I x N/A VII BOARD OF AIRPORT COMMISSIONERS REPORT TO THE. ILA,,,,S4A Completed

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1 VII ill Los Angeles World Airports REPORT TO THE BOARD OF AIRPORT COMMISSIONERS A- (vikv Meeting Date: Approved by'aula Adams, Directr Airports Administration 4/6/2017 ILA,,,,S4A Completed CAO Review: Pending I x N/A Reviewed by: Samson Mengistu, Chief 0- aerating Officer ` CityAis rney Al Debora Flint - Chl"' Executive Officer ` \ Reviewed for Date i Approval Status By Finance 3/16/2017: MY I] N NA RW CEQA 3/16/2017 NY N AE Procurement 3/16/2017 NY ON Cond MT Guest Experience 3/15/2017 NY N i BY SUBJECT: Contract Award: Airport General Liability Insurance Brokerage Services and Property Casualty Insurance Brokerage Insurance Services Approve award of a three -year contracts for General Liability Insurance Brokerage Services to Willis Insurance Services of California, Inc. for an amount not to exceed $145,000 annually and Property, Casualty Insurance Brokerage Services to Kaercher Campbell & Associates Insurance Brokerage for an amount not to exceed $145,000 annually for comprehensive Insurance brokerage services to Los Angeles World Airport for the term of April 1, 2017 through March 31, RECOMMENDATIONS: Management RECOMMENDS that the Board of Airport Commissioners: 1. ADOPT the Staff Report. 2. DETERMINE that this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Article II, Section 2.f. of the Los Angeles City CEQA Guidelines. 3. FIND that the work can be performed more economically or feasibly by an independent contractor than by City employees. 4. APPROVE the award of the individual contracts for General Liability Insurance Brokerage services to Willis of California, Inc. and for Property, Casualty Insurance Brokerage services to Kaercher Campbell & Associates Insurance Brokerage for the period of April 1, 2017 through March 31, Page 1 LA WA Insurance Broker of Record Contract

2 5. AUTHORIZE the Chief Executive Officer or her representative, to execute the contracts with both Willis of California Insurance Brokerage, Inc. and Kaercher Campbell & Associates Insurance Brokerage upon approval as to form by the City Attorney. DISCUSSION: 1. Purpose Allow Los Angeles World Airports (LAWA) to secure the professional brokerage services to market, place and bind LAWA's comprehensive Property, Casualty and General Liability Insurance programs with the domestic and International insurance underwriting markets as well as additional brokerage services and guidance as required. 2. Prior Related Actions February 19, Resolution No The Board of Airport Commissioners (Board) approved contracts for LAWA Insurance Brokers of Record, Kaercher Campbell & Associates Insurance Brokerage and Willis Insurance Services of California, Inc. expired on February 28, Current Action The ability to effectively manage and control large risk exposures is fundamental to the operation and financial stability of LAWA airport system. A comprehensive insurance program like the one LAWA has maintained for the past three decades is a cornerstone to protecting LAWA from risk perils. The City of Los Angeles / LAWA does not have on its own the ability or capacity to market and place such large insurance coverages for these perils, thus the insurance brokers of record become the most practical alternatives. In the past LAWA has adopted the option of a co- broker system to procure general liability and property insurance and to assist Risk Management in the administration of these programs. A large percentage of other airports and large private companies utilize this same co- broker program. Through the use of insurance brokers, LAWA has been able to greatly expand its insurance coverages and limits while reducing its overall insurance premiums (by nearly 57% since 2002). The current insurance broker of record system enables LAWA to receive the optimal insurance capacity and pricing. The insurance brokers also act as LAWA's agents in matters of insurance policy interpretation and resolving coverage disputes. The current insurance program that has evolved at LAWA is viewed as a respected and innovative leader amongst similar large domestic and international airports. Currently, one broker is responsible for the property, casualty insurance program and the other broker is responsible for the general liability, terrorism insurance program. It is recommended that this successful co- broker system continue into this contract term as the most beneficial arrangement for LAWA. Page docx

