04-091 Milliman, IncAGREI=MENT
CITY OF CUPERTINO
10300 Torre Avenue
Cupertino, CA 95014
408-777-3200
~3 J7 g 9
NO. O3 I t=
BY THIS AGREEMENT made and entered into on the _ 27th day of July 2004
by and between the CITY OF CUPERTINO (Hereinafter referred to as CITY) and
Name (1)Milliman, Inc (2)
Address 650 California St 17th F1r.CitySan Francisco Zip 94108 Phone415-403-1333
(Hereinafter referred as CONTRACTOR), in consideration of their mutual covenants, the parties hereto agree as
follows:
CONTRACTOR shall provide or furnish the following spe~:ified services and/or materials:
Analysis relating to the City's self-insured workers compensation program as described on
page 5/13 of City's RFP (attached).
EXHIBITS: The following attached exhibits hereby are m~cde part of this Agreement:
Page 5/13 of City's RFP for actuarial analysis of workers' compensation program
7/16/04 letter re: proposal for actuarial services -workers' compensation program
TERMS: The services and/or materials furnished under ti-lis Agreement shall commence on 7/28/04
and shall be completed before 9 / 15 / 04
COMPENSATION: For the full performance of this Agreement, CITY shall pay CONTRACTOR:
Not to Exceed $7,000.00.
GENERAL TERMS AND CONDITIONS
Hold Harmless. Contractor agrees to save and hold harmless the City, its officers, agents and employees from any
r nd all damage and liability of every nature, including all costs of defending any claim, caused by or arising out of the
erformance of this Agreement. City shall not be liable for acts of Contractor in performing services described herein.
I j~~nsurance. Should the City require evidence of insurability Contractor shall file with City a Certificate of Insurance
(~ ~! efore commencing any services under this Agreement. Said Certificate shall be subject to the approval of City's
Director of Administrative Services.
Non-Discrimination. No discrimination shall be made in tFle employment of persons under this Agreement because
of the race, color, national origin, ancestry, religion or sex of such person.
Interest of Contractor. It is understood and agreed that this Agreement is not a contract of employment in the sense
that the relation of master and servant exists between City end undersigned. At all times Contractor shall be deemed
to bean independent contractor and Contractor is not authorized to bind the City to any contracts or other obligations
in executing this Agreement. Contractor certifies that no one who has or will have any financial interest under this
Agreement is an officer or employee of City.
Changes. This Agreement shall not be assigned or transferred without the written consent of the City. No changes
or variations of any kind are authorized without the written consent of the City. Other: As per "Contractual Terms"
in attached proposal (pp 4&5); except that choice of Law will be that of the State of
CONTRACT CO-ORDINATOR and representative for CITY shall be:
California.
NAME r.arol Augustine DEPARTMENT Finance
This Agreement shall become effective upon its execution kly CITY, in witness thereof, the parties have executed this
Agreement the day and year first written above.
^< <-~~ ~ Title
Soc. Sec. # ~ ~
APPROVALS
EXPENDITURE DISTRIBUTION
D TMENT HEAD DATE ACCOUNT NUMBER AMOUNT
~./ 7 ~ 110-4100-7014 $7,000.00
CITY CL K D
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CITY CLERK COPY
A ft?ILLI P.A F, td GL02=.L FIF. iti
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Consultants and Actuaries
July 16, 2004
City of Cupertino
Attention: City Clerk
10300 Torre Avenue
Cupertino, California 95014
Re: Proposal for Actuarial Services -Workers Compensation Program
Dear City Clerk:
Milliman, Inc. is pleased to submit this propo~:al for consulting actuarial services for the
City of Cupertino (the City). This letter outlin~:s the project scope and provides you with
the items listed in the Request for Proposal (RFP).
INTRODUCTION ~ I+ XECUTIVE SUldIIVIAR~t
Standard Analysis. This analysis relates to the City's self-insured workers
compensation program. Specifically, using data evaluated as of June 30, 2004 we will
provide the City with estimates of:
• RetaineCl lpgcl reserves as of June 30 20'04. Reser~'e est~.i~ateS equal the projected
ultimate losses minus actual payments made to date; the City should establish a
balance sheet liability for this item.
• Funding estimate for Policy Year 200~~-05. Funding estimates are intended to
provide for future losses. Many organizations use these estimates for budget
purposes. For workers compensation, these estimates will reflect California's new
workers compensation benefits. We will also assume your current self-insured
retention will apply for going forward, u~~less you prefer alternative limits.
