City Auditor - City Recorder - Council Ordinance - 177107 ARM Tech for Risk Management consulting services proposal

This proposal presents ARM Tech’s response to the captioned Request for Proposals (RFP). It is based on the RFP, information provided in the pre-bid conference and our experience with many similar projects.

ARM Tech is an Aon company specializing in risk management consulting for public entities. ARM Tech has completed many similar projects in Oregon and elsewhere, as shown by our references.

We accept all terms and conditions contained in the RFP and model agreement for PTE services. The undersigned is authorized to negotiate and sign a contract with the City.

We appreciate the opportunity to present this proposal to the City of Portland. We are confident we can provide the clear, thorough analysis the City is seeking. We look forward to the possibility of working with you on this important project.

This section of the proposal describes the project team. Personnel have been selected to ensure the highest level of professional analysis for each project element, to obtain local representation and to maintain a compact work group.

Most of the work will be completed by ARM Tech personnel. Team members are drawn from other Aon companies, as indicated, to obtain the highest level of professional expertise.

1. Steven P. Kahn, CPCU, ARM, a Managing Director of ARM Tech, will manage all work for the City. He has over 20 years of consulting experience and spent two years as an underwriter.

Mr. Kahn holds an MBA with an emphasis in risk management and insurance and a bachelors degree from the University of Oregon. He is past President of the Orange Empire Chapter of the Society of CPCU, past President of the Risk Management Research Council and Editor of Practical Risk Management, (website: www.pracrisk.com).

Mr. Kahn is a frequent speaker at RIMS, PARMA, PRIMA and other governmental agency risk management meetings. He has lead consulting projects for City County Insurance Services, the Oregon Special Districts Insurance Association and for large entities such as the states of Arizona, Delaware, Illinois, Kansas, Kentucky, Maine, Michigan, Missouri, North Dakota, Ohio, Oklahoma and West Virginia.

Mr. Kahn has extensive experience managing large projects, writing reports, editing the work of others and presenting results to senior management and elected officials. This experience will contribute significantly to a successful project.

2. Ms. Jo Ann Wood, CPCU, AIC, RPLU, a Senior Consultant, directs ARM Tech’s claims consulting practice. She holds a bachelors degree from Arizona State University with an emphasis in business. Experience includes handling, supervising, managing and auditing claim operations in multiple jurisdictions (including Oregon) and for multiple coverage lines (including workers compensation and liability).

3. Mr. Mujtaba Datoo, ACAS, is a Consulting Actuary at ARM Tech. He has provided multi-line actuarial services since 1980, including analyzing all aspects of workers compensation ratemaking, cost allocation plan development, legislative pricing in statewide filings to determine rate adequacy, and presentation of findings for the National Council on Compensation Insurance (NCCI). He is an Associate of the Casualty Actuarial Society.

4. Mr. Brady Dunn, is a Casualty Risk Control Consultant for Aon Risk Services Technical Services Division and has over 10 years of casualty risk control experience. Prior to joining Aon Risk Services, Mr. Dunn was the Director of Safety Services for Safetylogic.com. Mr. Dunn’s duties included consulting fortune 1000 clients on risk management process improvement and e-risk control methods and implementation.

Mr. Dunn holds a Bachelors Degree in Environmental Safety and Health from Oregon State University.

5. Mr. Neil Harrison, ACII, AIRM, is Director of Risk Information Consulting Services at Aon Risk Consultants Inc. Mr. Harrison joined Aon in 1986 and has held senior management and consulting positions within the group since 1992. Mr. Harrison holds professional designations in risk management and insurance, and is a frequent speaker at conferences as well as a contributor to publications. Mr. Harrison has operated as the lead consultant on risk management and claims management technology projects for private and public sector clients around the world.

Support will be provided by word processing, graphic design and other staff, as needed. The individuals listed above will complete the vast majority of the work. A broad range of consultants are available to provide, peer review, backup additional technical input and support.

Table I-1 identifies the specific scope of services issue(s) each team member will address and provides the requested contact information.

Team Member and Address

Contact Numbers

Project Role (Scope of Work Items to Analyze)

Steven P. Kahn

1901 Main St., 4^th Floor

Irvine, CA 92614

Phone: 949-608-6501

Fax: 949-608-6530

E-mail: steven_kahn@ars.aon.com

A, E, G and overall project management

Mujtaba Datoo

1901 Main St., 4^th Floor

Irvine, CA 92614

Phone: 949-608-6514

Fax: 949-608-6530

E-mail: mujtaba_datoo@ars.aon.com

Jo Ann Wood

1901 Main St., 4^th Floor

Irvine, CA 92614

Phone: 949-608-6518

Fax: 949-608-6530

E-mail: jo_ann_wood@ars.aon.com

C, D and E (portion addressing providing claims services to third parties).

