Guide to FHWA Funded Wrap-Up Projects
IX. Program Selection
- Project Information
Project Information is the information necessary to identify and evaluate project risks and provide the information used by insurance carriers to underwrite the wrap-up program coverages
The information is used by the broker as a tool to assess the project exposures and design the wrap-up coverages to address these risks. The information is also used to develop the underwriting submission.
Wrap-up is developed by using a form of RFP to approach pre-qualified insurance companies. The solicitation and ensuing competition will encompass not only the program coverage and cost but also the carrier services necessary to ensure the success of the program(s).
Each carrier should respond to pre-defined coverage requirements, specifically identified loss control services, claims services, data management services and administrative responsibilities.
The selected wrap-up broker works with the owner to determine their objectives and requirements. The broker then develops the coverage and service requirements as part of a comprehensive underwriting submission.
It is critical that the broker have the experience to design the appropriate coverages and services, and present the project and its exposures to the (insurance) markets in a manner that encourages the underwriter to achieve the most competitive terms and conditions available.
- Preparing A Comprehensive Underwriting Submission
Once the broker has been selected, the owner and broker will work together to prepare a document to be provided to potential insurers. This document is the underwriting submission, which must accurately explain the project, identify the desired coverages and services and, provide positive differentiation that may favorably influence the underwriter's assessment of the project.
- Project Information
This is descriptive information, site plans, surveys and assessments and other information that helps to educate the underwriter. For example, the exposures presented by the restoration of the sea wall are (relative to constructing a bridge) unusual and present additional hazards that can negatively impact price, or even insurers' willingness to quote. Details should go beyond merely identifying the work, by providing information (as available) regarding the methodology and the safety standards that will be employed to minimize risk.
- Exposure Data
This data typically includes estimated payrolls, by job classification, and work schedules. This also may include information on adjacent properties and how the potential property damage exposures will be controlled. It should also identify any exposure from the public (such as pedestrian and vehicle traffic) and again, describe the safety and control methods to be employed.
Following is a list of the types of information required prior to implementing a wrap-up. The type of project (road, rail, bridge, airport) will determine the exact information required and at what point it will be required by underwriters, brokers and other parties to the wrap-up.
- Project Information
- Project description
- Subcontracts by trade, if applicable, and levels at which subs can be hired without bid or pre-qualification by General Contractor/Construction Manager
- Sample contract including insurance requirements and indemnification provisions
- Bonding requirements, if applicable
- Work within 50 feet of existing rail tracks (owner and other's)
- On-site labor cost breakdown by year for the term of the project
- Workers' Compensation remuneration by class code
- Workers' Compensation remuneration by trade
- Work-hour estimate by trade
- Unburdened contractors' labor costs (i.e., straight-time) by trade
- Total unburdened labor cost
- Non-US payroll
- Estimated total cost of project
- Estimated hard construction cost by major item, broken down by material and installation components
- Construction schedule (start and completion dates)
- Work-flow chart
- Description of any unusual exposures (i.e., USL&H, tunnels, extensive excavation, blasting)
- Description of the project and construction processes
- Description of the professional team (e.g., architect, structural engineer, mechanical engineer)
- Survey reports (e.g., geotechnical report, environmental impact statement, test boring results)
- Funding arrangements for the wrap-up
- If this is an extension of the existing system, will operations of existing facility/ies continue during the construction period?
- Distance from nearest river, lake, sea, ocean, reservoir
- Construction Manager and/or Project Manager
- Samples of contracts to be used (should include insurance an safety requirements)
- Owner, Construction Manager, Project Manager and Prime Contractor's Workers' Compensation experience modification for the prior four years
- Copy of Owner's Safety Program - note whether there will be a full-time site safety coordinator under contract to the Construction Manager and/or Project Manager
- Formal name and general description of the Project
- Selection of drawings, photographs along the alignment and any other documentation that might assist insurer's appreciation of the project.
- Site location including a map showing the full alignment. The map should show the proximity of third-party property surrounding the alignment.
- Complete schedule of locations
- Environmental Impact Statement
- Soil Report
- Indications of Prior Use of Project Site
- Contact person for physical site survey
- The total cost of supply and construction with a breakdown into the key elements, for example,
- Signaling and communications
- Fare collection
- Depot and Workshops
- A bar chart showing all activities from start of construction on-site to completion of testing and commissioning
- Details of the total length of any trackway and split, including
- Description of all structures either below or above ground, e.g., elevated structures:
- Number of spans
- Average height of spans
- Length of spans
- Details of all road or river crossings. If the alignment will cross any significant underground or over-ground services, describe. Does the contract involve any diverting of such services?
