agenda - lee health | lee health · 2019. 12. 18. · agenda finance & investment committee...
Post on 21-Aug-2020
0 Views
Preview:
TRANSCRIPT
AGENDA FINANCE & INVESTMENT COMMITTEE MEETING
MAY 30, 2019 AT 9:00 A.M. Gulf Coast Medical Center – Boardroom (Medical Office Building)
13685 Doctor’s Way, Ft. Myers, FL 33912
1. Call to Order – David Collins, Chairman
2. Public Input
3. Committee Minutes – There are no minutes to approve.
4. SEI Investment Update (30) (Informational) Peter Glennon, Senior Client Portfolio Manager, Client Portfolio Management Team Brian Bono, CFA, Client Investment Strategist, Advisory Services Team Sandra Ackermann-Schaufler, CFA, Portfolio Manager, Investment Management Unit
5. Financial & Statistical Update FYTD 4/30/2019 (15) (Informational) Ben Spence‐ Chief Financial Officer
6. Employee Total Rewards Program 2020 (15) (For Recommendation to the Board) Alison Thurau‐ System Director HR Total Rewards
7. Budget 2020 Operating Margin Target & Budget Assumptions (15) (For Recommendation to the Board)
Ben Spence – Chief Financial Officer
8. Medicare Advantage Update (25) (Informational)
John Chomeau – Chief Population Health Officer
9. License Agreement for Parking Spaces (5) (For Recommendation to the Board)
Latrice Davis – VP of Operations ‐ LPG
10. 3 Year Continuing Services Contract for Construction Management (10) (For recommendation to the Board)
a) Acute Care b) Outpatient Care Dave Kistel –VP Facility Management
11. Adjourn – David Collins, Chairman
Date of the next Committee Meeting: September 26, 2019 at 9:00 a.m. Gulf Coast Medical Center – Boardroom ‐ 13685 Doctors Way, Ft. Myers, FL 33912
1 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI’s Fiduciary
Management Solution
May 30, 2019
A flexible approach for managing your
asset pools and their impact on your
healthcare organization’s finances
2 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Agenda
• SEI Corporate Overview and Update
• SEI Strategic Advice
− Process
− Current Financial Ratios
− Lee Health Dashboard
• Investment Management Review/Outlook, Process and Philosophy
• International Equities (tabled for November 2019 meeting)
• Appendix: Performance and Fund Detail
SEI Participants
• Peter Glennon, Senior Client Portfolio Manager, Client Portfolio Management Team
• Brian Bono, CFA, Client Investment Strategist, Advisory Services Team
• Sandra Ackermann-Schaufler, CFA, Portfolio Manager, Investment Management Unit
3 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI overview: Over 25 years of taking accountability for
healthcare client investment results
• A financially sound organization – Publicly held firm (NASDAQ: SEIC), global company
– Repurchased more than $1 billion in SEI stock since January 2008
– More than $740 million of unrestricted cash on hand
• $89 billion in institutional assets under management with 479 clients
• SEI is the largest OCIO to healthcare providers* – 44 healthcare clients
– $15.3B in healthcare AUM
– Greater than 30% compound annual growth rate in
healthcare AUM since 2009
• Manage assets for a variety of healthcare organizations, including large
and small regional health systems, specialty care hospitals and long-term
care organizations
• Named ‘Top OCIO Provider’ for the second consecutive year at the 2018
Institutional Asset Management Awards1
• SEI’s healthcare solution has achieved the
“Peer Reviewed by HFMA®” standard
since 2011
Data as of March 31, 2019. $332 billion in firm wide assets under management. Source: SEI fourth quarter earnings release, 2018. 1As of November 2018. * Distinction based on
competitive research utilizing publicly available information as of 12/31/18. Largest based on number of healthcare clients, and/or based on healthcare client assets under management in
SEI’s OCIO program for which SEI has discretion for money manager hiring and replacement decisions on behalf of those clients. HFMA staff and volunteers determined that these
products and services have met specific criteria developed under the HFMA Peer Review Process. HFMA does not endorse or guarantee the use of these products and services.
$6.9B
$15.3B
2009 2019
4 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI quarterly update
Will There be Growth in the Spring?
A summary of the first-quarter outlook by CFA and Chief Market Strategist, James Solloway.
Is the Rate Hike Cycle Over? The Federal Reserve’s latest projections depicted a softer assessment of the economic outlook.
2019 Fixed-Income Manager Survey We polled the sub-advisors within our U.S. investment-grade fixed-income strategies about their outlooks for interest
rates, monetary policy and bond-market conditions in 2019.
Investment Liquidity How or when should you explore the opportunities that can come with liquidity?
Pension Accounting Research Series: ASC 715 Discount Rate Selections 2019: Disclosure ranges for 2018.
SEI Adds $1.1 Billion in New OCIO Assets in Fourth-Quarter 2018 Nine new clients represent continued market demand for OCIO. Guide Dogs for the Blind, Pine Crest School and
the Jerusalem Foundation, Inc. are among SEI’s institutional clients added in the fourth-quarter of 2018.
Jim Smigiel on Bloomberg Daybreak: Australia Jim Smigiel, Chief Investment Officer of Absolute Return Strategies, discusses the global markets and shares his
thoughts on U.S. and China trade relations with Bloomberg's Shery Ahn and Haidi Stroud-Watts.
SEI Named "Top OCIO Provider" at 2018 Institutional Asset Management Awards SEI is recognized for second consecutive year.
Q1 2019. Financials as of March 31, 2019. *Distinction based on competitive research utilizing publicly available information as of 12/31/18. Largest based on number of healthcare clients, and/or based on healthcare client assets under management in SEI’s OCIO program for which SEI has discretion for money manager hiring and replacement decisions on behalf of those clients. HFMA staff and volunteers determined that SEI’s outsourced investment management solution met specific criteria developed under the HFMA Peer Review process. HFMA does not endorse or guarantee the use of this product. Top OCIO Provider at the Fund Intelligence 2017 and Fund Map 2018 Institutional Asset Management Awards as of November 2018. *Pensions & Investments, July, 2018. SEI ranked as a largest outsourcer based on worldwide institutional outsourced assets under management.
.
Research and Commentary
SEI in the News
April 30, 2019: Plan Sponsor Council of America Annual Conference Tampa, Florida. SEI will have a booth. Please let us know if you plan to attend.
Events
SEI is the largest OCIO for healthcare providers and
hospitals*. See how SEI stands out on our webpage.
HFMA Peer Review: Key Findings
billion
Institutional
AUM
billion
Worldwide
AUM
$332
$89
For more information or a digital copy, email
Institutions@seic.com
5 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI brings a centrally focused, team-based approach to
Lee Health
Client Advisory Team
Client Service
Director
Vivian Estadt
• Overall client strategy
• Regular client meetings
• Committee/Board education
• Asset allocation analysis
• Portfolio design
• Investment policy formulation
• Performance reporting
• Transition management
• Customized portfolio modeling
• Enterprise risk management
Investment
Strategist
Brian Bono, CFA
Portfolio
Manager
Sandra
Ackermann-
Schaufler, CFA
Managing
Director, Advice
Al Pierce, CPA
Client Portfolio
Manager
Peter Glennon
Portfolio Strategies Group
• Capital market assumptions
• Dynamic strategies
• Portfolio strategies
• Economic outlook
Traditional and Non-Traditional Strategies Group
• Portfolio construction
• Manager placement and portfolio weighting
• Public and alternative strategies
• Manager selection
Manager Research Group
• Global manager research
• Manager due diligence
• Manager sourcing
• Manager monitoring
Investment Management Unit
Investment Strategy Oversight Committee and Risk Management Group
6 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI Strategic Advice Process
7 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI’s Fiduciary Management model for
healthcare organizations
*Defined benefit plans only
- Goal setting & monitoring
- Integrated financial modeling
- Asset allocation strategy development
- Asset / liability study*
- Investment policy formulation
- Liability driven investing*
- Metric reporting
- Portfolio structure
- Manager research & selection
- Manager oversight & replacement
- Dynamic asset management
- Transition management
- Exclusive fiduciary
- Multi-level risk analysis
- Trust & custodial services
- Rebalancing
- Disbursements
- Sub-accounting & reporting
- Benefit payments*
- Defined benefit actuarial
services
- Account transition
Strategic
Advice
Trustee
Services
Additional
Services
Investment
Management
OCIO/ FIDUCIARY
MANAGEMENT
• Integrated and holistic approach to designing and implementing asset allocation strategies for multiple investment pools maintained
by healthcare organizations
• Alignment of investment allocation strategies with organizational goals, objectives, risk tolerances and key financial metrics /
covenants as quantified through in-depth enterprise risk analysis
• Dedicated team of healthcare sector specialists
• Time-tested manager selection team focused on evaluating industry-leading independent institutional firms
• Actively managed portfolios designed to take advantage of market opportunities based on SEI’s active view
• Choice around the type of investment implementation, level of discretionary delegation and size of delegation engagement
8 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Capital Structure
Operations/ Capital Budgeting
Unrestricted Cash/
Investments
Relationship between the inherent risk ‘components’ of a
healthcare provider
Unrestricted Cash/Investments
› Operating / working capital liquidity
› Growth targets
› Support of strategic objectives
› Net financial margin
› Funding capital spending
› Asset allocation
Operations/Capital Budgeting
› Competitive positioning
› Strategic initiatives
› Capital spending
› ACA / health policy changes
› Forecasted performance
› Current / desired rating
Capital Structure
› Debt portfolio
› Interest rate sensitivity
› Credit facilities
› Interest rate swaps
› Bond covenants
› Credit rating implications
Healthcare Enterprise Risk
Organizational goals / financial constraints drive allocation strategies for:
Cash / short-term Board-designated / long-term
Foundation / endowment Self / captive insurance reserves
9 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI’s advice process incorporates Enterprise Risk
Management principles into allocation strategy development
Enterprise Risk Management (ERM):
› Closely links organizational strategy,
operations, finance and treasury
› Identifies potential risks that may impact
the organization
› Helps prioritize and manage identified
risks within the defined risk ‘appetite’
Risk appetite:
› Amount of risk an organization is willing
to accept in the pursuit of value
› Broad and strategic
Risk budget:
› Guides operating units or initiatives and
is closely linked to risk appetite
› Tactical and operational
Identify risk exposures
Financial forecasting
Scenario development / stress testing
Monitor risks / revise strategy
INTEGRATED
ERM
PROCESS
10 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Healthcare enterprise integration: Balance sheet investment
strategy should incorporate strategic metrics
For illustrative purposes only.
A benchmark-based focus fails to accurately demonstrate the impact on
the organization and performance relative to key financial metrics
SEI: Strategic Financial Metrics Basic Metrics
Returns vs. Benchmarks
Actual Benchmark
Returns vs. Peers
% R
etu
rns
% R
etu
rns
1 YR 3 YR 5 YR
1 YR 3 YR 5 YR
Rating Agency Median
Organization-Specific Metric
0
50
100
150
200
250
300
350
Days Cash on Hand
Days
0
1
2
3
4
5
6
7
8
Debt Service Coverage
%
x
0
50
100
150
200
250
300
Cash to Debt
Rating Category Rating Category
Rating Category
11 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Important information: Asset allocation & performance
Inception date: 9/30/2007
Property and alternative asset values and performance may be reported on a monthly or quarterly lag.
The Portfolio Return numbers are calculated using Gross Fund Performance, using a true time-weighted performance method (prior to 6/30/2012,
the Modified Dietz method of calculation was used). Gross Fund Performance reflects the effective performance of the underlying mutual funds that
are selected or recommended by SIMC to implement an institutional client’s investment strategy. Gross Fund Performance does not reflect
the impact of fund level management fees, fund administration or shareholder servicing fees, all of which, if applicable, are used to offset the
account level investment management fees the client pays to SIMC. Gross Fund Performance does reflect certain operational expenses charged
by the funds and the reinvestment of dividends and other earnings. The inclusion of the fund level expenses that the client incurs but that are offset
against the client’s account level investment management fees would reduce the Gross Fund Performance of the mutual funds.
If applicable, alternative, property and private assets performance and valuations may be reported on a monthly or quarterly lag. Alternative,
property and private assets performance is calculated gross of investment management fees and net of administrative expenses and underlying
fund expenses. However: Structured Credit Fund performance is calculated gross of investment management fees and net of administrative
expenses; SEI Offshore Opportunity Fund II Ltd. Class A performance is calculated net of investment management and administrative expenses;
and Energy Debt Fund performance is calculated net of management fees, performance fees, as applicable, and operating expenses. For
additional information about how performance is calculated, please see your monthly performance report.
12 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
How we create probability distributions and what they mean
• The probability distribution graphs and / or tables that follow are meant to
provide an overview of the range of possible outcomes for a given variable
(e.g., returns, pension contributions, expense) for a given asset allocation.
• The probability distributions are generated using SEI’s proprietary
modeling tool and simulated capital market behavior.
• Capital market behavior is simulated for 1,000 possible scenarios based on
expected performance of each asset class and reflecting current economic
conditions. Capital market assumptions such as return, standard deviation
and covariances are inputs into this process, combining with model
parameters to create market scenarios.
• We use these 1,000 capital market scenarios to create 1,000 output
scenarios for each variable being considered.
• A 90% confidence interval should be interpreted as 90% of the projected
output variables, falling between the 5% and 95% results, based on SEI
Capital Market Assumptions.
• This projection is hypothetical in nature, does not reflect actual investment
results and is not a guarantee of future results.
95th percentile:
95% of outcomes are less than
or equal to this value
5th percentile:
5% of outcomes are less than or
equal to this value
50th percentile:
50% of outcomes are greater than
this amount, and 50% are less
$ M
illi
on
s
Distribution of
Probable Outcomes
95th Percentile
Median
(50th Percentile)
5th Percentile
75th Percentile
25th Percentile
22
20
18
16
14
12
10
8
6
4
2
0
About Capital Market Assumptions
• SEI Investments Management Corporation develops forward-looking, long-term capital market assumptions for risk, return, and
correlations for a variety of global asset classes, currencies, interest rates, and inflation.
• These assumptions are created using a combination of historical analysis, future market environment expectations and by applying our
own judgment. In certain cases, alpha and tracking error estimates for a particular asset class are also factored into the assumptions.
• We believe this approach is less biased than using pure historical data, which may be affected by unsustainable trends or permanent
material shifts in market conditions.
13 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Key financial ratios vs. Moody’s hospital and health system
medians
*Sources: Lee Health audited financial statements for the fiscal years ended 9/30/2018 and 9/30/2017, and unaudited interim financials for the seven months ended 4/30/2019;
S&P Ratings Direct report dated 3/14/2019; Moody’s ratings report dated 3/21/2019; Moody’s Not-for-Profit Hospital and Healthcare System Medians report dated 4/12/2019; SEI analysis
Credit Ratings
• S&P: ‘A+’ rating affirmed in May 2019;
outlook maintained at Positive
• Moody’s: ‘A2’ rating affirmed in May 2019;
Stable outlook
• Leading market share in favorable service areas
• Continued strong margins remain favorable to ‘A2’
medians
• Strong unrestricted liquidity provides flexibility
• Large construction projects impacting cash reserves
and ultimately drives increased leverage
• Projected liquidity will improve through reimbursement
financing
Prelim 2018 Audit Audit Prelim
A Rating 2016 2017 2018 (Prelim) 30-Sep-17 30-Sep-18 30-Apr-19
Key Ratios
Operating Margin 2.00 2.7% 1.8% 1.7% 4.1% 3.0% 4.1%
Days Cash on Hand 220.60 213.1 213.7 209.7 231.2 195.6 210.2
Unrestricted Cash & Inv to Total Debt 176.4% 160.9 175.4 172.6 146.2 133.2 127.4
Medicare % of Gross Revenues 48.30 44.9 45.8 47.2 49.1 52.2 53.6
Other Ratios/Stats
Capital Spending / Depreciation 1.1 1.2 1.2 1.1 2.1 3.1 2.0
Total Debt to Capitalization (%) 29.4% 33.1% 32.4% 32.1% 32.4% 30.5% 33.8%
MADS Coverage - Moody's Adjusted (x) 4.7 4.7 4.4 4.4 4.2 3.1 3.9
Regional Hospitals
Moody's Medians LMHS
14 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Lee Health
Asset allocation
Portfolio metrics presented gross investment management fees.
Source: SEI Capital Market Assumptions. Please see important disclosures at the beginning of this section and at the back of the presentation.
Asset Class Current
Effective 4/30/19
S&P 500 Index 19.0
US Small/Mid Cap Equity Index 5.5
World Equity ex-US 7.5
World Equity ex-US Index 6.5
Emerging Markets Equity (+ Frontier) 4
Global Low Beta Equities 5.5
Total Equity Exposure 48
Limited Duration Fixed Income 11.5
Core Fixed Income 24
TIPS 5.5
Total Fixed Income Exposure 41
Directional Hedge 4.5
Private Real Estate 6.5
Total Alternatives Exposure 11
Portfolio Metrics
Expected Return 6.0%
Standard Deviation 11.5%
1-Year Value at Risk (5th percentile) -11.2%
15 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Executive summary / portfolio review as of March 31, 2019
Fiscal Year 2019 Performance Summary (October 2018 through March 2019)
• Assets totaled $753,108,978 as of 3/31/19
– 9/30/17 assets: $830,861,182
– Net contributions/disbursements to portfolio: ($80,000,000)
– Net investment gain/loss: $2,250,845 in FYTD ‘19
– Fiscal year to date return as of 3/31/19: 0.53%
• Assets totaled $919,256,440 as of 4/30/19
– Net contributions/disbursements to portfolio: $70,138,366
– Net investment gain/loss: $18,256,892
– Fiscal year to date return as of 4/30/19: 2.58%
Economic Highlights
• Risky assets rebounded sharply from a difficult fourth quarter, thanks to oversold conditions, a suddenly-more-dovish Federal Reserve, and hopes for
further stimulus measures in China.
• U.S. equities led the way once more. Although first-quarter returns were impressive, developed and emerging markets were still down from a year ago,
driven by ongoing worries about China and Europe.
• A more-dovish Fed, falling interest rates, and benign financial conditions were tailwinds to credit, allowing spreads to reverse much of the widening that
occurred in late 2018. These dynamics were especially helpful to long-duration and high-yield bonds, although most areas of fixed income did well.
• Consumer price inflation continued to slow from its mid-2018 highs, creating a bit of a headwind for inflation-linked Treasurys. However, the favorable
environment for fixed income allowed TIPS to post a positive return for the quarter despite falling inflation.
• Commodities also performed well, led by cyclical areas like energy and industrial metals, as both oil and nickel rebounded from steep fourth-quarter
declines.
Strategy Review
• LH investment portfolio produced positive return towards budget for FYTD 2019 (+)
• LH investment portfolio contributed to improved LH financial ratios for FYTD 2019 (+)
• 6 of 10 funds held in the portfolio for FYTD 2018 met or exceeded their benchmarks (+)
No Manager Changes YTD
Please refer to the “Important information: Asset allocation & performance” page for additional information on portfolio performance.
