While all the facts are yet to be disclosed or discovered in about what led up to the explosion of the Deepwater Horizon rig, and the subsequent sinking shows that there was a shocking lack of quality control or even process control. Even though there was a fractured structure with BP contracting with Transocean and Halliburton for work, BP is, as the contract holder, ultimately the final say in how work would proceed. This is clear from the testimony of one of the rig workers who overheard an argument with the BP Offshore Installation Manager and the "Tool Pusher".
The argument was over when to remove the heavy drilling mud that is used to control the oil which is under pressure in the undersea reservoir. It seems that the removal of this mud and the failure to react when more was mud was coming out than seawater was going in are likely to be the proximate causes of all that followed, including the massive and on going leak.
"Originally posted at Squarestate.net"
In my professional life I am a 6 Sigma Black Belt. For those of you not deeply involved in the nerdiness of business process improvement that is a project manager for process improvement projects. 6 Sigma is an incredibly powerful set of tools that allow any business process to be adjusted to meet the customer’s requirements in the most efficient way possible. It spans everything from design to production to ordering to delivery and billing of the product. One of the major deliverables from any 6 Sigma project is a quality control plan. I have been thinking about this and how it relates to BP and their disastrous spill in the Gulf of Mexico.
One of the major goals of 6 Sigma is to have a nearly perfect process. A process that is at 6 Sigma is standard deviations from the mean of defects. Put simply it means there will be 3.4 defects per million opportunities. Some processes are better than that, for example Airlines have a 7.4 Sigma process in regards to deaths, with 1 death per 1 million flying hours as the average. This is a good example of a well controlled set of processes that are focused on because of the extreme outcomes if there is a failure.
On the other hand their luggage handling, which we can all agree is a far less critical system, comes in at about 4.3 Sigma. Why is there such a difference within a single company or industry? In a word cost. The airlines could put systems into place that brought the performance of their baggage handling to the same level as their passengers surviving if they wanted to, but to do so would cost a lot in new system and up keep. So, they make the business decision that people will live with the loss of their bags (which is usually temporary) if they arrive alive. While this puts a hit on customer satisfaction it does keep the costs down.
This kind of penny pinching might be understandable in the airline industry which runs on paper thin profit margins, but it is inexcusable in a company like BP which runs a profit margin in 7% to 9% range. There is also the issue that these margins, which are not out of line for major corporations, represent billions in profit every quarter. There is enough money to work on safety, BP has chosen not to spend it.
If the Deepwater Horizon was a single incident, there could be some excuse made that was a one off, the efforts of an overly zealous group manager who pushed the bottom line too hard. However is not the first time the BP has been caught out pushing profits over basic safety. The Texas City refinery explosion killed 15 workers. BP was charged with criminal violations of environmental laws and later fined $87 million by OSHA for failure to implement agreed on safety measures.
BP talks the talk about process improvement but there is a dirty little secret about any process improvement initiative, if the executives and senior management are not on board with the proposed improvements they just don’t happen. Having process safety engineers is a must for any large company, but that is not the same as being willing to do what they and their teams recommend. Worse in companies where the executives are not actively pushing for change there is can be competing cultures.
The process improvement folks can be beavering away assessing risk, balancing cost and proposing changes that will limit failures, all the while the line operations group will be resisting. Change, even change that will save money in the medium and long run, costs money and effort. While the change is on-going the whole process will be less efficient, up to the point the workers learn the new process and become comfortable with it. When a line manager is caught between the bottom line and the costs of change it is most often the change that gets thrown out the window.
This is how you can get in a situation where you know the problems, the potential consequences and the costs, and still not make the needed changes. Massive multinationals like BP most often have a senior corporate structure that is all about the quarterly profit. It is hard to make the conceptual argument that taking a slightly lower profit this quarter or year will allow for more profit in the future or prevent a enormously costly accident like Deepwater Horizon. Executives in this generation have come up through the ranks by slashing costs and boosting production. They have very set ideas about how that works and are often skeptical about the projections in 6 Sigma.
It is a real tragedy, since 6 Sigma is all about measurement, testing and retesting. It is the difference between thinking a change will help and being able to show it statistically. Sadly one of the most hated classes in college is statistics and there is a belief that they can be manipulated to show anything. While that has some truth to it, if one takes the time to look at the data, understand the confidence levels and really know the math the reality is that statistics will generally tell you what is actually going on.
Given the desire to increase or maintain profits pitted against the chance of savings or prevention of accidents the money almost always wins. It does not matter that companies like General Electric and Motorola have shown that adhering to 6 Sigma can be massively profitable and transformational, if there is not the willingness make changes you get what we see with BP, a lot of talk about safety and process improvement, but a culture where a on-site manager can overrule the standard procedure over the objections of the drilling company, all to save money.
This spill is going to cost BP tens of billions of dollars when all things are said and done. They have made a blanket statement that they will pay the cost of the clean up and the claims for loss of revenue. Since the leak seems likely to go on until sometime in August with somewhere around 1.6 million gallons of crude oil being spilled into the Gulf of Mexico the costs will be equally huge. All of this could have been prevented by a willingness to give up 10th of 1% of the operating profit and put safety on the same list as profit. Instead they rolled the dice and we all lost.
Since it is clear that money is the main motivator for these companies, one of the things that Congress can do (in addition to banning deep water drilling until there is technology that prevents blow outs at the 6 Sigma level) is to make it really costly for companies to fail to put safety first. It might be time to set the minimum fine for a safety related fatality at 1% of annual profit. This will get the attention of managers and executives alike. When a single worker death can cost you billions, you start to pay the requisite amount of attention.
In the end, there is some hope that BP will learn it’s lesson, but I would not hold my breath. Having worked in the process improvement field I have seen that there are two types of companies; there are the ones that actually embrace the idea that better processes mean less loss (both in products and safety) which leads to better profits and the ones that just pay lip service to the idea. BP and the rest of the oil industry clearly fall in the latter category.
The floor is yours.