Personal Best Time on the Trail maximizing service provider performance

1. Personal Best Time on the Trailmaximizing service provider performance Jim Jean, Texas Association of Counties Pat Parsons, Oklahoma Municipal Assurance Group John Cummings, Montana Municipal Interlocal Authority

2. Personal Best Time On The Trail This session is focused on how to maximize service provider performance given the fact that Public Entity Pools often rely on TPA’s for claims investigation, claims processing, risk management, actuarial studies and many other services.

3. Personal Best Time On The Trail Specifically we will review: I. Contracting II. Performance Criteria/Benchmarking III. The RFP / RFQ Process

4. Personal Best Time on the Trail Contracting to Maximize Service Provider Performance Jim Jean, Texas Association of Counties

5. CONTRACTING 101What is a Contract A contract is an agreement between two parties that creates an obligation to perform. To be enforceable a contract requires: • An Offer • An Acceptance • Consideration

6. Parties Effective Date and Terms Statement of Service (SOS) Pricing Performance Standards Indemnification / Risk Transfer Warranties Remedies Risk Allocation Boilerplate Signatures Liability and/or Damages (Legal Responsibility) Major Areas within Every Contract

7. Contracting 101 • A contract requires a meeting of the Minds • Consideration must be mutual. Both parties must receive something of value • Clarity is required. A reasonable person must be capable of understanding contract terms. • Terms of the offer must be clear and definite • The acceptance must be clearly communicated

8. Contracting 101 Pool Managers must be involved in drafting the contract • State what services are required • What standards must be followed • What reports are required • The time-line for performance

9. Contracting 101Understanding the Commitment • The Principle Issue: Ensure there is a clear understanding of the two parties’ commitment. • Ensuring Enforceability AND Oversite: 1. Establish objective measures of performance (did you get what you wanted?) 2.Create methods to resolve disputes without affecting progress. 3. Determine means of recourse and remedies, if all else fails.

10. Contracting 101 Summary • Service contracts are important for most Pools to operate • Frequent management involvement is necessary for smooth contract performance • Communication during life of contract is essential • A contract must be a “Win-Win” situation for both parties

11. Personal Best Time on the Trail Performance Criteria/Benchmarking Pat Parsons, Oklahoma Municipal Assurance Group

12. Contracts • There are myriad public/private contracts. • Why? • Promotes competition of price • Performance guarantees • Cost savings • Service quality • Innovation • Enhanced risk management • Key risks such as overruns and delivery dates can be transferred to the private sector

13. Contract Performance • Whatever contract is considered: • Seek out stakeholder input • Utilize “best value” contracting • Low bid is not always best bid! • Develop performance benchmarks and hold them to your requirements • Lack of payment or reduced payment is strong motivation • Strong oversight and monitoring protocols

14. Contract Performance • Focusing on claims or TPA services: • Processes that can be measured • Prompt contact • Within 48 hours? • Investigation • Complete with documentation of compensability/liability issues. • Summary of fieldwork, scene photo’s, witness statement’s, etc. • Recovery • Any subrogation possibilities? • Statutory Compliance • Reserving Practices • Proper or “step” • Litigation managed? • Settlement timely? • Documentation • Claims system/reporting • Staffing and supervision • Productivity Ratio • Average Cost

15. Other Considerations for Pool Contract Performance Measurement • Loss Control • Incurred Loss Reduction • Number of Visits • Overall Cost Control • Legal • Hourly Rates/Time Spent • Adherence to Budget • Financial Results • Marketing • Number of Calls/Visits • Growth • Account Quality • IT/Software • Installation timeline • Response time • Cost controls • Consulting • Usually Specific • Underwriting • Timeliness of Quotation • Documentation Quality • Adherence to Rating Plan Guidelines • Lobbying • Success/Failure to Achieve Stated Objectives

16. Claims - Productivity Ratio Resolved Claims – Reopened Claims Received Claims > or equal to 100%

17. Claims - Productivity Ratio “Always be closing” Alec Baldwin (Glengarry Glen Ross)

18. Claims - Average Cost • Incurred Cost/Number of Claims = Avg Cost Note: Industry averages will vary based on line of business

19. Performance Criteria/Benchmarking • Understand the needs of your stakeholders; • Utilize resources (peers, AGRIP, etc..) to determine whether there are pooling industry benchmarks; • Include performance guarantees in your contracts; • Actively manage either individually or through contract auditing firms; • Communicate frequently with contractor and stakeholders at your organization; and

