Disaster-Recovery Purchasing: Lessons learned in Recovery

Transcription

1 Brian Yeoman Education Director NAEP Sr. Research Scientist Houston Advanced Research Center Disaster-Recovery Purchasing: Lessons learned in Recovery Monday July 10, 2006

2 Disaster Facts 35-40% of businesses never reopen 5 year average of US disaster losses is 2.5 billion (pre Katrina) A dollar spent on disaster preparedness saves 7 $ in disaster related economic losses The rate of occurrence of natural disasters has increased by 40 % in the last 15 years

3 Recent HE Disaster Facts Mississippi Pearl River Community College sustained $20-25 million in damage to three campuses. The University of Southern Mississippi sustained $250 million in damage to its coastal facilities. William Carey College was destroyed. Louisiana Tulane University suffered $250 million in losses. Delgado Community College sustained $350 million in damages. Southern University estimates its damage at $ million. Dillard University sustained major damage in three of its historical buildings. Xavier University also sustained severe damage.

4 Katrina facts 205,000 houses were damaged, as of June 2006, 60% remain unoccupied Nine months after Katrina less than 1 in 10 businesses had reopened The SBA has rejected 70% of the 2.4 million loan applications Less than 35% of the 462,000 residents have returned State Farm and Allstate will not sell homeowners insurance in New Orleans More than 100,000 families in LA and MS are living in trailers

5 June 9, 2001 Houston Texas

6 What a disaster looks like?

7 72 hours later

8 Challenges: A Cyclotron Facility

9 Wonder where the radioactivity went?

10 The Campus implications 10 million gallons of water inundated the complex $225 million of sponsored research projects were affected Salaries and benefits of the researchers and staff were more than $120,000 each day for 35 days Over 1 million gsf was out of service for 5 weeks Over 200,000 gsf was out of service for 28 months

11 Implications cont d 3,200 individuals displaced from their workplace for 5 weeks 525 physicians and 800 residents displaced from their practice sites Over 4,700 animals lost many representing successive generation research that will take years to replicate 800+ students and 800 residents returned to disrupted routines Student service areas student affairs, bookstore, student health, cafeteria, educational services, etc. were out of service from a one to 24 months

12 The extent of damage is overwhelming!

13 Water always wins!

14 100,000 gsf of gross anatomy labs & mortuary were destroyed & 4,800 animals perished in Animal Care

15 State of the Campus The Cyclotron facility was completely destroyed Gross Anatomy was completed destroyed The Animal Care Center was completely destroyed High End Instrumentation (NMRs/MRIs/Cyclotron)) were destroyed Electrical Systems were completely destroyed for the entire 1 million gsf complex Mechanical Systems for 250,000 gsf were completely destroyed All internal bsmt walls were mould and bacteria infected

16 Cost of Recovery Debris Removal 7.8 Emergency Protective Measures 13.9 Building Repairs 49.5 Equipment and Supply Replacements 19.6 Cyclotron Decommissioning 3.0 Cyclotron Replacement 13.5 Building Replacement 30.0 Temporary Relocations 12.5 Utilities Mitigation Other Mitigation $138 million

17 First the experience : Then the Lesson We had a plan The plan failed Review the plan Update the plan Test the plan, and Exercise your plan

18 Its usually bigger than you think Event size is critical Evaluating the scope of damage is essential You tend to underestimate You pay a price for this Learn to think out of the box

19 Communications Internal and external communications are critical before, during and after an event Develop a backup plan just in case Plan A fails Ensure employees, faculty, media, congressional and state legislative representatives are kept informed

20 Insurance We had it It is extremely hard to collect on large claims quickly Leads to conflict of cash flow and repair/replacement mentality Review your policies, Read Every Word Hire an insurance claims consultant within 24 hours

21 Business Interruption Insurance You can not have too much! Make sure you have it! The cost of research and operating expenses during the recovery are not an eligible FEMA expense

22 FEMA FEMA is here to help Not to do your recovery for you We had many bad experiences with this help Hire experts to assist your institution with the process Learn quickly what your predisaster condition was There are two programs; Public Assistance (PA) where Colleges and Universities will apply and Emergency relief for individuals. Most individual recovery is funded by loans from the SBA.

23 NIH not invented here Beware of higher education s cultural millstone We like to believe we can self perform Disaster demonstrates our every weakness Why? Everyone has a family Everyone had a full time job before the disaster The regulations are incredible!