Mr. Brady Dunn

1211 SW 5th Ave. #600

Portland, Oregon, 97204

Phone: 503-306-3670

Fax: 503-295-0923

E-mail: brady_dunn@ars.aon.com

Mr. Neil Harrison

685 Third Avenue, 8^th Fl.

New York, NY 10017

Phone: 212-792-9008

Fax: 501-694-0157

E-mail: neil_harrison@aon.com

Scope items in Table I-1 follow the lettering on pages 5 through 8 of the City’s RFP.

Section A above describes qualifications. Each person’s skills will be utilized as follows:

1. A successful project, such as the Risk Management Program Review requested by the City, requires project team members with the necessary skills, a project manager to coordinate the work and a clear, concise written report. Mr. Kahn has successfully managed many projects with a similar or broader scope. He has significant experience managing the work of consultants in several disciplines and in ensuring the final report thoroughly addresses each issue to be analyzed.

2. The analysis and recommendations requested for workers compensation and liability claims requires project team members with claims administration and management skills. Ms. Wood has 23 years of experience and has provided similar consulting services for projects managed by Mr. Kahn.

3. The cost allocation program should be actuarially sound. Mr. Datoo’s many years of experience with rating plan design will contribute significantly to our evaluation of this issue.

4. Mr. Dunn’s background in risk management process improvement and loss prevention consulting will ensure the City receives sound consultation on claims reduction recommendations, contract acquisitions of loss control services, loss prevention organizational issues, the loss prevention program evaluation, and communication of OR OSHA requirements.

5. Any significant risk management consulting project requires a professional assessment of the use of technology, data and information. Mr. Harrison has the skills required in this area and, as a qualified risk management professional, will align technological and data based recommendations with the business and risk profile of the City.

A list of similar projects is in Section III-D, References. We encourage the City to contact personnel shown. We have kept the list compact to comply with RFP space requirements. Many additional references can be provided.

Mr. Kahn will serve as project manager and directly perform the portions of the project shown in Table I-1. He has performed a similar role for many major projects, including work for the States of Nevada, Missouri and Maine. Each of these projects, and many others, required coordinating a multi-disciplined project team. Project management techniques successfully used include:

1. Ensuring each project team member thoroughly understands the issues they are to address.

3. Careful coordination with the client, including individuals to be interviewed, interview dates, data needs and issues to be addressed, if any, which are not thoroughly described in the RFP.

4. Team conferences to monitor progress, identify problems and keep work on schedule.

5. Careful review of the report sections prepared by each team member so the client receives a thorough, seamless work product.

Each client has a preferred way of communicating and being involved in the project. We will learn the City’s preferences early and accommodate the City’s project management style.

Project team members who do not have an office in Portland are Mr. Kahn, Mr. Datoo, Ms. Wood and Mr. Harrison. Their office locations are shown in Table I-1. Where appropriate team members will work from Aon office facilities in Portland to ensure ease of access and operational efficiency for the City.

Background on the lead information technology professional assigned to this project is in Section A above. As previously referenced, our services in this key field will be directed by Mr. Harrison. Mr. Harrison will be supported by additional ARM Tech and Aon technology professionals as needed, and will deploy their skill sets in response to specific issues that emerge. Such skill sets may include data consolidation, data collection, report design, report distribution, data integrity and application development.

The specific role of each project team member is set forth in Section A above. The Scope of Work items each project team member will address are in Table I-1.

Many of the cities, counties, states and school districts with which we work are closely reviewing their risk management program or major program elements due to:

2. Significant increases in insurance premiums, reductions in insurance coverage and/or increases in deductibles and self-insured retentions.

3. Significant increases in losses, particularly workers compensation and some types of liability claims (often employment practices, discrimination and other claims that fall outside protection afforded by tort claims caps).

The RFP issued by the City indicates similar concerns. It appears the City must closely evaluate expenditures, has evaluated various risk management organization structures and is evaluating cost allocation plans to stimulate department efforts to reduce claims and achieve equity.

Section II of the RFP identifies each issue to be analyzed. These issues are listed below. We have expanded on some to provide the City a detailed understanding of the depth of our analysis and to include additional points we believe will lead to a more successful project.

