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Self-insurance leads to savings on construction
February 23, 1998
One of the non-monetary provisions of the UConn 2000 legislation has turned into a major money-maker, giving University officials the flexibility to add unexpected - and previously unaffordable - elements to new construction and renovation projects.
The savings, which have arisen because the University is self-insuring all major UConn 2000-related projects, already exceed $4.5 million. And the extra work and additional features that contractors will add to buildings involved in the program as a result will soon be appreciated by the students, faculty and staff using them. Connecticut taxpayers also will benefit in cases where better construction methods mean that buildings will be easier to maintain and will require fewer repairs.
What's more, savings through the Owners Controlled Insurance Program (OCIP) promise to go up.
Self-insurance, though not a new concept in the private sector, is almost unheard of in public agencies, partly because the savings are largely attributable to the size, scope and number of projects involved, says Larry Schilling, University architect. Self-insurance means that the University, not the individual contractors nor the dozens of individual subcontractors working on UConn 2000 projects, is buying worker's compensation and liability insurance for entire projects. The savings are realized through the price benefits of buying in quantity.
"To make this work, you have to have at least $40-$80 million in projects," he says. "We knew it would work with UConn 2000, because there are so many projects. If we were putting up one building, it's likely that the general contractor could have found a policy just as inexpensively as we could. But with a dozen projects going on at any one time through UConn 2000, we're able to secure a much lower rates.
To assess the savings from self-insurance, contractors bidding on UConn 2000 projects are asked to provide two estimates - one with coverage provided by the contractor and subcontractors, one with coverage provided by UConn. In each of the nine projects currently under construction, or about to begin, extensive savings are revealed in the self-insurance bid, ranging from slightly more than $100,000 for the new ice rink to more than $2 million on the South Campus project.
Additional savings have been realized by completing projects under budget. Another provision in the UConn 2000 legislation has given University officials the opportunity to decide what companies can bid on a UConn 2000 project, rather than open the job to all comers and award it to the low bidder. Through this pre-qualification process, officials can screen out firms with poor safety records or those who have no experience with similar projects. Officials also look for firms who have a history of finishing jobs on time, on budget, and who have adequate financial backing. The pre-qualifying process is one of the factors credited with the on-time, under budget completion of several projects, including renovations at Mansfield Apartments and the Harry A. Gampel Pavilion, construction of the new parking garage and the field house renovation project. Work on the new chemistry building and the South Campus residence halls also are on schedule.
The savings realized on construction projects - either through self-insurance or by completing the work under budget - are immediately available for other UConn 2000 projects. Savings from the Mansfield Apartment renovations are being used to enhance the new ice rink, Schilling says, and savings from other projects may be used, for instance, to wire every seat in the new chemistry building's 300-seat lecture hall for computers, or to install in the building's research labs a "seamless, poured floor," which is easier to clean and maintain than the tile floor that had been proposed.
"In every project, there is a long list of items we would like to have, but don't plan for because of cost considerations," Schilling says. "The savings (from the OCIP) allow us to plug some of those 'wish list' items into the final plans."
So far, savings have been realized from nine UConn 2000 projects, including the new downtown Stamford campus, the Marine Sciences Institute at Avery Point and, in Storrs, from the garage, South Campus, and new structures for chemistry, fine arts, the biology/physics building, the central heating plant, the new warehouse, and the ice rink, which will replace the current open air facility once construction is completed there. That job will begin next monht.
Schilling estimates there are at least four more projects in Phase I of the UConn 2000 program that also will offer substantial savings through OCIP, including the new business school, renovations to the Waring Chemistry Building and the Wilbur Cross Building, and the conversion of Fairfield Road to a pedestrian mall.
During Phase II - the final six years of the 10-year plan - Schilling says there are at least 20 projects that will involve self-insurance. The savings, he says, are expected to at least double those realized during Phase I.