For Institutional Investor use only. Not for public distribution.
Lee Health
16
Investment Objective
1. Long term objective is to generate a return sufficient to
meet its current and expected future financial
requirements
2. To earn the greatest total return possible consistent
with its general risk tolerance, the securities noted as
eligible for purchase and permissible investments
3. Funds shall be invested with safety of capital, liquidity
of funds and income as primary priorities
FYTD through April 2019
$387.1 $413.9 $451.6 $458.0 $493.8
$612.4
$727.2
$836.3
$941.0 $957.2
$830.9 $753.1
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 Q2FY2019
1) ~$150 million was added to the Lee Health accounts on 4/17/2019
Source: Lee Health Investment Policy Statement, SEI. Data as of 4/30/19 unless otherwise indicated. Inception date 9/30/2007.
Portfolio Market Value
Risk Tolerance
1. Short-term volatility and uncertainty of investment
results are recognized as real and will be managed
appropriately through specific asset allocation
strategies and diversification
2. Portfolios will be evaluated on a "total return“ basis,
measured against risk taken by the Sharpe ratio
3. Investments should be made with judgement and care
$919,256,4401
Total Market Value 4/30/19
For Institutional Investor use only. Not for public distribution.
Lee Health FYTD through April 2019 (continued)
IPS Target Actual % Compliant
Equity 48% 46.6%
Fixed Income 41% 40.5%
Alternatives/Core
Property 11% 12.9%
(1) Returns greater than one year are annualized. Allocation split for Alternatives reflects the split between Hedge and Private Real Estate as of 3/31/2019. Please refer to the Important Information: Asset Valuation and portfolio returns page for additional information on portfolio performance. (2) All returns reflect Alternative returns as of 12/31/18 unless otherwise noted. (3) Alternatives Q2 FY19 return is as of 3/31/19. Source SEI, Lee Health Investment Policy Statement. Data as of 4/302019 unless otherwise indicated.
PotentialBased on
CMAs
Actual
-30% -20% -10% 0% 10% 20% 30% 40% 50%
Investment Policy Compliance Investment Policy Objectives Review
Standard Deviation
(3 years trailing)
Expected Return Distribution (short term, gross of fees1)
3Y 5Y 10Y ITD
Portfolio Sharpe Ratio 1.3 0.9 1.4 0.5
Benchmark Sharpe Ratio 1.2 0.8 1.2 0.4
11.4%
4.8%
Q2
FY19
FYTD
2019 7Y 10Y
Lee Health 6.32 2.6 6.4 6.9
Equity 12.8 1.1 10.4 12.7
Fixed Income 2.5 3.9 2.8 4.1
Alternatives/
Core Property 3.92 4.3 8.1 n/a
-11.20 6.00 26.50
-20.20 6.90 43.20
-15.90 6.40 34.60
5th 50th 95th
17
UPSIDE CAPTURE
DOWNSIDE
CAPTURE
106.97% 103.78%
113.82%
100.19% 95.43% 99.60%
-4.00 3.90 12.50
109.41%
99.00%
For Institutional Investor use only. Not for public distribution.
Lee Health FYTD through April 2019 (continued)
-9.09%
-5.70%
6.20%
1.40%
9.30% 9.70% 7.50%
-1.10%
8.30% 10.24%
5.52%
2.90% 3.40% 4.20% 4.20% 4.10% 3.90% 3.80% 3.40% 3.10% 3.10% 3.20%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
Annual Return
Est. Cost ofDebt
21 20 23 23 37 40
45 48 47 40 45 44
43 38
43 48
38 28
38 37 37
33 42
42.8
22
18
21 23 22
18
5 4 4
4
5 5.1 4
3
3
3 4
3 3 3 5
5
6 8.2 10
21 10
3 1
11 8 8 8
7
6 10
2
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q2 FY19
Cash
Other
Real Estate
Alternatives
Fixed Income
Equity
Sources: Lee Health audited financial statements for the fiscal years ended 9/30/2008 to 9/30/2018, and unaudited interim financials for the seven months ended 4/30/2019; estimated
cost of debt is calculated as annual interest cost divided by outstanding debt; SEI institutional account statements; FY 2017 and 2018 allocation changes and growth stats include
amounts segregated into the Liquidity Pool in FY 2017 and the Liquidity Pool and Money Market Account in FY2019; www.emma.msrb.org; SEI analysis
Annual Return vs. Estimated Cost of Debt
Allocation Changes
18
6.3% Q2 FY19 Return
3/31/19
2.6% FYTD Return
4/30/19
19 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Total allocation strategies outperform broad market indexes
*Total Real Estate strategy returns and NCREIF are as of 12/31/2018. Source: SEI, MSCI, Bloomberg Barclays. Indexes are unmanaged and cannot be invested
in directly. Returns greater than one year are annualized.
As of April 30, 2019 Q1
(%)
1Y
(%)
3Y
(%)
5Y
(%)
7Y
(%)
10Y
(%)
Total Equity strategy 12.80 2.09 11.09 7.38 9.75 13.49
MSCI All Country World Index 12.33 3.16 11.27 7.03 9.01 12.59
Excess +0.47 -1.07 -0.18 +0.35 +0.74 +0.90
Total Fixed Income strategy 2.54 3.97 2.67 2.86 2.84 4.15
Bloomberg Barclays U.S. Aggregate Bond Index 2.94 4.48 2.03 2.74 2.48 3.77
Excess -0.40 -0.51 +0.64 +0.12 +0.36 +0.38
Total Real Estate strategy* 1.81 8.31 8.73 10.53 11.02 n/a
NCREIF Property Index 1.80 6.82 7.07 9.12 9.61 n/a
Excess +0.01 +1.49 +1.66 +1.41 +1.41 n/a
Total Hedge strategy 6.98 3.33 6.64 2.72 3.55 -
HFRI Composite Fund of HF 4.62 0.15 3.94 2.20 3.10 -
Excess +2.36 +3.18 +2.70 +0.52 +0.45
20 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
DCOH
218 (+8 days)
213 (+3 days)
205 (-5 days)
192 (-18 days)
208 (-8 days)
201 (-9 days) -$43 (-4.73%)
-$37 (-3.99%)
-$86 (-9.37%)
-$26 (-2.79%)
$17 (1.86%)
$38 (4.16%)
-$120 -$100 -$80 -$60 -$40 -$20 $0 $20 $40 $60
Rising US Inflation
Trade Protectionism
Global Bear
Int'l Equity Correction
US Steady Pace
US Equity Rally
Stress test – current portfolio
Source: Blackrock Portfolio Risk Tools;
SEI Investment Management Unit
Starting market value (4/30/19): $919.2 million
Starting DCOH (4/30/19): 210 days $ millions
Scenario descriptions:
• US Equity Rally: Risk-on trading environment where the Russell 3000 Index increases 10.0%.
• US Steady Pace: Inflation surprises to the upside, catching the Fed off guard. Nonetheless, the Fed maintains the current pace of
tightening. Equities and spread assets are up on the back of robust growth.
• International Equity Correction: MSCI EAFE Index decreases 10.0%.
• Global Bear: World equities decline 20.0%.
• Trade Protectionism: US protectionism escalates trade disputes, and market sentiment deteriorates amid fears of a global trade war.
Global equities sell-off, with Chinese and EM equities underperforming.
• Rising US Inflation: Higher inflation than expected forces the Fed to change tack, tightening more than priced-in by the market. Risk
assets are hit by faster-than-anticipated rate hikes by the Fed. US equities underperform other global assets.
21 Footer
Investment Management Review/Outlook,
Process and Philosophy
22 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
5.9
2.2
5.0
8.9
6.0
3.0
12.1
13.2
18.5
18.6
6.3
1.8
4.9
7.4
6.5
2.9
9.8
10.3
14.6
14.0
-0.4
0.5
0.0
1.4
-0.4
0.0
2.1
2.6
3.4
4.0
-5 0 5 10 15 20
Commodities
Inflation-Linked
Emerging Markets Debt
High Yield Bonds
Long Duration
U.S. Investment-Grade Bonds
Emerging Markets Equity
Developed Int'l Equity x US
U.S. Small Cap
U.S. Large Cap
Financial Markets Review (%)
1 Month (Apr-30)
Q1 2019
YTD (Apr-30)
Market performance overview
• Risky assets rebounded sharply from a difficult fourth
quarter, thanks to oversold conditions, a
suddenly-more-dovish Federal Reserve, and hopes for
further stimulus measures in China.
• U.S. equities led the way once more. Although
first-quarter returns were impressive, developed and
emerging markets were still down from a year ago,
driven by ongoing worries about China and Europe.
• A more-dovish Fed, falling interest rates, and benign
financial conditions were tailwinds to credit, allowing
spreads to reverse much of the widening that occurred
in late 2018. These dynamics were especially helpful to
long-duration and high-yield bonds, although most
areas of fixed income did well.
• Consumer price inflation continued to slow from its
mid-2018 highs, creating a bit of a headwind for
inflation-linked Treasurys. However, the favorable
environment for fixed income allowed TIPS to post a
positive return for the quarter despite falling inflation.
• Commodities also performed well, led by cyclical areas
like energy and industrial metals, as both oil and nickel
rebounded from steep fourth-quarter declines.
U.S. Large Cap = Russell 1000, U.S. Small Cap = Russell 2000, Developed International Equity x
U.S. = MSCI World ex-US, Emerging Markets Equity = MSCI EFM (Emerging+Frontier Markets),
U.S. Investment Grade Bonds = Bloomberg Barclays U.S. Aggregate, High Yield = BofA ML
Master II HY Constrained, Emerging Markets Debt = 50% JPM EMBI GD / 50% GBI- EM GD
Indexes, Long Duration = Bloomberg Barclays Long US Govt/Credit, Inflation Linked = Barclays 1-
5 Year TIPS, Commodities = Bloomberg Commodity. Sources: SEI, index providers. Past
performance is no guarantee of future results.
23 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
U.S. equity market review
• Equity markets rebounded after an especially weak fourth
quarter. Small caps got off to a hot start but the performance
gap closed by the end of the first quarter.
• Outside of real estate, which was buoyed by sharply lower
interest rates, defensives generally lagged cyclical sectors.
• Growth was supported by a strongly rebounding technology
sector, while value lagged due to the relatively lackluster
healthcare and financials sectors.
• Valuations, which had come down significantly following the
fourth quarter sell-off, started to push up moderately.
towards the end of the quarter. -5%
0%
5%
10%
15%
20%
Dec '18 Jan '19 Feb '19 Mar '19
Cu
mu
lati
ve
To
tal R
etu
rn
QTD Domestic Equity Market Returns
U.S. Large Cap (14%) U.S. Small Cap (14.6%)
11.9%
16.1%
19.9%
17.5% 17.2% 16.4% 15.7%14.0%
12.0%10.8% 10.3%
8.6%6.6%
5.7%
12.7%
15.4%
21.0%
3.2%1.3%
13.2%
7.7%
10.5%
19.3%
-0.4%
-4.7%
14.9%
-10%
-5%
0%
5%
10%
15%
20%
25%
Value Growth Technology RealEstate
Industrials Energy Con.Disc.
Comm.Services
Con.Staples
Utilities Materials Financials HealthCare
To
tal R
etu
rn
U.S. Large Cap Sectors
QTD 1-yr
Source: Bloomberg, Russell, Standard & Poor’s. US Large Cap represented by Russell 1000 Index, US Small Cap represented by Russell 2000 Index. Value and Growth represented by
Russell 1000 Value Index and Russell 1000 Growth Index respectively. Sectors are represented by respective S&P 500 sector indexes. As of 3/31/2019.
24 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
International equity market review
Source: Bloomberg, Russell, MSCI. Developed (ex-US) by MSCI World ex-U.S. Index, Emerging Markets by MSCI Emerging Markets Index, U.S. represented by Russell 3000 Index. Regions
are represented by respective MSCI Index. All returns in USD. As of 3/31/2019.
• International markets rebounded from a weak fourth
quarter but still underperformed the U.S.
• Developed ex-U.S. and emerging markets performed
largely in line over the quarter.
• Within emerging markets, Asia showed the most strength,
due largely to the performance of China’s equity market.
• Valuations have been lifted from their 2018 lows by
rallying equity markets but are still close to their longer-
term averages.
14.0%
10.4% 9.9% 10.0%8.5% 7.8%
11.1%
7.9% 7.6%8.8%
-3.1%
-7.4% -6.6%
-3.9%-5.8%
-6.8% -6.7% -6.4%-10%
-5%
0%
5%
10%
15%
20%
U.S. Developed(ex-U.S.)
Emerging Europe Pacific Far East Asia Latin America Europe
Broad Regions Developed Regions Emerging Regions
To
tal R
etu
rn
Regional PerformanceQTD 1-yr
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Dec '18 Jan '19 Feb '19 Mar '19
Cu
mu
lati
ve
To
tal R
etu
rn
QTD International Equity Market Returns
Developed (ex-U.S.) (10.4%) Emerging Markets (9.9%)
25 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Fixed income review
• Fixed income markets provided solid returns during
the quarter, with the Bloomberg Barclays U.S.
Aggregate up 2.9%. High Yield was especially
strong, rising 7.3%.
• Lower credit quality tended to do better along with
longer duration.
• Spreads, particularly within high yield, compressed
significantly during the quarter after sharply
widening in the fourth quarter. They once again are
sitting well below long-term averages.
• Yields continued to fall while the curve continued to
flatten out.
1.5%
2.0%
2.5%
3.0%
3.5%
00 05 10 15 20 25 30
Yie
ld
Maturity Length (years)
U.S. Yield Curve
3/31/2019 12/31/2018 3/31/2018
Source: Bloomberg, JP Morgan. Investment Grade (IG) spreads determined from Bloomberg Barclays U.S. Corporate Index. High Yield (HY) spreads determined from Bloomberg Barclays U.S.
Corporate High Yield Index. Emerging Market Debt determined by JP Morgan EMBI Diversified Sovereign Index. As of 3/31/2019.
1.2%
3.9%
3.5%
1.5%
5.3%
4.2%
1.1%
3.5%
3.0%
1.5%
5.3%
3.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
US InvestmentGrade
US High Yield Emerging MarketDebt
Op
tio
n-A
dju
ste
d S
pre
ad
Option-Adjusted Spreads
March '19 Last Quarter 1-Year Ago 10-Yr Average
FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION
26 Data as of 3/31/2019 unless otherwise noted
The outlook: Spring has sprung
The good news
• We are seeing the initial signs of improving global
growth, including in Europe and the U.K.
• The U.S. is near full employment. Upward pressure on
wages are not yet reflected in inflation growth. U.S.
productivity has accelerated, which is a big plus.
• China’s stimulus measures should help its economy
gain traction. Despite the setback in trade talks with
the U.S., we think China’s domestic demand will
improve, which should offset difficulties the country
may face with respect to U.S. trade.
• The Federal Reserve’s sharp pivot to dovishness was
a catalyst for the strong performance of risk assets in
the first quarter.
• We expect stock prices to grind higher. Last week’s
events rattled investors, but remember that bear
markets are fundamentally induced, not investor-
induced.
The bad news
• U.S. stocks are expensive, and profit growth has
slowed; although still positive, it is now comparable to
growth in other parts of the world.
• The U.S. Treasury yield curve remains close to
inversion. Yet we think this means very little to the
economy and stock-market performance.
• Unresolved trade tensions between China and the
U.S. are certainly a negative development. Corporate
supply chains will likely be realigned over time,
although low-cost countries may benefit as production
of low-margin goods are moved out of China.
• Inflation pressures could begin to rise as companies
strive to maintain their profit margins. An
improvement in productivity has somewhat limited
this.
FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION
Data as of 3/31/2019 unless otherwise noted.
27 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
More than 100 professionals
globally:
• US
• UK
• Canada
• Hong Kong
More than 60 CFAs, MBAs
and other advanced
designations
Over 25 years of manager
selection and portfolio
construction experience
Risk
Management
Group
Portfolio risk
management
oversight and
operational due
diligence
Investment Oversight
Committees
Several committees oversee the
products and services we offer.
Each has a unique focus, including
portfolio management, asset allocation and manager research.
Portfolio Strategies
Group
Asset allocation team that
creates capital market
assumptions and directs both
strategic and long-term portfolio
positioning.
Portfolio Managers
Equity . Fixed Income .
Hedge Funds . Private Equity .
Real Estate
Global portfolio management
team responsible for investment
manager selection and portfolio
construction.
Manager Research
Global manager research team
responsible for identifying and
monitoring investment
managers in each asset class.
A global investment unit with highly credentialed investment
experts
As of December 31, 2018.
28 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI investment philosophy and implementation
Strategic Asset Allocation
Markets are mostly efficient and investors should
avoid market timing by developing a diversified,
long-term asset allocation
Tactical/Opportunistic Investing
Markets can occasionally be inefficient and
present thematic opportunities in public and
private markets
Manager Implementation
Style tilts and strong active investment manager
selection within less efficient asset classes can
create better risk-adjusted returns
Risk Management
Separating risk management from investment
management is crucial in maintaining objectivity
and effectively managing portfolio risk
29 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Advisory and Client Portfolio Teams
Portfolio Strategies Team
Manager Research and Portfolio Manager Teams
Advisory and client teams design a unique investment portfolio based on your
return, risk, liquidity and qualitative goals / objectives
Long-term (3-10 year) optimized asset allocation based on SEI’s viewpoints and
assessment of asset class valuations
Shorter-term (1-3 year) asset allocation based on shorter-term viewpoints and
relative value opportunities between asset classes
Our global manager research team identifies and oversees best of breed
specialist managers by asset class and geography. Manager positioning /
weightings are implemented inside each fund by the portfolio manager team.
