A principal's guide to contracting to meet the Health and Safety in Employment Act 1992

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Case studies

Contract to build a small residential development
Harvesting a woodlot of plantation timber
Local authority lets a contract for a new link road
Motor vehicle insurer includes health and safety in its approved repairer processes
Government department lets a contract for the cleaning of a large office in a suburban shopping mall

Case study 1: Contract to build a small residential development

Principal: Quayside Developments Ltd, a small residential development company operated by Leon Hooper and his wife Glad, who together hold two-thirds of the shares, and with the balance owned by a financial backer not directly involved in the running of the business. Quayside Developments have developed a range of townhouse projects over the last 16 years, always employing some combination of the company’s own capital and short-term financing through finance companies and banks.

Contractors: BB Builders Ltd, a four-employee construction company owned by builder Sid Moon, with a minority shareholding held by members of his immediate family.

Project: Construction of four unit-titled townhouses on a subdivided urban section.

Organisation: The developer, Quayside Developments, manages the project themselves, with BB Builders engaged to complete the structural work, and subcontractors engaged by Quayside completing ancillary work such as roofing, plumbing and electrical, and landscaping work.

Pre-tendering: BB Builders Ltd is one of several builders Quayside have used for different projects. Leon keeps pre-tender information in a brief register of suppliers, which is regularly maintained and reviewed after each contract. The register contains financial and legal information on businesses (their bankers, shareholders and legal structure, public liability and other insurances, employee qualifications, trade organisation membership and business alliances, and other relevant information). Much of this general information is relevant to health and safety performance, but some more specific health and safety information is obtained when appropriate. Some of this is also closely relevant to compliance with the Building Act, electricity and gas legislation.

Tendering: Four builders tendered for the contract. Three had completed earlier contracts for Quayside, and one completed a brief pre-tender questionnaire that Leon has used. Tendering was based on working drawings and specifications prepared by the architects and engineers. Leon also included health and safety as an item in the agenda of his meetings with architect and engineer and discussed various issues with them. He also asked that the outlines of a health and safety plan be included in the tender documents.

Some issues were particular to the site. For example, it was on a busy road, so Leon ensured that the tender documents required a plan for parking and traffic management. A steep waterside site presented additional hazards, and the tender documents asked for additional information on how these would be managed with respect to scaffolding and access for vehicles and plant. This also had an impact on electricity cables.

As with other contracts, Leon found he needed to pay particular attention to areas where the work interacted with other contractors, neighbours, or the public.

Tender review, evaluation, and contractor selection: As always, tenders were reviewed on price, availability and other factors including past track record of the tenderers. Leon considered health and safety issues, and looked for evidence of health and safety being noted and thought through by the tenderers. Leon has found this to be an indicator of the quality of work generally. In two cases he asked for additional information on how tenderers would manage particular hazards.

Because Leon was organising subcontractors himself, he and the designers paid particular attention to clarifying roles and responsibilities between the principal contractor and subcontractors.

Awarding the contract and information-sharing: All contracts were in writing and with reference to the tender documents. The health and safety plan is part of the contract documents and is maintained as the project progresses.

Notification of the work under the Health and Safety in Employment Regulations 1995 was the principal’s responsibility.

Monitoring performance: Leon is on site and meets with the contractors and subcontractors at least daily. Where practical he arranges informal site meetings to discuss shared tasks and resolve or clarify any issues arising.

Leon’s policy is to put any variation involving additional costs to writing, and to formalise any modifications to specification or plans and maintain a master copy agreed with the contractor/ sub-contractor. This is in addition to the documentation required by the Building Act and other legislation.

Leon finds this documentation is an essential aspect of managing the project.

The accurate information has financial and organisational benefits, but also contributes to health and safety by improving people’s ability to monitor, plan and respond to situations.

Post contractual evaluation: Leon looks for continual improvement, and completes a systematic evaluation of each project. He records costs, efficiencies made and any holdups, accidents or significant breaches of contract or failures of the contactor and subcontractors progressively, and evaluates these after each project is completed. He also asks contractors for feedback on his own performance.

Case study 2: Harvesting a woodlot of plantation timber

Principal: Radiata Investments (1978) Ltd
Contractors: Mac’s Logging Ltd

Project: Harvesting a 60-hectare farm-forestry woodlot comprising a plantation of 30-year-old pinus radiata trees on rolling arable land (with a yield of 500 cubic metres per hectare). The contract represented a minimum of three months work for a logging gang of 8-10, and two or more logging truck owner-operators.

Organisation: The owner of the plantation, Radiata Investments, was a partnership between two neighbouring farmers, Gus and Luke, who planted and managed the woodlot.

