Reducing Risk When Hiring Vendors and Contractors

Vol. 15 No. 5

businessmanager eletter Vol15 No5 vendorshake

Summer is rapidly approaching, which usually offers a slightly slower pace around campus. With students enjoying their summer break, most schools take advantage of the opportunity to renovate, expand facilities, and make changes to the campus that during the school year would be more difficult to schedule. Renovations usually entail the use of vendors and contractors—exposing your school to risks associated with contractual workers.

This is a good time to review the basics of working with vendors and contractors, even if your campus is already hosting a construction crew. If you’ve missed a few steps while hiring them, there’s no rule that says you can’t backtrack and request documentation now.

Which leads us to the golden rule of working with vendors and contractors: All vendors and contractors must provide evidence of good risk management and insurance before they arrive to start work. “Good risk management” evidence simply means documentation of their policies, mission, and standard practices. You should have written documentation of their safety standards, their policies for workplace safety, and references. And, let’s not forget—inform your attorney of all contracts. Your legal counsel must review all provided documentation for legal wording and accuracy.

What to Look For in the Vendor-Provided Insurance Documentation

A “certificate of insurance” provides the proper evidence of insurance. The certificate of insurance should contain coverage for the work activities and provided services.

All certificates of insurance should show coverage for “General Liability,” with limits not less than $1,000,000. If the vendor or contractor has employees, the certificate of insurance should include “Workers Compensation” with employer’s liability limits of not less than $1,000,000. If vehicles are involved, “Automobile Insurance” with limits of not less than $1,000,000 should be included in the certificate of insurance. If professional services are provided, require “Professional Liability” insurance with limits of not less than $1,000,000.

All certificates of insurance should also state that the vendor’s or contractor’s insurance names your school as an “Additional Insured.” All vendors and contractors should uphold and coordinate safety procedures as required by law, standards of care, and common sense. Have your lawyer review all provided insurance documentation to make sure the insurance meets state law standards.

Additional Documentation: Contracts, Safety Records, and Loopholes

In addition to proof of insurance, have in hand a formal contract that describes the work (or services) to be performed, and delineates the contractor's responsibilities, schedule, compensation, and a method to resolve disputes. This contract should state they are independent contractors, they have proper insurance, they will agree to safety procedures, and they are responsible for their work and workers.

The contracts should contain wording that states the vendor or contractor will “Hold Harmless,” “Indemnify,” and “Waive Subrogation” for any of their actions and/or responsibilities. Provide recommendations, legal wording, and appropriate procedures.

ISM’s Business and Operations Academy provides an ideal opportunity to elevate your skills while interacting with ISM Consultants and your peers from other schools. The conference is designed for CFO, Business Managers, Operations Managers, and School Heads with three years experience (some exceptions are made—contact for more information). This year, the Business and Operations Academy will run October 22–25 in St. Louis, MO. If interested, be sure to register before the event fills!

Additional ISM resources:
The Source for Business and Operations Vol. 6 No. 6 Reviewing Your Property Casualty Insurance Premiums
The Source for Business and Operations Vol. 3 No. 7 Risks That Keep You Up at Night

Additional ISM resources for Gold Consortium members:
I&P Vol. 41 No. 4Risk Management Assessment: Reduce Your School’s Exposure
I&P Vol. 41 No. 5 The Risk Management Assessment Process

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