3 Procurement Process On Tuesday, December 6, 2016, Risk Management released a Request for Proposals (REP) for Insurance Broker of Record for LAWA, on the City of Los Angles Business Assistance Virtual Network (LABAVN). A voluntary pre -proposal conference was held on Wednesday, December 14, On Friday January 20, 2017 Risk Management had received proposals from four firms. All of the proposers passed the initial administrative review process. The proposals were reviewed by a five member evaluation committee composed of the following LAWA and Los Angeles County employees:. Risk Manager III, Risk Management. Chief Management Analyst. Risk Manager. Director of Administration. Chief Management Analyst The evaluation committee reviewed the written proposals according to the criteria listed below: Item Evaluation Criteria Maximum Points 1 Experience performing work of similar scope and magnitude, primarily 15 with public entities and specifically (large) airports 2 The financial stability and integrity of the brokerage firm 10 3 Demonstrated experience of the brokerage firm in interacting and 15 negotiating directly with domestic and worldwide underwriting markets 4 Qualifications, experience and full disclosure of the individuals who will be assigned as day to day account managers and their location proximity to LAWA 25 5 Brokerage / firm resources for safety, risk mitigation and loss control 10 6 Quality of the submitted RFP including thoroughness, completeness, 15 appropriate level of detail and responsiveness to service, requirements under the "Provision of Service" section of this RFP 7 Proposed broker fee structure & schedule, including placement cost and 10 fees, commission & contingency payments 8 Compliance with Administrative Requirements Pass /Fail Total Points 100 Proposers Ranking: Brokerage: Ranking: Willis of California 1 Kaercher Campbell & Assoc. 2 Marsh & McLennan 3 Alliant 4 Page 3

4 The evaluation committee ranked Willis Insurance Services of California as the most qualified proposer to provide General Liability Brokerage services to LAWA and Kaercher Campbell & Associates Insurance Brokerage as the most qualified to provide Property /Casualty brokerage services to LAWA. Both of these brokerage firms demonstrated extensive experience, resources and ability to perform as demonstrated in their RFP submission. Action Requested Staff requests that the Board approve the Broker contracts and authorize the Chief Operating Officer to execute the two contracts after approval to form by the City Attorney. Fiscal Impact Costs incurred under these contracts will be recovered through landing fees and terminal rates and charges, as well as through non -aeronautical revenues. 4. Alternatives Considered Self -Insure all General Liability and Property Exposures An alternative to the utilization of brokers to market and place insurance would be for LAWA to completely self- insure itself against large and potentially catastrophic risk exposures. This alternative is not deemed prudent or practice in view of the potential for major and catastrophic losses that could occur at LAWA's airport facilities. Such an uninsured loss could result in dire financial consequences on LAWA's financial stability, operations and bond ratings. Use of LAWA Employees to Market, place and Bind Insurance Coverages A potential alternative to using professionally licensed insurance brokers of record would be for the City Personnel Department to create a new classification of :Licensed Insurance Brokers" within the City, so that LAWA could employ several full -time licensed brokers/ employees. Such a program, while technically feasible, would still require the use of intermediate brokers to effectively market and assist in placing the large insurance limits required of LAWA and to procure insurance in the overall domestic and international markets. Risk Management has evaluated this alternative and their analysis suggests that this would not be a realistic or cost effective alternative. APPROPRIATIONS: Funds for these contracts are included in the Fiscal year LAWA Operating budget in Cost Center Property, Liability & OCIP Section, Commitment Item Contractual Services. Funds for subsequent years will be requested as part of the annual budget process. Page 4

5 STANDARD PROVISIONS: This action, as a continuing administrative activity, is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Article Il, Section 2.f. of the Los Angeles City CEQA Guidelines. 2. This contract is subject to approval as to form by the City Attorney. 3. Actions taken on this item by the Board of Airport Commissioners will become final pursuant to the provisions of Los Angeles City Charter Section Willis Insurance Services of CA and Kaercher Campbell & Associates will comply with the provisions of the Living Wage Ordinance. 5. Procurement Services reviewed this action (File No. 8020). No mandatory Small Business Enterprise goal for this project has been established, as no subcontracting opportunities were identified. 6. Willis Insurance Services of CA and Kaercher Campbell & Associates will comply with the provisions of the Affirmative Action Program. 7. Willis Insurance Services of CA has been assigned Business Tax Registration Certificate No Kaercher Campbell & Associates has been assigned Business Tax Registration Certificate number Willis Insurance Services of CA and Kaercher Campbell & Associates will comply with the provisions of the Child Support Obligations Ordinance. 9. Willis Insurance Services of CA and Kaercher Campbell & Associates will have approved insurance documents, in the terms and amounts required, on file with the Los Angeles World Airports prior to issuance of a Notice to Proceed. 10. Pursuant to Charter Section 1022, staff determined the work specified on the proposed contract can be performed more feasibly or economically by an Independent Contractor than by City employees. 11. Willis Insurance Services of CA and Kaercher Campbell & Associates have each submitted the Contractor Responsibility Program Questionnaire and Pledge of Compliance and will comply with the provisions of the Contractor Responsibility Program. 12. Willis Insurance Services of CA and Kaercher Campbell & Associates must each be determined by Public Works, Office of Contract Compliance, to be in full compliance with the provisions of the Equal Benefits Ordinance prior to execution of contract. 13. Willis Insurance Services of CA and Kaercher Campbell & Associates will be required to comply with the provisions of the First Source Hiring Program for all non -trade LAX Airport jobs. 14. Willis Insurance Services of CA and Kaercher Campbell & Associates have each submitted the Bidder Contributions CEC Form 55 and will comply with its provisions. Page docx