Gus and Luke discussed with the consultant the different ways Radiata Investments might go about realising their investment in the woodlot. They asked a forestry consultant, J P Needleworth, to complete an assessment of the standing volume of the woodlot, and advise on the best time and means of harvesting.

Together they decided to harvest the timber in the summer of year 30, to minimise damage to the land and to make the work easier and more efficient, and so that replanting could occur in the following winter.
The consultant then prepared a logging plan to allow the best recovery of the timber.

Gus and Luke decided to let a tender for logging and transport, and to sell the logs themselves, through a broker, Wooden Agencies. Depending on size or quality, the logs would be delivered to any of three destinations: the nearby port for export quality logs, a pulp mill for the lowest grade of logs, and a local sawmill for domestic grade saw logs.

This way of operating was chosen as an alternative to selling the woodlot to a forestry contractor as a “standing crop”. If that had been done, the contractor would then have taken full responsibility for harvesting the timber and made a profit or loss by selling the logs, reducing Radiata Investments’ involvement, and their legal obligations.

Pre-tendering: Radiata Investments used their forestry consultant, JP Needleworth, to help with the tendering process.

From the logging plan the consultant could develop a short list of suitable contractors. An advertisement was also placed in the local newspaper asking logging contractors to register their interest.

The consultant maintained, and regularly updated, pre-tendering information on three logging operators who said they were interested in tendering. Two further contractors responded to the advertisements and they were sent a pre-tendering questionnaire for them to complete before being supplied with tender documents. In addition to financial, operational and other questions, the pre-tender questionnaire sought specific information on health and safety management and performance.

Tendering: Tenders were based on the logging plan and other documentation provided by the logging consultant.
The logging plan provided guidance on:

skills and equipment needed to complete the work
a detailed site plan and roading plan with suggestions for access from the road, a skid site and other transport requirements
a proposed plan for directional felling
estimated yields of particular grades of log
an outline of delivery destinations/ purchasers’ expectations (including dates), and transport requirements
a standard for quality control
specified cost components that were to be provided by the tenderer, and
reporting expectations and communications.

Each of these aspects of the contract has an impact on health and safety, and Gus, Luke and the consultant agreed it was important to provide timely information and describe expectations as clearly as possible.

In addition, tender documents allocated responsibilities between contractor and principal wherever practical. Reporting requirements – on production and quality and incident and hazard reporting were included in the tender documents.

This included responsibilities for interaction with the health and safety inspectorate, regional council and territorial authority as appropriate.

Tenderers were asked specifically for information on their ACC standing, and any workplace injuries over the last two years. They were also asked to indicate any variation from the tender document and negotiate alternatives where appropriate - in advance of submitting their tender.

Tender review, evaluation, and contractor selection: Four tenders were received. Gus, Luke and the consultant evaluated them together. They reviewed the tenders for price and for completeness against the specification. Two of the tenderers included a company profile showing their equipment, personnel and experience in performing different logging contracts. Gus and Luke found this profile very useful to their decision and in communication with the successful contractor.

Mac’s Logging Limited was chosen for various aspects of their tender, not only price. Their provision of information on health and safety management proved to be a good indicator the quality of tender.

Awarding the contract and information-sharing: After Mac’s Logging was chosen as the successful tenderer, the consultant produced a written contract based on the tender documents and information received. The parties met to sign the contract and discuss the steps towards Radiata Investments concluding the sale of the logs and completing other steps before Mac’s Logging could begin the contract. The work meant that Gus and Luke required some additional fencing to remove gates and allow trucks better access. There was also some minor additional roadwork, and they reorganised scheduled farm work to fit in with the work on the woodlot.

Notification of the work under the Health and Safety in Employment Regulations 1995 was the contractor’s responsibility.

Monitoring performance of the contract: Harvesting the woodlot could be described as a medium-sized operation. A total of about 10 fellers, skid workers and machine operators were employed at any one time. The work was organised from one skid site set up according to the logging plan. Log haulage was carried out by up to four trucks coming and going from the site, in addition to the skidders, bulldozers and other machinery.
Regular meetings and site visits formed the basis of the monitoring of the contract.

In addition there were production reports from the contractor, and sales returns from the log purchasers. Gus and Luke checked these for consistency with the logging plan. They also passed the information on to the contractor to do the same.

Once work began there were weekly on-site meetings. These were to discuss progress, and health and safety was on each meeting’s agenda. At each weekly meeting the contractor reported on the work completed, and described the work planned for the week ahead, including what and where machinery and personnel would be working and any other information Gus and Luke would need.

