Among commercial motor carriers, safety regulations can be a controversial topic. Whether it’s an EOBR mandate or a CSA rating system that is flawed, you’ll always have vigorous debate on the right way to go. One topic where you’ll find little disagreement is the high cost of non-compliance.
Calculating the cost of noncompliance, however, is not an easy task. There are so many variables to consider: fleet size, type of vehicle, LTL vs. truckload, route type (regional, dedicated, long-haul) and trip length, to name a few. We recently found some research to put numbers to noncompliance:
Fines for Failure to Comply
An obvious way to quantify the costs of noncompliance is by examining fines levied against carriers for violations of DOT safety regulations. In 2011, DOT-regulated truck, bus and motor coach companies paid $30,674,218 in fines for failure to comply with Federal Motor Carrier Safety Regulations (FMCSRs). The average fine per case was $5,050.
The table below shows that fines in 2011 were higher than previous year. Fines in 2012 may be even higher, as the data is still incomplete.
One of the most costly violations is the falsification of a driver log (§395.8[e]). In cases where this was the sole violation cited, carriers paid an average fine of $9,394. Another costly violation is the transportation of hazardous materials without a properly prepared shipping paper (§177.817[a]). The average cost in cases where this was the sole violation: $8,578.
Lost revenue associated with out-of-service (OOS) drivers and vehicles is another cost of failure to comply with FMCSRs. We estimated the average miles per hour travelled is 50, and the average revenue per mile is $1.75. The average revenue per hour (50 mph x $1.75) is $87.50. If a typical out-of-service violation sidelines a driver or a vehicle for four hours, the lost revenue per OOS violation is $350.
This number does NOT include other associated costs. Roadside repairs for out-of-service vehicles may cost three to five times the cost of repairs performed at a terminal. Lost driving time is another cost. Not only is a driver failing to produce revenue when he or his vehicle is out-of-service, he’s also using up his fourteen hours of work time. Delivery delays are another associated cost that’s difficult to quantify. This is especially problematic for less-than-truckload or dedicated fleets.
Impact on Litigation
According to Rob Moseley, head of the transportation department at Smith Moore Leatherwood, juries are relatively accepting of truck drivers who make mistakes. Moseley said in a recent interview, “Juries are much less forgiving when safety issues are ignored at the management level of the company.” He added, “A trucking company gets to explain two problems or inconsistencies. After that, the jury doesn’t listen and will punish the trucking company.” The result? Damages typically increase.
The costs associated with legal defense are also likely to increase. Not only must the carrier address the issue under litigation (such as determining who ran a red light), the carrier must also defend against compliance failures. This may require additional experts and depositions, which, according to Moseley, can add tens of thousands of dollars to the bill.
Additional Financial Impact
Other costs that we’ve calculated include:
- Increased frequency of inspections and the additional violations identified during these inspection
- More detailed inspections (e.g., more Level 1 inspections) and the associated violations identified
- Impact on insurance rates
- Loss of business due to poor CSA scores
- Reduction in contracted rates for carriers with poor CSA scores
The bottom line for carriers: Invest in compliance with applications like BigRoad that eliminate all form and manner issues before submission while also alerting the driver of potential violations before they occur. Regularly auditing your drivers’ logs, maintaining accurate and complete records, following a sound drug testing policy and training your drivers is costly. But it may be less expensive than the alternative.