I have a new case study in my “the cheapest solution is not always the least expensive” file: the BP-Deepwater Horizon oil rig explosion.
While everyone is waiting to see whether the continuing “top kill” efforts to plug the leaking oil well are successful, the lawsuits are piling up and more facts are bubbling to surfacing, along with the oil. These new facts that are shedding light on what happened in the days and hours before the tragic explosion on April 20th that claimed 11 lives and caused millions of barrels of oil to spew uncontrolled into the Gulf of Mexico, fouling waters and slowly spreading a gooey black death sentence across the delicate ecosystems of the Gulf’s neighboring shores.
I don’t know about you, but I find having a front row seat to the surreal underwater disaster courtesy of a live videocam on the gulf’s floor particularly disturbing. Watching those fast and furiously billowing plumes of gas and oil, my brain can’t help but scream: MAKE IT STOP.
The lengthy investigation into this disaster will no doubt sort out and allocate responsibility for how this mess happened and in the meantime we’re all praying that efforts to plug the gaping underwater hole work.
Nonetheless, the facts as they are emerging and known to date offer two lessons that are of value to any business.
1. Lesson #1: Have a Plan B, a back-up plan, and make sure Plan B works.
An article from the Washington Post reported that BP didn’t have an effective plan for handling a worst-case scenario blowout on the oil drilling rig even though BP told the Minerals Management Service, the government entity regulating such enterprises, that it did. The article also points out that “it appears that no other company drilling in the deep waters of the Gulf of Mexico had such a plan either, or it would have been brought in to stop the spill.”
Overconfidence and overreliance on an untested plan is always a risky proposition. Best business practices counsel that you should never risk more than you can afford to lose. That’s why lesson #1 is so ironic in the face of lesson #2.
2. Lesson #2: The fastest and cheapest solution is not always the least expensive.
Another article this week from the New York Times reported that in the days leading up to the oil rig explosion BP had two options for sealing the oil well and records are beginning to show that financial incentives may have contributed to the selection of the riskier of the two options. BP was trying to save money. The oil rig was apparently scheduled to be moved to another location to drill another well and delays were costing BP over $500,000 per day.
Unfortunately, perceptions of putting profits ahead of safety are guaranteed to be a litigation lightning rod, particularly when Plan B fails, and that’s exactly how the litigators will portray the corporate bigwigs in this eco-drama. The bigger the oil slick, the bigger the damages.
Hundreds of lawsuits have been filed and more will follow. When all is said and done the cost to resolve these suits and restore the reputation of the parties involved will be much greater than the extra time and effort it would have taken to cap the well properly in the first place.
It just goes to show that “doing it right the first time” is as much about quality control as it is about legal risk management.