Strategic Allocation
Short / Medium
Term Allocation
Manager Allocations
XYZ
Client
Portfolio
Robust investment platform enables custom portfolio
building that addresses long- and short-term investor needs
30 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI’s representative institutional investment strategies
SEI Large Cap Equity Strategy AJO, L.P. – Quantitative Relative Value Coho Partners – Relative Value Fred Alger Management, Inc. – Differentiated
Momentum LSV Asset Management* – Quantitative Contrarian
Value Mar Vista Investment Partners LLC – Stability Schafer Cullen Capital Management – Disciplined Value
SEI U.S. Small Cap II Equity Strategy ArrowMark Partners – Stable Growth Copeland Capital Management, LLC – Dividend Growth EAM Investors, LLC – Momentum Growth LMCG Investments, LLC – Relative Value Snow Capital Management, LP – Value
SEI Extended Markets Index Strategy State Street Global Advisors – Passive
SEI World Equity ex-U.S. Strategy Acadian Asset Management – Quant Value/Momentum Alliance Bernstein, L.P. – Quant Value Baillie Gifford – Growth BlackRock International Ltd. – Style Flexibility EARNEST Partners – Core/Relative Value Tilt JO Hambro Capital Management – GARP McKinley Capital Management – Quantitative
Momentum Wells Capital Management, Inc. – Value
SEI Global Managed Volatility Strategy Acadian Asset Management Wells Capital Management LSV Asset Management*
Domestic Equity
Global Equity
U.S. Equity Factor Allocation Strategy SEI Investments Management Corporation
SEI U.S. Large Cap Disciplined Equity Strategy AJO, L.P. – Large Cap Momentum AQR Capital Management – Enhanced S&P 500 Ceredex Value Advisors LLC – Large Cap Value Coho Partners, Ltd. – Stability Quantitative Mgmt. Associates – Quantitative Bias
Exploitation
SEI U.S. Small Cap Equity Strategy Axiom International Investors, LCC – Quantitative Growth EAM Investors, LLC – Momentum Growth Falcon Point Capital – Emerging Growth LSV Asset Management L.P. – Value Martingale Asset Management, L.P. – Low Volatility William Blair & Company – Relative Value
SEI Large Cap Index Strategy State Street Global Advisors – Passive
SEI S&P 500 Index Strategy State Street Global Advisors – Passive
SEI Screened World Equity ex-U.S. Strategy Acadian Asset Management – Core Baillie Gifford – Growth EARNEST Partners – Value McKinley Capital Management – Growth
SEI World Select Equity Strategy AS Trigon – Emerging European Value Fiera Capital – Deep Quality/Stability INTECH – Global Volatility Capture / Momentum LSV Asset Management* – U.S. Value Mackenzie Investments –Momentum Maj Invest. – Global Value/Stability Metropole – Pan European Value Poplar Forest Capital, LLC – Value SNAM – Japan Value Towle – U.S. Value
SEI U.S. Small / Mid Cap Equity Strategy ArrowMark Partners – Stable Growth Axiom International Investors – Quantitative Growth Cardinal Capital - SMID Cap Value Copeland Capital Management, LLC – Dividend Growth LSV Asset Management* – Contrarian Value 361 Capital, LLC – Diversified Momentum
SEI Real Estate Strategy CenterSquare Investment Management – REIT
SEI U.S. Managed Volatility Strategy Wells Capital Management LSV Asset Management* - Contrarian Value
SEI Emerging Markets Equity Strategy AllianceBernstein L.P. – Value Causeway Capital Management – Quantitative Core JO Hambro Capital Management – Growth Kleinwort Benson Investors International Ltd. – Dividend
Focus RWC Asset Advisors (U.S.) LLC. – Growth WCM Investment Management – Quality Growth
Sub-Adviser Diversification as of April 30, 2019. The strategies above are not an exhaustive list, but represent those that are typically utilized by SEI Institutional clients. Certain strategies are
currently available only in registered mutual fund products. References to specific SEI funds are designed to illustrate SEI’s manager selection process, which is implemented by SEI
Investments Management Corporation (SIMC). The managers may be offered exclusively through mutual funds. References to specific securities do not constitute an offer or
recommendation to buy, sell or hold such securities. *As of March 31, 2019, SEI Investments Company has a 38.9% minority ownership interest in LSV Asset Management.
31 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
SEI’s representative institutional investment strategies
(continued)
Sub-Adviser Diversification as of April 30, 2019. The strategies above are not an exhaustive list, but represent those that are typically utilized by SEI Institutional clients. Certain strategies are
currently available only in registered mutual fund products. References to specific SEI funds are designed to illustrate SEI’s manager selection process, which is implemented by SEI Investments
Management Corporation (SIMC). The managers may be offered exclusively through mutual funds. References to specific securities do not constitute an offer or recommendation to buy, sell or
hold such securities.
Fixed Income
SEI Cash Management Strategies Money Market Funds Custom Separate Accounts
SEI Opportunistic Income Strategy Ares Management – Bank Loans Manulife Asset Management – Multi-Sector LIBOR Plus Schroders Asset Management. – Enhanced Cash Wellington Management Company – Enhanced Cash
SEI Ultra Short Duration Bond Strategy Logan Circle Partners Wellington Management Company
SEI Short Gov’t Bond Strategy Wellington Management Company
SEI Limited Duration Bond Strategy Logan Circle Partners Metropolitan West Asset Management LLC
SEI High Yield Bond Strategy Ares Management – Opportunistic Benefit Street Partners – Relative Value Brigade Capital Management – Opportunistic J.P. Morgan Asset Management – Relative Value T. Rowe Price Associates – High Yield
SEI Emerging Markets Debt Strategy Colchester Global Investors – Consistency Investec Asset Management – Security Selection Marathon Asset Management, LP –Experience Neuberger Berman – Macro Stone Harbor Investment Partners – Relative Value
SEI Core Fixed Income Plus Strategy U.S. Core Fixed Income Strategy High Yield Strategy Emerging Debt Strategy
SEI U.S. Core Fixed Income Strategy Jennison Associates – Security Selector w/Corporate Bond Focus Logan Circle Partners, L.P. – Core Fixed Income Metropolitan West Asset Management – Macro/Value-Oriented Wells Capital Management – Security Selection Western Asset Management – Macro/Sector Rotator
SEI Intermediate Duration Credit Strategy Income Research & Management Legal & General Inv. Mgmt. America Logan Circle Partners
SEI Long Duration Credit Strategy Income Research & Management Jennison Associates Legal & General Inv. Mgmt. America Logan Circle Partners Metropolitan West Asset Management
SEI Long Duration Bond Strategy Income Research & Management Jennison Associates Legal & General Inv. Mgmt. America Metropolitan West Asset Management
SEI Dynamic Asset Allocation Strategy State Street Global Advisors
SEI Multi-Asset Real Return Strategy AllianceBernstein L.P. – Multi Asset Real Return Columbia Management Investments – Active Commodities Credit Suisse – Quantitative QS Investors, LLC – Inflation Long/Short Equity
Alternative Investments
Other
SEI Alternative Investments Equity Long/Short Strategies Event Driven Strategies Global Macro Strategies Relative Value Strategies Venture Capital Strategies Buyout Strategies Private Debt Strategies Private Real Assets Strategies Private Real Estate Strategies Structured Credit Strategies Energy Debt Strategies
32 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Risk Management and Research Systems
Risk Management
Systems such as Aladdin and Axioma provide daily updates which allow for
stress testing, scenario analysis and risk evaluation at the manager, strategy
and portfolio level
Research Tools
Systems and subscriptions such as FactSet, Axioma, Style Research, Intex
and Decision Lens utilized for qualitative and quantitative analysis and
benchmark data
Due Diligence Systems such as Financial Risk Management, FactSet and eVestment, First
Advantage, BackTrack and BDO Consulting to perform background checks *
*As of December, 2018. The above breakouts of our approximate and certain tools/systems are used for multiple functions and may overlap between groupings.
APPROXIMATELY
$10.2M
IN ANNUAL
TECHNOLOGY
INVESTMENTS* $4.1 M
Risk Management
$3.8 M
Research Tools $2.3 M
Due Diligence
Significant investments in industry-leading technology to
facilitate risk management and research
33 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Risk management analysis at multiple levels
This chart illustrates the type and frequency of reports and analysis that SEI has available to monitor risk at the manager and portfolio level. Specific risk management protocols may
vary depending on the manager or portfolio and may be customized for particular clients.
Manager Level Analysis
Metric Description Frequency
Security Level Holdings Analysis Access to portfolio holdings Daily
Tracking error Aggregates risk from all active exposures relative to a benchmark Weekly
Manager contribution to risk Measures how the active risk budget is allocated Weekly
Manager risk-adjusted return Provides an objective measure of manager alpha Monthly
Portfolio Level Analysis
Metric Description Frequency
VaR model integrity Compare manager return forecast with results Daily
Portfolio benchmark-relative exposure guidelines
Controls tracking error by setting limits on relative exposures Daily
Counterparty risk Monitors exposure to dealers from OTC derivative transactions Daily
Relative value at risk Identifies excessive risk-taking relative to benchmark Daily
Cover Measures the amount of capital in excess of the liabilities created by derivative exposures
Daily
Tracking error Aggregates risk from all active exposures relative to a benchmark Weekly
Stress testing Uses stress scenarios to identify non-linear behavior Monthly
34 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
International Equities Tabled for November 2019 meeting
35 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Portfolio design | Blueprint for success Portfolio Design
• Alpha Source Expectations
• Investment Levers and Powers
• Strategic Blueprint
• Tactical Framework
• Risks and Mitigation
• Exposure Limits
36 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Manager selection | Idea generation
Quantitative
Portfolio Characteristics
Performance Patterns
Qualitative
Industry Contacts
External Databases & Internet
Manager
Selection
For Illustrative Purposes Only
37 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Manager selection | Manager research & monitoring
Quantitative Consistency with Philosophy
Evidence of Skill vs Luck
Qualitative Alpha Drivers - Philosophy, Process & People
Alpha Risks – Organization & Resources
Judgement
Personal Assessment
Analysis
Manager
Selection
For Illustrative Purposes Only
38 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Manager selection | Hiring & firing
Manager
Selection
SEI Thesis Based Hire
Decision
• Research Alpha Sources
Exploited
• Discover Source of
Competitive Advantage
• Assess Future Headwinds &
Tailwinds
SEI Thesis Based Fire
Decision
• Thesis Review Trigger
• Identify Better Idea
• Future Headwinds
Typical Hire Decision
Good Performance
Smart People
Typical Fire Decision
Bad Performance
Staff Turnover
39 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Portfolio construction | Strategic risk budgeting Portfolio
Construction
Fund Thesis Manager Selection Risk Management
Portfolio Design
TE 1.43 %
Beta 0.99
Stock Specific 50%
Style Risk 23%
Country Risk 17%
Sector Risk 9%
FX Risk -1%
SII
T W
orl
d E
qu
ity
ex
US
Fu
nd
Source : SEI / Factset / BlackRock
Solutions Dec 31st, 2018
AB
Acadian
Baillie Gifford
BlackRock
Earnest Partners
JO Hambro
McKinley
EverKey
% Capital $ % Risk
40 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Portfolio construction | Dynamic manager weights Tactical
Allocation
Source: SEI, Factset
Note: Value managers consist of NFJ and BHMS. Value factor attractiveness/payoff is a measure of the likelihood of a factor outperforming. The attractiveness (RHS) is
measured in terms of standard deviation units here, with a standard deviation of 2 signaling a high likelihood of outperformance and a standard deviation of -2 signaling a high
likelihood of underperformance. More details on the exact metric used can be provided.
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
0
5
10
15
20
25
7/3
1/2
01
5
8/3
1/2
01
5
9/3
0/2
01
5
10
/30
/20
15
11
/30
/20
15
12
/31
/20
15
1/2
9/2
01
6
2/2
9/2
01
6
3/3
1/2
01
6
4/2
9/2
01
6
5/3
1/2
01
6
6/3
0/2
01
6
7/2
9/2
01
6
8/3
1/2
01
6
9/3
0/2
01
6
10
/31
/20
16
11
/30
/20
16
12
/30
/20
16
1/3
1/2
01
7
2/2
8/2
01
7
3/3
1/2
01
7
4/2
8/2
01
7
5/3
1/2
01
7
6/3
0/2
01
7
7/3
1/2
01
7
8/3
1/2
01
7
9/3
1/2
01
7
10
/31
/20
17
11
/30
/20
17
12
/30
/20
17
1/3
0/2
01
8
2/2
8/2
01
8
3/2
8/2
01
8
4/2
8/2
01
8
5/2
8/2
01
8
6/2
8/2
01
8
7/2
8/2
01
8
8/2
8/2
01
8
9/2
8/2
01
8
10
/28
/20
18
11
/28
/20
18
12
/28
/20
18
Val
ue
Fac
tor
Att
ract
ive
ne
ss/P
ayo
ff
We
igh
t o
f V
alu
e M
anag
ers
Value Attractiveness/Payoff (RHS) Value Managers Weight (LHS)
41 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Risk management | Independent oversight
For Illustrative Purposes Only
ACTIVITY FREQUENCY
• Relative value at risk
• Portfolio fund benchmark-relative exposure guidelines
• VaR model integrity 1
• Counterparty risk 2
• Coverage 3
DAILY
• Tracking error 4 WEEKLY
• Manager contribution to risk 5 WEEKLY
• Manager risk-adjusted return
• Stress testing
MONTHLY
Notes:
1 - Comparison of ex-ante forecasts
with ex-post realisations
2 - Measures the amount of capital in
excess of notional OTC derivative
exposures
3 - Exposure to dealers from OTC
derivative transactions
4 - Standard Deviation of excess
returns
5 - Measures how active risk is
allocated across the managers in a
portfolio
Risk
Management
42 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
US 13.65%
Canada 15.37%
Europe ex
UK 10.45%
UK 11.89%
Australia 11.39%
China 17.69%
Brazil 8.14%
Russia 12.18%
MSCI ACWI performance
YTD 2019 (as of 3/31/2019)
India 7.16%
Japan
6.66%
Argentina
-2.01%
Colombia
24.8%
South Africa
4.43% Positive
Neutral
Negative
Below %15
Sources: MSCI Indices except Panama, which is sourced via FTSE Indices, USD, FactSet, SEI,
The performance data shown is past performance. Past performance is no guarantee of future results. The
investment return and principal value of an investment will fluctuate so that an investor’s shares, when
redeemed, may be worth more or less than their original cost and current performance may be lower or
higher than the performance quoted. For performance data current to the most recent month end, please
call 1-800-DIAL-SEI.
43 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Global equity market overview:
Growth less balanced – risks increasing1
• Sources: 1World Economic Outlook, January 2019; 2Credit Suisse, March 31, 2019 (Risk Appetite chart).
• Global growth forecast for 2019 and 2020 were revised downward in autumn of 2018 and then
again at the beginning of 2019 based on weaker momentum in the second half of 2018.
• Idiosyncratic activities weighted on larger developed economies (e.g. Germany, Italy, France, Japan)
but this happened against a framework weakening financial market sentiment, tightening of financial
conditions in advanced economies, trade policy uncertainty and concerns about China’s growth.
• Risks to global growth tilt to the downside.
Global Risk Appetite2
Euphoria
Panic
44 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Valuations look more attractive
Source: Bloomberg, FactSet, MSCI and AB
Based on MSCI US, MSCI Europe ex-UK, MSCI UK, MSCI Japan and MSCI Emerging Markets. Price/forward earnings ratios are based on earnings estimates for the next 12
months.
Data as of 12/31/2018
45 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Retail Sales (USD Billions) China: Net Export as Percent of Nominal GDP
0
1,500
3,000
4,500
6,000
1992 1998 2004 2010 2016
Left display as of December 31, 2017; right display through September 30, 2018
Source: AB, Bloomberg, CEIC Data, National Bureau of Statistics of China
Chinese economy goes consumer
US Retail Sales
China Retail Sales
46 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
China A-Share Korea Taiwan Indonesia Other
China A-shares weighting will increase through 2019
Source: MSCI, Lazard
Starting in May the weighting of China A-shares will be raised 3x in 2019
Saudi Arabian equities will be added in two steps (May and August)
Argentina’s equities will be added in one step (May)
Current May 2019 Aug 2019 Future Nov 2019
47 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
World Equity ex U.S.
Performance and risk statistics: April 30, 2019
Data as of 4/30/2019, Source: SEI Data Portal, FactSet. Gross Fund Performance reflects the effective performance of the underlying mutual funds that are selected or recommended by
SIMC to implement an institutional client’s investment strategy. Gross Fund Performance does not reflect the impact of fund level management fees, fund administration or shareholder
servicing fees, all of which, if applicable are used to offset the account level investment management fees the client pays to SIMC. Gross Fund Performance does reflect certain
operational expenses charged by the funds and the reinvestment of dividends and other earnings. The inclusion of the fund level expenses that the client incurs but that are offset against
the client’s account level investment management fees would reduce the Gross Fund Performance of the mutual funds. Past performance is no guarantee of future results. The principal
value and investment return of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original value. Current performance may be higher or
lower. For performance data current to the most recent month end, please call 1-800-DIAL-SEI.
Calendar Years Apr
2019
Q1
2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
SIIT World Equity Ex-US Fund 2.68 12.08 -15.74 29.88 4.20 -5.62 -2.34 18.32 18.70 -12.75 13.40 35.30
MSCI All Country World ex US Index 2.64 10.31 -14.20 27.19 4.50 -5.66 -3.87 15.29 16.83 -13.71 11.15 41.45
Trailing Periods 1 Yr 3 Yr 5 Yr 7 Yr 10 yr
SIIT World Equity Ex-US Fund -3.33 9.04 3.77 6.29 8.75
MSCI All Country World ex US Index -3.23 8.09 2.83 5.35 7.74
Risk Statistics - 3 Year Standard
Deviation
Tracking
Error
Sharpe
Ratio
World Equity Ex-US Strategy 10.98 1.94 0.72
MSCI All Country World ex US Index 10.56 - 0.66
Risk Statistics - 5 Year Standard Deviation Tracking Error Sharpe
Ratio
World Equity Ex-US Strategy 12.00 2.10 0.26
MSCI All Country World ex US Index 12.05 - 0.17
48 Footer
Appendix: Performance and Fund Detail
49 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Lee Health main account
Asset allocation & performance as of April 30, 2019
Fiscal Year
to Date
As of 4/30/19, cash assets of $70,165,196 in money market pool and $50,045,353 in liquidity pool.
50 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Lee Health cash accounts
Asset allocation & performance as of April 30, 2019
As of 3/31/19, cash assets totaled $3,049.
Liquidity Pool
Money Market Account
51 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
• During the first quarter, the market rebounded from 2018’s
negative end.
• U.S. stocks had their strongest quarter since 2009.
• The S&P 500 Index was up 13.65% for the period.
• Information technology and industrials were the leading sectors
for the quarter.
• Materials and utilities lagged.
• The fastest-growing stocks drove performance during the period
across all indexes.
• The cheapest stocks underperformed their benchmarks, despite a
strong start in January.
Source: SEI Data Portal, FactSet based on data from SEI
Figures in parenthesis are end of period weights.
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and principal
value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and current
performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call 1-800-DIAL-
SEI.
0.28
0.52
0.35
0.90
0.86
1.61
1.57
1.46
1.24
1.02
3.83
0.0 1.0 2.0 3.0 4.0 5.0
Materials (2.7%)
Real Estate (3%)
Utilities (3.2%)
Energy (5.5%)
Consumer Staples (7.2%)
Industrials (9.5%)
Consumer Discretionary (10%)
Communication Svcs (10.2%)
Financials (13.3%)
Healthcare (15%)
Information Technology (20.4%)
Quarter
Contribution to Absolute Return By Sector (%)
SIIT S&P 500 Index Fund
52 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
Source: FactSet, SEI
Figures in parenthesis are end of period weights.
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and principal
value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and current
performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call 1-800-DIAL-
SEI.
