Estimated incident cost savings in shipping due to inspections

Abstract

The effectiveness of safety inspections has been analysed from various angles, but until now, relatively little attention has been given to translate risk reduction into incident cost savings. This paper quantifies estimated cost savings based on port state control inspections and industry vetting inspections. It is based on a unique dataset of 515,194 ship arrivals and inspections from the United States of America and Australia, and inspections of three industry vetting inspection regimes, for the time period 2002 to 2007. The risk reducing effect of inspections is estimated by means of duration models, in terms of inspection gains based on the probability of survival. The results suggest average total estimated cost savings in the range of USD 74 to 192 thousand (median USD 19 to 46 thousand) owing to reduced risk of total loss due to a port state control inspection. Cost savings for industry inspections are found to be even higher, especially for tankers. The savings vary by type, age and size of the ship. The benefits of an inspection are in general larger for older and larger vessels, and also for vessels with undefined flags and unknown classification societies. As inspection costs are relatively low in comparison to potential cost savings, the results underline the importance in determining high risk ships to prevent costs due to total loss of ships.

A model assessing cost of operating marine systems using data obtained from Monte Carlo analysis

“…Recently the concept of TIV has been applied in the marine industry to analyse the effectiveness of RCO's by quantifying risk as a function of various cost factors incurred during accidents [Bijwaard & Knapp 2009, Knapp et al 2011. Studies such as Knapp et al (2011) establish that TIV can be used to facilitate CBA for marine operations.…”

“…The efficiency of maintenance and inspection policies can have a significant effect on the cost of operation for engineering systems. A number of previous studies are available concerning the effects which scheduled maintenance and inspection actions have, on the cost of system operation [Bijwaard & Knapp 2009, Jones et al 2009a, Knapp et al 2011.…”

“…This can be directly related to maintenance and inspection policies. Knapp et al (2011) discuss how effective inspections can increase the survival rate of a vessel and relate this to the risk of an accident occurring. When analysing risk as a function of cost it is important that methods are employed to sufficiently predict the cost of events which may occur due to a potential accident.…”

“…Well established decision making tools such as Formal Safety Assessment (FSA) and Delay-Time Analysis (DTA) have been applied in the marine industry in order to effectively analyse key cost factors incurred during vessel operations [Lois et al 2004, Jones et al 2009a. Recently the concept of TIV has been applied in the marine industry to analyse the effectiveness of RCO's by quantifying risk as a function of various cost factors incurred during accidents [Bijwaard & Knapp 2009, Knapp et al 2011. Studies such as Knapp et al (2011) establish that TIV can be used to facilitate CBA for marine operations.…”

“…When analysing risk as a function of cost it is important that methods are employed to sufficiently predict the cost of events which may occur due to a potential accident. Knapp et al (2011) employ the concept of Total Insured Value (TIV) to relate the risk of an incident to the potential for a total loss event occurring. This concept of TIV is based on the components identified by Wood (1995).…”