NOV. 01, 2020
Excavating and grading contractors are in the business of preparing land for construction. Their primary work often involves grading and digging trenches and foundations. Some excavating contractors may also perform related tasks, including installing drainage pipes in trenches or working with concrete. Excavators and graders typically use heavy equipment to move earth and materials. Such equipment includes bulldozers, front-end loaders, excavators, skid steers, backhoes and graders.
Revenue for excavating contractors typically comes from building construction. In fact, 75% of their revenue is tied to the construction of residential and nonresidential buildings, with the other 25% coming from nonbuilding-related construction.1 In terms of nonbuilding-related construction, excavating contractors may assist on road projects, but road construction companies often handle that work themselves.
Excavating and grading contractors are covered under the following codes:
Industry outlook and trends
According to IBIS World, as of March 2020 there were:1
- 43,572 excavation businesses
- 313,067 jobs
Additionally, the industry reached $69 billion in revenue and experienced 2.7% annual growth between 2015 and 2020. Excavation work is tied closely to new building construction and infrastructure spending. While continued industry growth is anticipated, the rate is expected to slow over the next five years. The industry will probably experience significant disruption due to the COVID-19 pandemic and the economic downturn it has caused.
Excavating companies vary in size and employ several different types of workers, including entry-level laborers and heavy-equipment operators. Skilled equipment operators are particularly critical to an excavating contractor’s operations, as equipment must be used in a safe manner while still meeting project deadlines. The U.S. Bureau of Labor Statistics estimates the job outlook for equipment operators will increase 10% over 10 years.2
As with many other trades in the construction industry, finding qualified operators can be challenging. The average annual salary for a construction equipment operator is $48,160 compared with $39,810 for all occupations in the U.S. economy.2
In terms of honing skills, training for new equipment operators is often done on the job. However, technical school programs and apprenticeship programs are available. In some cases, technology such as virtual reality simulators are being used to train employees.3 This is a low-risk way to train a new operator, particularly given the fact that heavy equipment can cause serious damage if not used properly.
While excavating and grading may not seem technology-forward at first glance, innovations are impacting the industry and allowing contractors to work more safely, more quickly and more accurately. Examples of such technology include:
- Drones — Drones are hardly a new technology, but they are becoming more common in excavation works. Drones not only allow businesses to take aerial photographs quickly, but they can also improve land surveillance using GPS data.4
- Machine guidance and autonomous equipment5 — Machine guidance technology utilizes sensors on a machine to assist operators or even perform some of the work. Using these tools, an excavator could be set to dig to the correct height with the push of a button. This technology can greatly increase the accuracy and speed of both new and experienced operators. In time, this technology could get to a point where an operator may not even be needed. More than 100,000 pieces of equipment are estimated to already have some level of machine control.2
- Products as a service and the Internet of Things (IoT)6 — Heavy-equipment manufacturers continue to use the IoT to deliver smarter maintenance, and more machines are coming equipped with sensors. These sensors can make preventive maintenance more effective and even reduce equipment downtime. This is particularly important as every piece of heavy equipment represents a sizable investment.
- Wearables — While not a new technology, wearables are gaining popularity in excavation work. One such example is RFID tags, which can alert equipment operators if a worker is near a moving piece of equipment.7
Insights on major lines of coverage
Property exposures will depend on the size of the operation. Smaller operations may work out of the owner’s home or a small office space with a separate yard for equipment. Larger operations will probably have an office and a dedicated shop for repairing equipment and trucks. The shop may also be used to house equipment. Some excavating contractors will also maintain mobile trailers that can be set up at job sites. If work is done on equipment in a shop, often welding and torching are performed, which require additional safety considerations.
- Precautions: A hot work permit program should be in place for any welding or cutting operations that may be part of equipment repair. Oils and fuels should be stored properly in and around the shop away from any ignition sources.
Theft of equipment can be a serious concern, particularly given the equipment’s value. Smaller equipment, such as skid steers, may be easy for thieves to steal. Excavating contractors will also have several hand and power tools on-site that could be potential targets for criminals.
- Precautions: Security measures should be in place, and buildings should be locked. Equipment with cabs should also be locked. Keys must be removed from all equipment. GPS tracking devices can be used to help businesses recover equipment if it is stolen.
Trench work is a serious exposure, as a trench collapse can result in fatalities and severe injuries. Working around large earthmoving equipment is also a serious concern, as employees can get run over, struck by or pinned by such machines. Additional hazards include falling material, noise exposures, and strains and sprains.
- Precautions: A written safety and health program that accounts for employee training should be in place. Training should emphasize trenching safety programs, which involve using the proper safety equipment (e.g., trench boxes), identifying competent persons and educating employees in sufficient depth. Additional training for workers should focus on hazard communication, chemical safety, personal protective equipment (PPE) and equipment operation. A program should be in place to ensure that only qualified and trained employees operate equipment. Employers must also ensure that the appropriate safety equipment is in place to protect employees on the ground.
Excavating and grading contractors often use pickup trucks as well as tractor-trailer combos, both of which may constitute commercial motor vehicles. For large equipment, many contractors will use a semitruck with a lowboy trailer to load and move equipment. Smaller contractors may hire a third party to move equipment. Dump trucks may also be used depending on the scope of the excavation operations. This wide variety of vehicles opens businesses up to several potential risks, including Federal Motor Carrier Safety Administration (FMCSA) compliance, load securement concerns and potential liability issues stemming from flying rocks off of dump trucks.
- Precautions: Drivers should be vetted thoroughly using annual motor vehicle record (MVR) checks. All drivers should also complete defensive driving training. Commercial motor vehicle operators will need to be trained on load securement, and loose material should be tarped to prevent it from striking other vehicles. Telematics can be used to track and address unsafe driver behaviors such as speeding and hard braking
Significant liability exposures are associated with excavation work. One very common claim involves hitting utility lines, such as gas, water and cable lines, during excavation operations. Some of these lines can also cause serious safety concerns should they be struck by equipment. Other common claims occur when businesses dig near existing structures, which in turn makes them unstable and may cause them to collapse. Working near public roadways can also open businesses up to claims, particularly if their failure to control traffic results in an accident.
- Precautions: Procedures should be in place to locate underground utilities. This could involve contacting utility companies, calling digging hotlines and using equipment to find potential digging hazards. There must also be procedures in place when digging around structures. Additionally, traffic control must be considered when a business’s work impacts nearby roadways.
Recommended lines of coverage: Property, workers’ compensation, commercial auto, inland marine, business income, general liability (products — complete operations, premises and operations) and umbrella.