Cost per life saved

To be fair, bureaucracies exhibit some rationality. The probability of exposure control is reduced as the cost per life saved rises. But the costs of many exposure limitations are much greater than the implicit market price for health risks as inferred from wage data in dangerous occupations. Because the costs of these extreme regulations are not paid by those who value exposure reduction the most, existing pollution controls are almost certainly inefficient. 

The method adopted in many industries is to use a Value of Preventing a Fatality (VPF). The VPF is the amount that an organisation will spend to reduce risk by a single fatality, and is used in cost benefit analysis (CBA) to assess reasonable practicability. The costs and benefits of a potential risk control are evaluated, and if the cost per life saved is less than or roughly equal to the VPF, the risk control is regarded as reasonably practicable and must therefore be implemented. The quantitative approach was formalised by the Health and Safety Executive (HSE) in its 1988 paper (updated in 1992) The Tolerability of Risk from Nuclear Power Stations and its 1989 paper Quantified Risk Assessment its Input to Decision Making Whilst the 1988 paper was developed for the nuclear industry, its principles have been applied widely. 

It is at this point that the concept of cost per life saved (CPL) arises. Industries and organizations are reluctant to state-specific levels of CPL which they would regard as being disproportionate to a reduction in risk. However, criteria in the range 1,000,000 to 15,000,000 are not infrequently quoted. 

A 1,000,000 cost per life saved target is used in a particular industry. 

The predicted risk of 8 x 10 pa leads to a gross disproportionality factor of 9.3 as shown in Figure 2.5 which, in practice, could be obtained using a spreadsheet for carrying out the log scale calculation mentioned above. The cost per life saved criteria thus becomes 9.3 x 1,000,000 = 9,300,000. 

The cost per life saved in this example is given by the cost of the proposal divided by the number of lives saved over the plant life, as follows ... 

The cost per life saved criterion (Section 2.2), typically 2,000,000, therefore becomes 10.7 million. ALARP is tested as follows ... 

Cost per life saved and ALARP are also addressed. 

The cost per life saved over a 40-year life cycle of the equipment (without cost discounting) is calculated, assuming two fatalities, as explained in Appendix 5. 

The demonstration of ALARP is supported by calculating the Cost per Life Saved of the proposal. The process is described in Chapter 2. Successive improvements are considered in this fashion until the cost becomes disproportionate. The target of 3 x 10 pa corresponded to a maximum tolerable risk target of 10 " pa. The resulting 2 x 10 " pa corresponds to a risk of 6.6 X 10 pa. This individual risk is not as small as the Broadly Acceptable level and ALARP should be considered. 

If a cost per life saved criteria of 4,000,000 is used then the expenditure on any proposal whieh might reduce the risk to 10 pa (based on 10 pa but with 10 similar hazards) ean be ealeulated (based on a 30-year plant life) as ... 

Assuming flie cost of a floatation system is 17,000 and assuming a 10-year equipment life then the cost per life saved arising from the risk reduction is ... 

Thus, assuming a cost per life saved criterion of 4,000,000, any proposal which might reduce the risk to the Broadly Acceptable limit of 10 pa might be tested as follows. 

For the expense to just meet the cost per life saved criterion then ... 

The Gross Disproposition Factor, GDF, (see below) for this example is 8.6 Thus, on this basis, if the cost per life saved criterion were 1,000,000 then, with GDF taken into account, it becomes 8,600,000. The proposed further improvement is Justified. 

General fencing of the railroad in urban areas would be justified if the value of an individual life saved is greater than 300 million annual cost divided by the 105 lives saved. The resulting cost per life saved is approximately 3 million. This number is in the range of figures cited in the literature, and used by the DOT as a... 

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