The Business Case for Implementing an In Vehicle Monitoring System (IVMS)

IVMS

The oil and gas industry has witnessed a significant improvement in jobsite safety over the last two decades.  This culture change started with the recognition that jobsite incidents are predictable, preventable, and therefore unacceptable.  As a result, we focused on the consistent observation of key risk behaviors and hazards that, combined with timely feedback and corrective action, can prevent these incidents.  We now see management involved, proactive safety systems and best practices in place and employees engaged in the process.  The industry has also focused on measuring performance and continuous improvement as it relates to worksite safety.

While some companies have already made the commitment, we believe it is time to enact a similar culture change and focus on driving safety.  Based upon the last three years of available data, NIOSH reported that over 50% of oil and gas work-related fatalities resulted from motor vehicle incidents.[1]

Unfortunately, this statistic is trending upward to 54% of all work fatalities in 2016.  According to the CDC-NIOSH, the oil and gas industry is second only to transportation and warehousing in the number of motor vehicle related fatalities per 100,000 workers.[2]

The preliminary results for 2017 and 2018 indicate the frequency and severity of motor vehicle crashes involving oil and gas employees is increasing.  Regions like the Permian Basin have seen a 50% increase in the number of roadway fatalities in the first half of 2018 compared to same timeframe in 2017.

Based on this data, we need a safety system similar to jobsite safety that monitors driving behavior in real time and provides employees with consistent feedback to reinforce desired actions and change risky behaviors.  The technology exists today to accurately monitor driver behaviors, travel routes, and vehicle conditions in a cost-effective manner.  Similar to other technology solutions, In-Vehicle Monitoring System (IVMS) functionality and reliability has improved significantly over the last few years.  Costs have decreased due in large part to the number of quality providers.[3]

Berkley Oil & Gas has reviewed studies conducted by several different organizations with similar positive results.  Exploration and Production (E&P) companies are gaining amazing efficiencies, including one that observed a 49% plus reduction in motor vehicle accident frequency and severity after they implemented IVMS along with a 20% plus reduction in related fuel and maintenance costs.[4]

They realized even greater savings in year two as they refined their approach, focusing on feedback and recognition of desired driving behaviors.

E&P companies are also recognizing the many benefits of having customers with an IVMS.  More companies are now including this requirement in their master service agreements.  Some of the benefits they see include the reliability and timeliness of work completed and accuracy of billing.  We are finding E&P companies are also concerned about the personal impact motor vehicle accidents are having on workers, their families, and the public.[5]

Communities certainly understand the regional economic gains that result from oil and gas.  They also see the traffic congestion, deterioration of roads, and both good and bad driver behaviors.  Your company has the opportunity to stand out in a positive way to customers and the public by avoiding accidents, having drivers that are safe and courteous, and using equipment that is in good condition.  Everyone benefits when the oil and gas industry has a positive impact and reputation in the communities where we do business.

Clearly many companies are implementing IVMS with great success, but we do hear some concerns we would like to explore.  The most common concerns with implementing an IVMS include cost, time required to manage these systems, reliability of the data, and fear of losing “good” employees.

The cost and terms of an IVMS are certainly factors in your decision.  We have observed a significant decrease in cost over the last few years due to an increase in number and quality of system providers.  This creates a more competitive environment.  Functionality and reliability are also improving, as well as the ability to negotiate favorable monthly rates per monitored driver or power unit, equipment costs, maintenance, and contract period options.[6]

When considering the costs, we recommend quantifying the savings and benefits associated with fewer motor vehicle accidents, lower maintenance costs, lower fuel costs, and improved customer satisfaction.  Most importantly, you benefit by protecting your employees, the public, and your business.  IVMS have quickly become a smart tool used by safety conscious companies to manage this difficult exposure.  Without an IVMS, driving is largely an unsupervised part of the job with potentially devastating consequences for your company, employees, and families.  When you evaluate and quantify these factors, we believe the benefits will easily exceed the costs and the decision will be an easy one.

It is true that the time required to implement and manage these systems can easily be underestimated, especially during the first year.  These systems will require a time commitment to make sure the system is deployed properly, including training.  You also need time to properly set up the system, monitor it, adjust and communicate results, coach employees, and continuously improve the process.  This is similar to most business systems and processes that require discipline and a commitment of employee time to ensure the desired business outcome is achieved.

Please note that collecting data related to driver behaviors and vehicle condition when not managed and acted on appropriately can actually increase your liability.  This should be reinforced with front-line supervisors and managers.

The NIOSH motor vehicle work group created a free guide for the oil and gas industry to help with the effective selection and implementation of these systems.  A free copy can be obtained from the Berkley Oil & Gas – Energy Risk Solutions website or directly from your Risk Services Representative.

