A number of scientific studies have examined the relationship between safety and profitability in the construction sector. These studies focus on the correlation between three types of costs:
- Mandatory costs (resulting from legal requirements)
- Preventive costs (such as training)
- Curative costs (arising from damage, claims, and illness)
Across several projects, these costs were calculated as a percentage of total construction costs and then compared. The results show that an optimal level of investment exists.
Companies that invest as little as possible in safety are relatively often confronted with incidents, illness, and necessary repairs prior to delivery. A low safety budget leads to so-called failure costs, which exceed the initial savings. In other words, cutting costs upfront results in higher costs later on.
On the other hand, companies that invest heavily in safety achieve better control and consistency in their processes, but they do not fully recoup these investments through reduced failure costs alone. Both trends are logical. The key question is whether there is an optimal point of investment—and the results indicate that there is.
The graph below illustrates the relationship between the different cost categories. The optimal point is reached at 1.05% of total construction costs.
The researchers note that this optimal point was calculated for projects with an average risk level and for companies that already have a reasonably mature safety standard. For higher-risk projects, a larger budget is required to ensure safety. Companies with a low safety standard must first invest in improving their organization through management training and coaching.
Juni Daalmans
August 2023