- Details of ground conditions, ground water level and meteorological information
- For construction work on or about areas with heavy traffic, details of safety measures, e.g., night work, traffic diversions
- Number of stations (depots and workshops) and details of the station structures
- Description of the depot/workshop structure(s) and the maximum value of property that will be located at the depot/workshop at any given time, e.g., railcars/buses to be located at depots/workshops at night
- Security and fire fighting measures that will be in place at the depot/workshops
- When and in what form will railcars/buses arrive at site
- Indicate whether rolling stock items will be fully assembled prior to arrival at the sire or will they be partially assembled at the site
- Describe all on-site railcar/bus testing and commissioning activities and the duration (this may be shown in the bar chart)
- Excess Liability
- Brief description of the project.
- Type of construction/design, is it tried and tested or innovative.
- The estimated construction values, preferably split between hard costs and soft costs.
- Who is the prime contractor?
- How many subcontractors will be used, how many subcontractor employees on site.
- Estimated period of construction.
- Safety procedures employed on-site and with regard to third parties.
Depending on the above underwriters may have some further questions and require some additional information.
- Professional Liability
Information required is very similar to the above as regards the project, with the addition of:
- Details of the prime architect/engineer
- Number of subcontractors involved
- Details of fees
With the above non-U.S. insurers should be able to obtain negotiable terms although underwriters may have additional questions and require an application to be completed and sight visits. Some markets also will require an independent legal/engineering review be completed at their expense (subject to receiving an order to bind coverage) and approval of the final contractual agreements.
As well as a description of the project underwriters will need the following:
- Details of the project values and probable maximum loss
- Details of the location as respects natural perils, i.e., earthquake, windstorm, flood and fire
- Force Majeure
To develop premiums, underwriters typically need the following information:
- Brief description of the project, values, type of construction and similar information
- Duration of project, including any anticipated period for delays
- Description of how the project is financed and how the debt is to be serviced on completion of project (revenue-to-debt projection)
- Estimated cost to service the debt (weekly/daily) if project is delayed and to whom would the insured be financially obligated (e.g., surety, bank)
- Amount of the deductible the insured would be willing to absorb (e.g., number of days multiplied by the daily debt service)
To finalize the placement, an application will need to be completed as well as an independent legal/engineering review of the contract at underwriters' expense should they receive an order to bind coverage.
- Liquidated Damages
Information needed to obtain premium indications would be similar to what is needed for force majeure although from the prime contractor's perspective. As with force majeure, to finalize the placement an application must be completed and an independent legal/engineering review of the contract at the underwriters' expense, should they receive an order to bind coverage.
- Cost Overrun
This coverage protects the owner should costs increase on the project (not the debt servicing) due to unanticipated events, i.e. the design is amended.
- Estimated number of subcontractors. List proposed subcontractors (to the extent available)
- Specify whether work will be performed by union or non-union workers
- What work will be subcontracted
- Indicate any preferences for levels of deductible, design coverage, maintenance coverage and any exclusions
- Completed Operations requirements (e.g., three years after project goes into revenue production)
- Claim handling instructions and procedures
- Approved legal counsel, physician panels, outside experts and similar service professionals
- Schedule of on-going Builder's Risk policies
- Experience Modification Worksheet
- Complete List of Named Insureds
- Prior carrier information for past four years
- Claims Handling
- Copy of the present claim handling instructions
- Copy of present claims procedures (owner's internal instructions)
- List of approved legal counsel, physician panels, outside experts
- Data systems information, including type, capability
- Disaster planning program
- Consultant and/or contractor responsibilities
- Budget (exclude this item from RFPs for wrap-up insurers)
- Copies of current contract clauses related to contractor insurance, incentive formulas, safety requirements
- Companies/individual(s) responsible for safety
- Outline of site-specific safety programs
- Substance abuse program description, if applicable
- Safety and health program for the current wrap-up
- Overview of safety and health training, including orientation for contractors
- Key Parties
Merely providing information about the project does not give the underwriter a complete picture. The underwriting process also evaluates the key parties that will manage the project and influence site activities. The most effective submissions include information that identifies these parties, their responsibilities, and reporting relationships. Although it is likely that none of the trade contractors or subcontractors have been selected, information regarding selection criteria, including contract requirements regarding the trade contractor's selection of subcontractors should be included.
|Party||Type of Information|
|Owner||Organization Chart identifying project contacts|
Résumés for Project Director and Safety Personnel
Financial Information (private sector owners)
|Project Manager||Description of the Firm|
Resume of Key Personnel
Copy of Contract
|Construction Manager or General Contractor||Description of the Firm|
Résumés of Key Personnel
Copy of Contract
|Architect of Record||Description of Firm|
Responsibilities - During Construction
Copy of Contract
|Prime Contractors (if identified)||Description of the Firm|
Résumés of Key Personnel
Copy of Contract
Generally, the underwriting submission should include information that serves to elevate the project to a "superior risk" status. This could include information about the Workers' Compensation jurisdiction, the project safety program and the commitment to safety. Increasingly, site security and building or work methodology (experimental or new technologies) are viewed as important considerations. In addition to the project specific data, a description of the key parties, their qualifications and responsibilities are important components of the project information used in the underwriting process. All of these factors influence the underwriter's assessment of the project, and ultimately the cost.
Office of Program Administration