24 State Assistance or your Linus Blanket The state won t bring any money The state is tapped out due to the size of the event The state will provide more bureaucrats Self insurance is a fiction The legislature will pick your claims apart You will still have to cash flow the entire recovery with institutional resources

25 Recovery: Policy & Procedure Must begin virtually immediately Is very personal No one wants to be in harms way again The rules don t go away Regardless the severity of your loss you are not allowed any betterment by FEMA Thus, you will tire of hearing pre disaster condition FEMA says You must do after the event exactly what you would do before the event. Your policies and procedures in affect at the time of the event can be your best friend or your worst enemy

26 Recovery: Procurement You must competitively bid You must not suspend your dollar limits on bids You must have an authorization to purchase You must have funds to allot to the purchase You must not issue cost plus contracts You must be patient ; decision making is slow and painful regardless the damage on campus You have got to have a place to do the work

27 Documentation Document Everything There is no such thing as too much documentation Pray that your internal controls are rock solid and that they are unquestionable If you can not document it you are not going to be reimbursed Documentation is everything! When in doubt hire a consultant to do the documentation FEMA style

28 Funding the Recovery Plan for a sufficient Rainy Day Fund Remember FEMA is a reimbursement only program; and at 75% of actual allowable expense 25% is always the institutional cost share in the FEMA mode Your insurance has a deductible know what it is Insurance is slow, FEMA is slower Insurance will disallow so will FEMA Do not issue purchase orders unless you have it funded

29 It is all about cash flow Your insurance is prime FEMA is secondary Waiting for settlement is unnerving to faculty and academic administrators You will have a 25% institutional cost share You will have a deductible The state is the grantee and they will withhold on your reimbursements

30 Scope of work versus cost Scope of Work is the sole determinant Do not get hung up on the cost estimation process The damage assessment recorded in the project worksheets are scope driven FEMA has its own costing methodology and it is not worth fighting over The Stafford Act reimburses on actual cost as measured by the defined and agreed scope of work

31 Value of Research Society acknowledges there is a value The insurance industry and FEMA do not Be patient; know your rights, don t accept verbal instructions or interpretations Get every decision in writing

32 Assert your claims Sophisticated instrumentation is highly susceptible to disaster FEMA and the insurance industry consistently seek the lowest cost option They will try and repair a cyclotron if you let them Insist upon the option that best fits your needs Provide your own independent evaluation at your cost if need be

33 Mitigation Definition: Action taken to minimize the risk from a future event FEMA has two programs think of them as 25% capital loans 406 program Work on damaged facilities and damaged elements only 404 program Administered by your state government. Does not have to be focused on a damaged facility. Is competitively awarded amongst all those damaged. Know the difference and maximize the use of each both programs have a 25% cost share matching requirement

34 Frequently Asked Questions (FAQ s) Does FEMA pay up front? A: No, FEMA programs are based upon reimbursement for work completed which agrees with an agreed scope of work How quickly does FEMA arrive onsite? A: Depending upon the size of the event and the extent of your damages, it could be days, weeks, or months.

35 Frequently Asked Questions (FAQ s) How much is the cost share? A: The cost share is usually 25%. Some emergency & debris costs are at 10% but this is a minimal portion of your total loss typically. Is mitigation funding limited? A: Yes, The 404 mitigation operated by your state is allocated at 15% of the total disaster. 406 mitigation is limited by the size of the loss in a particular facility and by a cost benefit analysis evaluation FEMA operates.

36 Lessons Learned Professionally you will be challenged to your core Physically you will become exhausted Mentally you will be severely tested You may lose friendships over the recovery process You will learn that you can never plan to much or too hard for disasters You will learn how hard it is to say NO

37 Procurement Lessons Local contracts maybe worthless and your state contracts not much better Regional contracts are not robust enough in some instances to provide rapid and sure response to the campus Your Job order Contractor (JOC) will become a critical partner Emergency generators can be hard to find but your JOC contractor can get them Not all of your staff will be available So called First rights contracts are hard to enforce in a total disaster The inventory process for damaged goods will be tedious Documentation for Pro Card purchases may not exist for many supply items lost in the event Professional network relationships are really valuable

38 Why the plan failed? The event was larger than the plan anticipated The impact on critical personnel was greater than anticipated The impact on vendors was bigger than anticipated The destruction to 200,000 gsf was total The infrastructure collapsed; there was no electricity and no AC, & only 25% of the personnel. An enterprise system offsite and working made no difference

39 Plan Improvements Create secondary contracts for essential materials with vendors not in your immediate area Form strategic alliances with other higher educational institutions not in your area Form mutual support agreements with major corporate entities not in your area Exercise your plan annually Get senior management to put Purchasing on the executive team for emergency disaster response Secure a solid relationship with a Physical Plant on another campus not in your city or region Read STRONGER IN THE BROKEN SPACES by James Lee Witt

40 Because Water always wins

41 Mitigation projects are big and expensive

42 Safer, stronger and better Disaster resistance is an investment not an expense

43 Thank you!! Do Great Things!!