Approved Contractor
Insurance Program
Initiative
Chris Hilder
Director ASDEFCON and
Contracting Initiatives
professionalise | re-prioritise | standardise | benchmark | improve industry relationships and industry performance | lead reform
Approved Contractor Insurance
Program (ACIP) Initiative
ACIP Management Team:
- led by Director ASDEFCON & Contracting Initiatives (ACI)
-
comprising nominated officers from the Directorate of ACI (in
Procurement & Contracting Support Branch (PCSB)) and DMO Legal
-
PCSB and DMO Legal are part of Contracting and Legal Division in
DMO Commercial Group
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Objectives:
– improve practice and reduce inefficiencies in formulating, negotiating
and ensuring compliance with contractual insurance requirements
What is it?
– centralised review and approval (pre-qualification) of participating
Defence companies’ global/group and local insurance programs
– pre-qualification is recognised by the granting of ACIP status (subject
to conditions)
– companies granted ACIP status are deemed compliant with insurance
requirements in individual contracts (subject to stand-alone projectspecific insurances not covered under the company’s ACIP)
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Current Approach:
– individual procurement teams on a contract-by-contract basis are
responsible for reviewing contractor insurances for compliance with the
contract insurance requirements and for ensuring ongoing compliance
– key problems:
• lack of DMO insurance expertise
• confidentiality of company insurance programs
• inconsistency across DMO
• duplication
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Benefits:
– streamline management of contract insurance issues (reduce
transactions costs to both DMO and Industry):
• reduce tender data and contract data deliverable requirements
• reduce tender evaluation, contract negotiation and contract
management effort
– continue to improve risk management within DMO, particularly in
respect of insurable risks
– provide DMO with greater transparency and understanding of
participating Defence companies’ insurance programs
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Benefits Continued:
– enhance the relationship between DMO and participating Defence
companies’ global risk and insurance managers
– ACIP Management Team will perform centrally some functions
previously decentralised
– standardisation
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Application:
– top dozen or so Defence companies with which DMO regularly
contracts
– voluntary
Rationale:
– the review process has resource costs for both DMO and
participating companies, so diminishing returns in applying this
Initiative below a certain scale
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
– applies to Complex (some exceptions) and Strategic procurements
Procurement Lifecycle:
– Develop Request Documentation:
• new ASDEFCON insurance clauses (long form and short form),
ASDEFCON Insurance Handbook and ACIP Management Team to
provide guidance on contract insurance
– Tender Evaluation:
• tenderers with ACIP status - no TDR response (except for any
stand-alone project-specific insurances not covered by their ACIP)
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Procurement Lifecycle:
– Contract Negotiations:
• procurement team requests ACIP Compliance Assurance Report
only if:
• liability, transit or contract works limit of indemnity =>$25m; or
• aviation or marine policy required
• procurement team reviews report and resolves any identified issues
– Contract Management:
• procurement team relies on ACIP Compliance Assurance Report, or
ACIP status if above thresholds not met
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Parameters – what does not change for Defence procurement teams:
– procurement team’s responsibility to properly manage risks by
identifying appropriate contractual insurance requirements based on a
liability risk assessment (LRA) and value for money
– procurement team’s responsibility to manage any stand-alone project
specific insurances for risks not covered by the company’s ACIP
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Parameters – what does not change for companies with ACIP status:
– company’s responsibility to properly manage risks and their insurance
program, and to discuss appropriate contractual insurance
requirements with the procurement team (performing their own LRA if
required)
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Parameters – what the initiative does not do:
– not an exercise in using information obtained from the reviews to
obtain more insurance cover than is required
• it is the LRA that drives contract insurance requirements (subject to
value for money)
– not an exercise in benchmarking one company’s ACIP against
another’s
– not an exercise in DMO advising companies about their own insurance
programs
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Overview of Pre-Qualification Review Process:
– inspection of company’s insurance policies
– interview of company’s key risk and insurance personnel
– initial review typically 2 days at company’s head office
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Outcomes of Pre-Qualification Review Process:
– sufficient insight into company’s insurance (including reinsurance and
captive) arrangements to satisfy due diligence requirements and to
understand company’s insurance arrangements
– confidence in the adequacy of company’s insurance arrangements
– confidential report capturing the above (will provide to company for
comment)
– if OK, granting of ACIP status and listing on a register
– ACIP status subject to conditions and further periodic reviews
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Implementation Issues:
– commercial sensitivity of the information
– ACIP Management Team will keep the confidential report closely held,
it will not be made available to procurement teams (ie it will be kept at
‘arms length’ from procurement teams and their advisers)
– the above does create some communication protocols, eg providing
ACIP Compliance Assurance Reports only against what has been
tendered or agreed in contract negotiations
– we will assist procurement teams with insurance issues based on
general insurance expertise and knowledge of our advisers
Commercial Group
Approved Contractor Insurance
Program (ACIP) Initiative
Current Status:
– four Defence companies have been granted ACIP status:
• BAE Systems, Boeing, Raytheon and Saab
– finalisation of pre-qualification review report of one further company in
progress
– webpage available with links to all supporting documentation
Commercial Group
QUESTIONS?
Commercial Group