0.21
0.32
0.66
0.60
0.72
1.48
1.33
2.20
2.13
1.74
4.54
0.0 1.0 2.0 3.0 4.0 5.0
Consumer Staples (2.6%)
Utilities (2.9%)
Energy (3.4%)
Communication Svcs (4.3%)
Materials (4.5%)
Real Estate (8.8%)
Consumer Discretionary (11.8%)
Healthcare (12.1%)
Industrials (13.9%)
Financials (16.1%)
Information Technology (19.5%)
Quarter
Contribution to Absolute Return By Sector(%) • During the first quarter, the market rebounded from 2018’s
negative end.
• The Russell Small Cap Completeness Index was up 15.95% for
the period.
• Information technology and industrials were the leading sectors
for the quarter.
• Materials and utilities lagged.
• The fastest-growing stocks drove performance during the period
across all indexes.
• The cheapest stocks underperformed their benchmarks, despite a
strong start in January.
• The Fund aims to produce investment results that correspond to
the performance of the Russell Small Cap Completeness Index.
SIIT Extended Market Index Fund
53 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT Emerging Markets Equity Fund
(#) indicates the percent target allocation in the Fund excluding cash
Benchmark: MSCI Emerging & Frontier Markets Index. Source: FactSet, SEI Data Portal.
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and
current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call
1-800-DIAL-SEI.
Performance Review
• The Fund struggled modestly during the quarter due to a
combination of allocation and selection effects within the consumer
discretionary sector. Weak selection within financials (particularly
insurance) also detracted. From a regional perspective, a lack of
exposure to and poor selection within Chinese financials hurt, as did
an overweight to financials within the Philippines.
• Selection within real estate (China, Vietnam and the Philippines)
was positive. Selection within materials in South Africa, the U.K.
and off-benchmark Canada also helped.
• KBI Investors suffered due to weak selection within large
technology names in China, Korea and Taiwan. AllianceBernstein’s
lack of exposure in China, overweight to consumer staples and
underweight to information technology hurt. Causeway detracted
due to poor selection within emerging Asia and India (materials and
industrials).
• WCM’s selection within consumer discretionary (retailing), financials
and health care contributed. J.O. Hambro benefited from selection
across multiple sectors (real estate, energy, financials). This was
offset by weak selection within consumer discretionary and lack of
exposure to Chinese company Alibaba. Selection was also poor
within health care and industrials.
54 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT Emerging Markets Equity Fund
Positioning Review
• From a sector perspective, the overweight to financials was
decreased during the quarter by trimming holdings in banks and
diversified financials.
• The Fund was underweight communications services in many of the
larger emerging-market countries (China and Korea) and instead
invested in smaller technology names.
• It was overweight industrials as growth is picking up in the sector.
• The Fund was also overweight consumer staples due to the rising
middle class in emerging markets.
• From a country perspective, emerging Asia (China, Korea and
Taiwan) was the largest overweight.
• The overweight to India was increased during the period.
• The Fund was also overweight smaller countries (Vietnam,
Thailand, Philippines).
• It was overweight Latin America. Managers see attractively priced
growth opportunities in Argentina and Colombia.
• It was also overweight the Europe, Middle East and Africa (EMEA)
region, although the overweight was reduced during the quarter by
pulling out of Kuwait and Saudi Arabia.
• Managers also exited out of names that had reached target price in
South Africa.
Source: FactSet
*Versus the MSCI Emerging & Frontier Markets Index; figures in parentheses are actual Fund weights, excluding cash; only the three largest active
sector and region over- and underweights are shown.
55 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT World Equity Ex-US Fund
(#) indicates the percent target allocation in the Fund excluding cash
*Benchmark: MSCI ACWI ex USA Index. Source: FactSet, SEI Data Portal
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and
current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call
1-800-DIAL-SEI.
Performance Review
• The Fund performed well during the quarter. Selection within
information technology (IT) (software and services) contributed.
• Selection within and an overweight to banks were beneficial.
• From a country perspective, selection was strong in Israel,
Singapore and Germany. Selection within Dutch and U.K. materials
stocks and an overweight to Australian metal and mining stocks
helped.
• An underweight to Canadian energy stocks detracted. Poor
selection in Norway also hurt. Overweights to Polish and
Portuguese energy stocks held back performance.
• J.O. Hambro’s selection across multiple sectors contributed. Baillie
Gifford benefited from selection within consumer discretionary
(retailing), industrials, IT and specialty materials. BlackRock added
to performance via selection across multiple sectors.
• Wells EverKey suffered due to poor selection within financials and
industrials, which offset good selection within IT and materials.
56 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT World Equity Ex-US Fund
Source: FactSet
*Versus the MSCI ACWI ex USA Index; figures in parentheses are actual Fund weights, excluding cash; only the three largest active sector and
region over- and underweights are shown.
Positioning Review
• During the quarter, the Fund’s underweight to consumer staples
was decreased as managers added to food staples, retail
beverages, tobacco and household products.
• The overweight to financials was also decreased by trimming from
banks and diversified financials due to profit-taking.
• From a regional perspective, financials were mostly trimmed in
China and India.
• From a country perspective, the underweight to emerging Asia was
increased, trimming from Chinese, Indian and Taiwanese equities.
• The underweight to Japan was decreased by adding to consumer
discretionary and communications stocks that offer good growth
opportunities.
• From a sector perspective, the Fund remained overweight
information technology as managers are optimistic on long-term
growth opportunities in the sector.
• It was overweight materials due to company-specific opportunities.
• The Fund was also overweight health care, focusing on companies
that either reduced costs of the health care system or addressed the
needs of an aging population.
• The largest position was an overweight to Europe ex-U.K.
Managers continued to find company-specific opportunities in the
region.
• It was underweight the U.K. due to Brexit concerns.
57 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT Core Fixed Income Fund
(#) indicates the percent target allocation in the Fund excluding cash
*Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index. Source: SEI Data Portal with data from Fund sub-advisors.
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and
current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call
1-800-DIAL-SEI.
Performance Review
• The Fund performed well during the quarter as all spread sectors
outperformed comparable Treasury bonds. Its duration was longer than the
benchmark, but moved closer to neutral by quarter-end. This added to
performance as yields declined. The Fund’s overweight to the long end of
the yield curve contributed as 30-year yields declined. A small overweight to
credit helped. An overweight to financials also contributed, as did a small
overweight to industrials.
• A higher-quality bias within commercial mortgage-backed securities
detracted as lower-quality tranches outperformed.
• Western Asset Management benefited from an overweight to spread
sectors. Logan Circle Partners’ overweight to credit helped, but an
underweight to non-corporates hurt. MetWest’s overweight to financials and
non-agency mortgages was beneficial. An underweight to corporates
detracted as spreads narrowed.
• Wells Fargo Asset Management’s performance suffered due to selection
within corporates. Jennison’s defensive positioning detracted as spreads
widened.
58 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT Core Fixed Income Fund
*Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index. Source: BlackRock Solutions based on data from SEI. Performance data quoted
represents past performance, gross of fees. Past performance does not guarantee future results. The investment return and principal value of an
investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and current performance
may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call 1-800-DIAL-SEI.
(#) indicates the relative weight to the benchmark on a contribution-to-duration basis; because of its different interest-rate sensitivities, Non-Agency
MBS is shown on a market-value basis.
Positioning Review
• The Fund reduced the overweight to banking during the quarter, as
spreads have narrowed.. Capital positions are stronger now than they
were pre-2008.
• Duration moved around a neutral posture. The Fund was overweight the
25-30 year segment of the yield curve; underweight the 15-20 year
segment; and neutral the short and intermediate segments.
• The Federal Reserve is keeping interest rates low, which encourages
borrowing and could foster inflation. Accordingly, exposure was added in
the middle section of the yield curve, which would be less impacted than
longer-dated bonds should inflation begin to rise. Still, the Fund
maintained an overweight to the long end of the curve as inflationary
pressures are likely to advance only gradually.
• The Fund had a small overweight to the corporate sector.
• It was neutral to slightly overweight both industrials and utilities.
• Securitized overweights to asset-backed securities (ABS) and
commercial mortgage-backed securities (CMBS) remained. These bonds
offer competitive yields, especially on a risk-adjusted basis.
• Within CMBS, managers believe a higher-quality bias should help ease
concerns about retail properties.
• The Fund maintained an allocation to non-agency mortgages.
• It was overweight agency mortgages, which serve as a high-quality
alternative to Treasurys.
• Managers remain in gradual risk-reduction mode and look for
opportunities to add back risk.
59 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT Limited Duration Bond Fund
(#) indicates the percent target allocation in the Fund excluding cash
*Benchmark: ICE BofA Merrill Lynch 1-3 Year U.S. Treasury Index. Source: SEI Data Portal with data from Fund sub-advisors.
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and
current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call
1-800-DIAL-SEI.
Performance Review
• The Fund outperformed its benchmark during the quarter.
Overweights to financials and industrials contributed.
• MetWest benefited from selection within financials and industrials and
a long duration posture. An overweight to cash detracted.
• Logan Circle Partners’ overweight to banking, industrials and asset-
backed securities (ABS) contributed. Its short duration posture hurt.
60 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT Limited Duration Bond Fund
*Benchmark: ICE BofA Merrill Lynch 1-3 Year U.S. Treasury Index. Sources: SEI, BlackRock Solutions based on data from SEI
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and
current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call
1-800-DIAL-SEI.
Positioning Review
• During the quarter, the Fund’s underweight to government bonds
was increased to buy more attractive securities within securitized
sectors.
• The overweight to ABS was increased as managers find these
more appealing than corporates.
• The Fund remained overweight financials.
61 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SIIT Real Return Fund
Performance Review
• The Fund performed in line with its benchmark for the quarter. An
underweight to Treasury Inflation Protected Securities (TIPS)
contributed as they outperformed nominal bonds.
• There were no material detractors during the quarter.
Source: SEI Data Portal
Performance data quoted is past performance, gross of fees. Past performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and
current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call
1-800-DIAL-SEI.
SIIT Real Return Fund
Absolute Return (%)
62 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SEI Special Situations Fund:
Performance versus other asset classes
1SEI Special Situations Fund Ltd returns include December estimates. Performance is gross of investment management fees and net of administrative
expenses and underlying fund expenses. Actual performance for investors will be presented in the monthly statements produced by the administrator.
Clients implemented via collective investment trusts incur product-level fees, including trustee and administrative fees, which will affect performance. 2 Volatility is annualized 3-year standard deviation through 03/31/2019. 3Assumes risk-free rate of 1.2% 03/31/2016-03/31/2019. 4 October 2009 is used as
date of Inception.Performance for periods of less than one year is cumulative. Performance data quoted is past performance. Past performance is no
guarantee of future results. The principal value and investment return of an investment will fluctuate so that shares, when redeemed, may be worth more or
less than their original value. Current performance may be higher or lower. For performance data current to the most recent month end, please call your
client service representative. Sources: SEI, Bloomberg.
Market Indexes 1Q19 YTD 1Y Return 3Y Return 5Y Return
Since
Inception4 Volatility2 Sharpe Ratio3
S&P 500 TR: 13.6% 13.6% 9.5% 13.5% 10.9% 13.3% 10.7% 1.1
MSCI World TR: 12.5% 12.5% 4.0% 10.7% 6.8% 9.0% 10.1% 0.9
MSCI Emerging Markets: 9.6% 9.6% -9.6% 8.1% 1.2% 1.6% 13.0% 0.5
Dollar Index: 1.2% 1.2% 8.1% 0.9% 4.0% 2.5% 5.8% 0.0
Bloomberg Barclays Global
Agg: 2.2% 2.2% -0.4% 1.5% 1.0% 2.0% 4.7% 0.1
Bloomberg Barclays US Agg: 2.9% 2.9% 4.5% 2.0% 2.7% 3.4% 3.0% 0.3
Bloomberg Commodity: 6.3% 6.3% -5.3% 2.2% -8.9% -4.2% 9.9% 0.1
Hedge Fund Indexes
HFRI Composite Fund of HF: 3.8% 3.8% -0.6% 3.2% 1.7% 2.1% 3.2% 0.6
HFRI Div. Fund of HF: 4.5% 4.5% 1.0% 3.7% 2.2% 2.8% 3.4% 0.7
HFRX Global HF Index: 2.6% 2.6% -3.3% 1.9% -0.3% 0.8% 3.7% 0.2
SEI Funds
Special Situations Fund:1 7.1% 7.1% 3.1% 6.6% 2.7% 4.0% 4.6% 1.2 Strategy Performance (gross)
Special Situations Fund
Equity Hedge: 9.1% 9.1% 5.4% 6.9% 4.3%
Relative Value: 4.0% 4.0% 3.2% 6.9% 3.3%
Event-Driven: 6.2% 6.2% 0.7% 7.9% 3.0%
63 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
SEI Special Situations Fund: Performance review
In base currency, gross of fees
Sources: SEI
Performance for periods of less than one year is cumulative. Performance data quoted is past performance. Past performance is no guarantee of future
results. The principal value and investment return of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their
original value. Current performance may be higher or lower. For performance data current to the most recent month end, please call your client service
representative.
All sub-strategies were positive in the first quarter.
Contributors:
• Equity Hedge returned 9.1%, adding significant alpha over its 44% net market exposure.
Gains were broadly distributed, but payment services (First Data, Worldpay), small-cap
equities, long-biased strategies and China exposure were areas of particular strength.
• Event-Driven returned 6.2%, in line with its market exposure. Activist investors Third Point
and Starboard Value performed best, helped by positions in Nestle, Papa John’s and
Mellanox.
• Relative Value returned 4.0%, outperforming its 20% net market exposure. Multi-strategy
fund Schonfeld and credit long/short specialist GCA were the best performers.
• There were no detractors, but we had relatively weak performance in securitized assets
(short hedges hurt), distressed debt (PG&E bonds) and Europe.
64 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
U.S. property market landscape
Sources: NCREIF ODCE Vacancy Rate is from the NCREIF ODCE Details spreadsheet and is calculated as 1 minus the Occupancy rate; NPI Net Operating
Income Growth, Transaction Cap Rates, Current Value cap Rates, and NPI Price Index are from the NCREIF Trends Report and the Index figures are 4-quarter
rolling averages
65 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
U.S. property market returns
Source: NCREIF. NPI is a quarterly time series composite total rate of return measure of a very large pool of individual commercial real estate properties acquired
in the private market for investment purposes only on an unlevered basis. The ODCE (Open-End Diversified Core Equity) is a Fund-level capitalization weighted,
time-weighted return index and includes property investments at ownership share, cash balances and leverage. Past performance does not guarantee future
results. Performance for periods of less than one year is cumulative; greater than one year is annualized.
• It was another positive quarter for the U.S. property market, with
both income and capital growth contributing to returns.
• Strong operating fundamentals continued and supported higher
valuations, with appreciation contributing 0.4% of the ODCE’s 1.4%
total return.
• All five sectors had gains; industrial and retail led the way with
increases of 3.0% and 1.7% and were followed by office, multifamily
and hotel at 1.6%, 1.3%, and 0.4%, respectively.
• Rounding out the real estate marketplace, the west and south
regions had the strongest performance (up 2.2% and 1.9%,
respectively). Occupancy rates and current cap rates all remained
in line with the prior quarter. Same store net-operating-income
growth rate increased relative to the prior quarter.
66 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
Core Property Fund: Performance review
Contributors
• Of the nine underlying Funds, four exceeded the NPI benchmark of
1.8% and seven were ahead of the ODCE peer group of 1.4%.
• Gains were broad based, as all four of the primary sectors posted
positive returns. The three sector specialists again generated
attractive income returns relative to the more diversified managers.
• The Fund’s overweight to industrial assets, as well as the non-core
exposure to self storage, both contributed on a comparative basis.
Detractors
• Overall, the managers performed well, with only two posting an
absolute return lower than 1.2%.
• The primary laggard was a diversified fund that is in the process of
selling assets and returning capital; quarter to quarter volatility in the
return of this manager is anticipated throughout the process.
Sources: SEI and NCREIF. Fund Allocation excludes cash.
Performance for periods of less than one year is cumulative; greater than one year is
annualized. Performance is gross of investment management fees and net of
administrative expenses and underlying fund expenses. Clients implemented via
collective investment trusts incur product-level fees, including trustee and
administrative fees, which will affect performance.
Performance data quoted represents past performance. Past performance does not
guarantee future results. The investment return and principal value of an investment
will fluctuate so that an investor’s shares, when redeemed, may be worth more or
less than their original cost, and current performance may be lower or higher than the
performance quoted. For performance data current to the most recent month end,
please call 1-800-DIAL-SEI.
67 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Data as of 3/31/2019
Core Property Fund: Positioning and actions
Sources: SEI, NPI. Based on actual invested position of money drawn by Underlying Funds and excluding cash; “Other” includes predominantly self-storage, hotel and land.
Positioning
• The Fund currently maintains overweights to the industrial and other
sectors at the expense of office and retail.
• Fund-level leverage stands at 22.8%, and occupancy is 93.4% for
the quarter; both of these are higher than the corresponding ODCE
figures by 1.2% and 0.6% , respectively.
• The Fund remains well diversified through its nine managers, which
in total provide exposure to more than 900 individual properties.
Actions
• The Fund received additional commitments of approximately $31.0
million for January 1, 2019 and currently has no investment queue.
Additionally, redemption requests totaled $31.2 million for March 31,
2019, with many of those due to rebalancing requests.
• Current assets under management are $2.2 billion.
• For a variety of reasons, including both risk positioning and capacity
addition, we are in the process of replacing one of the diversified
managers; this exchange will reduce the fund’s leverage ratio while
also adding a manager with a larger portfolio of properties in an
effort to lower individual property risk.
68 Footer
Disclosures
69 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Important information This presentation is provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary
of SEI Investments Company. The material included herein is based on the views of SIMC. Statements that are not factual in nature, including
opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are
subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results. This presentation
should not be relied upon by the reader as research or investment advice (unless SIMC has otherwise separately entered into a written agreement
for the provision of investment advice).
There are risks involved with investing including loss of principal. There is no assurance that the objectives of any strategy or fund will be achieved
or will be successful. No investment strategy, including diversification, can protect against market risk or loss. Current and future portfolio
holdings are subject to risk. Past performance does not guarantee future results.
For those SEI funds which employ a “manager of managers” structure, SIMC is responsible for overseeing the sub-advisers and recommending
their hiring, termination, and replacement. References to specific securities, if any, are provided solely to illustrate SIMC’s investment advisory
services and do not constitute an offer or recommendation to buy, sell or hold such securities.
Any presentation of gross mutual fund performance of underlying mutual fund investments or gross account level performance is only intended for
one-on-one presentations with clients and may not be duplicated in any form by any means or redistributed without SIMC’s prior written consent.
Through June 30, 2012, annual performance is calculated based on monthly return streams, geometrically linked. From June 30, 2012 onward,
annual performance is based upon daily return streams, geometrically linked as of the specific month end.
Performance results do not reflect the effect of certain account level advisory fees. The inclusion of such fees would reduce account level
performance, particularly when compounded over a period of years. The following hypothetical illustration shows the compound effect fees have
on investment return: For an account charged 1% with a stated annual return of 10%, the net total return before taxes would be reduced from 10%
to 9%. A ten year investment of $100,000 at 10% would grow to $259,374, and at 9%, to $236,736 before taxes. For a complete description of all
fees and expenses, please refer to SIMC’s Form ADV Part 2A, the investment management agreement between SIMC and each client, and
quarterly client invoices.
Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain
cases have not been updated through the date hereof. While such sources are believed to be reliable, neither SEI nor its affiliates assumes any
responsibility for the accuracy or completeness of such information and such information has not been independently verified by SEI.
Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any
management fees, transaction costs, or expenses, which would reduce returns. Indexes are unmanaged and one cannot invest directly in an
index.
70 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Important information
SIMC develops forward-looking, long-term capital market assumptions for risk, return, and correlations for a variety of global asset classes, interest
rates, and inflation. These assumptions are created using a combination of historical analysis, current market environment assessment and by
applying our own judgment. In certain cases, alpha and tracking error estimates for a particular asset class are also factored into the
assumptions. We believe this approach is less biased than using pure historical data, which is often biased by a particular time period or event.
The asset class assumptions are aggregated into a diversified portfolio, so that each portfolio can then be simulated through time using a monte-
carlo simulation approach. This approach enables us to develop scenarios across a wide variety of market environments so that we can educate
our clients with regard to the potential impact of market variability over time. Ultimately, the value of these assumptions is not in their accuracy as
point estimates, but in their ability to capture relevant relationships and changes in those relationships as a function of economic and market
influences.
The projections or other scenarios in this presentation are purely hypothetical and do not represent all possible outcomes. They do not reflect
actual investment results and are not guarantees of future results. All opinions and estimates provided herein, including forecast of returns, reflect
our judgment on the date of this report and are subject to change without notice. These opinions and analyses involve a number of assumptions
which may not prove valid. The performance numbers are not necessarily indicative of the results you would obtain as a client of SIMC.
We believe our approach enables our clients to make more informed decisions related to the selection of their investment strategies.
For more information on how SIMC develops capital market assumptions, please refer to the SEI paper entitled “Executive Summary: Developing
Capital Market Assumptions for Asset Allocation Modeling.” If you would like further information on the actual assumptions utilized, you may
request them from your SEI representative.
71 FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Important information
Annual performance is calculated based on monthly return streams, geometrically linked as of the end of the specified month end.
Performance results do not reflect the effect of certain fund fees and expenses or investment advisory fees which would lower performance.
Performance reflects the reinvestment of dividends and other earnings. Performance information shown does not reflect any charges or fees which
may or may not be imposed by SIMC or the money manager, which will reduce performance returns. The following hypothetical illustrates the
compound effect fees have on investment return: For an account charged 1% with a stated annual return of 10%, the net total return before taxes
would be reduced from 10% to 9%. A ten year investment of $100,000 at 10% would grow to $259,374, and at 9%, to $236,736 before taxes. For a
complete description of all fees and expenses, please refer to SIMC’s Form ADV Part 2A, the investment management agreement between SIMC
and each client, and quarterly client invoices. For more details on the manager’s fees and expenses, please refer to their Form ADV Part 2A. This
presentation of modified gross performance is only intended for one-on-one presentations with clients and may not be duplicated in any form by
any means or redistributed without SIMC’s prior written consent.
#3400.1
59 R
ev. 1
0/1
6
Board of Directors
Financial Update
FY 2019 period ending 4/30/19
Presented on 5/30/19
Financial Services
System AdmissionsFor the seven months ending April 30, 2019
Fiscal year to date inpatient admissions were relatively flat
to budget and prior year by 0.3% and 0.7% respectively.
Overall growth of adjusted admission fiscal year to date
was 1.8% higher than prior year but under budget -1.1%2
89,000
90,000
91,000
92,000
93,000
94,000
93,274
92,267
90,659
YTD Budget YTD Actual YTD Prior Yr
Adjusted Admissions47,700
47,800
47,900
48,000
48,100
48,200
48,300
48,400
48,140
48,316
47,925
YTD Budget YTD Actual YTD Prior Yr
Admissions
Average Length of StayFor the seven months ending April 30, 2019
FY’19 LOS increased 2.0% from prior year and 0.6% from budget.
Inpatient cases have become more complex and documentation
has improved. Case mix index increased to 1.64 from 1.61 prior year
and 1.62 budget.3
5.00
5.05
5.10
5.15
ALOS
5.205.24
5.14
YTD Budget YTD Actual YTD Prior Yr
Average Daily Census (ADC)For the seven months ending April 30, 2019
1050
1100
1150
1200
1250
1300
1350
1400
ADC ADC with Short Stays
1,182
1,342
1,193
1,372
1,161
1,326
YTD Budget YTD Actual YTD Prior Year
ADC YTD is over 1.0% and 2.8% from budget and prior
year, respectively. Of significance is the month of
February’s ADC was 122 higher, March was 99 higher and
April’s ADC was also 93 higher compared to prior year. 4
SurgeriesFor the seven months ending April 30, 2019
0
10,000
20,000
IP Surgeries OP Surgeries
12,29716,80912,379
14,450
12,52914,498
YTD Budget YTD Actual YTD Prior Yr
Outpatient surgeries trending down from budget across all
locations. Coconut point cases were lower than budget by 1,053
cases due to an even spread of budget cases which should have
reflected a steady build up. Coconut Point surgeries are growing
rapidly, Jan - Mar from 52 to 127. cases.
24,000
26,000
28,000
30,000
Total Surgeries
29,106 26,829 27,024
YTD Budget YTD Actual YTD Prior Yr
ER Visits For the seven months ending April 30, 2019
6
ER adult treated and released visits up 5.4% from prior year,
Lee Health at Coconut point, 6,881 visits or 10.5% over budget.
Total system-wide average ER visits per day in month of April
was 858 vs. prior year 814, an increase of 45 patient per day.
130,000
135,000
140,000
145,000
150,000
ER Visits
148,173 147,086
138,974
YTD Budget YTD Actual YTD Prior Yr
15.0%
20.0%
25.0%
% ER Visits Admitted
19.0% 18.8% 20.2%
YTD Budget YTD Actual YTD Prior Yr
Physician VisitsFor the seven months ending April 30, 2019
7
FY’19 Physician Visits are 3.7% under budget and 0.6%
above prior year. The majority of this variance is due to
Specialty visits (both adult & pediatric) being below
budget and prior year by 26,533 and 348 visits respectively.
860,000
870,000
880,000
890,000
900,000
910,000
920,000
930,000
926,115
892,182886,974
YTD Budget YTD Actual YTD Prior Yr
OP ProceduresFor the seven months ending April 30, 2019
8
Outpatient procedures are 3.7% above budget YTD and
10.5% from prior year. Cardiology and Rehab Services saw
the most significant increases in volume along with the
opening of Coconut Point.
420,000
440,000
460,000
480,000
500,000
520,000
482,516
500,497
452,770
YTD Budget YTD Actual YTD Prior Yr
Income Statement
Fiscal Year to Date 2019seven month period through 4/30/2019
9
Statement of OperationsFor the seven months ending April 30, 2019
10
Act to Bud
$ Var
STATEMENT OF OPERATIONS:
Revenues:
Net Patient Revenue 1,090,933 1,098,663 1,034,822 7,730 0.7% 6.2%
Other Operating Revenue 58,185 39,228 22,889 (18,957) -32.6% 71.4%
Total Net Operating Revenue 1,149,118 1,137,891 1,057,711 (11,227) -1.0% 7.6%
Expenses:
Operating Expenses 1,026,332 1,012,188 948,402 14,144 1.4% -6.7%
Capital Expenses 78,663 78,492 67,849 171 0.2% -15.7%
Total Expenses 1,104,995 1,090,680 1,016,251 14,315 1.3% -7.3%
Operating Gain 44,123 47,211 41,460 3,088 7.0% 13.9%
Operating Margin % 3.8% 4.1% 3.9%
Non Operating Revenue 37,155 19,195 24,374 (17,960) -48.3% -21.2%
Excess Revenues Over Expenses 81,278 66,406 65,834 (14,872) -18.3% 0.9%
Profit Margin % 7.1% 5.8% 6.2%
Year to Date
Actual Prior Year
Act to Bud
% Var
Act to PY
% VarBudget
11
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY19 BUD FY19 ACT FY18 ACT
36.6% 35.6% 36.7%
16.6% 18.0% 16.7%
4.2% 4.3% 4.3%
9.0% 8.6% 8.8%
19.5% 19.4% 19.1%
14.1% 14.1% 14.4%
Comm/Other
HMO/PPO
Medicaid HMO
Medicaid
Medicare HMO
Medicare
Payer MixFor the seven months ending April 30, 2019
FY’19 Payer mix increase of Medicare HMO and increase
demand for Medicare Advantage plans in our region.
Relatively stable payer mix otherwise.
12
Charity Write-offs & Bad Debt ExpenseFor the seven months ending April 30, 2019 (in thousands)
FY’19 Charity as a % of Gross Revenue is higher than prior
year by 9.4% and budget by 2.1%. Bad Debt as a % of Net
Revenue is running also lower than prior year by 9.4% and
budget by 6.3%.
Charity Write-offs 172,498 178,046 167,371 -3.2% -6.4%
Bad Debt Expense 152,859 144,289 150,036 5.6% 3.8%
Total Charity Write-Offs & Bad Debt Expense 504,602 491,031 463,365 2.7% -6.0%
Gross Patient Revenues 5,139,697 5,245,551 4,795,253 -2.1% -9.4%
Net Patient Revenues (to include bad debt) 1,090,933 1,098,663 1,034,822 -0.7% -6.2%
Charity as a % of Gross Revenue 3.4% 3.4% 3.5% -1.1% 2.8%
Bad Debt as a % of Net Revenue 14.0% 13.1% 14.5% 6.3% 9.4%
Actual Prior Year
Act to Bud %
Variance
Act to Prior
% VarianceBudget
Net Revenue per Adjusted AdmitFor the seven months ending April 30, 2019
13
11,100
11,200
11,300
11,400
11,500
11,600
11,700
11,800
11,900
12,000
Net Rev per AA
11,696
11,907
11,414
Budget Actual Prior Year
FY’19 Net Patient Revenue per adjusted admit increase from
budget is 1.8% and prior year 4.3%.
Net Revenue per CMI Adjusted AdmitsFor the seven months ending April 30, 2019
14
6,950
7,000
7,050
7,100
7,150
7,200
7,250
Net Rev per CMAA
7,205
7,250
7,082
Budget Actual Prior Year
1.50
1.55
1.60
1.65
System Case Mix
1.62
1.64
1.61
Budget Actual Prior Year
FY’19 Net Patient Revenue increase from budget is $7.7m. The
revenue impact due to volume was negative $11.8m offset by a
positive rate impact of $19.5m. Case Mix Index has remained
higher than both budget and prior year.
Operating Expense Analysis Fiscal Year to Date 2019seven month period through 4/30/2019
15
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY19 BUD FY19 ACT FY18 ACT
53.4% 52.9% 54.9%
19.1% 19.0%19.7%
4.3% 4.7%4.5%
11.4% 11.1% 9.4%
5.6% 5.8% 5.2%
Gain from Operations
Depreciation/Interest
Purchased Services
Other Services
Supplies
Salaries/Benefits
(4,518)
4,987
(1,333)
2,549
11,184
Percent of Total Operating RevenueFor the seven months ending April 30, 2019
Budget Actual Prior Year Bud Variance PY Variance Var %
Total Operating Expenses 1,026,332 1,012,188 948,402 14,144 (63,786) 1.4%
Expenses – Salaries and Benefits For the seven months ending April 30, 2019
17
Labor expenses
increased $21.8 million
from prior year and
came in under budget by
$11.2 million primarily
due to a 3.3% gain in
labor productivity.
Average Hourly Rate
FTE per AOB
Average hourly rate
increased 3.5% from
prior year and was 1.0%
over budget resulting in
a negative rate variance
to budget of $5.3m.
5.00
5.10
5.20
5.30
5.26
5.11
5.30
YTD Budget YTD Actual YTD Prior Yr
34.50
35.00
35.50
36.00
36.50
36.11
36.49
35.24
YTD Budget YTD Actual YTD Prior Yr
Budget Actual Prior Year Bud Variance PY Variance Var %
Total Salaries & Benefits 613,670 602,486 580,654 11,184 (21,832) 1.8%
Expenses – Supplies per CMAAFor the seven months ending April 30, 2019
1,410
1,420
1,430
1,440
1,450
Supplies per CMAA
1,448
1,430 1,428
Budget Actual Prior Year
18
Supply Expense came in $2.6 million under budget overall and is 1.2% lower
per case mix adjusted admission than budget. Drugs had the most
significant favorable variance at $3.4 million under budget.
Budget Actual Prior Year Bud Variance PY Variance Var %
Total Supplies 219,180 216,631 208,585 2,549 (8,046) 1.2%
Expenses – Purchased ServicesFor the seven months ending April 30, 2019
-
50,000
100,000
150,000
Purchase Services
131,551 126,564
99,199
Budget Actual Prior Year
19
Purchased services ran under budget by $5.0 million with most significant favorable variances in the Medicaid Provider Service Network lower membership and corresponding fees. The favorable variance was partially offset by greater than budgeted contract expense for contracted hospitalists services at Gulf Coast Medical Center and Cape Coral Hospital ($1.4m over budget) , and increases in contract service agreements for equipment repairs and maintenance and information technology.
Budget Actual Prior Year Bud Variance PY Variance Var %
Total Purchased Services 131,551 126,564 99,199 4,987 (27,365) 3.8%
Gain (Loss) From Operations ( in 000’s )
For the seven months ending April 30, 2019 (in thousands)
20
38,000
40,000
42,000
44,000
46,000
48,000
44,123
47,211
41,461
Budget 2019 Actual 2019 Prior Year 2018
Operating Margin: 3.8% 4.1% 3.9%
Financial RatiosFor the seven months ending April 30, 2019
21
2017 Moody's
Median
2019 Financial
Goals
FYE 4/30/19 FYE 9/30/18
226.5
195.8
210.2
195.6
Days Cash on Hand
2017 Moody's
Median
2019 Financial
Goals
FYE 4/30/19 FYE 9/30/18
169.6%141.5% 127.4% 133.2%
Cash to Debt %
For the month of April, cash increased from the issuance of
new debt by $150m.
22
Strong Financial Results
Year over Year freestanding
outpatient net revenue
growth
Nat'l Leader Desired Meets Exceeds Current Reporting
Target Direction Goal Goal Status Tracking Period
Year over Year freestanding
outpatient net revenue 25.0% 30.0% 34.3% FTYD Aprgrowth
Key Performance Indicator
Results
Strategic Priority
FTYD Apr
Higher is
Better
Higher is
Better3.0% 3.5% 4.1%
Better than
Goal
Better than
GoalOperating Margin %
__
4.60%
Right Cost
Strong Financial
Key Performance Indicator
Right Cost
Operating Margin %
Definition
Annual percentage increase in net revenues generated in freestanding outpatient centers. Compare
growth between FY 2018 and FY 2019.
Operating Margin percent is calculated by dividing the system’s gain from operations by total
operating revenuew. This is reported in the monthly consolidated financial statements on page A.8.
Strong Financial
Results
Strategic Priority
Thank You
Lee Memorial Health System Board of Directors Updated 3/2/17
BBBOOOAAARRRDDD OOOFFF DDDIIIRRREEECCCTTTOOORRRSSS
RECOMMENDED FOR BOARD FINANCE COMMITTEE ACTION (Action includes Acceptance, Approval, Adoption, etc)
Keep form to one page, EMAIL to: boardofdirectors@leehealth.org by Noon
Eight (8) days PRIOR to presenting.
DATE: May 22, 2019 LEGAL SERVICE REVIEW? YES X NO__
SUBJECT: FY 2020 Lee Health Total Rewards Recommendations
REQUESTOR & TITLE: Alison Thurau, System Director HR, Total Rewards and Michael Wukitsch, Chief Human Resources Officer
PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY) (justification and/or background for recommendations – internal groups which support the recommendation)
Annually the LH Board of Directors reviews the fiscal year LH Compensation and
Benefits budget approved by senior leadership and presented by Human Resources. Upon review, action is taken to approve a recommended program pending full Board
approval of the final budget in September.
SPECIFIC PROPOSED MOTION:
Approval of the FY 2020 LH Compensation Program Recommendations pending the
Board of Directors’ final approval of the FY 2020 LH Budget.
Approval of the FY 2020 LH Benefits Program Recommendations pending the Board of Directors’ final approval of the Fiscal Year 2020 LH Budget.
FINANCIAL IMPLICATIONS Budgeted Account X Non-Budgeted ____ (Annual Project Budget and Total Project Budget)
STAFFING & OPERATIONAL IMPLICATIONS
(including FTEs, facility needs, etc.)
PURPOSE/REASON FOR RECOMMENDATION
To attract and retain LH staff, approval will help LH remain market competitive for both compensation and benefits.
SUMMARY (including alternatives considered, Pros and Cons)
Compensation Budget- $18.8 M Benefits: Health Plan Budget - $118 M
#3400.1
59 R
ev. 1
0/1
6
Total Rewards Presentation
Presented By; Alison Thurau , System Director HR Total Rewards May 2019
1
Positioning Total Rewards: Does it give employees what they really want?
WHAT COMPANIES OFFERWHAT EMPLOYEES CRAVE
13%EVP differentiated by having a purpose-driven mission
75%Thriving employees are 3x times more likely to work for
a company with a strong sense of purpose…
21% Practice some form of internal pay disclosure
28% Offer a career management/pathing tool
14%Have health & well-being as a talent management priority this year
75%10x more likely to feel career-
empowered
77%3x more likely to say their workplace
focuses on health & well-being
MERCER GLOBAL TALENT TRENDS 2018 STUDYCopyright 2019 Mercer (US) Inc. All Rights Reserved.
2
Annual Pay Raise:The Highs and Lows of the Employee Experience
3
Total Rewards Strategy: Main Drivers= Organizational Culture and Business Strategy
• Our employees are the heart of Lee Health and it’s essential that we link our culture, business strategy, employee performance and recognition and rewards. As we succeed in improving patient and employee safety and experience, and in operating margin, we share that success with our employees through pay for performance.
• Our goal is to optimize the health, wellness and productivity of Lee Health employees and their families while managing future benefit plan costs, offering competitive benefits and maintaining employee engagement and retention.
Our Values : Respect, Excellence, Compassion, Education
Total Rewards Strategy – Compensation
Base pay structure and hiring packages must support our ability to hire, develop, and retain talent. Base pay structure should be competitive -- matching the market (50th %tile) where we compete for talent. We should be more competitive (60th and 75th %tile) for high demand and difficult-to-recruit positions. “Competitive” is defined by base pay, hiring incentives and key contributor bonuses at the current time – but needs to focus on identifying top performers, team and individual incentives in the future.