20. Quotes for consideration “Performance stands out like a ton of diamonds, non performance often is explained away.“- Harold S. Geneen, CEO ITT (1959-1977)ITT "What gets measured gets done, what gets measured and fed back gets done well, what gets rewarded, gets repeated” gets repeated - John E. Jones, Federal Judge "You get what you measure. Measure the wrong thing and you get wrong behaviors.“ - John H. Lingle , AuthorAuthor

21. Personal Best Time on the Trail Maximizing the RFP / RFQ Process John Cummings, MMIA

22. Best Practices for RFP’s - Overview 1. Organize, Study & Plan 2. Define the Business Problem 4. Select the Team (make sure stakeholders are involved) 5. Define with Open Requirements 6. Draft the RFP (find boilerplate documents to assist)

23. Best Practices for RFP’s - Overview • Review the Draft • Prepare the Request for Information (RFI) Document or Session • Conduct the Evaluation • Follow Up

24. Best Practices for RFP’s - Overview • The following "best practices“ have been designed to improve the RFP process • With proper management, RFPs can be quick and produce excellent results. • Always involve legal counsel for review of document

25. Why Utilize the RFP Process? RFPs are most useful when: • Multiple solutions are available that will fit the need; • Multiple vendors could provide the same solution; • Exact solutions for the project cannot be clearly specified; • The project requires different skills, expertise, and technical capabilities from vendors; • The problem requires that vendors combine and subcontract products and services; • You want to exert leverage on a vendor to provide savings.

26. Why Utilize the RFP Process? Despite the usefulness of RFPs, it seems that they have become something to avoid in some organizations due to the advance planning and time required.

27. Organize, Study & Plan Before Issuing an RFP Readiness for the RFP process is the key to success. Critical success factors include: • Stakeholders must understand the circumstances and agree to the established timeframes. With any project of the scope requiring an RFP, executive level support within the agency/organization is critical to success.

28. Define the Business Problem • No single critical success factor is more important than properly defining the business problem. Agencies / organizations need to clearly articulate the problem they are trying to solve through the RFP. • If you cannot state the business problem in a single sentence, you are likely including requirements you think are part of the solution rather than just identifying the business problem itself.

29. Select the RFP Team Every team should have a leader who should almost always be the person charged with administering the contract that would be awarded through the RFP. Some suggestions regarding team makeup to follow: • The team must include the manager of the contract, user of the end product/service, and agency subject matter experts. • The team should include stakeholders of the business problem and people with expertise who are expected to add value to the review. • Teams may include "consultants" that will not be required to review the RFP. One or two of these people from upper management or with a specific specialty (such as financial, technical, or legal) may prove quite helpful. In summary, the more bright minds and diverse perspectives on the team, the more likely an RFP is to result in a successful business solution.

30. Crafting the RFP Ideas for crafting the RFP should come from a number of different sources • RFPs are consistently better when the team that will review the responses has been involved in the RFP development. • Requirements and the evaluation criteria should provide a mechanism for making an easy "apples to apples" comparison of the respondents and their proposed solutions.

31. Conducting the RFP Evaluation • Meeting the submission requirements is pass/fail. • Develop a management discretionary point matrix based on the business requirements. • Brief the team on the RFP before the responses are received and emphasize the critical points needed in the responses. • Hold a meeting with the team after they have had a chance to review the responses to discuss their initial impressions. Ask each person for the positives and negatives of each proposal. Have them pick their top two and discuss the reasons for their selections.

32. Conducting the RFP Evaluation • Ask the team to submit their preliminary rankings. Based on the point's total, determine the finalists and invite them for a Best and Final Offer (BAFO) presentation. • Make sure they understand the points that you want them to cover, that the subject is deliverables and not sales, and ask them to bring the delivery team (the delivery team is more likely to give realistic information regarding the product and implementation since the expectations set are their responsibility to deliver) along to present. • Meet after the BAFO to discuss presentations and any new findings/perspectives on the vendors. • Submit the final evaluation. (be careful to rate vendors proportionally, that is to make sure you have the proper difference between the best and the rest.)

33. Other Successes from the Trenches What other successful techniques have “you” the audience come up with maximize service provider performance?

34. Questions

35. Contract & Presentation Information John Cummings, jcummings@mmia.net Jim Jean, JimJ@country.org Pat Parsons, pparsons@omaq.org

36. Contract & Presentation Information This presentation can be downloaded at www.mmia.net under RISK MANAGEMENT / Risk Management Bulletins & should be on the PRIMA Conference Handouts website next week