1 Transportation Research Board Disadvantaged Business Enterprises (DBE) Committee Innovative...

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Transportation Research BoardDisadvantaged Business Enterprises (DBE) CommitteeInnovative Funding for DBE Support Services;

Brad Anderson & Jerry L. Malone

Global Risk Managers, Inc.;

Americans Rebuilding America™ An Economic Stimulus Program

• Owner Controlled Insurance (OCIP)

• Workforce Development (WPA3 ™)

Proprietary Work Product ofGlobal Risk Managers, Inc.

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INTRODUCTION With strong leadership and encouraging dynamic approaches to risk management and workforce training, such as the AASHTO OCIP, BOWD and WPA3, the American economy will recover and remain strong both now and in the future.

Increase jobsite safety Increase insurance and warranty coverage Reduce construction claims delays Increase DBE contractor participation Reduce construction insurance cost

The resulting savings can fund economic development initiatives that promise to improve the quality of life for all of its citizens in the following ways:

Create high paying jobs Reduce welfare dependency and reduce crime rates Improved quality of life for citizens of America

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Agenda

Introduction

AASHTO OCIP

Review

•OCIP and WPA3 program benefits

•Benefits to the economy

•Overview of programs

•Workforce development

Conclusion

Discussion & Next Steps


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VISION

More jobs , better employment opportunities and safer work places all across America.

MISSION

To leverage leading risk management strategies to create better workplace outcomes, savings, economic and workforce development opportunities for federal, state, municipal and other project owners pursuing large scale infrastructure development projects.

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THE OPPORTUNITY

By taking a proactive stance, our government leaders can take advantage of the resources they are already deploying to allow more of our citizens to become gainfully employed.

This opportunity is increased dramatically by the potential multiplier effect of the proposed stimulus package.

The recovery of the American economy can be accelerated by strong leadership encouraging a dynamic approach to risk management and workforce development, education and training , such as the AASHTO OCIP, BOWD and WPA3.

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THE OPPORTUNITY (cont…)• Global serves as exclusive OCIP Consultant to American

Association of State Highway & Transportation Officials (AASHTO), has a relationship with the National Conference of Black Mayors and the National Association of Minority Contractors (NAMC).

• Global, founded in 1991, provides risk management and workforce development services to public and private entities. Global is a minority owned and managed company. Global has been engaged by AASHTO to design OCIPs to fund Business Opportunity and Workforce Development (BOWD) services for federal, state and local governments.


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Overview of Program

AASHTO OCIP

ContractorAssistance

SuretyBonding

Substantial Savings Consistent Coverage &

Limits Coordinated Claims

Handling Increased Small &

Minority Participation Workforce Development

Professional services toSmall and MBE/FBE contractors

Enable contractors tosecure bonding credit

"Contractor friendly" bonding services

Identify qualified contractors

Increase surety bonding capacity


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What is a Wrap-Up (OCIP)?

An insurance program for any large transportation or infrastructure construction program in which:

The owner procures certain insurance policies on a long term basis (up to 10 years) protecting both the owner and various contractors involved rather than relying on the individual insurance policies of the various contractors purchased on an annual basis which are subject to changes in the marketplace.

Typical OCIP insurance policies are:o Workers compensationo General liability with extended completed operation coverageo Umbrella liabilityo Builders risk insuranceo Can include professional and environmental liability


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National Economic & Social Benefits

Transportation is at the leading edge of the Nation’s economic recovery and can serve as a model for investing infrastructure dollars to stimulate state and local economies by creating high paying jobs in many communities . By undertaking innovative economic development initiatives in the transportation sector, we have the opportunity to improve the quality of life for all of our citizens. To do so, government leaders must take a proactive stance by taking advantage of emerging resources that could allow more of our citizens to become gainfully employed. Encouraging dynamic approaches to risk management and workforce training such as the AASHTO OCIP, BOWD and WPA3 would help create high paying jobs, reduce welfare dependency and lower crime rates, leading to an overall improvement in the quality of life for the citizens of America.