Markets where we recruit:
Support Positions – Florida Market
Professional Positions – National Market
Leader Positions – National Market
4
Total Rewards Strategy – Compensation
Recommendation FY 2020:
• This year we are requesting approval of :
• A 3% merit pool of $ 14.5 million and a 0%-6% range with an average merit of 3.0%.
• $1.5 million for market adjustments, along with a Key Contributor’s Pool of $700,000 and a Nursing certification pool of $1.2 million.
• Including three additional Holidays to be paid at the Special Holiday Premium rate for a cost of $900,000. ( Memorial Day , July 4th and Labor Day)
• FY 2020 compensation budget of $18.8 million for approval.
5
Thank You
Benefits – The Journey
• How to improve
health status,
hold costs, and
make limited
decreased plan
design
changes.
The Health Plan has been
conservatively budgeted for
years with increasing
enrollment. The Lee Health
Employee Health Plan
medical claims trend
(4.7%) is below market
(6.0%) without benefit
reductions or significant
premium increases.
Benchmarking – vs. 2018 PPO BenchmarksPlan design details
▲ Favorable to benchmark
T H E L E E H E A LT H P L A N H A S A H I G H E R A C T U A R I A L / P L A N VA L U E C O M PA R E D T O B E N C H M A R K
P P O D E S I G N S .
— Comparable to benchmark
Source: Mercer’s National Survey of Employer-Sponsored Health Plans, 2018.
▼ Unfavorable to benchmark
• Values represent in-network benefits
*2018 PPO Plan Designs
Lee Health Plan Hospitals 500+ Health Care 500+ National 500+
ACTUARIAL VALUE 91% ▲ 88% 87% 87%
INDIVIDUAL/FAMILY DEDUCTIBLE $350 / $1,050 ▲ $600 / $1,250 $1,000 / $2,000 $750 / $1,500
INDIVIDUAL/FAMILY OOPM $2,500 / $7,500 ▲ $3,250 / $7,000 $3,300 / $7,000 $3,000 / $6,850
PLAN COINSURANCE 10% ▲ 20% 20% 20%
PHYSICIAN VISIT (PCP/SPC) $25 / $60 ▼ $25 / $40 $25 / $40 $25 / $40
EMERGENCY ROOM
Copay for ER (% of ER’s / Median) Yes / $150 81% / $150 84% / $150 78% / $150
Coinsurance for ER (% of ER’s / Median Yes / 10% ▲ 38% / 20% 28% / 20% 46% / 20%
Health Plan Cost BenchmarksActive Health Care Costs
Lee Health Benchmarking Health Care CostsAverage Plan Cost per Active Employee
BenchmarksLee Health vs. Benchmark
2018 Category 2018 PPO
Lee Health Medical Cost $13,122
Hospitals 500 + $14,374 ($1,252)/ -9.5%
Health Care 500 + $13,268 ($146)
National 500 + $13,178 ($56)
Source: Mercer’s National Survey of Employer-Sponsored Health Plans, 2018.
Forecast of 2020 Financials Based on Incurred Claims Data Paid Through December 2018
• Assumes Employee Only and Employee + Children contributions increase by 5%; Employee + Spouse and Family tiers increase by 10%
• Holding contributions flat in 2020 (at 2019 levels) would results in net costs of $117.7M.
Lee Health 2020 Forecast
Forecast Item Medical Pharmacy Total
2019 Projected Net Incurred Claims (9,457 enrollment) $111,181,000 $19,690,000 $130,871,000
Claims Trend 1.060 1.115 1.068
Forecasted 2020 Claims Cost for 9,457 Employees $117,852,000 $21,954,000 $139,806,000
Less Projected Rx Rebates $0 ($3,905,000) ($3,905,000)
Forecasted 2020 Claims Cost Net of Rx Rebates $117,852,000 $18,049,000 $135,901,000
Administration $2,019,000
Rx Dispensing $105,000
Network Access Fees $454,000
Stop Loss Insurance Premiums $1,882,000
Florida Cancer Payments $1,380,000
Status Quo Total Cost Before Considering Employee Contributions $141,741,000
Status Quo 2020 Illustrative Employee Contributions $25,932,000
Lee Health Status Quo Net Cost for 2020 (expected enrollment of 9,457) $115,809,000
Status Quo 2020 Net per Capita Cost $12,246
Strategic Next Steps – From the Committee
Strategies to Manage the Plan Going Forward:
Move RX Specialty Medicines – Top 2 to Lee and HPMC sites for 340 pricing and care advantages.
Develop a strong OB/GYN Care Management Program
Promote to plan participants our Oncologists and Advanced Providers in our Cancer Center.
For recruiting purposes offer employee and spouses the same coverage as if at Lee Health if working outside Lee, Charlotte and Collier counties.
Explore telemedicine offering for behavioral health.
Consider a move to a value based network.
10
Recommendations for Approval
• No increase in premiums except for the top tier. This is the tier of $100,000 plus salary. The increase in premiums would be 3% for this tier.
• Continue with current plan qualifiers and expand our outreach e-learning programs to Hyperlipidemia. Also convert our Osteoarthritis Program to a e-learning program.
• Approval of the 2020 health plan budget of $118 million.
11
12
In Summary :
Our 403(b) retirement plan match
remains above the market. If a
participant contributes 5% after
one year of service, Lee Health
contributes a matching 5% up to
IRS limits.
The PTO benefit remains very
competitive to market with no cap
on accruals and cash in provided.
Thank You
Lee Memorial Health System Board of Directors Updated 3/2/17
BBBOOOAAARRRDDD OOOFFF DDDIIIRRREEECCCTTTOOORRRSSS
RECOMMENDED FOR BOARD ACTION (Action includes Acceptance, Approval, Adoption, etc)
Keep form to one page, EMAIL to: boardofdirectors@leehealth.org by Noon
Eight (8) days PRIOR to presenting.
DATE: May 30, 2019 LEGAL SERVICE REVIEW? YES__ NO_x_
SUBJECT: FY 2020 Financial Projections and Ratio Targets REQUESTOR & TITLE: Ben Spence, Chief Financial and Business Services Officer
PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY) (justification and/or background for recommendations – internal groups which support the recommendation)
None
SPECIFIC PROPOSED MOTION:
Motion to approve the gain from operations target and budget assumptions to correspond
with a 3.0% profit margin and establish the financial goals for the FY 2020 budget
FINANCIAL IMPLICATIONS Budgeted Account ____ Non-Budgeted ____ (Annual Project Budget and Total Project Budget)
Lee Health sets it prices in a manner that ensure the financial viability of the system to maintain a reasonable
operating margin sufficient to meet the long term capital needs that support the strategic plan of the
organization that enables its mission an vision to be realized. Hospital prices reflect rates that are sufficient
to cover the cost of charity care, losses on uninsured and losses on reimbursement from payers that do not
fully cover the cost of services provided.
STAFFING & OPERATIONAL IMPLICATIONS (including FTEs, facility needs, etc.)
PURPOSE/REASON FOR RECOMMENDATION
To allow Lee Health to continue FY 2020 budget process in a timely manner.
SUMMARY (including alternatives considered, Pros and Cons) Three year financial projections are used to assist with establishing the target operating margin for the 2020 Budget.
Based on the assumptions provided in the presentation, the target operating margin for the FY 2020 Budget will be 3%. The three year financial projection continues to support the System’s ability to meet the financial ratio goals.
#3400.159 Rev. 10/16
FY 2020 Financial Assumptions Projections and Ratios
Ben Spence, Chief Financial & Business Services Officer May 30, 2019
Key Assumptions – Inpatient Volume
• Population Growth of 2.2% • Hospital Inpatient use rate per 1,000 persons decrease of
1.8% • Inpatient Admission Growth of 1.3% in FY 2020 and 0.4%
in FY 2021 and FY 2022 • Acute Care Admissions 0.2% • Post Acute Admissions 27.5%
• Opening of Gulf Coast SNU
• Average Length of Stay (ALOS): • FY 2020 flat with Acute Care decrease of 2.5%
offset by growth in the Gulf Coast SNU • FY 2021 and FY 2022 at a 2.5% reduction
Key Assumptions – Outpatient Volume
• Observation Growth of 1%
• Outpatient Centers Growth of 5.0% • Lee Health Coconut Point Open for full year • Recent or Anticipated Acquisitions
• Physician Services Growth of 16.3% • Physician Recruitment and Acquisitions
• Overall Volume Growth of 3.2% in Adjusted Admissions • FY 2021 and FY 2020 at 2.4%
Revenue/Reimbursement Assumptions
• Hospital rate increase of Gross 5% / Net 2%. • Rate Increases will be set within the parameters of the
Hospital Rate Setting Guiding Principals attached
• Overall net revenue per adjusted admission rate increase • FY 2020: 2.00% increase • FY 2021: 1.25% increase • FY 2022: 1.00% increase
• Rationale: • Increased pressure on governmental reimbursement
(70% of our payer mix) • Increase pressure on commercial reimbursement rate • Uncertainty around ACA and uninsured trend line
Operating Expense as a % of Net Operating Revenue
Actual Projected2018 2019 2020 2021 2022
Salaries & Wages 46.9% 45.7% 45.0% 44.5% 44.1%Employee Benefits 7.7% 7.6% 7.4% 7.4% 7.4%Supplies 19.3% 18.8% 17.8% 18.2% 18.6%Purchased Services 10.5% 11.8% 13.4% 13.4% 13.3%Other Services 5.8% 5.8% 5.7% 5.7% 5.7%Depreciation & Amortization 5.6% 6.0% 6.2% 6.4% 6.3%Interest 1.2% 1.3% 1.4% 1.4% 1.4%
Total Operating Expenses 97.0% 97.0% 97.0% 97.0% 96.8%
Gain from Operations 3.0% 3.0% 3.0% 3.0% 3.2%
Statement of Operations (in thousands)
Actual Projected2018 2019 2020 2021 2022
Gross Patient Revenue 8,000,779 8,627,112 9,092,060 9,608,109 10,159,061
Total Deductions from Revenue 6,250,285 6,797,678 7,150,287 7,594,722 8,076,573
Net Patient Revenue 1,750,494 1,829,433 1,941,772 2,013,387 2,082,488Other Operating Revenue 39,488 74,096 144,601 146,049 147,509Total Operating Revenue 1,789,982 1,903,530 2,086,374 2,159,436 2,229,997
Operating Expenses
Salaries & Wages 839,206 869,221 939,445 961,325 983,220Employee Benefits 137,404 145,384 154,328 160,541 165,181Supplies 346,082 357,572 372,018 392,367 413,870Purchased Services 187,941 223,908 280,055 288,457 297,111Other Services 104,143 111,288 119,380 123,541 127,558
Total Operating Expenses 1,614,777 1,707,373 1,865,226 1,926,231 1,986,940Depreciation & Amortization 100,366 113,878 129,569 138,529 140,576Interest 20,996 25,377 28,936 29,500 31,000
Gain From Operations 53,843 56,902 62,643 65,176 71,482
Non Operating Revenue 47,196 26,135 59,395 61,579 63,945
Excess of Revenue over Expenses 101,039 83,037 122,038 126,754 135,426
Lee Health Ratios Based on Projections
2017 Moody's Actual ProjectedMedian 2018 2019 2020 2021 2022
Profitability Ratios:
Operating Margin 2.3% + 3.0% 3.0% 3.0% 3.0% 3.2%Excess Margin 5.2% + 5.5% 4.3% 5.7% 5.7% 5.9%Operating Cashflow Margin 8.6% + 9.8% 10.3% 10.6% 10.8% 10.9%
Liquidity Ratios:
Days Cash on Hand 226.5 + 195.6 215.6 202.2 201.0 212.2Cushion Ratio 23.9 + 13.1 14.1 14.4 16.1 17.5 Cash-to-Debt 169.6% + 133.2% 130.1% 141.0% 153.1% 176.6%
Liquidity Ratios:
Debt-to-Capitalization 32.9% (-) 30.5% 33.2% 30.4% 27.8% 25.3%Annual Debt Service Coverage 5.4 + 3.1 3.3 3.7 4.0 4.1 Debt-to-Cash Flow 3.0 (-) 3.6 3.7 3.3 3.0 2.7
Note:+ = Ratios that should be above the Moody's median(-) = Ratios that should be lower than the Moody's median
Cash Available for Capital Based on Projections (in thousands)
Actual Projected2018 2019 2020 2021 2022
Sources of Cash:
Gain From Operations 53,843 56,902 62,643 65,176 71,482Non Operating Revenue (Excluding Investment Income) 4,675 7,056 7,056 7,056 7,056Depreciation & Amortization 100,366 113,878 129,569 138,529 140,576
Total Sources of Cash 158,884 177,836 199,268 210,761 219,113
Uses of Cash:
Change in Patient Accounts Receivable (13,323) (13,390) (15,014) (10,790) (9,693)Net Borrowings/(Repayments Long Term Debt) (21,456) 128,518 (44,524) (38,527) (39,618)Change in All Other Assets 15,819 (4,165) (5,684) (4,017) (3,876)Change in All Other Liabilities (11,812) 34,819 7,000 3,372 3,131
Total Uses of Cash (30,772) 145,782 (58,222) (49,962) (50,056)
Cash Provided Prior to Investment Income 128,112 323,618 141,046 160,799 169,057Cash Provided by Investment Income 42,521 19,079 52,339 54,523 56,889
Cash Provided (Used) 170,633 342,696 193,384 215,322 225,946
Cash Balance Beginning of Period 996,434 876,521 1,023,312 1,046,695 1,077,017
Cash Balance Before Capital Spending 1,167,067 1,219,217 1,216,696 1,262,017 1,302,963
Projected Capital Spending 290,547 195,905 170,001 184,999 130,001Excess Cash After Capital Expenditures (119,914) 146,791 23,383 30,323 95,945
Total Cash & Investments 876,520 1,023,312 1,046,695 1,077,018 1,172,962Total Outstanding Debt 658,166 786,684 742,160 703,633 664,015
Cash-to-Debt Ratio 133.2% 130.1% 141.0% 153.1% 176.6%
Lee Memorial Health System Guiding Principles for hospital charges and rate setting
1) Lee Health hospital average annual price increases for all services including room and board rates and ancillary hospital services are based upon the most recent medical cost trend index as published by PriceWaterhouse Coopers, Health Research Institute (HRI). Average price is computed by dividing total charges by total adjusted admissions and case mix index. The Medical cost trend has ranged from 5 – 12% over the past 10 years.
2) Lee Health’s pricing goal is for its average hospital price per case mix adjusted admission
to be at or below the 45th percentile in the State of Florida based on hospital charge data reported annually to the Agency for Health Care Administration.
3) Lee Health sets it prices in a manner that ensure the financial viability of the system to maintain a reasonable operating margin sufficient to meet the long term capital needs that support the strategic plan of the organization that enables its mission an vision to be realized. Hospital prices reflect rates that are sufficient to cover the cost of charity care, losses on uninsured and losses on reimbursement from payers that do not fully cover the cost of services provided.
4) When the Board approves the annual operating and capital budget assumptions and financial goals to initiate the development of the budget, the Board approves the price increase which was determined using the pricing parameters and methodology listed above in 1 – 3.
Supplemental Information Lee Health prices compared to State of Florida average hospital prices based on 2017 AHCA data
• Lee Health prices are 24% lower than average hospital prices in state of Florida • 67% of hospitals in Florida have higher average prices • Lee Health prices are 2% lower than regional not-for-profit hospital average • Lee Health prices are 47% lower than regional for-profit hospitals
Historical Pricing Fact: Lee Health lowered community health care prices significantly in 2007 when it acquired the two HCA hospitals. Average prices at Gulf Coast Hospital and Southwest Florida Regional Medical Center on the highest volume DRG’s went down by 18% after Lee Health acquired these facilities.
Net Revenue impact of gross price increases
• Lee Health’s average net per-patient reimbursement has essentially kept up with inflation in recent years, increasing roughly 1 – 2% annually.
• Those net changes reflect the amounts the health system actually recovers, and are substantially less than the gross average charge master price increases of 5% annually.
• To be clear: raising the gross price by 5% does not translate to a 5% increase in health system reimbursement from payers and patients.
• The reason higher prices do not result in correspondingly higher reimbursement is because a large percentage of our payments are based on fixed case rates rather than a percentage of charge methodology.
• Medicare, Medicaid and our largest contracted commercial insurance companies pay on a predetermined fixed payment based on the type of service provided. In other words, those payers do not necessarily pay more when overall inflation and health system prices increase.
• Medicare and Medicaid insure approximately 68% of all Lee Health patients. Significantly, Medicare and Medicaid do not allow hospitals to negotiate for rates but rather publish their prices annually and providers choosing to participate in these programs must accept these rates as payment in full.
• Both Medicare and Medicaid reimburse Lee Health at amounts that are significantly less than our actual costs of providing care.
• Gaps in health insurance pose another hurdle. At least 9% of our patients are uninsured. Lee Health’s charity policy provides that patients with incomes from 0 –200% of the federal poverty level receive a complete 100% write-off of their bills. Lee Health absorbs all of the cost of care for these patients.
• Another often overlooked fact is that, despite Lee Health’s status as a special purpose unit of local government, Lee Health does not receive any direct tax support to help offset the losses on charity care and uninsured patients. Lee Health is the largest public health system in Florida that does not receive direct taxpayer support.
• Altogether, the challenge we face is as apparent as it is daunting. To maintain its public mission to our community, Lee Health must find ways to offset the losses on Medicare and Medicaid patients, and the $280 million in charity care write-offs to the uninsured and underinsured in the fiscal year that ending September 30, 2018, all without direct taxpayer support.
• In addition, we face challenges with the 25% our patients who have private (non-governmental) commercial insurance. This insurance generally is offered through patients’ employers.
• A small portion of these commercial payers have contract provisions that pay providers on a mutually agreed upon percentage of the gross charge master prices. Although these contracts represent a small percentage of our overall payer arrangements, they bring in additional net reimbursement related to our annual gross price increases.
• Those increases help offset the losses on the governmental payer reimbursement and charity care for the uninsured. To be clear: Even with those modest increases, the health system’s net reimbursement only manages to keep up with inflation.
• Choosing to raise charge master prices less than 5% would require a corresponding decrease in costs. That would be achieved largely through lower wage rates and/or fewer employees. The 5% rate increase is necessary to support the Board-approved operating margin, currently set at 3% for FY 2019.
The table below provides the impact of each 1% increase in gross prices for Lee Health:
Table of Net Reimbursement expected for each 1% in price increase
5% price increase = $15 million net revenue increase*
4% price increase = $12 million net revenue increase
3% price increase = $9 million net revenue increase
2% price increase = $6 million net revenue increase
1% price increase = $3 million net revenue increase
Budgeted Merit & Market Increase for FY 2019 to continue providing competitive compensation for staff $15.4 million
Lee Health“Moving Care from Volume to Value”
• Population Health Transformation
Strategic Introduction
Dr. Larry Antonucci
• The Administration has been focused on the emerging marketpressures and these proposals are what administration believe are“must do and can’t fail” initiatives
Dr. Scott Nygaard
• We know that physician engagement and alignment to value basedcare models are essential and required to achieve Right Care in theRight Place at the Right Time and Right Cost
Ben Spence
• Remembering that we no longer are financially sustainable if we donot move to the a balanced payment model that fully takesadvantage of “Value Based Payments”
Why is Medicare Advantage a Must Do, Can’t Fail?The Market Landscape Is Changing
Competitors are targeting Lee Health’s Physicians and Patients and will challenge Lee Health if we fail to align patents and physicians to our advanced payment arrangement (CON, Ambulatory Expansion, ACO’s and Insurance Products)
• As HCA enters they are intending to target high margin business and Lee Health could lose patients, encounters and associated revenue.
