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For many ALARP decisions, the HSE does not expect duty holders to undertake a detailed Cost Benefit Analysis (CBA), a simple comparison of costs and benefits may suffice.

A CBA should only be used to support ALARP decisions. It should not form the sole argument of an ALARP decision nor be used to undermine existing standards and good practice. A CBA on its own does not constitute an ALARP case and cannot be used to argue against statutory duties, cannot justify risks that are intolerable, nor justify what is evidently poor engineering.

Justifiable costs that may be taken into account in a CBA include: • Installation;

• Operation; • Training;

• Any additional maintenance;

• Business losses that would follow from any shutdown undertaken solely for the purpose of putting the measure into place;

• Interest on deferred production, e.g. oil or gas remaining in an oil/gas field while work is carried out on a platform;

• All claimed costs must be those incurred by the duty holder (costs incurred by other parties, e.g. members of the public should not be counted); • The costs considered should only be those necessary for the purpose of

implementing the risk reduction measure (no gold plating or deluxe measures).

Justifiable benefits that may be claimed in a CBA can include all the benefits of implementing a safety improvement measure in full, in that they are not underestimated in any way. The benefits should include all reduction in risk to members of the public, to workers and to the wider community and can include:

• Prevented fatalities;

• Prevented injuries (major to minor); • Prevented ill health;

• Prevented environmental damage if relevant (e.g. COMAH).

Benefits claimed can also include the avoidance of the deployment of emergency services and avoidance of countermeasures such as evacuation and post accident decontamination if appropriate. However, in order to compare the benefits of implementing a safety improvement with the associated costs, the comparison must be conducted on a common basis. A simple method for coarse screening of measures puts the costs and benefits into a common format of ‘£s per year’ for the lifetime of a plant.

Table 1 shows some typical monetary values that could be used.

Table 1: Typical Court Awards (2003)

5.5. Example

Question: Consider a chemical plant with a process that if it were to explode could lead to:

• 20 fatalities;

• 40 permanently injured; • 100 seriously injured; • 200 slightly injured.

The rate of this explosion happening has been analysed to be about 10-5_{per year,}

which is equivalent to 1 in 100,000 per year. The plant has an estimated lifetime of 25 years. How much could the organisation reasonably spend to eliminate the risk from the explosion?

Fatality £1,336,800 (times 2

for cancer) Injury Permanently incapacitating injury. Some

permanent restrictions to leisure and possibly some work activities.

£207,200

Serious. Some restrictions to work and/or leisure activities for several weeks / months.

£20,500

Slight injury involving minor cuts and bruises with a quick and complete recovery.

£300

Illness Permanently incapacitating illness. Same as for injury.

£193,100

Other cases of ill health. Over one week absence. No permanent health consequences.

£2,300 + £180 per day of absence

Minor Up to one week absence. No permanent

health consequences.

Answers: If the risk of explosion were to be eliminated the benefits can be assessed to be:

Fatalities: 20 x £1,336,800 x 10-5 x 25 yrs = £6684 Permanent injuries: 40 x £207,200 x 10-5 x 25 yrs = £2072 Serious injuries: 100 x £20,500 x 10-5 x 25 yrs = £512 Slight Injuries: 200 x £300 x 10-5 x 25 yrs = £15

Total benefits = £9,283

The sum of £9,283 is the estimated benefit of eliminating the major accident explosion at the plant on the basis of avoidance of casualties. (This method does not include discounting or take account of inflation.)

For a measure to be deemed not reasonably practicable, the cost has to be grossly disproportionate to the benefits. In this case, the DF will reflect that the

consequences of such explosions are high. A DF of more than 10 is unlikely and therefore it might be reasonably practicable to spend up to somewhere in the region of £93,000 (£9300 x 10) to eliminate the risk of an explosion. The duty holder would have to justify the use of a smaller DF.

This type of simple analysis can be used to eliminate or include some measures by costing various alternative methods of eliminating or reducing risks.

Alternative approach

It is more likely that a safety improvement measure will not eliminate a risk, just reduce the risk by an amount and we will need to evaluate the risk reduction provided as the benefit against the cost of implementation.

Typically organisations operate a cost per life saved target (or Value of Preventing a statistical Fatality: VPF).

The cost of preventing fatalities over the life of the plant is compared with the target VPF;

The improvements will be implemented unless costs are grossly disproportionate.

5.6. Example

Question: Application of ALARP

The proposed safety system has been assessed and a risk of 8.0x10-6_{pa predicted.}

Given that the Broadly Acceptable (Negligible) Risk is 10-6_{pa then the application of}

ALARP is required.

In this example, for a cost of £10,000, additional instrumentation and redundancy will reduce the risk to 2.0 x10-6_{pa (just above the negligible region) over the life of}

the plant which is 30 yrs.

Should the proposal be adopted?

Answer: Number of lives saved over the life of the plant is given by:

N = (reduction in the fatality frequency) x number of fatalities per incident x life of the plant

= (8.0 x10-6_{- 2.0 x10}-6_{) x 2 x 30}

= 3.6 x10-4

Hence the cost per life saved is: VPF = £10000 / 3.6 x10-4

= £27.8M

The calculated VPF is >10 times the target cost per life saved criterion of £2M and therefore the proposal should be rejected.