Risk shifting and disorganization in multi-tier contracting chains: The implications for public safety

Abstract

Organizational responses to financial crises have contributed to workplace changes, including a reliance on multi-tier sub-contracting chains. An extensive research literature discusses the adverse impact of these trends on worker health and safety. Research has shown that economic pressures leading to unsafe practices by contractors, hazardous forms of disorganization in contracting chains and regulatory failure contribute to adverse health and safety outcomes for workers. Less research has addressed the impact of sub-contracting chains on the potential for complex catastrophic incidents in which the public could be impacted. We contribute to a growing body of work on this subject by examining excavation work around high pressure natural gas pipelines in Australia. We draw on past research complemented with concepts from the economics literature to highlight the impact of ‘risk shifting’ as contractors seek to cope with financial pressure in highly competitive sectors. Contract terms incentivize contractors to work as quickly as possible while also prioritizing compliance with safety-related rules. Using qualitative data from 36 face-to-face interviews we discuss the way that supply chains characterized by these types of contracts can lead to situations where the pressure to work quickly means that contractors might trade off safe work practices in order to meet project deadlines and make a profit. We argue that in times of acute financial pressure, safety can become fungible with an associated increase in risk to the public. The findings of this research may have broader implications for other public risk situations in sectors with similar structures and organizational arrangements.