Reliability of the data obtained is also important.  While this aspect has improved in the last few years, we recommend addressing this concern when you are selecting a system and vendor.  Also, recognize that a certain amount of time will be required to monitor the data and make adjustments when appropriate.  The flexibility of certain systems, level of customer support, and commitment of a company to properly set up their parameters, monitor, and take action will all be important to ensure data quality.

One common fear for companies implementing an IVMS is losing good employees.  We hear about employees resisting the change, but we have not found losing good employees to be a significant issue for several reasons.  First, jobs that require company driving without an IVMS are disappearing rapidly.  A large percentage of companies now have an IVMS requirement.  We have also discovered that proper communication and implementation of these systems will reduce employee concerns and resistance.  We have found good employees and their families appreciate the company doing everything they can to keep workers safe.  Employees respond to management leading by example and communicating this information in a positive manner.

Over the last several years, we have observed five large verdicts (ranging from $43.5 million to $281.0 million) against oil and gas service companies from motor vehicle accident lawsuits in Texas and New Mexico.[7]

These cases are based on various theories of liability, including negligent entrustment.  An IVMS is a proven approach to improve driving safety and reduce these exposures when implemented properly.  Given all of these benefits and the growing liability exposures, can you afford to go without an effectively managed IVMS in all company vehicles?

 

 

 

[1]

“Implementing an In-Vehicle Monitoring Program: A Guide for the Oil & Gas Extraction Industry” NORA Council MV Product, PDF, p.8; BLS, Census of Fatal Occupational Injuries (CFOI) – Current and Revised Data, “2016 Census of Fatal Occupational Injuries (final data)”;

[2]

“Implementing an In-Vehicle Monitoring Program: A Guide for the Oil & Gas Extraction Industry” NORA Council MV Product ,PDF, p.7

[3]

“Real-time Feedback Combined with Coaching Can Help Fleet Drivers Decrease Unsafe Driving Practices,” NIOSH Research Rounds, Vol. 1 # 4, Oct. 2015, https://www.cdc.gov/niosh/research-rounds/resroundsv1n4.html;

[4]

“Implementing an In-Vehicle Monitoring Program: A Guide for the Oil & Gas Extraction Industry” NORA Council MV Product, PDF, p.4, 10; B.R. Gale, SPE, and M.V. Trostel, Encana Oil & Gas (USA) Inc.; D.L. Armitage, M.A. Mason, and L.S. Bautista; SPE, Cartasite. “Case Study: Encana Implements Successful Driving Safety and IVMS Program,” 2011, PDF, p. 2; David Armitage, “ROVR Generates Big Returns,” EnCana, Cartasite Presentation at the 2016 OSHA Oil & Gas conference, PDF;

[5]

“How does an IVMS deliver productivity benefits,” IVMS Solutions in the Mining Industry, 10/11/13, https://miningivms.wordpress.com/2013/10/11/how-does-an-ivms-deliver-productivity-benefits/; “Benefits of IVMS Technology in Improving Transport Operations” by Ashok Kulkarni, Shell, WRI Ross Center for Sustainable Cities, SlideShare.net, https://www.slideshare.net/EMBARQNetwork/benefits-of-ivms-technology-in-improving-transport-operations;

[6]

“Benefits of IVMS Technology in Improving Transport Operations” by Ashok Kulkarni, Shell, WRI Ross Center for Sustainable Cities, SlideShare.net, https://www.slideshare.net/EMBARQNetwork/benefits-of-ivms-technology-in-improving-transport-operations; “Implementing an In-Vehicle Monitoring Program: A Guide for the Oil & Gas Extraction Industry” NORA Council MV Product, PDF, p. 13;

[7]

“Texas Jury Nails Frac Company with $101 Million Verdict” by John Kingston, 7/23/18, Freightwaves.com, PDF, https://www.freightwaves.com/news/verdict-trucking-company-big-award?rq=texas%20jury; “Lytle woman wins $43.5M jury verdict in driving-while-texting case” by Patrick Danner, 11/24/17, PDF, https://www.mysanantonio.com/business/local/article/Lytle-woman-wins-43-5M-jury-verdict-in-12378537.php; “Eagle Ford Shale company slapped with $281 Million Jury Verdict in Dimmit County for wrongful death case” by Jose G. Landa, 12/9/13, Eagle Pass Business Journal, PDF, http://www.epbusinessjournal.com/2013/12/eagle-ford-shale-company-slapped-with-281-million-jury-verdict-in-dimmit-county-for-wrongful-death-case/; “Family given $58.5M in fatal crash” by Bill Rodgers, 3/22/13, Albuquerque Journal, PDF, https://www.abqjournal.com/181251/family-given-585m-in-fatal-crash.html;