The effects of reputational damage on supply chain

27 February 2019

New York building damage underlines how a health and safety incident can impact the entire construction supply chain.

The events that unfolded at 130 Liberty Street (originally One Bankers Trust Plaza) in August 2007 were to fundamentally change how contractors – and everyone down the supply chain – operate in New York.

A fire broke out and when firefighters arrived they discovered that the basement standpipe, which should have supplied water to the floors above, had been damaged and consequently rendered inoperable.

Two firefighters died tackling the blaze and in 2008 the Manhattan District Attorney indicted the construction supervisors and the demolition subcontractor.

A project that had originally been expected to cost around $45 million eventually cost much more than that amount by the time demolition was completed in 2011.

I was a safety director for the general contractor, undertaking oversight on the project at the time of the fire. One of my safety managers was among those indicted.

The effects on the general contractor and the demolition subcontractor charged with decontaminating and dismantling the building were significant.

The latter was dismissed from the project by the general contractor who was in turn removed from the project by the project owner shortly afterward..

Sign up to our latest News & Insights

While all those indicted were subsequently cleared, the process had a negative reputational and commercial impact on both the companies leading the project and to the local general contractor market.

The immediate impact upon the general contractor’s business was noticeable.

The company was placed under a non-prosecutorial agreement for several years and suspended from bidding on certain projects with some clients.

It also accelerated a global restructuring and rebrand of its operations that had been underway prior to the fire.

For the general contractor market at large, the case led to a significant change in the way abatement and demolition projects are conducted in New York City.

New regulations

A number of new regulations were passed, accompanied by the introduction of additional oversight and fire safety training requirements.

A clear lesson is that companies need to appreciate the dynamic and changing nature of their responsibility to operate safely.

Traditional methodologies and approaches in safety may need to be adjusted to the new realities of the environment in which construction companies now find themselves.

Consequently, strengthening their ability to adjust prior to, during and following accidents is mission critical to managing the reputational risk of both individual project stakeholders and the construction market in general.

TALK TO AN EXPERT

For more information please contact Ray Master, Director, Construction Risk Partners (a JLT Group company) on +1 646-625-7090.

YOU MAY ALSO BE INTERESTED IN