Because access was through farmland, Mac’s Logging also advised of any additional contractors, such as earthmovers, coming on site, and undertook to report any incidents or significant hazards arising from the work. If Gus or Luke couldn’t be present for a site meeting they rescheduled, or at least made contact by phone.

The flow of information from principal meant the contractor could better plan the work, making it more efficient and profitable, and safer for employees and subcontractors. Gus and Luke were in the best position to provide the contractor with information, even in addition to that contained in the logging plan, and it was important to maintain the flow of information.

Post-contractual evaluation: The contract was completed on time within four months, and at the specified rate, and all log sales contracts were met on satisfactory terms.

Radiata Investments completed a formal evaluation of the investment and the contract to harvest the woodlot was part of that. The evaluation report formed the basis of their discussions about further investment in forestry and the use of specific areas of the land after the woodlot was harvested.

The consultant contributed to an evaluation of the contract and used the information to amend their information on logging contractors for future reference.

Case study 3: Local authority lets a contract for a new link road

Principal: Blue Moon Bay District Council
Contractors: Clearway Civil Contracting (CCC) Ltd

Project: A contract to form and seal a 1.6 kilometre two-lane road through rural land to link the ends of two existing roads.

Organisation: The council engaged civil engineering and project management consultancy, MacAdam, Camber and Partners (MCP) to design and oversee the construction of the new road, including culverts, drainage and related work.

The council selected MCP on the basis of their track record in the design and project management of similar work for the council and other clients. In choosing MCP for the role, the council made specific reference to, and asked MCP to describe their awareness and management of health and safety. This included the health and safety performance of other design work and contracts they had administered.

In addition, in selecting MCP for their role, the council asked for evidence of the consultancy’s ability to:

engage personnel with appropriate qualifications and experience for the role
maintain an appropriate level of site supervision
provide and maintain a risk and hazard register - updated at each stage of the contract.

MCP advised that the work was best organised through a principal contractor, who would use their own arrangements for subcontractors to carry out work, including:

earthmoving and haulage
surveying
amenities
asphalt
road marking
signage
suppliers.

Before beginning the tendering process, the council had provided information and instructions to MCP including:

authority to act as its agent on its behalf
a point of contact within the council and a process for requiring information or authorisations
requiring a transparent tendering process, with adequate time for tenderers to review and implement the information provided.

Pre-tendering: MCP maintained a list of approved tenderers meeting the council’s health and safety, financial, and other requirements. By agreement with the district council, MCP required tenderers to be accredited under either of two health and safety management systems maintained by different sector organisations – “Operate Safe” or “Qest”.

MCP also placed invitation to tender notices in trade journals and newspapers seeking registration of interest. Any respondents not on MCP’s list of approved tenderers completed a questionnaire, including information on safety and health, and were assessed for entry to the list.

MCP supplied the council with a list of businesses meeting its requirements that would receive tender documents.

Tendering: MCP maintained a procurement regime to suit the risk profile, type and size of the project. It was based on price and non-price attributes, including health and safety performance.

This meant that, where practical, selection criteria that were not price dependent were identified in the tender documents – this included several critical safety components, including traffic control. Although, MCP maintained the ability to further negotiate pricing in those areas. Where there was a “reward” component to non-price criteria, this was specified in the tender documents.

Tenderers were required to document certain safety standards including machinery, traffic control processes, maintenance, and personnel requirements. They were also required to provide a draft health and safety plan for the project.

Tender review, evaluation, and contractor selection: Four complete tenders were received, two from national companies, one from a regional contractor, and one from a smaller local firm.

Clearway Civil Contracting Ltd, the regional firm, was selected on the basis of a range of criteria (including the specified non-price elements), as well as their track record, available resources, and their ability to complete the work on time. They also provided details of critical subcontractors they would be using to complete the project.

The contents of the draft health and safety plan were reviewed during the evaluation, although some details were to be completed after the contract was awarded.

CCC Ltd was able to demonstrate its health and safety performance through membership of the ACC’s WSMP programme, and completion of the Operate Safe accreditation process, including being able to report on its performance against national benchmarking (key performance indicators).

Awarding the contract and information-sharing: Although the council acted through MCP as its agents, the contract itself was signed at the appropriate level of delegation within the council.

Awarding the contract always involves the passing of documentation. In relation to health and safety this meant MCP transferring to CCC Ltd:

all appropriate permissions and approvals for the work
design documents
risk assessment documentation completed during the design and tender stages
a summary of reporting requirements
details of contact personnel.

CCC Ltd transferred to MCP:

the completed health and safety plan for the project
documentation of personnel qualifications as required
information on reporting
contacts for project reporting.

