a better business. Have a great week!