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Steve Allen: ROI of PSMS – Stakeholder Engagement, Element 2

The ROI of PSMS

Element Two: The Benefits of Stakeholder Engagement

 INTRODUCTION:

This is the second in a series of articles discussing the value or benefits an organization might expect to receive from implementing each of the ten elements of American Petroleum Institute’s Recommended Practice 1173 (API RP1173) – Pipeline Safety Management Systems (PSMS). In this article, I will explore the benefits associated with stakeholder engagement.

As I stated in the first article, PSMS is not currently a requirement for pipeline operators even though many of the individual elements of RP1173, in whole or in part, are required by existing regulations (e.g., OQ, Risk/Integrity Management, Operational Controls/Procedures, etc.). The value PSMS provides is that it requires operators to manage the various aspects of their operation with intentionality, holistically, and with a keen focus on risk and continuous improvement. In this article, I will attempt to identify some of the benefits derived from stakeholder engagement. 

 WHO ARE STAKEHOLDERS AND WHAT IS THE BENEFIT OF ENGAGING THEM?

What is stakeholder engagement? Essentially this PSMS element requires operators to maintain a process and plan for communication and engagement with both internal and external stakeholders regarding risk identification and risk mitigation/management. While the stakeholder engagement element of PSMS includes the stakeholders identified in 49 CFR 192.616 – Public Awareness, it is intended to reach a much broader audience, including employees, customers, contractors, locators, regulators, and others.

I will address some of the different types of stakeholders that need to be engaged as per RP 1173 and identify the benefits of doing so with each. The list of stakeholders will not be all-inclusive, but I think you will get the idea of the benefits of stakeholder engagement overall. A common theme among many of these stakeholders is the concept of “See Something,” “Say Something,” with the operator expected to “Do Something.”

 Employees: Employee engagement is CRITICAL! “C-Suite” employees to “boots on the ground” employees must be engaged regarding risk identification and mitigation. Effective two-way communication between management and workers will result in honest, accurate, and timely identification of risks to the pipeline system. The expectation is that the employee engagement processes and procedures in place will result in management acknowledging risks identified by employees and taking action to address such risks, including allocating necessary resources where needed to address such risks.

 “Boots on the ground employees” are a pipeline operator’s eyes and ears regarding operations and problems that arise, and when they speak up, their voices MUST not be dismissed. Establishing effective processes, procedures, and communications channels for employees to voice their concerns and inform management of risks identified to the system is priceless!

 Customers: Engagement with customers is also CRITICAL! After all, customers are at the end of the delivery chain. They live within the downstream infrastructure of the operator. They should also be considered the eyes and ears of the company when considering things that could go wrong at the point of delivery. Customers reside where operators’ actual products/services are delivered. If there are safety-related issues that arise in the delivery of these services, then there must be methods in place to educate customers about safety-related risks and how they should go about reporting such risks to the operator.

 A well-designed customer engagement program that effectively addresses customers’ education regarding risk identification and reporting will yield significant returns to an operator. Seconds count, and a well-informed/engaged customer base can literally mean the difference between life and death! Thought of in a different light, customers are an operator’s last line of defense regarding risk identification and communication, certainly well worth the effort.

 Contractors: In many cases, contractors account for a very large percentage of an operator’s workforce, and as such, it is imperative they are engaged in the risk identification and mitigation efforts of the operators they serve.  As part of their contractor engagement programs, many operators have in place corrective action programs (CAPs) that require contractor personnel to speak up if they see a safety-related issue that should be addressed, without fear of retribution. Again, the concept of “See Something, Say Something” is a fundamental tenant of PSMS, and the more it is embraced, the better overall safety is achieved.

 As it relates to contractors, safety begins with the quality of the work they perform, and the integrity of pipeline installed or maintained. Contractor quality management practices and adherence to operator CAPs are key components needed to ensure the long-term safety of a pipeline.  

 For further information on this concept, I recommend reviewing API RP-1177 Recommended Practice for Steel Pipeline Construction Quality Management Systems (Nov. 1, 2017) and Pipeline Construction Safety Management Systems developed jointly by the Distribution Contractors Association (DCA) and the American Pipeline Contractors Association (APCA).

 Damage Prevention Stakeholders: In the world of damage prevention, facility owners, One-Call centers, locators, landowners, excavators, and others are all stakeholders. These stakeholders engage each other in various ways across the country with the common goal of safety and the avoidance of excavation damages. Unfortunately, the level of stakeholder engagement, in some cases, is ultimately driven by the threat of financial loss from excavation damages. Based on state One-Call regulations these financial losses can be significant, and in some states can run into millions of dollars.  Also, under federal and state pipeline safety regulations, pipeline operators can be subject to large penalties for non-compliance and in certain cases can pass those penalties on to their locating contractors through contract indemnification clauses. Lastly, pipeline operators, excavators, and locators can each be held liable for injuries, death and property damages that result from excavation damages. For all these reasons, damage prevention stakeholders clearly need to engage each other to ensure safety and prevent damages.

 Regulators: You may be asking yourself how a regulator is considered a stakeholder. Simply put, in most cases, it is the regulator’s responsibility to ensure compliance with pipeline safety and state One-Call regulations. Discharging this responsibility is a balancing act. Regulators do not always have the authority to directly address the root cause of a problem (such as with state One-Call laws that result in unintended circumstances) and must rely on their ability to influence stakeholders through engagement as opposed to enforcement action.  

 WHY STAKEHOLDER ENGAGEMENT IS IMPORTANT

Through effective stakeholder engagement, pipeline operators:

 ·      Help ensure all stakeholder parties know what is expected of them and know how to satisfy these expectations.

·      Improve employee morale by keeping them informed.

·      Create an internal environment of open, two-way communications that helps to surface and address safety issues and concerns that may arise without fear of reprisal.

·      Create an external environment of open, two-way communications that helps to make sure all parties involved are working together to identify and address safety related issues.

·      Reinforce the positive safety cultures they need to ensure safe pipeline operations.

·      Intentionally seek to identify opportunities for continuous improvement regarding pipeline safety.

 FUTURE ARTICLES

Be sure to stay tuned for future articles regarding the ROI of PSMS. Each element of PSMS will be examined and will hopefully help convince those on the fence that pursuing PSMS brings value to the organization in ways including, but not limited to enhanced pipeline safety.

 If you would like to learn more about how Energy Worldnet can help you with your PSMS journey, do not hesitate to contact me at 317-523-7437.

(Note: While the title of this series “The ROI of PSMS” may be a bit misleading, it does draw attention to the notion that an implementation of PSMS involves certain costs and carries the expectation of certain benefits, both of which will vary from organization to organization.  Technically, the calculation of ROI is made by simply dividing the “quantified” net benefits by the costs of implementation (investment). The resulting ROI percentage can be used for prioritizing competing investment opportunities. For the discussion of this series, the notion of competing investments is not considered, and the intent of the series is to identify PSMS related benefits to inform the decision-making process regarding whether to move forward with PSMS.)

Steve Allen
Executive Director, Pipeline Safety
Energy Worldnet

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