• Probability Levels & Present Values. The estimates described in the previous
section will be calculated on an expected value, undiscounted basis. We will also
show the results at the 70%, 80%, 90% and 95% probability levels, which
increase the likelihood, but do not guarantee, that actual future payments will not
exceed our estimates. Additionally, the present value associated with our
' Unless otherwise specified, losses include allocated loss ;adjustment and claim administration expenses.
City of Cupertino
' July 16, 2004
Page 3 of 5
manage have twelve members of the Casualty Actuarial Society and ten other
professionals at various levels of career development.
Software. Milkman has developed customi~:ed software (based in Microsoft products
such as Excel) that we use for our self-insure~J clients, which can easily be tailored to a
client's specific needs. Since this is an internal product, the software itself does not have
a "reputation" in the industry. However, using this software as a tool, Milkman itself has
developed a valued reputation for providing hi€;h quality consulting services.
DATA
Requested Items. Attachment B to the RFP ~:ontains a "snapshot" of the basis data we
need to complete the analysis; we would also like to review that report at earlier
evaluation dates. In addition, we would like to review your prior actuarial study.
Data Reliances. Our estimates will be based on the data that we receive from the City
and your TPA. Although we check data for reasonableness, we do not perform an
independent verification or audit. Such a review would be beyond the scope of our
assignment. If the underlying data or information is inaccurate or incomplete, the results
of our analyses may likewise be inaccurate or ir~coinplete.
Industry Data. We will base our projections on the City's own historical data to the
extent it is credible. If the City's own experience is not statistically reliable enough to
forecast by itself we will supplement the Cit•,~'s data with industry statistics from the
California Workers Compensation Insurance Rating Bureau (WCIRB) and the Insurance
Sel-vices Office (iS0) or other industry sources.
TIIVIE TABLE AND WORK PRODUCT
Timing. A preliminary draft report will be completed with three weeks of receiving the
data. The final draft will be completed within ~, week of receiving your comments on the
preliminary draft. The deadlines identified in ;,your RFP can easily be met if the data is
available by mid A„g„st,
Deliverables. The results of our analysis will be fully documented in a written report. In
addition to summarizing the results, the report will include a detailed discussion of the
assumptions, methodologies underlying our a~lalysis, sources of variability and other
important limitations. The report will also discuss the City's experience (loss rates,
frequency and severity) and compare them to other California public entities.
„~ City of Cupertino
July 16, 2004
Page 5 of 5
binding arbitration under the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall take place before a panel of three arbitrators. Within
30 days of the commencement of the arbitration, each party shall designate in writing a
single neutral and independent arbitrator. TYie two arbitrators designated~by the parties
shall then select a third arbitrator. The arbitrators shall have a background in either
insurance, actuarial science or law. The arl:Iitrators shall have the authority to permit
limited discovery, including depositions, prior to the arbitration hearing, and such
discovery shall be conducted consistent with the Federal Rules of Civil Procedure. The
arbitrators shall have no power or authority to award punitive or exemplary damages.
The arbitrators may, in their discretion, award the cost of the arbitration, including
reasonable attorney fees, to the prevailing party. Any award made may be confirmed in
any court having jurisdiction. Any arbitra~~ion shall be confidential, and except as
required by law, neither party may disclose the content or results of any arbitration
hereunder without the prior written consent o:~ the other parties, except that disclosure is
permitted to a party's auditors and legal advisors.
Choice of Law. The construction, interpretation, and enforcement of this Agreement
shall be governed by the substantive contract l~rw of the State of California without regard
to its conflict of laws provisions. It is the intention of the parties that the Limitation of
Liability paragraph above shall be enforceable and the parties believe that the clause is
enforceable under California law. In the event that the Limitation of Liability clause is
not enforceable, then the parties agree that NI;w York law, and not California law shall
apply. In the event any provision of this agre~;ment in unenforceable as a matter of law,
the remaining provisions will stay in full force and effect.
CLOSING
Milliman appreciates this opportunity to submit this proposal to the City of Cupertino.
Please contact us if you have questions or comments.
Best regards,
Guy A. Avagliano
FCAS, MAAA
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OFFICES IN PRINCIPAL CIl~IES WORLDWIDE