Magazine article Risk Management

Taking Responsibility for Your Own Risk: Ray Scullian Had Enough Confidence in the Safety System at the Orlando Utility Commission to Assume All the Risk for a $550 Million Construction Project. (Assuming Risk)

Magazine article Risk Management

Taking Responsibility for Your Own Risk: Ray Scullian Had Enough Confidence in the Safety System at the Orlando Utility Commission to Assume All the Risk for a $550 Million Construction Project. (Assuming Risk)

Article excerpt

As director of risk management and safety for a company that was planning a three-year, $550 million construction project of a coal-fired plant, Ray Scullian considered two insurance options. One was to arrange for traditional third-party insurance. The other was to create an owner-controlled insurance program.

Each option had benefits and drawbacks for his organization, Orlando Utilities Commission (OUC), a public electric and water utility in Florida. "With the first option, we would have to send a multimillion dollar check to an insurance company," he says, "but we would be able to cap our expenses, quantify our insurance costs in advance and wash our hands of the risks. After all, the project could have been a disaster." He envisioned the possibility of serious accidents, catastrophes from the site or the project having so many safety problems that the Occupational Safety and Health Administration would shut it down.

Traditional insurance was also appealing because the project would involve thousands of contract workers, none of whom had any specific allegiance to OUC or to its long history of commitment to safety and loss prevention.

The second option--owner-controlled insurance--had its allure too. "In this case, we would have to challenge ourselves to create a comprehensive loss prevention package designed to significantly reduce risk transfer," Scullian says. "If we were able to do it properly, we would end up saving millions of dollars.o

While many risk managers may have taken the safe route and opted for third-party insurance, Scullian had sufficient reason to believe that the better option was creating an OUC-owned program. Even though it was saddled with potential risk if the project got out of control, it also had a much greater upside if the project was a success.

After management backed Scullian's recommendation, work began.

The Project

Scullian knew that one key to the project's success would be daily involvement by committed and experienced employees. To this end, he arranged for a full staff of on-site professionals to deal with all aspects of risk. There was a fully staffed medical clinic, a workers' compensation adjuster, an insurance administrator and a group of managers to run the comprehensive safety program.

The next step was to hire the right construction workers and apprise them of what would be expected. "Every worker who entered the site knew that there were going to be significant safety requirements," Scullian says. Training reemphasized the stringent safety policies and practices, and the importance of safety was continually addressed in weekly meetings.

In an innovative move, OUC also created an incentive program for on-site specialists. "We rewarded them with financial bonuses as the project continued to produce savings," says Scullian. These bonuses encouraged medical staff, adjusters, administrators and managers to perform to the best of their abilities in keeping the project safe.

For example, the insurance administrator was stringent about restricting access to the location for anyone who had not gone through a background screen (criminal record, past safety record) or had not been tested on location for drug or alcohol use. The medical facility focused its attention on trying to treat as many people as possible on site, rather than sending them to off-site medical services, which would have involved more cost. The insurance adjuster directed his efforts on paying benefits fairly, quickly and honestly.

"Everyone really appreciated these rewards, because these were things they didn't typically receive," Scullian says. "There probably aren't too many insurance adjusters in the U.S. who receive more than a salary for the work they do.o

Not long after the project began, Scullian began to receive positive feedback on the project. "The phone started ringing, and I knew this was a good sign," he says. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.