Contractor controlled insurance: A Comprehensive Guide

I. Introduction

What Is Contractor controlled insurance, and Why Does It Matter?

Purpose: A risk financing option wherein the contracting authority allows the contractor to self-underwrite their own risks, streamlining processes while requiring trust in the contractor's risk management.

Context: In Canadian government contracting, this model is used by departments such as Public Services and Procurement Canada to reduce administrative burden while maintaining oversight through Treasury Board of Canada Secretariat guidelines.

Overview: This guide breaks down the components of contractor controlled insurance, explores its strategic value in procurement, and highlights how digital tools like CanadaBuys and data analytics are shaping risk assessment processes.

II. Definition

A. Clear and Concise Definition

What it is: A risk financing option wherein the contracting authority allows the contractor to self-underwrite their own risks, streamlining processes while requiring trust in the contractor's risk management.

Key Terms: Concepts such as self-insurance, risk retention, underwriting standards and the relationship to Controlled goods, Insurance transfer and Government specified insurance.

B. Breakdown of Key Components

• Component 1: Policy structure and risk retention limits established by the contractor under PSPC standards.

• Component 2: Internal risk management procedures and third-party audits to ensure compliance with Treasury Board policies.

• Additional Components: Reporting requirements, performance bonds and integration with e-procurement platforms like e-procurement and CanadaBuys.

C. Illustrative Examples

• Example 1: A road construction project managed by PSPC in Alberta uses contractor controlled insurance to align coverage terms across multiple subcontractors, reducing costs by 12% and simplifying tender evaluation in the source list process.

• Example 2: A defence installation upgrade under a supply arrangement leverages this model to centralize risk oversight internally, accelerating the contract award process by two weeks.

III. Importance

A. Practical Applications

Contractor controlled insurance is applied in major federal infrastructure procurements, where consistent coverage allows departments to compare bids more objectively. It integrates with CanadaBuys workflows and supports real-time budget checks through the real time budget check (RTBC) feature.

B. Relevant Laws, Regulations, or Policies

The model is governed by the Treasury Board Standard on Insurance Services, the Government Contracts Regulations and the Canadian Free Trade Agreement. Public Services and Procurement Canada enforces these rules to maintain competitiveness and protect public funds.

C. Implications

By shifting underwriting responsibility to contractors, departments can focus on core procurement activities, achieve cost savings and reduce administrative delays. This approach encourages robust risk management practices and can enhance competitive advantage for compliant suppliers.

IV. Frequently Asked Questions (FAQs)

A. Common Questions

• Q: What does Contractor controlled insurance mean? A: It is a self-underwriting model that streamlines risk financing in government contracts.

• Q: Why use this approach? A: It reduces duplicative coverage, lowers costs and accelerates procurement timelines.

• Q: How does it work in practice? A: Contractors submit a combined insurance proposal as part of the RFx and adhere to Treasury Board reporting standards.

• Q: Who oversees compliance? A: Public Services and Procurement Canada audits policies against TBS guidelines and may require performance bonds linked to the milestone based payments schedule.

B. Clarifications of Misconceptions

• Misconception 1: Contractor controlled insurance is too complex for small businesses. Truth: Small suppliers can opt in by partnering with experienced insurers and leveraging standard document templates.

• Misconception 2: It eliminates departmental oversight. Truth: PSPC maintains strict audit rights and performance metrics through contract clauses.

V. Conclusion

A. Recap

Contractor controlled insurance centralizes risk financing, aligns coverage across stakeholders and supports efficient Canadian government procurement under established policies.

B. Encouragement

Departments and suppliers are encouraged to assess how this model can reduce costs, streamline evaluation and strengthen compliance in upcoming sourcing events.

C. Suggested Next Steps

• Review Government specified insurance guidelines in the context of contractor controlled models.

• Explore CanadaBuys tutorials on risk management and e-procurement.

• Consult with experts familiar with Supply arrangement (SA) and related insurance requirements.