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$0$20,718,244

$31,077,366

$36,256,927

OCIP (Deductible)

Traditional

ContractorsInsurance Cost

OCIPInsurance cost based on Claims experience

$1,000,000

$21,000,000

$41,000,000

$61,000,000

$81,000,000

$101,000,000

$121,000,000

OCIP vs. Traditional Approach

Sample OCIP Savings Analysis


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Contractor OCIP Safety Program - Benefits

Increases safety awareness Enhances peer support for a safe working environment Provides a reward for safe working behavior of contractor employees Impacts the safety culture of all contractors Can be combined with existing safety programs to increase rewards Specific loss reduction goal focus


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America Benefits from AASHTO OCIP

• The AASHTO-Global OCIP can develop a savings of up to $30 million on a $1 billion budget (up to 3% of construction values) which may fund the BOWD and Workforce to Eradicate Poverty in America (WPA3), which will develop a workforce to help eradicate poverty in America.

The program will target four groups: • the chronically unemployed, • the newly unemployed, • the underemployed• the currently employed looking to improve their skills.


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Global OCIP Overview

Global works with private and public organizations to implement Owner Controlled Insurance Programs (OCIP) on capital improvement construction projects. As a result, savings from the OCIP can be used to fund Workforce Development (WPA3) programs such as:

• apprenticeships

• internships,

• scholarships

• training programs

and other economic stimulus, high paying jobs, training and education initiatives at institutions like the Gates Foundation, National Urban League, UNCF, community and technical colleges, and labor organizations.


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America Benefits from WPA3The Global OCIP can develop savings which should be authorized to fund

the WPA3, which will develop integrated social services to eradicate poverty in America such as:

• Mentor/Protégé, • Transfer of technology,• At risk youth,• Summer interns,• Daycare, • Access to mental health services, • Clothing, • Housing and transportation assistance


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Channel part of the savings from OCIPs to fund:•apprenticeships•internships•scholarships•training•workforce development programs•contractor incentives (contractor safety bonus, share in OCIP savings)•private incentives (tax credits & empowerment zones)

Workforce Development Programs


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Workforce Development TargetsThe program will target four groups:

- the chronically unemployed,

- the newly unemployed,

- the under-employed and

- the currently employed looking to improve their skills.


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Overview of Global Programs

OCIP


SuretyBonding




Minority Participation Workforce to Eradicate

Poverty in America







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Surety Bonding Assistance Program Benefits

Provides the most innovative, comprehensive, efficient and 'contractor friendly' level of bonding services.

Program is consistent with the need to increase Small and DBE participation of prime contractors

Enables the contractor to increase surety bonding capacity

Identifies contractors who will qualify through coordinated surety support and outreach programs

Bonds are underwritten through an exclusive ‘A’ rated surety program using non-traditional, negotiated underwriting guidelines


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Overview of Program

OCIP


SuretyBonding




Minority Participation Workforce to Eradicate

Poverty in America







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Contractor Assistance Program Benefits

Provide professional services to Small and DBE contractors in the areas of:

financial estimating scheduling business management services legal computer training apprenticeship programs mentoring programs


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America Benefits from AASHTO OCIP and WPA3

• Substantial savings of up to $30 million on a $1 billion budget (up to 3% of construction values) over contractor- provided insurance program

• Centralized/financially stable insurance carrier for all contractors; consistent coverage and limits

• Coordinates coverage for cross suits and eliminates insurance carrier subrogation

• Potential for increased participation of small and minority-owned contracting firms

• Standardize insurance for all contractors• Minimize claims and litigation cost• Provide a funding source for additional construction workforce

development, training and new jobs


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NEXT STEPS

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Proposed Course of Action

Upon the TRB’s approval, Global will update the current National Cooperative Highway

Research Program (NCHRP) Synthesis 308: Owner -Controlled Insurance Programs

(OCIPs) with recommendations for the use of OCIP savings to fund Supportive

Services for Transportation construction projects

Develop guidelines for the use of OCIP savings to fund Supportive Services for

Transportation

Review State and federal regulations

Develop schedule of specific projects to be included

Meet w/ large and small contractors and associations

Prepare OCIP to accommodate suggested changes by US DOT or the states


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AASHTO Global OCIP benefits Experienced OCIP administration and implementation Reduction of owner’s administrative burden and responsibilities Effective federal-aid eligible OCIP program design Unbiased selection of appropriate insurer and other service providers Comprehensive project safety and cost management Builds a team player philosophy with owner and contractors to design and

implement OCIP Can lead to the resolution of ethical and moral issues such as bid rigging &

conflict of interest Worst case OCIP cost don’t exceed contractors traditional insurance


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Summary &

Conclusion

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Team Strengths

GlobalMarketingStrength

DBEResources

ProfessionalQualifications

AdministrativeServices

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Appendix

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OCIP Benefits & Burdens to States

