A teaching module for H&S teaching in Canadian undergraduate engineering programs

A Business Case For Health And Safety Lac

Mégantic

SLE reported to control: engine surges, emission of oil

droplets and engine smoke Agreement reached: park the train, leave lead locomotive

running and shut the other four off Parked downhill in Nantes, Quebec on a 1.2% grade track

at 1:15 a.m. MOT Lac-Mégantic derailment summary is here.

(TSB, 2014– Pg. 3)

The Disaster

Cause & Effect1. Origin-Farnham, Qc

1.1Faulty Procedures1.1.1 Recertification1.1.2 SPTO training

1.2 Procedures not followed1.2.1 Absence of Penalty Brake Application1.2.2 Negligence of previous mechanical report1.2.3 Safety data Sheets1.2.4 No emergency response assistance plan (ERAP)

1.3 Maintenance1.3.1 Lead Locomotive – cause of initial fire

2. Parking –Nantes, Qc

2.1Faulty Procedures2.1.1 Lack of Hand Brake Effectiveness Test2.1.2 Unattended Train2.1.3 Brake Failure

2.2 Procedures Not Followed2.2.1 Insufficient hand brakes2.2.2 Lead locomotive Shut Down after fire

3. Lac –Megantic

3.1 Faulty Procedures

3.1.1 Hazardous Material3.1.2 Structure of Cars

Impact -Fire and Explosions

1. Loss1.1 47 people died1.2 40 buildings destroyed1.3 53 vehicles destroyed1.4 6 million litres of petroleum crude oil wasted1.5 Contamination of approx. 31 hectares of land

2. Rescue2.1 Over 1000 firefighters from 80 different municipalities in Quebec & 6 counties in state of Maine participated in rescue 2.2 2000 people evacuated2.3- major environmental clean-up

4. Lack of Oversight by Ministry of Transportation4.1- Lack of enforcement4.2- lack of regulation

Contributing Factors & Control Measures

Contributing Factors & Control Measures

Estimated Costs Accrued in Nantes $855.50

Costs Accrued and Estimated in Lac-Mégantic $646,134,654.00

Estimated Legal and Litigation Costs $71,006,583.00

Estimated Business Loss $90,339,920.00

Estimated Employees Loss $449,297.00

Damages Cost

Total $770,983,207.00

The Aftermath

Preventative Costs CostProper OMS/SMS and Culture Change $575,000.00Insufficient Crew Members $ 91,340.00 Technical Upgrade of Tank Cars $ 2,220,000.00 Preventative Maintenance of Locomotive $ 558,121.00 Shippers Commitment /ComplianceEmergency Crew Rail Operation Training/guide $ 5,016.00 Regulatory Oversight Enforcement $ 250,000.00 Total $3,669,447.00

Preventative Measures

COST / BENEFIT RATIO

Total Preventative Cost $3,669,447.00

Total Damage Cost (Benefit if averted) $770,983,207.00

Cost/Benefit 0.00476 = 0.48%

Cost-Benefit Analysis

1. Operational Implication of the Damage

Number of Years Allocated to Compensate 170 years

Total Damage $770,983,207.00

Revenue Required to Cover Total Damage $3,107,550,209.00

Average Annual Revenue of Short line Rail

18,194,444.00

The Business Implications

5-Industrial Composit Cost Calculator Applying Cost Calculators – Incident

5-Industrial Composit Cost CalculatorApplying Cost Calculators - Investigation

5-Industrial Composit Cost Calculator Applying Cost Calculators – Damage

5-Industrial Composit Cost CalculatorApplying Cost Calculators - Replacement

5-Industrial Composit Cost CalculatorApplying Cost Calculators - Productivity

5-Industrial Composit Cost CalculatorSummary of Costs

$ 1093. 61

$850.63

$ 2915.90

$ 863.49

$1303.27

$7,026.90

Case: Nemi Auto Body & Paint Incident

• Please form groups of 2 or 3 .

• Please read the Case (handout).

• Using the calculator, please conduct a business analysis of this incident.

• Please cover the 4 suggested points. Write your names and answer on the paper provided.

• Your answer sheets will be collected at the end of the allotted time.

• You have 15 Minutes to complete the questions. (We’ll be available to answer your queries).

Nemi Auto Body & Paint- Damage Costs

Inventory losses……………………………………………………………………… $5,000.00Client Damage (Cab)……………………………………………………………….$60,000.00

5-I Costs:Incident Costs…………………………………………………………………………. $1,093.61Investigation Costs……………………………… ……………………………………..$850.63Damages to equipment……………….…… ……………………………………..$2,915.90Replacement Costs……………………………… ……………………………………..$863.49Productivity Costs……….……………….…… ……………………………………..$1,303.27

TOTAL……………………..……………………………………………………………….$72,026.90

Nemi Auto- Prevention Costs

Secondary Safety Pin……………………………………………………………………$150.00

Hose Routing Canal …………………………………………………..…………..….$2,850.00

TOTAL……………………..………………………………………………………………...$3,000.00

Nemi Auto- Cost/Benefit Analysis

Prevention Cost ……………………………………………………………………$3,000.00

Damage Cost (benefit) ………………………………………………..…..….$72,026.90

Cost/Benefit Ratio……………………..……………………...0.0417 = 4.17%

Nemi Auto- Business Implications

Damage Cost ……………………………………………………………..…..….$72,026.90

Profit Margin= 0.12

Capital needed to cover damage…………………………………….….$600,224.17($72,026.90 : 0.12 )

Annual Sales = $2,500,000.00 >> Daily Sales: $6,944.00 (2,500,000/360)

Time Required to Cover the Damage Cost……………...86.44Days($600,224.17: $6,944.00)

Nemi Auto- Cost/Benefit Analysis

Prevention Cost ……………………………………………………………………$3,600.00

Damage Cost (benefit) ………………………………………………..…..….$86,432.28

Cost/benefit Ratio……………………..……………………...0.042 = 4.2%

Nemi Auto- Business Implications

Damage Cost /Benefit ……….…………………………………………..…..….$86,432.28($72,026.90 x 1.20 )

Profit Margin= 0.12

Capital needed to cover damage…………………………………….….$720,269.00($86,432.28 : 0.12)

Annual Sales = $2,500,000.00 >> Daily Sales: $6,944.00

Time Required to Cover the damage Cost……………...103.73Days($720,269 : $6,944)