We understand the City allocates losses, insurance premiums and administrative costs to departments. These costs arise out of what are generally referred to as automobile liability, general liability, workers compensation and property insurance programs. We understand three separate calculations are made to determine a charge to each department. We will carefully analyze:

a. Ease of understanding. The cost allocation plan and the data it relies upon must be easily understood by department heads, and the integrity of both the plan and the data must be absolute. If not, they will not understand the actions they must take to reduce costs.

b. Affect on budget stability. A cost allocation plan must be responsive to changes in a departments losses and operations, yet provide some year-to-year stability. We will review the techniques used and balance achieved in the current plan.

c. Fairness and objectivity. We will evaluate data used, quality, objectivity, fairness, frequency of plan changes and how results are presented to departments.

d. Responsiveness to loss experience. We will evaluate responsiveness to claims frequency and claims severity. As stated above, the plan must achieve a balance between responsiveness and stability.

e. Measurement of exposure and experience. Most cost allocation plans balance exposure to loss (e.g., number and type of vehicles for automobile liability) and actual loss experience. We will evaluate the exposure measures used, the relative weight given to exposure and experience, and whether the weight varies based on department size.

f. Actuarial soundness. We will carefully evaluate whether the cost allocation plan adheres to sound actuarial principles.

g. How allocated costs might compare to insurance premiums. We will obtain the actual cost allocated to three representative bureaus in each of be last three years, estimate the insurance premiums the bureau would have paid had insurance been purchased independently, compare the two, identify the risk financing and other services each provides, and explain the differences.

h. Other cost allocation programs. We will discuss with the City Budget Director methods used to allocate other costs (e.g., vehicle usage, information services, photocopying, etc.) and techniques that have proven successful at reducing costs.

i. Federally funded programs. We will evaluate whether the federally funded programs are charged premiums and whether this requires special consideration.

j. Timing of the cost allocation process. We will evaluate when departments must be advised of their premiums, data available at that time, and whether changes in timing can improve accuracy without missing important budget deadlines.

We understand that the City desires to have loss prevention programs reviewed to ensure that, with limited resources available, the greatest impact is being made on reducing losses. We understand most of the major bureaus have a person responsible for loss control efforts and that the only bureau that has a loss prevention group is the Bureau of Environmental Services. We will evaluate and make recommendations on:

a. Loss prevention organization structure. With limited resources and a wide variety of exposures, the City’s loss prevention organization must have broad expertise and communicate effectively with other bureaus about common loss prevention issues. We will review the current loss prevention organizational structure for balance and effectiveness in reducing losses.

b. Vendor contract negotiation and acquisition. We will evaluate the current contract acquisition process to ensure the vendor selection process is appropriate and to ensure the City’s buying power is maximized. We will also look at existing opportunities for shared services among different bureaus and that appropriate services are being purchased.

c. Loss prevention roles and responsibilities. We will evaluate the roles and responsibilities of the loss prevention professionals at each bureau. Areas of focus will include measurable results documentation, whether staffing is adequate to handle tasks assigned, policy enforcement procedures, professional development and shared services.

d. Loss prevention program evaluation. We will evaluate the City’s loss prevention program to ensure adherence to regulatory standards as well as industry best practices. We will concentrate on safety committee evaluation, training program effectiveness, self inspection effectiveness, accident investigation procedures, written policies and procedures compliance, and other identified program areas.

e. Communication of OR OSHA requirements. We will evaluate the existing communication procedures for getting OR OSHA requirements to the bureaus. Our evaluation will include looking into the possible use of e-media platforms (Internet or Intranet) to aid in the communication process. Additionally, we will evaluate the bureaus process for implementing necessary recommendations that come from the City.

Our liability claims analysis will address each issue in the RFP. To complete our analysis, we will:

b. Review job descriptions, accountabilities and workflow to ensure efficiency and staffing adequacy.

c. Interview key personnel regarding current practices and issues to assess training, experience and application.

d. Review prior claim audits and claims data to assess trends and choose claims for audit.

e. Audit a sample of 60 claims onsite, including open and closed files to assess adherence to industry best practices.

f. Design and mail a survey to claimants from a strategic selection of closed claims and compile claimant survey responses.

Our workers compensation claims analysis will address each issue in the RFP. Our analysis will focus on:

b. Any problems coordinating workers compensation and employee benefit programs and the cost of those problems.

