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Contractor's All Risk Insurance (CARI)

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Contractor's All Risk Insurance (CARI)

Post by kruger on Tue Jan 19, 2010 4:02 pm

Hi,

I need a definitive interpretation of the above subject provision in the PBD (Section 14. Insurance), particularly its application on Information Technology (I.T.) Infrastructure projects.

This particular project has a civil work component, i.e. building, that will house the various I.T. hardware/software components. However, the cost of this building amounts to only around 3.4% of the total project cost and the major components of the project which is I.T. related are sourced outside the country.

I need to be enlightened in view of the fact that our resident auditor here in the Department is still requiring the contractor to provide such insurance, even though the project is already in its final completion stage (85%).

I should reiterate that this is an I.T. Infra project and I could not find any guideline on how to apply CARI in this case, more so with its major components imported from other countries where all forms of insurance are required during shipping, freight, handling, etc.

Thanks and best regards!
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Re: Contractor's All Risk Insurance (CARI)

Post by riddler on Tue Jan 19, 2010 4:25 pm

kruger wrote:Hi,

I need a definitive interpretation of the above subject provision in the PBD (Section 14. Insurance), particularly its application on Information Technology (I.T.) Infrastructure projects.

This particular project has a civil work component, i.e. building, that will house the various I.T. hardware/software components. However, the cost of this building amounts to only around 3.4% of the total project cost and the major components of the project which is I.T. related are sourced outside the country.

I need to be enlightened in view of the fact that our resident auditor here in the Department is still requiring the contractor to provide such insurance, even though the project is already in its final completion stage (85%).

I should reiterate that this is an I.T. Infra project and I could not find any guideline on how to apply CARI in this case, more so with its major components imported from other countries where all forms of insurance are required during shipping, freight, handling, etc.

Thanks and best regards!

Let me share my thoughts kruger. I believed CARI is applicable to Infrastructure Projects which is required to be submitted by the Winning Bidder/s before implementing the project.
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re CARI

Post by charlie brown on Tue Jan 19, 2010 6:07 pm

Hi kruger,

the CARI is part of the overhead cost which in turn is part of the indirect cost in the computation of the ABC for Infra. the Direct Cost + Indirect Cost + VAT = ABC.
If im not mistaken, insurance is under clause 15 of the PBD for civil works. Im also not sure what you mean by IT Infra projects. An IT project could contain a software and hardware component and depending on the percentage of each, a project can be considered a consultancy (if it is more about creating a customised software). depending on the nature of the project, you may separate the hardware and software component although if it is a customized IT project it would probably be best for the consultant creating the software to prescribe the hardware as well. Obvously your IT project has a civil work component as mentioned. Again depending on how important it is that the building that will house the hardware should conform to specific requirements of the IT project, it might also be best that the whole hardware/software/civil work component be lumped together into one consultancy or goods procurement. You also mentioned that the infra component is only 3.4% of the total project cost but since you did not mention the absolute value I have no way of determining whether i would suggest a separate infra project or not.

i can share though some experiences; if the IT hardware and software places special requirements of the building and the building cost is minimal, say below half million and you have a tight schedule it might be best if you lumped together the 3 components. otherwise you may chop it up into its 3 separate components if practicable. In which case the CARI will apply to the Infra portion.

As to the procurement of imported IT hardware the insurance component is the reponsibility of the supplier. if you have a foriegn supplier and you are paying thru LC then the supplier might be asked by the negotiating bank to submit insurance and other import documents before payment can be made. If a local supplier, just the same the cost of insurance is part of the reponsibility of the seller. if the consultant making the IT program is buying the equipment then all the more that it will not be your concern. I hope i was able to share valuable inputs to your procurement activity. best of luck Very Happy
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Re: Contractor's All Risk Insurance (CARI)

Post by sunriser431 on Tue Jan 19, 2010 9:04 pm

kruger wrote:Hi,

I need a definitive interpretation of the above subject provision in the PBD (Section 14. Insurance), particularly its application on Information Technology (I.T.) Infrastructure projects.

This particular project has a civil work component, i.e. building, that will house the various I.T. hardware/software components. However, the cost of this building amounts to only around 3.4% of the total project cost and the major components of the project which is I.T. related are sourced outside the country.

I need to be enlightened in view of the fact that our resident auditor here in the Department is still requiring the contractor to provide such insurance, even though the project is already in its final completion stage (85%).

I should reiterate that this is an I.T. Infra project and I could not find any guideline on how to apply CARI in this case, more so with its major components imported from other countries where all forms of insurance are required during shipping, freight, handling, etc.

