Composing the Grand Opera
Consider a set of operating criteria: indirect management of operations in a high-capital industry involving multiple sites and heavy equipment; heavy government regulation of that industry, complete with high insurance mandates, permitting, and bonding; high participation of capable but under-capitalized subcontractors.
And just for good measure, throw over the top an acquisition that results in a mandate to consolidate insurance programs for cost savings and better risk measurement and management.
It might seem like a particularly nasty exercise cooked up by a risk management professor to test the creativity and determination of students. But in reality it was just another day at the office for Jennifer Cable.
Balfour Beatty Construction is a worldwide contractor building high-rise apartments, schools, prisons, hospitals and military housing. The actual construction, and sometimes demolition beforehand, is done by local subcontractors. Given the municipal and federal projects, a considerable percentage of the subcontractors are small, local operators, often women- or minority-owned, as per government incentives.
“The insurance needs of government work require subcontractors to carry hefty insurance,” said Cable. “Many can’t afford that, especially the minority firms. So we developed a contractor-controlled insurance program. Under that, we don’t include the cost of insurance in the bidding. We carry all the risk in a master program.”
Cable has long experience in risk management, but her degree is in opera performance. Aptitude in music and math often go together and indeed, Cable used to tutor statistics and probability. That led her to database creation.
“I always want strong players on my team, and I try to identify those in advance.” — Jennifer Cable, Claims Manager, Balfour Beatty Construction
When Cable started at the company eight years ago, there were four different groups, each running its own insurance program. When the company was acquired by its current owner, based in the U.K., she was asked to consolidate.
“I had to evaluate all four divisions and their programs,” Cable recalled, “plus what I inherited from my predecessor, and then review federal, state, and local safety and insurance requirements. That whole process took about six months.”
Even as Cable was trying to formalize, standardize and optimize, she knew that the industry was constantly in flux. “With construction, things move around, literally.
Equipment, staff, job sites and clients all shift. Then we are growing and expanding, entering new markets, new states with new regulations. There is retraining, even as regulations are changed.”
One essential step was to create allies in the field, so Cable introduced herself and the program personally. The divisions and their operating staffs were used to working autonomously, and even though the mandate from the new owners was to consolidate, Cable said it was important to present herself as a resource, not someone taking anything away.
The program is mostly in place, but integration continues as the company expands into new states, and as new subcontractors are brought in.
“Just last year we had several acquisitions on the West Coast, which was our biggest ever,” said Cable. By reputation, California might have seemed like it would be the complicated market, but Cable added, “Washington State was the big challenge.
The operations there went from self-funded to state-funded, then retroactively into a risk pool. We are still working on that.”
Again Cable was able to make allies. “We built a relationship with an outside law firm. I always want strong players on my team, and I try to identify those in advance. I am willing to spend a little more on the front end of a project or transaction rather than deal with some catastrophe at the other end.”