Monitoring performance of the contract: The work was scheduled to take place over a total of 30 weeks.

CCC Ltd provided written reports to MCP monthly. MCP reviewed these reports against tender performance criteria and discussed any points of variance in a report to the council.

Every week there was a site meeting, convened by CCC Ltd’s project manager and engineer as appropriate. The council’s contracts manager, engineer or other personnel would also attend when required. An agenda and minutes were kept for each meeting. Health and safety was an agenda item, although frequently other agenda items concerned matters that had an impact on health and safety.

All incidents and accidents on site were reported to the principal via MCP.
Operate Safe formed the basis of CCC Ltd’s health and safety management programme. It has the following components:

Key performance indicators - to allow companies to ensure they meet or exceed the average industry performance - and a requirement for Improvement Plans where performance falls short.
Systems and Training - internal systems to meet the audit requirements of ACC WSMP programme and training (evidence based) to exceed the HSE Act requirements for Induction training, through a hierarchy of cards for operatives, based on national education qualifications (unit standards and National Certificates).
Auditing - evidence based internal (including maintaining the hazard register) and to meet ACC WSMP accreditation.

Best practice: For training - through mandatory Operate Safe courses.
For auditing - through an industry best practice guide (based on a current and sector specific ranked risk and hazard analysis) for WSMP secondary accreditation.

Operate Safe requires agents and principals to review their own performance on site - including ensuring that, at least, records show there is appropriate task analysis, necessary training, and that suitably qualified subcontractors and personnel are being utilised by the contractor.

Post-contractual evaluation: MCP completed a full review of the contract and contractor performance. It used this to monitor its own performance, update its pre-tendering register, and to provide a report to the council. The council’s contract manager used the information to plan further work and for planning maintenance and other subsequent work in relation to the new road.
Performance indicator data was forwarded to the national KPIs database held by the Centre for Advanced Engineering (University of Canterbury).
CCC Ltd reviewed its own performance against the key performance indicators.

Case study 4: Motor vehicle insurer includes health and safety in its approved repairer processes

Principal: Combined Vehicle Insurers (CVI) acting on behalf of its policyholders
Contractors: Up to 150 motor vehicle repairers nationwide

Nature of the work: CVI is a significant motor vehicle insurer with a national network of offices. It offers insurance to businesses as well as private insurers. As part of its business it receives several thousand motor vehicle claims each year.

Health and safety issues are significant in the motor vehicle repair industry. There are mechanical hazards, and considerable occupational health hazards, particularly from dusts and the use of solvents and isocyanate-based paints. For a smaller business these can require considerable investment in the appropriate controls, including spray booths and respiratory protective equipment.

For repair firms, these investments are often linked to improvements in quality and productivity. Insurance companies play a significant role by requiring and maintaining standards that encourage the firms they contract to invest in appropriate equipment and healthy and safe systems of work.

Organisation: In responding to motor vehicle claims, CVI allows its customers a choice of which repairer they use from an extensive list of approved repairers. To gain CVI “approval” repairers need to meet a range of requirements, including health and safety.

The approved repairer programme is organised nationally, and the company uses its network of loss assessors/adjustors to not only assess damage and approve individual claims, but also to monitor the ongoing performance of repairers. CVI also requires annual review of each “approval”.

Pre-tendering: The approved repairer programme is in effect a form of pre-tendering. CVI collect a range of information concerning staffing and other factors to indicate the repairer’s ability to provide repairs of suitable quality and timeliness. There is also some emphasis on the quality of client access, reception areas and the provision of other services to CVI’s policyholders as they use the approved repairer. A customer survey is included in the process.
Health and safety, along with quality assurance, is a significant component of the approval process. Repairers’ premises are assessed for the quality of equipment and work methods. This places emphasis on electrical and mechanical plant safety, the application of hazardous substances (HSNO) controls and codes of practice for painting operations and dust control, including spray booth design and maintenance.

As part of evaluating the quality and safety of the work environment, approved repairers provide evidence of their staff induction and training provision, hazard management processes and emergency procedures in place.

Although repairers may provide evidence of membership to or accreditation by an industry association, this is additional to the assessment carried out by
CVI’s assessors, who complete the approval of individual repairers. Assessors are all recruited to their role on the basis of their industry experience, and this involves awareness of the health and safety issues associated with motor vehicle repair work.

Approval takes the form of an initial questionnaire/proposal completed by the repair firm. CVI’s assessors then evaluate this and either follow up with further questions, or assess aspects of the individual workplace as appropriate.

The approval is reviewable by CVI annually.