Benefit Burden Source

Savings - (2% of budget) will allow for additional construction projects to be included

Contractors reduced profits from insurance rebates

GAO Report

Increased Safety Requires Education & Cooperation of the Owner and Contractors

TRB Report

Federal-Aid ReimbursementEligibility

Guidance and Limits on Federal Reimbursement of Insurance Costs

FHWA Memorandum, dated January 8, 2002


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Owner Controlled Insurance Program

The FHWA memorandum dated January 7, 2002 says:

“ Owner Controlled Insurance Programs (OCIPs) are an effective way to improve the safety of construction operations and reduce the cost of insurance on large projects. Additionally, federal-aid funds can be used to participate in OCIPs on Federal-aid projects.”


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Excerpt from GAO Report on OCIPs(Demonstrated Savings)

Dollars in millions

Project name Total project Insurance and location cost Traditional Wrap-up Savings

Blue Water Bridge, Michigan $97.2 $10 $7.1 $2.9Boston Central Artery Tunnel,

Massachusetts $10,800 $1,030 $765 $265I-15, Salt Lake City, Utah $1,600 $52.2 $22.3 $29.9CTA Green Rehabilitation

Chicago, Illinois $408.7 $32.5 $21 $11.5Hudson-Bergen Light Rail (initial

segment) $992 $20 $11 $9Tri-Met, Westside Light Rail,

Portland, Oregon $952 $27.1 $17.2 $9.9

Insurance Costs


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Excerpts from TRB Report

• “DOTs are using OCIPs both for individual transportation projects and for groups of projects. “

• “Because OCIPs enhance risk management, more then 10 state DOTs have used some form of controlled insurance on one or more of their projects. “

• “The idea behind these programs is for the sponsor to purchase workers’ compensation and liability insurance for all parties working on a project.”

• “The OCIP provides a single point of contact for all liability issues, prevents insurance coverage gaps or redundancies, and should reduce underwriting and claims administration expenses.”

• “The results of such a program are a safer jobsite and lower construction costs.”


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Excerpts from GAO Report

• Results in Brief, Page 1: “Owners of transportation projects, such as transit agencies and state departments of transportation, experience a number of advantages and disadvantages when they use wrap-up insurance.

• “Major advantages include savings from buying insurance “in bulk,” eliminating duplication in coverage, handling claims more efficiently, reducing potential litigation, and enhancing workplace safety.”

• “According to insurance industry officials, wrap-up insurance can save project owners up to 50 percent on the cost of traditional insurance, or from 1 to 3 percent of a project’s construction cost, depending on its size.”


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Excerpts from FHWA Memo

• Paragraph 1: “Overall, the use of an OCIP can save money … through lower bulk insurance rates, improved safety management processes, and reduced disputes between contractors over who was responsible for a particular loss.”

• Paragraph 7: “Federal aid funds can be used to participate in OCIPs on Federal-aid projects. OMB Circular A-87 provides guidance and establishes limits on Federal reimbursement of insurance costs.”


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Key Consultants

• Clifford J. Schexnayder, Ph.D., P.E. Emeritus Eminent Scholar Del E. Webb School of Construction, Arizona State University

Prof. Schexnayder brings to this OCIP team practical experience having both an owner and construction industry perspective. He has a good understanding of how owners view risk from his OCIP research and authorship of the NCHRP Synthesis 308 for TRB and his experiences in the Corps of Engineers.

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Key Consultants…continued

• Algerine McCray was the former Deputy Director of California DOT (Caltrans) from 1999 to 2003.

Ms. McCray was the primary Caltrans Official responsible for Caltrans’ MBE and DBE programs and for all external and internal civil rights activities. In that capacity, she was responsible for developing, implementing, monitoring all civil rights issues, including contracting and contract compliance.

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Team qualifications include:

CPCUsProfessional Engineer (PE)Certified Safety Professional (CSP)Certified Public Accountant (CPA)PhD

Professional Qualifications

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America Benefits from AASHTO OCIP and WPA3

• Substantial savings of up to $30 million on a $1 billion budget (up to 3% of construction values) over contractor- provided insurance program

• Centralized/financially stable insurance carrier for all contractors; consistent coverage and limits

• Coordinates coverage for cross suits and eliminates insurance carrier subrogation

• Potential for increased participation of small and minority-owned contracting firms

• Standardize insurance for all contractors• Minimize claims and litigation cost• Provide a funding source for additional construction workforce

development, training and new jobs


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