The Cayman Contractors Association wishes to respond to an article in the Caymanian Compass, Wednesday, 19 November, titled ‘Contractors set Brac rates.’
In the article, Mr. Gerard Mendez of Heritage Insurance Company states that, ‘The appropriate transparency needs to exist,’ and asks the question of how the rates were derived. This is quite a valid question, the answer to which would be of interest to both the insurers and the insured.
The Public Works Department commissioned Chartered Quantity Surveyors BCQS to draw up a draft chart of rates. The CCA was then invited to meet with PWD and BCQS to discuss the rates. The draft rates were then sent out to all members of the CCA, large and small. A few suggestions were made by CCA contractors, each of which was deemed valid by both PWD and BCQS. The method used by PWD was both appropriate and thorough.
Mr. Mendez further states that he sees the setting of the rates as ‘a good thing, once I’m assured that the rates of small contractors and big contractors were factored in when arriving at the [standardised] rates.’ The rates were, in fact, unanimously approved by every single member of the CCA. The CCA membership comprises contractors both large and small.
Mr. Mendez goes on to say that his concern in this area arises due to his belief that the ‘rates of larger contractors tend to be higher because of higher overhead costs.’
The latter comment is a misconception. There is no question that the total dollars spent on overheads by larger contractors would be higher than that spent by a smaller company; however, the larger company also has more workers to disperse that overhead over. A company with, say 30 workers is likely to have three times the overheads of a company with ten workers. Overheads and numbers of workers tend to even out. If they did not, larger companies could not compete with smaller companies – their rates would be higher.
The situation is much like that of insurance companies. Island Heritage is one of Cayman’s larger companies and therefore would be anticipated to have higher overheads than smaller insurance companies; however, we have no doubt that their rates are competitive and in line with those of the smaller companies, as their overheads are disbursed over the number of staff. This is true of all industries.
In the same article, Mr. Michael Gayle, senior vice president of Sagicor General states that the standardisation of construction rates could help the underinsurance problem. The CCA appreciates that Mr. Gayle recognises and is anticipating this benefit.
This, in fact, was the reason why the CCA sent the standardised rates to all insurers. Having learned from Hurricane Ivan, our goal is to create a level playing field for all insurers, as well as for all those insured.
Brackers have already been badly hit by Paloma. It would truly be a tragedy if any of the insurers were to undercut the standard rates when providing settlements. If this were to happen, it would not affect contractors, as our rates would remain the same, but would most assuredly hurt the Brackers who have already been through enough tragedy as a result of the storm.
Cayman Contractors Association
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