The Cost of BSC Compliance

OSHA. IRS. EPA. BBP. PPE. HAZCOM. The alphabet soup of compliance can be confusing, and costly, for building service contractors.

Contracting Profits recently surveyed readers to find out about their compliance efforts and attitudes. We found that, while more than a third call compliance a “necessary evil,” most view their company’s programs and expenditures in a more positive light.

BSCs who responded to our survey spend an average of $12,817 a year to comply with local, state and federal regulations and laws, including recordkeeping, training, fines, labeling and supplies. These firms employ an average of 76 full-time-equivalent janitors, in addition to nine managers and office employees; the bulk of these companies take in less than $1 million in annual sales. Larger companies, logically, spent much more in total dollars (but often less as a percentage of sales) on compliance — up to $200,000 in a few cases, on annual sales of $20 million or more.

And, what do they say about these efforts? It varies — 18 percent say they spend too much; 10 percent are actively trying to reduce their

expenditures. One of these contractors even suggests BSCs move their companies to “a third-world country with little or no regulation” in order to escape increasingly burdensome costs; another suggested keeping a company small enough to stay off the radar screen of most regulatory agencies.

On the bright side
However, 31 percent say compliance is “not an overwhelming burden,” 13 percent say it keeps their workers and company safe; additionally, 9 percent say it helps them stand out.

We spoke with BSCs in those latter categories to find out how they maintain a balance between safety and cost — and a good attitude.

For instance, Kay Jordan, office manager of Pro Clean Inc. in Portsmouth, Ark., says her compliance costs aren’t small, but they are well-spent.

“The overall cost is significant — all training we do, whether it be for the worker or management, it does add to the cost,” Jordan says. However, the training has benefits beyond following the law — it can improve safety and worker health, for one, but there also are monetary benefits.

A good training program will keep a company operating within the law, but it also can reduce workers’ compensation premiums and the potential for fines.

In good graces
One major reason BSCs do spend what they do on complying with the law is because it’s the law. Violating the law can result in anything from increased scrutiny by the enforcement agencies, to fines and even jail time for deliberate, egregious violations. Of all of the agencies, BSCs seem to dread a meeting with the U.S. Occupational Safety and Health Administration (OSHA) the most.

“I will say that we have never had a run-in with OSHA, but through conversations with other BSCs, we have realized that the regulatory bodies are not fun to deal with,” says Brad Klein, president of Building Professionals of Texas Janitorial Service in Houston. Also, a company or an industry prone to safety problems is more likely to be the target of added scrutiny by regulatory agencies, which prompts Klein to be proactive in his company’s compliance efforts.

If a company does need to react — for instance, after receiving a warning or citation from a government agency — the best course of action usually is coming into compliance quickly, says Jordan.

“One time, we had a run-in with OSHA. It was with a lead-awareness situation; we were not informed by the [customer] about everything we were dealing with,” Jordan explains. “After we found out, we started doing our training. We let OSHA know what we were doing and how we were doing it, and the fines were dropped because we became compliant.”

In some cases, compliance programs don’t just keep companies on the right side of the law — it’s good for reputation, too. Klein says he touts company’s program, internally and externally, and he believes he stands out from his competitors as a result.

“Our compliance efforts stand out because we are a small company and everybody in the organization knows how serious I am about it,” says Klein. “They know that if I walk into a janitorial closet and see issues somebody is going to get chewed [out].”

Stretching your dollar
Contractors such as Klein who tout their stellar compliance programs still want to make sure their dollars go as far as they can. For Klein, this means stopping problems before they start so he doesn’t have to pay down the lines for injuries or fines. Similarly, one contractor in Nebraska asks his insurance company to help with compliance efforts, which in turn can reduce premiums.

Another key to keeping costs in line, say several of our respondents, is finding small savings wherever possible. Free resources can help (see sidebar below), as can purchasing safety supplies in bulk. Also, streamlining the paperwork can net significant savings.

“Try to do paperwork once a month instead of daily or weekly, unless you’re required to,” says one anonymous survey respondent. “Getting into the swing of the paperwork takes the same amount of time each time you do it, so if you do it only once a month, the setup time is less than if you set up more than once a month.”

There are, however, some costs BSCs will just need to absorb, as they can’t be changed. Environmental regulations and purchasing requirements often cause such unrecoverable costs. For instance, one contractor in Maryland who responded to the survey says his state and city agencies require specific, environmentally preferable products and brands; BSCs can’t substitute similar, less expensive products.

Another respondent in New Jersey finds he incurs extra labor expenses helping his customers with their own compliance efforts — specifically, collecting and disposing of the paper his clients must shred as a result of privacy regulations, such as those covering the health-care and insurance fields. There isn’t much of an opportunity to be compensated for that extra work, he adds, so the company must take the hit.

Contractors can and should work these costs into their overhead when they bid jobs, suggests one anonymous respondent. However, when new costs crop up on existing contracts, BSCs may just need to absorb the cost and address it during the next negotiation cycle.

All in all, doing a thorough job can be the best way to keep workers safe, compliance levels high and costs under control.

“I think we’re pretty good. We do our training and keep our logs; it’s all money well spent,” says Jordan. “We’re in good shape in everything we do; we cover everything we need to cover. Not everyone does, and that sets us apart.”