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Contractor compliance: Your business and managing third-party risk

24 May 2022

#Transport, Shipping & Logistics

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Contractor compliance: Your business and managing third-party risk

There seems to be ongoing uncertainty over what is required under the primary safety duty in any particular circumstance. So, do you have a duty to inspect and confirm the maintenance of vehicles of your contractors? Generally, those that do not own or operate vehicles do not need to start checking under the bonnet or carrying out dipstick tests. However, if you should reasonably notice obvious risks associated with maintenance, or indeed any other Chain of Responsibility (CoR) aspect, you are required to do something about it.

For example, a business operates a facility from which its goods are consigned by truck and observes that the vehicle supplied is obviously (i.e. to a reasonable observer) unroadworthy, and that the driver does not at all restrain the load before departing. It observes the same thing the next day, and the next. Is the business ‘ensuring so far as reasonably practicable the safety of its transport activities’ including ensuring that its conduct does not directly or indirectly encourage the driver or another party in the Chain to breach the Heavy Vehicle National Law (HVNL)? In short, no.

If you observe obvious risk (or one which ought reasonably have been observed) where a reasonably available solution (such as engaging with the transport operator) could eliminate that risk, it is considered to be ‘reasonably practicable’ for you to take steps to reduce that risk.

Shared responsibility

Each party in the Chain must ensure, so far as is reasonably practicable, the safety of their transport activities.

Additionally, the safety of transport activities relating to a heavy vehicle is the shared responsibility of each party in the Chain for the vehicle.

This is a shared responsibility to ensure, so far as is reasonably practicable, that business practices, requests or demands, delivery requirements, schedules, packing, loading or unloading practices do not directly or indirectly cause or encourage:

  • the driver to contravene the HVNL and or exceed the speed limits
  • another person (including another party in the CoR) to contravene the HVNL.

Whether a person has responsibility depends on:

  • the function the person performs
  • the nature of the risk
  • the person’s capacity to control, eliminate or minimise the risk.

Are you responsible for your contractors’ compliance?

Transport activities often involve interactions with third parties who have a shared responsibility for safety. A safety duty under the HVNL may not be transferred to another person, so it is essential that all parties in the Chain cooperate to control, eliminate or minimise any shared transport risks.

Definition: Third Party

A third party may be a business or an individual not directly employed by you that your business interacts with in the performance of its transport activities. A third party may perform some transport activities for or alongside you. These interactions can take place between you and, for example:

  • customers
  • prime contractors
  • subcontractors
  • warehouses and distribution centres
  • maintenance and equipment service providers.

The level of responsibility that each business or person has depends on their capacity to influence and control the particular activity, including decision-making relating to the activity. Capacity, in general, means the ability to have an effect on something or the behaviour of someone. Capacity in this context means the ability to control, eliminate or minimise the safety risk. 

The more control and influence your business has over a task (e.g. loading or unloading), the greater responsibility your business has to ensure the task is done safely.

Parties in the Chain only have a positive duty to notify regulators of ‘notifiable incidents’ under work health and safety laws. However, you should consider how to ensure the safety of your transport activities and/or ensure that you do not encourage or reward others in the Chain to breach their duties. Sometimes this requires you to notify and engage with other parties (not notify the regulators) when you detect a compliance problem.

Businesses do not need to micro-manage contractors, try to run their compliance function for them and audit everything they do. But, the HVNL will not permit you to avoid responsibility for unsafe practices merely by saying, “my contractor did that, not me”, especially if the problem arose as part of a process in which you were involved. If you could and should have readily identified that there was a problem, you cannot turn a blind eye to it.

Monitoring versus managing contractor risk

Parties in the Chain need to identify, analyse, evaluate and mitigate general risks associated with heavy vehicle supply chain safety under the HVNL. This includes monitoring or managing contractors, as appropriate.

You will be required to monitor risks in situations when you have limited control to manage the risk. This may be because:

  • the contractor has expertise that you do not have
  • the transport activity occurs outside your geographical control (such as a fatigue incident on a public road away from a base)
  • you have limited control of the transport activity (commercial goods packed by third party supplier).

You will be required to manage risks in situations when you possess the knowledge, skills and experience to manage the risk. This may include scenarios where:

  • you have the expertise, even though you are contracting with another expert
  • the transport activity occurs within your geographical control, i.e. loading on site
  • you have a high level of control of the transport activity.

Executive due diligence

Executive duties of due diligence will also extend to the appropriate monitoring or management of contractors and, in this context, requires executives to:

  • gain and maintain knowledge about the safe conduct of their transport activities
  • understand the hazards and risks associated with their transport activities
  • maintain appropriate resources to implement processes to eliminate or minimise their hazards and risks
  • respond to information received about their hazards and risks in a timely manner
  • verify that their resources and processes are provided, used and implemented.

Five tips for dealing with third parties

Consider the following when dealing with third parties:

  1. exercise a degree of due diligence in engaging a contractor, e.g. obtaining some assurance that they are aware of and complying with their CoR duties
  2. establish an incentive for them to comply with their (and your shared) duties. For example, include terms in your contract with them that require them to comply with the HVNL, comply with any site policies that you have and report to you if CoR incidents occur when they are engaged on your jobs. You cannot blindly assume that they will then do their job. It is important to periodically check in with them or observe their actions on your site to ensure that they are actually doing what has been agreed upon. If not, you need to engage with them to ensure that they improve their performance
  3. ensure that your transport providers are aware of their CoR safety obligations and have systems in place to manage those risks. One way to do this is get them to tick a, “Yes, we have compliance systems” box or put a clause in your contract that says that they must do so. However, this is rather passive and cannot be relied on in isolation. Ask for some evidence of those systems, e.g. the underlying CoR compliance policy or accreditation scheme enrolment or a short description of how they manage e.g. mass – but not every compliance record
  4. during the conduct of your transport activities, periodically observe that those systems are being used and are effective, e.g. make checks to ensure that loads are not arriving obviously poorly restrained or with evidence of load shift
  5. keep a log book of observations that raise a red flag warning, e.g. a truck that arrives on a severe list due to overloading or poor load restraint or that is very obviously damaged and unroadworthy (the kind of things that cause you to say, "Whoa, that isn’t right", even if you are not a trucking expert).

So, as a general rule, you are responsible for managing the safety of your own transport activities and you are not responsible for managing the compliance of your contractors or other third parties in the Chain. Despite this, where a contractor performs tasks for you and under your direction, control or influence or where you jointly perform a transport activity with a third party, you are responsible for engaging with that party to satisfy yourself that they know what they are doing and monitoring their performance to the extent necessary to ensure that they are doing so.

If you have any questions, please contact us below or send in your enquiry here.

Author: Nathan Cecil

  • This article was originally published in CoR Adviser. The article is © 2022 Portner Press Publishing Pty Ltd and has been reproduced with permission of Portner Press.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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