Thanks and best regards!
The GPPB issued NPM 004-2006 dated 03/17/2006. For details click this link http://www.gppb.gov.ph/opinions/view_opinion.asp?o_id=364
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Re: Contractor's All Risk Insurance (CARI)

Post by charlie brown on Wed Jan 20, 2010 1:06 pm

Hi kruger,

I just realized na patapos na pala project mo Embarassed sowi... In which case if it was really a mixed procurement (meaning infra and IT with the IT either as consultancy or combination consultancy and Goods) your auditor may be correct in requiring the civil works contractor to procure the CARI since it is part of the ABC. if not the PE may procure the same the cost of which to be deducted in the billing (its provided sa clause 15 revised PBD).

Kaya lang sa tingin ko di tama na i require yon sa importation of the hardware since if it was done thru Goods, it was supposed to be Delivered Duties Paid (DDP) kaya it was a risk and responsibility of the supplier. If the Goods are already in your office safe and sound eh di mo na kailangan pilitin supplier to procure the CARI.
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Re: Contractor's All Risk Insurance (CARI)

Post by Mikel on Wed Jan 20, 2010 2:58 pm

First, it would be helpful if sir kruger would clarify if the civil works (infra component of the project) was awarded to and implemented by the same supplier/ contractor who supplied the IT equipment of DOTC. (is the supplier of the IT equipment qualified to bid and undertake infra projects?)

As stated somewhere in this topic, CARI is only required for infra projects, thus, if the project does not fall qualify as an infra projects based on the definition provided in the Revised IRR of RA 9184, particularly sec. 5 (u) thereof, you may justify the non-provision of CARI with this reason, otherwise, your auditor may be correct in calling your attention for such non-provision of CARI.

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Re: Contractor's All Risk Insurance (CARI)

Post by amang'65 on Thu Jan 21, 2010 8:48 am

i believe our Resident Forum Auditor is right (heh.he), otherwise insurance and its warraties of these IT equipment should be the responisbility of the supllier of course for a certian period of time, especially the warranty. now if these warranty has already expired, it is already the agency's responsibility in insuring these equipment just as how we insure our vehicles, buildings and all equipment within this particular building. insuring government property is actually mandatory per COA/GSIS circulars.
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Re: Contractor's All Risk Insurance (CARI)

Post by kruger on Thu Jan 21, 2010 2:52 pm

Hi Guys,

Thanks a lot. The project is a hybrid of some sort. As I've mentioned earlier, it's a combo of hardware, software and building. The building is a major component not in terms of its cost but in terms of its function. Think of a Space Command Center and you'll get the idea. The project was classified as Infrastructure under the definition provided for by the GPM Vol. 3 which classifies the "civil works components of information technology projects" as infrastructure projects. Please disregard my earlier definition as I.T. infrastructure - although in reality the project really is an I.T. infra.

That said, I guess we're of the same opinion that only the civil works component of this I.T. project should carry the CARI. Very Happy However this will be redundant at this point because the structure is almost completed.

FYI, the TOR for this project required that foreign bidders (no available local technology, i.e. highly-specialized undertaking) should form joint ventures/consortiums with a local building contractors. This was necessary because of the unlikely possibility that a foreign I.T. company has building construction experience as well.

Also, can anybody post a guideline on how to apply the CARI? We've made some calls to the Insurance Commission but we couldn't get a definitive answer.

Thanks again and more power!
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Re: Contractor's All Risk Insurance (CARI)

Post by riddler on Thu Jan 21, 2010 4:49 pm

kruger wrote:Hi Guys,


That said, I guess we're of the same opinion that only the civil works component of this I.T. project should carry the CARI. Very Happy However this will be redundant at this point because the structure is almost completed.

Also, can anybody post a guideline on how to apply the CARI? We've made some calls to the Insurance Commission but we couldn't get a definitive answer.

Thanks again and more power!

I have a discussion before on the CARI with our Accountant. During the completion of our Infra projects, she required that the CARI be attached in the final disbursement voucher. However, i told her that to rquire the contractor at that point in time is already moot and academic, kasi tapos na nga ang project ano pa ang i-insure natin?. Very Happy especially then that most of the LGU's including some NG's are not follwing the CARI sa a requirement before starting the project.. fortunately all of our 2009 and onward projects are already CARI compliant. Very Happy

P.S. We dont require CARI for 1M below infra projects which we adopted from DPWH Memo. Question
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Re: Contractor's All Risk Insurance (CARI)

Post by carl on Wed Jul 07, 2010 12:12 pm

Great post, Thank's for the information....


captive insurance managers
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Re: Contractor's All Risk Insurance (CARI)

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