We will also audit a sample of 60 files and survey claimants, as stated in items 3e and 3f above.

This portion of the analysis will focus most heavily on the organization, structure, placement and role of risk management. Issues we will analyze are:

a. Risk Managers optimal status and authority level. We will evaluate the City’s risk management needs, changes in the risk management program that have occurred over the last five years and changes in City operations planned for the next three to five years. We will:

• Recommend an organizational placement and authority level we believe will have the greatest effect on reducing costs and protecting City assets.

• Define the role and responsibility of the Risk Manager within the Risk Management Bureau and Citywide.

• Described the level of involvement the Risk Manager should have in Citywide and Bureau activities.

A key component of our analysis will be how the City can reduce and stabilize its Cost of Risk (COR). COR is composed of three elements: retained losses, insurance premiums and risk management administrative expenses. These elements must be evaluated individually and in combination to obtain the lowest cost.

We will consider the need to reduce claim costs. We will also consider the need to obtain cooperation with other efforts that will help the City reduce costs through such efforts as use of insurance and indemnity clauses in contracts, compliance with return-to-work programs, providing information needed to obtain insurance at the least cost and other activities that will reduce and stabilize the City’s COR.

b. Risk management organizational role. We will review the City Code and recommend changes, if needed, to better define and clarify the role we recommend for the Risk Manager.

c. Purchased insurance. We will evaluate the most effective placement of the insurance purchasing function. We will consider such issues as compliance with procurement policy, knowledge of insurance products and markets, availability of data to make the insurance purchase, and ability to purchased insurance in the context of the City’s overall risk financing needs.

d. Organizational structure. We will present a model risk management structure designed to provide a high level of risk management service and the lowest long-term Cost of Risk. The model will identify the recommended Risk Management Bureau structure, how it fits into the City’s overall organizational structure, suggested composition of the Risk Management Bureau, and interaction and communication Bureau personnel should have with other departments.

e. Executive responsibilities. We will recommend roles and activities for the Mayor, Commissioners and Bureau Directors in risk management activities. We will also identify the types of reports senior officials should receive to allow them to measure progress in reducing the City’s COR and in achieving other risk management goals.

We understand the City currently operates an owner controlled insurance program (OCIP). We will evaluate whether the OCIP should be extended to other City projects. We will consider results achieved by the existing OCIP and projects planned for the next three to five years. We will discuss whether we believe expanding the OCIP is wise and how the City should approach such an expansion, if recommended.

The City is considering providing claims administration services to other public agencies. We will assess the City’s ability to meet prospective client’s expectations, such as:

We will review current operating costs and determine the effect on variable costs. This information will assist in evaluating claims service and risk information fees the City would require.

We will review the City Code and statutory requirements identified by the City Attorney to make recommendations regarding feasibility and contractual content.

We recognize the current use of a custom-developed SQL application and the ongoing plan to transition to a web enabled environment. We are positioned to provide a full range of risk technology consulting services to the City, both in relation to and in extension of this current scenario. Our evaluation of the City’s risk technology capabilities will include a review of:

We will apply our BTOPP methodology, a formal and participatory process through which we identify and verify information system requirements in terms of:

• The return on any investment in risk information systems and services we recommend.

It is important for the City to note that our activities in the risk information management consulting field extend beyond the traditional ‘claims system approach’ into all uses of data, information and technology within the risk management process. Our goal is to ensure the City has a strategy to meet its current and future risk information needs, including providing third-party claims administration services, should the City elect to do so.

The preceding sections describe the specific issues we will analyze. In each area, we will prioritize our recommendations and provide a five-year action plan for implementing recommended activities and monitoring progress.

We do not know the City’s current COR or how costs have changed over the last three years. However, we are confident a well-organized, technically sound program will reduce and stabilize costs and help the City avoid major unplanned costs. It is likely the City will obtain these benefits from this project.

We do not foresee any difficulties completing the project described in the RFP and as proposed. However, the City has requested the project be completed during a time when personnel in many cities are not fully engaged in work. To meet the project schedule we will review the proposed timeline with the City within 24 hours of being engaged to confirm dates, City contacts and the project schedule.

ARM Tech and Aon have a remarkable range of personnel available to provide backup for project team members and to address all technical issues. Personnel are available not only in Portland, but also in Seattle, California and throughout the country. This includes registered engineers, actuaries, loss control consultants, claim consultants, captive insurance company specialists, specialists in use of bonds to fund catastrophe risks and specialists in many other disciplines.