Tendering: Repairs are quoted and negotiated between assessor, client and repairer on an individual basis.

The approved repairer process means issues of quality, timeliness and price are able to be dealt with against a background of agreed standards, including those for health and safety. It also gives assurance to repairers that their pricing will not be in competition with businesses that do not meet health and safety and other standards, and so is an incentive against corner cutting.

Awarding the contract and monitoring performance: The payment for any repairs to the policyholder’s car is made by CVI to the repairer. Legally, this makes CVI a “principal” – being a person who or that engages any person (other than as an employee) to do any work for gain or reward.

Individual contracts for repairs tend to be of a predetermined nature and for short duration, meaning CVI does not usually monitor contractor performance, other than to deal with variations in the agreed work (contract).

Contractor review and evaluation: All significant repairs are inspected on completion.

CVI reviews the performance of individual contracts for quality, timeliness and other aspects of the contractor’s performance.

Assessors’ knowledge and experience can mean they can note and respond to health and safety issues as they visit and deal with repairers. This informs the annual review.

Case study 5: Government department lets a contract for the cleaning of a large office in a suburban shopping mall

Principal: Department of Wellbeing
Contractors: Immaculate Services Ltd

Project: A contract to clean a large office for 200 staff, and including some public spaces, in a regional shopping centre.

Organisation: The Department of Wellbeing’s policy is to review all extended contracts for services at three-yearly intervals. If a right of renewal isn’t exercised, the department carries out a full tendering process for a new contract.

The department has standardised contracting processes, including for health and safety. However these are able to be adapted to suit local circumstances.

The department is also bound to follow the Principles for the Property Services Industry, a government statement recognising that the interests of all participants in the industry are served by low turnover in cleaning staff, high levels of training and low levels of occupational illness and injury.

Pre-tendering: Before the tendering process began, the department evaluated the existing contractor’s performance. This included the facilities manager talking with different work groups and key users within the office, and led to refinements of how the work is organised and the terms of the contract. These had an effect on conditions for contractor staff and on health and safety. A Request for Tender document was prepared after the review.

The contract was placed on the Government Electronic Tender Service and advertised in the local newspaper. When businesses expressed an interest in tendering they were asked to supply some basic information on their capability and experience to prequalify for tendering.

Tendering: The Request for Tenders document was sent to four selected businesses.

The process was led by the department’s facilities manager, who acted as the contact point for tenderers. He emphasised that the department encouraged variations or improvements on the RFT document where appropriate.

Detailed information was expected on, among other things:

equipment and personnel being used to complete the work
any subcontracting included
referees on performance
a health and safety plan.

This encouraged tenderers to provide information on quality management, health and safety management and security systems. The request for tenders included a summary of the evaluation criteria that the department would use to select the successful tender. It also included a comprehensive set of safety and security instructions for contractors to the Department of Wellbeing.

Tender review, evaluation, and contractor selection: Tenderers were assessed against the criteria included in the RFT, with specific reference to satisfactory health and safety performance being a requirement.

Awarding the contract and information-sharing: The contract contained specific references to health and safety management. It set out the obligations of the principal and the contractor.
The Department of Wellbeing said it would:

provide the contractor with all relevant policies and procedures, including emergency procedures, and with information on hazards in the workplace
ensure access to and maintain the building and equipment in good working order
take all reasonable steps to ensure a safe working environment.

Immaculate Services Ltd said it would:

comply with the department’s health and safety policies and procedures
notify the department of any hazards identified in the premises by its employees
provide evidence, on request, of all induction and training procedures, working processes and procedures demonstrating its compliance with its obligations under the HSE Act
reserve the right, without penalty, to refuse to carry out work under conditions it considers dangerous to its employees, the department’s employees, or the public on or near the department’s premises.

The contract also contained provisions concerning security, limitations on subcontracting, and mutual undertakings to meet a range of statutory requirements. Immaculate were expected to provide a health and safety management plan.

The contract also required monthly meetings between the department’s facilities manager and the contractor.

Regular meetings: A brief monthly meeting covers performance and quality standards, any changes to access or facilities and encourage exchange of information between the office workers and the contractor. The contractor uses the meeting to advise of staff changes and security related issues and any incidents or areas for improvement. Meetings are regular and at the same time and place where practical. The facilities manager sends a note to the contractor in advance of any agenda items beyond usual reporting issues. Brief minutes are also kept of the meeting, of any reporting requirements and any decisions made at the meeting.

Monitoring performance of the contract: The monthly meetings are an important part of the principal’s monitoring of the contract. In addition an annual review is completed and the results are discussed with the contractor.