• As Aetna/CVS and Optum launch Retail/MedExpress and expanded MinuteClinics, ambulatory patterns may shift volume, reducing LPG Encounters and associated ED, Inpatient and Service Line Revenue
Implications: “Provide our Community with Local, Physician-Led Options”
What if Lee Health Does Nothing?
Lee County FFS vs MA Comparison
Developed based on BCC's 2018 ACO costs adjusted to FFS levels and to exclude ESRD
MA estimate reflects estimated discount of approximately 25% in aggregate PMPM costs
Major Subcategory Unit Util/1,000 Cost/Service PMPM Util/1,000 Cost/Service PMPM
Inpatient Short-Term Stay Hospital Admits 240.6 $10,565 $211.80 156.4 $10,565 $137.67
Inpatient Skilled Nursing Facility & RehabAdmits 79.7 $11,069 $73.51 51.8 $11,069 $47.78
Inpatient Psychiatric Hospital Admits 4.3 $7,828 $2.82 2.8 $7,828 $1.83
Total Inpatient $288.12 $187.28
Outpatient Hospital Outpatient Visit 5,647.7 $262 $123.16 3,953.4 $262 $86.21
Professional Procedures Procedures 13,102.7 $110 $120.48 10,482.2 $110 $96.39
Professional Evaluation and Management Visits 11,195.3 $65 $60.98 10,819.1 $66 $59.07
Professional Laboratory and Other Tests Procedures 32,110.0 $33 $89.05 25,688.0 $33 $71.24
Professional Part B Drugs Units 73,412.2 $14 $85.65 58,729.7 $14 $68.52
Total Professional $356.16 $295.21
Ancillary Home Health Agency Units 13,147.5 $70 $76.69 10,518.0 $70 $61.36
Ancillary Ambulance Units 2,416.3 $38 $7.65 1,933.0 $38 $6.12
Ancillary Durable Medical Equipment Hardware 63.5 $2,411 $12.75 50.8 $2,411 $10.20
Ancillary Other Visits 1,889.0 $64 $10.11 1,511.2 $64 $8.09
Total Ancillary $107.20 $85.76
Total $874.64 $654.46
Difference ($220.18)
Note
- Costs shown here are not risk-adjusted, however risk score for the baseline population is 1.002
- Trend has not been applied from 2018 to 2020. Based on the MA rate books, trend from 2018 to 2020 in Lee County is 8.6%
MA EstimateFL FFS Estimate
Unchecked - As payers expand Medicare Advantage, the shift to value will pressure revenue
Strategic Imperative: “Building options for our Community”
The competitive landscape requires
- Meaningful differentiation to protect pricing against declining FFS
- Physician alignment and loyalty to provider-led insurance products
- Patient “Delight” achieved through quality, integrated care management and the “Exceptional Lee” experience
Clinical Quality – “Raising the Performance Bar”
As a Medicare Advantage payer, we control 100% of the Premium, allowing Lee Health to set the standards of experience, quality, care delivery and value based payment arrangements
Quality standards are established across the entire continuum of care and the physician-led operating boards are accountable to set the quality standards and drive performance accountability
Profits are not taken out of our community and will be reinvested in quality, safety, innovation, enhanced benefits and provider incentives.
Proof of Quality: Provider Plans are Medicare STAR Rating Leaders
Provider-sponsored plans more likely to be rated 4.5 or 5 stars
• Distribution of 2015 MA Enrollees by Contract Quality Score. All plans vs. provider-sponsored plans
MA – A Focus on Quality
Plans are judged based on 9 Quality Categories
The following measures from these categories have direct and tangible impact on the Quality of Care received by a patient:• Staying healthy: screening tests and vaccines. Hitting the mark on these improve quality through
early detection, illness prevention, and perception of health/well-being• Managing chronic (long-term) conditions. Adherence to clinical standards of best practice, by design,
will improve the health and outcomes of members.• Member experience with the health plan. Especially focused on provider access and availability.
Access and coordination of care are the cornerstones for improved outcomes and health• Health plan customer service. Timely decisions on authorization and appeals and appropriate
Translation Service availability – improves patient experience, adding value and improving sense of well-being
• Drug plan customer service. How well the plan handles member calls and questions, again focusing on Timely Decisions and the Ease of Rx filling, as above
• Drug safety and accuracy of drug pricing. Ensuring medication safety, by definition, improves the quality of care delivered.
Independent Physician Engagement and Alignment is High
Clarion Health and the CIN (Innovatus) are generating physician excitement, engagement and alignment
Aligns PCP and Specialists into the Value Based Care model (Unlike the Medicare ACO that favors PCPs)
County Current Adequacy*Anticipated % of 2020
membership# of Providers
Charlotte 97.56% 876 183
Collier 97.56% 498 362
DeSoto 97.56% 36 22
Glades 90.24% 27 0
Hendry 95.12% 18 79
Lee 100% 2,562 918
Sarasota 97.56% 1,983 460
Total 6,000 2,024
* Currently credentialing contracted providers
Confidential – Do Not Distribute10
prepared for
• “Mark to Market” Process of multiple iterations and Actuarial Models
• Stakeholders
o Marketing
o Salesforce/Distribution - Brokers
o Lee Health and Evolent
o Actuarial – Evolent, Lee and Independent
• Comparisons and Benchmarks
o “Value Indexing”
• Clarion
• UHG
• Humana
Benefit Design and Competitiveness
Medicare Advantage Opportunity
Medicare Advantage Capability Readiness Dashboard
Culture/ Leadership
Quality / Outcomes
Risk Adjustment
Care Management
Network TechnologyHealth Plan Operations Functions
May2019
• Large Medicare Population and growing
• Positive P and L scenarios
• Alignment of initiatives across all lines
• ACO success
• Value of lives in MA are lucrative
Strengths
• Capital Reserves are in place
• Membership Enrollment
• Opportunity cost for other initiatives
• Physician engagement and alignment
Considerations
Combined Population Health Proforma
12
2020 2021 2022 2023 2024
Employee Health Plan Members 20,603 21,427 22,284 23,176 24,103
Savings $1.8M $1.9M $2.0M $2.2M $2.3M
Commercial Contracts Members 47,895 78,035 85,359 93,895 102,710
Shared Savings $3.5M $6.0M $6.8M $7.6M $8.5M
Medicare Advantage Members 6,000 7,200 8,280 9,108 10,019
Net Margin ($12.4M) ($5.4M) ($1.0M) $5.0M $9.8M
Direct to Employer Members 2,000 3,000 5,000 6,000 7,000
Net Margin $0.9M $1.4M $2.4M $3.0M $3.5M
Total Net Margin Impact ($6.3M) $3.9M $10.1M $17.7M $24.2M
Next Generation ACO will contribute ~$2.5 M Net Margin in 2019 and forecasted to Deliver ~$4.5 M in 2020.
Confidential – Do Not Distribute13
prepared for
2020
Numerous milestones for BCP’s MA Launch Timeline for 2020
20192018
Jan JanJuly
Imp
lem
enta
tion/B
uild
Op
era
tio
ns
Diligence
Foundation(Aug 18’ –April 19’)
Product & Bid(Dec 18’ – Oct 19’)
Implementation(Jun 18’ – Dec 19’)
Readiness & Go-live(Jul 19 – Dec 19’)
Transition / Hand-offs(Dec 19 –Mar 20)
Ongoing
Operations(Jan 20 +)
• Market Entry
Strategy
• Business
Case
• Network Devo Contracting, o Network compositiono Payment methods
o Contract
Templates
• Legal Entities
• State Licensure
• Market Org
• NOIA preparation
• CMS Application
• Product Design
• Bid
• Advertising
• Member
Materials
F/M/B office
• Process
development
• Benefit Build
• Provider
Loading
• Interfaces
• IT Dev
• Staffing
• Variable
Staffing
• ID Cards
• Testing
• Vendor
Readiness
• Training
Feb 13, 2019
MA Application
Submission
November 13, 2018
Notice of Intent to
Apply (Non-Binding)
June 3, 2019
Bid Submission
September
CMS Approval and
Contract Execution
Mid-Aug 2019: Part D Benchmark / Rebate Reallocation
CM
S
April October
Oct 15 – Dec 7
AEP Jan 1, 2020
Plan Effective Date
Thank You
Confidential – Do Not Distribute15
prepared for
Medicare Advantage market in Lee County is dominated by United and Humana
FL PENETRATION IS HIGH; LEE
COUNTY HAS OPPT’Y TO EXPAND
67%58%
67%
33%42%
33%
Lee
County, FL
183K
Florida
4,344K
National
56,998K
Traditional Medicare
MA enrollees
UNITED AND HUMANA DOMINATE LEE COUNTY
22%
48%
Humana
Other
FL Blue
United
Lee
County, FL
59K
23%
7%
AARP MedicareComplete Choice
Plan 2 (Regional PPO)
4 stars
AARP Medicare Complete (HMO) 4.5 stars
HumanaChoice Florida (PPO) 3.5 stars
Humana Gold Plus (HMO) 4 stars
HumanaChoice (RPPO) 3 stars
BlueMedicare HMO LifeTime 3.5 stars
AARP MedicareComplete Choice
Plan 1 (PPO)
4 stars
PLAN(S) STAR RATING
Confidential – Do Not Distribute16
prepared for
Addressable Market & Membership Projections
1 CMS Penetration Files (April 2018)2 CMS Ratebook Filing (2019)
Counties
MA
Eligibles1
MA
Enrolled1
Penetration
MA
Eligbles
(3-Year
CAGR) Quartile
Double
Bonus 2019 FFS2
2019
Benchmark
(No Bonus)2
2019
Benchmark
(3.5% Bonus)2
2019
Benchmark
(5% Bonus)2
Lee 192,312 64,267 33.4% 5.7% 95% NO $938 $891 $924 $938
Collier 99,271 23,282 23.5% 5.6% 100% NO $901 $901 $932 $946
Charlotte 68,968 23,663 34.3% 5.7% 95% NO $929 $882 $915 $929
Sarasota 142,658 40,578 28.4% 5.0% 100% NO $907 $907 $939 $953
Hendry 5,978 1,681 28.1% 4.9% 95% NO $919 $873 $905 $919
Glades 2,663 890 33.4% 5.7% 95% NO $962 $914 $948 $962
Desoto 7,370 2,158 29.3% 4.5% 95% NO $918 $872 $904 $918
Total 519,220 156,519 30.1% 5.5% 97% 0% $923 $895 $927 $941
ILLUSTRATIVE
Counties surrounding Lee have
only 30% penetration compared to
42% in Florida and 33% nationally
Lee Memorial Health System Board of Directors Updated 3/2/17
BBBOOOAAARRRDDD OOOFFF DDDIIIRRREEECCCTTTOOORRRSSS
RECOMMENDED FOR BOARD ACTION (Action includes Acceptance, Approval, Adoption, etc)
Keep form to one page, EMAIL to: boardofdirectors@leehealth.org by Noon
Eight (8) days PRIOR to presenting.
DATE: 5/22/2019 LEGAL SERVICE REVIEW? YES_X_ NO__
SUBJECT: License Agreement for parking spaces – Samile Investments, LLC (Licensor) and Lee Memorial Health System (Licensee) REQUESTOR & TITLE: Latrice Davis, VP Lee Physician Group, Tammy Powell, LPG System Director Practice Operations
PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY)
(justification and/or background for recommendations – internal groups which support the recommendation)
N/A
SPECIFIC PROPOSED MOTION: 1. Approve proposed licensing agreement between Samile Investments, LLC (Licensor) and Lee Memorial Health
System (Licensee) for 425 SE 47th Terrace, Cape Coral, FL 33904 comprising 31,744 square feet of vacant land to be utilized by Lee Health for parking to support the LPG South Cape practice located at 507 Cape Coral Parkway E, Cape Coral, FL 33904. Cost of License Agreement is $300.00 per month. Term begins on the effective date and may be terminated by either party with 30-days written notification.
2. Authorize the Lee Health President or Chairman to execute the lease upon final LMHS and/or Board counsel
review and revision of the final license agreement document as long as such revisions do not materially modify the specific license agreement terms as set forth above.
FINANCIAL IMPLICATIONS Budgeted Account ____ Non-Budgeted _X___
(Annual Project Budget and Total Project Budget)
STAFFING & OPERATIONAL IMPLICATIONS (including FTEs, facility needs, etc.)
PURPOSE/REASON FOR RECOMMENDATION
Not enough patient parking. Current Parking spaces 45. Staff need 24, This leaves 21 for Patients. Future growth and practice
needs such as a Coumadin Clinic and additional nurse visits cannot be initiated as we are limited by the number of spaces available
for patient parking.
SUMMARY Additional spaces are needed to sustain the current patient parking needs and provide additional services, such as
Coumadin Clinic. New providers cannot be considered at this location until the parking challenges are addressed.
LICENSE AGREEMENT
This License Agreement (“Agreement”) is effective on May 1, 2019 (the “Effective Date”)
between Lee Memorial Health System, a Florida public health care system (“Licensee”), and
Samile Investments LLC, a Florida limited liability company (“Licensor”).
TERMS AND CONDITIONS
1. Grant of License. Pursuant to this Agreement, Licensor grants to Licensee, upon terms and
conditions that follow, a revocable, non-exclusive license for the use of a parking lot
(“Parking Lot”) owned by Licensor.
2. Parking Lot. The Parking Lot is located outdoors on land with an address of 452 SE 47th
Terrace, Cape Coral, FL 33904. The Parking Lot is approximately 31,744 square feet.
Licensee accepts the Parking Lot “as-is” and may not change the Parking Lot in any way
without Licensor’s prior written approval.
3. Term. The term of this Agreement begins on the Effective Date and expires upon the
occurrence of any of the following events:
a. either party’s delivery of a termination in accordance with the applicable provisions of
this License;
b. upon Licensor’s ceasing to be the fee simple owner of the Parking Lot;
c. Licensee’s default and Licensor’s election to terminate pursuant to the default provisions
contained in this License.
4. Use. Licensee shall have access to the entire Parking Lot at all days and times that this
Agreement is in effect, in order that employees, patients, contractors, and guests of Licensee
may park their vehicles.
5. Fees. Licensee shall pay to Licensor a fee of $300.00 per month for the use of the Parking
Spaces. The monthly fee will be due on the first of each month during the term of this
Agreement and will immediately be deemed late and in default if not received by Licensor
when due.
6. Default. If Licensee should default in or otherwise fail to perform any of the obligations set
forth in this License, including without limitation any applicable rules and regulations
established by Licensor from time to time, and fail to cure any such breach or default within
twenty four (24) hours after notice from Licensor, then Licensor may, in addition to all other
remedies available at law or in equity, revoke this License upon delivery of notice to
Licensee. In such event, Licensee shall immediately vacate the Parking Lot in accordance
with this License. In the event this Agreement is terminated, Licensee shall not have the right
to occupy the Parking Lot. Should Licensee do so after termination, without the express
written consent of Licensor, it is agreed that said occupancy shall constitute a trespass and
that, in addition to any other remedies available to it, Licensor shall be entitled to seek
immediate injunctive relief.
9. Termination. Licensor or Licensee may terminate this License for any reason upon giving
30 days’ notice to the other party as provided for in this License. In the event of termination,
this License shall immediately become void and the Licensee shall vacate the Parking Lot in
accordance with this License.
10. Notices. Any notice required or permitted to be delivered pursuant to this Agreement will be
in writing and will be deemed delivered: (a) immediately, if delivered in person; (b) in three
business days if sent by certified U.S. mail, postage prepaid; or (c) in one business day if sent
by a national overnight courier, in each case addressed to the following addresses or such
other address as may be specified by either party hereto upon notice given to the other:
If to Licensor:
Innova Property Management
4645 SE 11th Place, Suite 102
Cape Coral, FL 33904
If to Licensee:
Lee Health Ambulatory Facilities
12801 Westlinks Drive, Suite 102
Fort Myers, FL 33913
11. Complete Agreement. With respect to its subject matter, this Agreement constitutes and
expresses the entire agreement of the parties and supersedes all prior agreements and
understandings, whether written or oral, between the parties. No change or amendment of
any of the terms or provisions hereof will be binding unless in writing and signed by the
party against whom the same is sought to be enforced. Neither the failure of either party to
exercise any right, power, or remedy provided under this Agreement or to insist upon
compliance by any other party with its obligations under this Agreement, nor any custom or
practice of the parties at variance with the terms of this Agreement, will constitute a waiver
by such party of its right to exercise any such right, power, or remedy or to demand such
compliance. The waiver by a party of any breach or violation of any provision of this
Agreement will not operate as, or be construed to be, a waiver of any subsequent breach or
violation hereof.
12. Choice of Law & Forum. This Agreement is governed by and construed in accordance with
Florida law, without regard to conflict of laws principles. Each party specifically consents to
Florida as the proper jurisdiction for all legal actions arising directly or indirectly from this
Agreement and agrees that the state or federal courts located in Lee County, Florida shall be
the exclusive forum and venue for any such action.
13. Counterparts. This Agreement may be executed in multiple counterparts, each of which will
be deemed an original, and all of which together will constitute one and the same instrument,
whether by original, electronic, or facsimile signature.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective
Date.
LEE HEALTH SAMILE INVESTMENTS LLC
_____________________________________ _______________________________________
Name & Title: __________________________ Name & Title: __________________________
Lee Memorial Health System Board of Directors Updated 5/16/17
RECOMMENDED FOR BOARD ACTION (Action includes Acceptance, Approval, Adoption, etc)
Keep form to one page, EMAIL to: boardofdirectors@leehealth.org by Noon
Eight (8) days PRIOR to presenting.
