Insurance Aids Minority Contracting

February 14, 2005
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GRAND RAPIDS — When the Convention and Arena Authority adopted the city’s Minority and Women Business Enterprises (MWBE) policy four years ago for the $212 million DeVos Place project, the seven-member board hoped that 12 percent of the largest construction contract in local history would go to subcontracting firms owned by women and minorities.

Although the city scrapped the MWBE program for a new policy last year, following the old one resulted in 17 percent of those convention center contracts going to minority- and women-owned companies.

“We were trying to meet the city’s program, even though it’s not a ‘city job,’ it’s an authority job.

“We worked very hard and we pushed very hard to get participation,” said Joe Erhardt, president of Erhardt Construction, which guided the project with Hunt Construction Group, of Indianapolis

“It was pretty much an open-book job,” added Hunt’s Bill Sewell, of the communication the general contractor had with the board.

Besides working with the CAA and holding seminars for subcontractors, the program worked so well because the Erhardt-Hunt group controlled the insurance policy for the entire four years it took to build

DeVos Place

“As the contractor, we bought insurance to cover the entire project for everybody that worked on it,” Erhardt said.

“So the contractors that came on board did not provide their own workers comp insurance. They did not provide their own general liability insurance or any of that,” he said.

“The big deal about that for smaller contractors — and not just minorities, but any of the smaller firms — is they generally don’t do as much volume and they can’t afford to carry as much insurance coverage that might normally be required on a project of this magnitude,” he added.

Because Erhardt-Hunt insured the project, subcontractors only needed to pick up small and more affordable policies for the work that was done away from the construction site.

“You take somebody who does a million dollars a year and he might not have five million dollars of insurance. He could work on this project because insurance was not an issue,” said Erhardt.

The final numbers show that 136 contractors worked on the project for 1.4 million hours.

Erhardt-Hunt also had the foresight to buy the policy in 2000 for the duration of the project — and luckily before the events of 2001 helped cause liability premiums to rise at alarming rates.

“That was a huge benefit to the owner and to the project,” said Erhardt.

The liability premiums for CAA officers and directors alone rose by 95 percent from 2000 to 2004, while the deductible tripled over that period.

In addition, the board cut its coverage in half, from $10 million in 2000 to $5 million in 2004, to get an affordable premium.

The

DeVos Place
project — which began in the summer of 2000 — finished under budget and ahead of schedule. Erhardt-Hunt moved the project’s completion date up by a month so the 40,000-square-foot ballroom would be finished in time to hold the gala dinner that was attended by 2,500 people on Feb. 1.

“Prior to that, it was the end of February,” said Erhardt of the original schedule. “But once you commit to it, you have no choice but to make it.”

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