Mr. Kahn will serve as project manager. He will ensure a successful project through such activities as ensuring each team member understands their role, coordinating interview schedules, monitoring data needs, obtaining progress reports from team members, carefully structuring the final report, and thoroughly editing the entire report.

Mr. Kahn will present the final report to the City, assisted by other project team members. He will also maintain communication with the City during the project.

1. Early discussions with the City to understand City expectations and preferred presentation styles.

2. Early identification of any problem areas, such as difficulty in scheduling interviews or difficulty in obtaining required data.

4. Ensuring that each project team member thoroughly addresses each issue assigned to them.

The City is wise to carefully consider how its consultants will manage the project and ensure a quality report. There are many experienced insurance professionals who have a limited consulting background. The keys to a successful consulting project are quickly identifying the most important issues/problems, obtaining data efficiently and preparing a clear, concise report. There are a limited number of individuals who actually have this consulting experience.

Client work papers and reports are confidential. However, King County was pleased with our report and posted it on their website. We would like the City to view the report at: www.metrokc.gov/auditor/1999/RiskManagementRft.pdf.

The RFP indicates work is to commence December 1 and be completed by January 31. A suggested schedule to complete work within these dates is in Table III-1.

Activity	Target Completion Date
Initial telephone discussion	December 1
Data provided by City	December 5
Meetings with City personnel	December 11
Project team conference	December 14
Follow-up discussions with City personnel	Throughout
Project team conference	January 7
Analysis complete	January 14
Draft report submitted	January 22
Report discussion meeting	January 27
Final report	January 31

We are flexible in our timing. We can adjust dates to meet the City’s schedule. However, work is to be completed over a holiday period. It is important City personnel be available to provide data and for interviews.

ARM Tech has performed projects for many additional entities, including the City of Minneapolis, King County, Boise City and the City and County of Denver. We would be pleased to provide additional references upon request.

We will complete the scope of work set forth in this proposal for a fixed fee of $79,000. This fee is based on the estimated hours, hourly rates and expenses in Table IV-1.

Team Member	Estimated Project Hours	Percent of Estimated Project Hours	Hourly Rate	Fees
Steven Kahn	80	22%	$250	$20,000
Mujtaba Datoo	15	4%	225	3,375
Jo Ann Wood	130	36%	165	21,450
Brady Dunn	90	24%	170	15,300
Neil Harrison	50	14%	250	12,500
Total	365	100%		$72,625
Expenses				6,550
Total Fee				$79,175

Reimbursable expenses include postage (e.g., for surveys) copying, word processing, travel and report production. The rates in Table IV-1 are fixed for the term of the project and for the six-month extension. The proposed fee includes all professional fees and expenses. It is proposed as a fixed fee and not as a fee that will vary based on the number of hours actually expended or variations in expenses.

Fifty-percent of the fee will be invoiced at project inception. The balance will be invoiced January 1, 2003. Each invoice is due upon presentation.

ARM Tech has a total workforce of 17 and employs women and minorities in a range of technical and managerial positions. These include Director of Actuarial Services, Accounting Manager and Word Processing Manager.

All employees have equal access to all training programs. In addition, as specific skill needs are identified, additional training is provided. Our goal is to ensure all employees have an equal opportunity to contribute to the company and to advance.

Our goal has been to obtain the best available services to support company operations and to provide the highest-quality service to our clients.

We do not believe any of the firms we have used are certified by the City as an M/W/ESB firm.

The proposed project is of modest size. Also, all skill sets are represented by ARM Tech and Aon employees. Thus, we do not anticipate retaining subconsultants on this project. However, as can be seen from the personnel assigned to this project, we have proposed a diverse project team. Should subcontracting on this project be indicated, we will work hard to achieve the City’s goals.

Hourly Rate Charged

Rate guarantee

All rates shown in Table IV-1 are guaranteed for the term and the project and for six months thereafter.

Review Services: $

Professional: $

Technical: $

Other: ___________________ $

No commissions will be received. Thus, no commissions will be used to offset fees.

• Hiring and retaining staff	Internal quality control standards
• Quality data with Internet access	• Prompt/focused claim investigations
• Communication with client	• Claims exposure identification
• Evaluating/obtaining settlement authority	• Litigation management program
• Disposition management program	• Evaluating, setting and communicating reserves
• Management of claims funding and payments	• Cost-containment services

• Business	People
• Technology	• Processes
• Operations