DATE: May 30, 2019 LEGAL SERVICE REVIEW? YES_x_ NO__ SUBJECT: 3 Year Continuing Services Contract for Construction Management for Acute Care Facilities REQUESTOR & TITLE: Dave Kistel, V.P. Facilities & Support Services PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY) (justification and/or background for recommendations – internal groups which support the recommendation) On June 23, 2016, Lee Health Board of Directors authorized Lee Health administration to negotiate a Three (3) Year Continuing Services Contract Construction Management for Acute Care/Inpatient Services per Board Policy. The Three (3) Year Continuing Services Contract was subsequently executed. The proposed agreement, attached hereto, is the same form that was approved by this Board in 2016. SPECIFIC PROPOSED MOTIONS: First Motion: to accept the Certification & Selection Committee’s Rankings for the 3-Year Construction Management Continuing Services Contract for Acute Care Facilities as determined on May 16, 2019. Second Motion: to authorize Lee Health administration to Proceed with contract negotiations for a Three (3) Year Continuing Services Contract for Construction Management for Acute Care Facilities, per Board Policy 20.15 D and the Consultants Competitive Negotiation Act, starting with the highest numerically ranked firm, RD Johnson Construction and, if such negotiations are not successful to authorize the Lee Health Administration to then negotiate with the next ranked firm. Third Motion: Upon successful negotiation in accordance with Board Policy 20.15 D, authorize the President & Chief Executive Officer or Board Chairman to execute a Three (3) Year Continuing Services Contract for Acute Care Facilities, in substantially the same form as the attached draft contract, subject to final legal review. FINANCIAL IMPLICATIONS Budgeted Account _x__ Non-Budgeted ____ (Annual Project Budget and Total Project Budget) The 3-year Continuing Services Contract for Acute Care will be utilized for projects that are either currently funded or will be funded in the future through capital and contingency funds as approved by Lee Health and the Board of Directors. The continuing services contracts are for individual construction projects not exceeding 2 million dollars. STAFFING & OPERATIONAL IMPLICATIONS None. PURPOSE/REASON FOR RECOMMENDATION Selection of Construction Management Firms for Acute Care Projects allows Lee Health to move forward on smaller projects without delays, in a cost effective and time efficient manner.
SUMMARY (including alternatives considered, Pros and Cons) The Certification & Selection Committee ranked firms based upon their qualifications for 3-year Continuing Services Contracts for Acute Care Services per Board Policy. RD Johnson was highest ranked firm for Acute Care Services. The Board is being asked to approve Lee Health administration to proceed with contract negotiations and execution of the contract pursuant to Board Policy 20.15 D.
1 2 3 4 5 6 7 8
DEANGELIS DIAMOND 80 77 62.5 89 77 92 75 72 624.5
STEVENS CONSTRUCTION 86 85 91 95 87 79 85 92 700
RD JOHNSON CONSTRUCTION 94 99 86 98 89 95 100 97 758
LMHS 3‐YEAR CONSTRUCTION CONTINUING SERVICES AGREEMENT
ACUTE CARE/INPATIENT FACILITIES
FIRMSELECTION COMMITTEE MEMBER ID
TOTAL
1
CONTINUING SERVICES AGREEMENT CONSTRUCTION MANAGEMENT SERVICES AT RISK
ACUTE CARE SERVICES
THIS AGREEMENT is made and entered into as of the _____ day of ________________, 2019, by and between Lee Memorial Health System, d/b/a Lee Health, a special purpose unit of local government (“Owner”) and ________________________ (“Construction Manager”).
RECITALS:
WHEREAS, Owner is a special unit of local of local government engaged in
the delivery of health care services to the residents of Lee County, Florida; and
WHEREAS, Construction Manager is a construction manager engaged in the delivery of construction management services to the residents of Southwest Florida; and
WHEREAS, in the course of fulfilling its legislative purpose, Owner periodically utilizes construction management services relating to the construction and remodeling of acute care healthcare projects requiring Agency for Health Care Administration (“AHCA”) submission, compliance and inspection (referred to as “Acute Care Project”); and
WHEREAS, the Owner and Construction Manager desire to enter into a Continuing Services Agreement for Construction Management Services at Risk relating to Acute Care Projects undertaken by Owner over the next three (3) years in which the construction costs of each-individual Acute Care Project does not exceed Two Million and No/100 Dollars ($2,000,000.00); and
WHEREAS, the specific scope of services to be performed by Construction Manager for each individual Acute Care Project (“Project”) shall be defined in work orders (“Work Order[s]”) which are issued pursuant to the terms of this Agreement. A sample copy of the Work orders to be issued under this Agreement is attached hereto as Exhibit “A”.
OPERATIVE PROVISIONS:
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Owner and Construction
2
Manager, intending to be legally bound, agree as follows: 1. Recitals. The recitals set forth above are true and correct and are incorporated
herein in their entirety.
2. Term. This Agreement shall be for a term of three (3) years. The contract period shall commence on _____________ and shall terminate on _________________.
3. Construction Manager’s Services.
3.1 Scope of Services. The specific scope of services to be performed by the Construction Manager in connection with any Acute Care Project performed under the provisions of this Agreement shall be described in detail in the Work Order issued for the Acute Care Project (“Work”).The form of the Work Order to be used is attached hereto as Exhibit “A”.
3.2 Basic Services. The basic services to be performed by the Construction
Manager in connection with any Work Order issued under the terms of this Agreement shall consist of the following services:
3.2.1 Construction Manager shall provide competent supervision of all
phases of the Work.
3.2.2 Construction Manager shall cause the Work to be performed in accordance with the applicable drawings and specifications and all things indicated thereon or implied therefrom.
3.2.3 Prior to the commencement of any construction under a Work
Order, Construction Manager shall prepare and submit for Owner’s approval a Project Schedule which shall indicate the dates for starting and completion of the various stages of construction.
3.2.4 Construction Manager shall provide scheduling and periodic
updating on a monthly basis in the interest of completing the Work in the most expeditious and economical manner (“Progress Schedules”).
3.2.5 Before performing any Work contemplated in a Work Order,
Construction Manager shall carefully study and compare the
3
various drawings, specifications and other contract documents relevant to the Work, take field measurements of existing conditions related to the Work, observe any conditions at the project and promptly report to the Owner and Architect any errors, omissions or inconsistencies discovered by Construction Manager.
3.2.6 Construction Manager shall supervise and direct the Work, using
the Construction Manager’s best skill and attention
3.2.7 Construction Manager shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work called for under a Work Order.
3.2.8 Construction Manager shall be fully and solely responsible for job
site safety.
3.2.9 Construction Manager shall be responsible for the acts and omissions of Construction Manager’s employees, subcontractors and their agents and employees and any other persons or entities performing portions of the Work for or on behalf of Construction Manager or any of its subcontractors.
3.2.10 Unless otherwise provide in the Work Order, Construction
Manager shall provide and pay for all labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation and other facilities and services necessary for proper execution and completion of the Work whether temporary or permanent and whether or not incorporated or to be incorporated in the Work.
3.2.11 Construction Manager shall enforce strict discipline and good order
among the Construction Manager’s employees and other persons carrying out the Work Order. Construction Manager shall not permit the employment of unfit persons or persons not skilled in tasks assigned to them.
3.2.12 Construction Manager shall deliver, handle, store, and install
materials in accordance with manufacturer’s instructions.
3.2.13 Construction Manager shall review for compliance with the
4
specifications and contract drawings, approve in writing and submit to the Architect shop drawings, product data, samples and similar submittals required by the specifications with reasonable promptness.
3.2.14 Construction Manager shall perform all work in accordance with
approved submittals.
3.2.15 Construction Manager shall confine its operations at the project site to areas permitted by law, ordinances, permits, specifications and construction drawings and shall not unreasonable encumber the project site with materials or equipment.
3.2.16 Construction Manager shall be responsible for cutting, fitting or
patching required to complete the Work or to make its parts fit together properly.
3.2.17 Construction Manager shall provide the Owner and Architect
access to the Work in preparation and progress wherever located.
3.2.18 Construction Manager shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under this Agreement. At the completion of the Work, Construction Manager shall remove from and about the Project waste materials, rubbish and Construction Manager's tools, construction equipment, machinery and surplus material.
4. Change Orders.
4.1 From time to time, Owner may authorize changes in Work Orders
issued pursuant to this Agreement, issue additional instructions, require additional Work, or direct the omission of Work previously ordered; provided, however, that Construction Manager shall not proceed with any change involving an increase or decrease in cost or extension of the substantial completion date without the prior written authorization of Owner in accordance with the procedures set forth herein.
4.2 Owner shall order changes in the Work by giving Construction Manager a written change order request (“Change Order Request”) setting forth in detail the nature of the requested change. Upon receipt of a Change Order Request, Construction Manager shall furnish to Owner a statement
5
setting forth in detail, with a suitable breakdown by trades and work classifications, Construction Manager's estimate of the changes in the Guaranteed Maximum Price attributable to the changes set forth in such Change Order Request and a proposed adjustment to the substantial completion date resulting from such Change Order Request. If Owner approves in writing the estimate of Construction Manager, such Change Order Request and such estimate shall constitute a change in the Guaranteed Maximum Price and the substantial completion date shall be adjusted as set forth in such estimate. The foregoing procedure shall apply to both additive and deductive change orders. Agreement on any change orders shall constitute a final settlement on all items covered therein, subject to performance thereof and payment therefore pursuant to the terms of this Agreement. Construction Manager agrees to perform all change order Work on the basis of reimbursement to it of the cost of the Work plus the overhead and profit percentages specified herein.
4.3 It is understood and agreed that refinement and detailing will be accomplished from time to time with respect to the drawings and specifications set forth in any Work Orders issued pursuant to this Agreement. No adjustment in the Guaranteed Maximum Sum or the substantial completion date set forth in Work Orders shall be made unless such refinement or detailing results in changes in scope, quality, function and/or intent of the drawings and specifications not reasonably inferable or anticipatable by a Construction Manager of Construction Manager's expertise and experience.
5. Owner's Responsibilities. For each Project constructed under the terms of
this Agreement, Owner shall provide Construction Manager with the following information: 5.1 Owner shall designate a representative authorized to act on Owner's
behalf with respect to the Project described in the Work Order. Owner or such authorized representative shall render decisions in a timely manner pertaining to issues submitted by Construction Manager in order to avoid unreasonable delay in the orderly and sequential progress of Construction Manager’s services.
5.2 Except for the permits and fees which are the responsibility of Construction Manager, under this Agreement, Owner shall secure and pay for necessary approvals, easements, assessments and charges required for construction, use or occupancy of permanent structures or
6
for permanent changes in existing facilities.
5.3 Owner shall furnish the services of architects, engineers and other professional consultants when such services are reasonably required by the scope of the Project.
5.4 Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and environmental tests, inspections and reports required by law or this Agreement.
6. Contract Price.
6.1 Compensation. In full consideration for the performance of any Work
Orders issued pursuant to this contract, Owner shall pay to Construction Manager the contract sum which shall consist of (1) the Cost of the Work; and (2) a profit and overhead component of ____ percent (__%) of the Cost of the Work (“Contract Sum”). Notwithstanding the foregoing, in no event shall the Contract Sum exceed the guaranteed maximum price established for each Work Order (“Guaranteed Maximum Price”). Owner shall not be obligated to Construction Manager for any sums in excess of the Guaranteed Maximum Price established for each Work Order.
6.2 The Cost of the Work. For purposes of this Agreement the phrase, “Cost of the Work” shall consist of the following items:
6.2.1 wages of hourly workers employed by Construction Manager to
perform any work called for under a Work Order;
6.2.2 cost of all materials, supplies and equipment incorporated or to be incorporated in any Project described in a Work Order issued pursuant to this Agreement, including the cost of transportation and storage thereof.
6.2.3 payments due to subcontractors from the Construction Manager or
made by the Construction Manager to subcontractors for their work performed pursuant to any Work Order issued under this Agreement;
6.2.4 rental charges for all temporary facilities, necessary machinery and
7
equipment, exclusive of hand tools used at the site of any Project described in any Work Order issued pursuant to this Agreement, whether rented from ·Construction Manager or any third party, equipment supplier, including installation, repairs and replacements, dismantling, removal, cost of lubrication, transportation and delivery costs thereof, which are used in the support of a subcontractor or Construction Manager's own forces in the performance of any Work called for under a Work Order issued pursuant to this Agreement, at rental charges consistent with those prevailing in the area. Automobiles and trucks shall only be rented and/or leased with the Owner's prior written consent and approval;
6.2.5 the cost of premiums for all insurance and bonds which
Construction Manager is required to procure by this Agreement for any Projects described in Work Orders issued pursuant to the terms of this Agreement;
6.2.6 sales, use, gross receipts, or similar taxes related to expenses
allowable as part of the Cost of the Work imposed by any governmental authority, and for which Construction Manager is liable;
6.2.7 expenses associated with telephone service, heat, light, power,
water, sanitary facilities, weather protection and elevator services at the Project;
6.2.8 costs for trash and debris control and removal from the Project;
6.2.9 costs incurred due to an emergency affecting the safety of persons
and property at the Project;
6.2.10 costs for watchmen and security services for the Project;
6.2.11 costs for efficient logistical control of the Project, including horizontal and vertical transportation of materials and personnel;
6.2.12 wages and salaries of Construction Manager's supervisory
personnel when stationed at the Project described in a Work Order but only with Owner's written approval and only for that portion of their time devoted to performing the Work described in the Work Order; and
8
6.2.13 any and all permits specifically required for the performance of
any Work described in a Work Order issued pursuant to this Agreement.
6.3 The Cost of the Work shall not include the following:
6.3.1 Any costs or expenses made necessary to correct defective
workmanship or to correct any Work not in conformance with any plans or specifications described in the Work Order or to correct any deficiency or damage caused by the negligent acts of Construction Manager or any other party for whom it is responsible including, but not limited to, its subcontractors and suppliers;
6.3.2 general operating expenses of Construction Manager's principal and branch offices other than the field office located at the Project identified in any Work Order issued pursuant to this Agreement;
6.3.3 any part of Construction Manager's capital expenses, including
interest on Construction Manager' s capital employed for the Project;
6.3.4 overhead and general expenses of any kind except as may be
expressly allowed in paragraph 6.1 of this Agreement;
6.3.5 any cost in excess of the guaranteed maximum price;
6.3.6 minor expenses, such as telegrams, telephone service, data processing costs, courier services, photocopies, reproductions and similar “petty cash” items; and
6.3.7 the cost of hand tools, such as shovels, hammers and the cost of
expendable items, such as bits, brooms, brushes, ropes and hard hats.
7. Payment.
7.1 Progress Payments.
7.1.1 Construction Manager shall submit to the Owner monthly
applications for payment in a form satisfactory to Owner
9
(“Application for Payment”). Each Application for Payment shall contain an itemization of all payments made to subcontractors, material suppliers and all other matters which represent a portion of the Cost of the Work as well as that portion of Construction Manager's overhead and profit attributable to the Cost of the Work reflected in each Application for Payment.
7.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month. No more than one (1) Application for Payment shall be submitted to the Owner during any month.
7.1.3 Owner shall make payment to Construction Manager not later than
thirty (30) days after the Owner receives the Application for Payment.
7.1.4 As an express condition precedent to the making of any progress
payments, Construction Manager shall furnish to Owner the following items:
7.1.4.1 A sworn Application for Payment. In each such Application for Payment, Construction Manager shall certify that it has completed all of the Work to be performed so as to entitle it to the progress payment for which it is applying. Construction Manager shall further certify in its Application for Payment that all such work has been performed in accordance with the applicable building codes and the plans and specifications described in the Work Order and that Construction Manager knows of no deviations or defects relating to the Work performed by it. Furthermore, Construction Manager shall certify in the Application for Payment as follows: “That as of the date of this Application for Payment, all due and payable bills with respect to the Project described in the Work Order to which this Application for Payment relates have been paid to date.”
7.1.4.2 A consent of surety from the surety issuing the Public Construction Bond furnished by Construction Manager in connection with the Work Order;
7.1.4.3 A partial lien waiver for the period of time covered by the
10
Application for Payment complying with the provisions of Section 713.20, Florida Statutes.
7.1.4.4 Such other forms and documents as Owner, in its sole discretion may require in order to assure an effective waiver of construction lien rights and/or bond claims of any nature whatsoever.
7.1.5 Construction Manager agrees that ten percent (10%) of the amount
due under each Application for Payment shall be retained by Owner until final payment is made. The amount of any retainage shall be included in Construction Manager's Application for Payment for the purpose of indicating the value of the Work performed, however, Construction Manager shall not request payment therefore from Owner until such retainage is actually due and payable.
7.2 Final Payment. The provision of the following documents shall constitute an express condition precedent to Owner's obligation to make final payment, including retainage amounts, hereunder:
7.2.1 A sworn final Application for Payment;
7.2.2 A final Contractor's Affidavit attesting to the fact that the Construction Manager has fully completed all Work to be performed under the Work Order and that all individuals, firms, or corporations furnishing material, labor, or services instant to the completion of construction and Work under the Work Order have been paid in full;
7.2.3 A final Contractor's Waiver acknowledging receipt of final payment and providing that said final payment constitutes a full release and discharge by Construction Manager to Owner of all claims and liens of Construction Manager against Owner arising out of, connected with, or resulting from performance of the Work Order.
7.2.4 Notebooks containing all warranties required under the project specifications and plans described in the Work Order as well as all warranties relating to equipment supplied by Construction Manager; and
11
7.2.5 A clean set of “As Built Documents”.
7.3 The payment of any Application for Payment by Owner, including the final application, does not constitute approval of or acceptance of that part of the Work to which such payment relates nor does it relieve Construction Manager of any of its obligations hereunder nor shall such payment constitute a waiver of any claims which Owner may then have or thereafter discover.
7.4 Notwithstanding any provisions hereof to the contrary, Owner shall not be
obligated to make payment to Construction Manager hereunder if any one (1) or more of the following conditions exist:
7.4.1 Construction Manager is in default of any of its obligations hereunder;
7.4.2 Any part of such payment is attributable to Work which is defective or not performed in accordance with the requirements of this Agreement; provided, however, such payment shall be made as to the part thereof attributable to the Work which is performed in accordance with such requirements and is not defective;
7.4.3 Construction Manager has failed to make payments promptly to Construction Manager's subcontractors or for material or labor used in the Work for which Owner has made payment to Construction Manager;
7.5 If Owner, in good faith, determines that the portion of the Guaranteed
Maximum Price then remaining unpaid will not be sufficient to properly complete the Work contemplated in the Work Order, whereupon no additional payments will be due Construction Manager hereunder unless and until Construction Manager, at its sole cost, performs a sufficient portion of the Work so that the portion of the Guaranteed Maximum Price then remaining unpaid is determined by the Owner to be sufficient to complete the Work; or if Owner, in good faith, determines that Construction Manager has not or will not with prompt acceleration of the Work, meet the substantial completion date specified in the Work Order.
7.6 In the event-of-a bona fide dispute by Owner-of any sums for which
payment has been requested, no interest shall be due on such disputed sums until such dispute is resolved, provided that all undisputed sums
12
shall have been paid in due course.
7.7 Owner reserves the right to issue joint checks to Construction Manager and its subcontractors or materialmen, or, to make payments to Construction Manager's subcontractors or materialmen, if, in Owner's sole judgment, it is necessary to do so in order to ensure payment to the aforesaid parties. The amount of said joint or direct checks shall be deducted from the Contract Sum.
7.8 The acceptance of final payment shall constitute a waiver of all claims
by Construction Manager except those previously made in writing 'and identified by the Construction Manager as unsettled at the time of the final Application for Payment.
7.9 Florida Prompt Payment Act. Notwithstanding anything contained herein
to the contrary, the Construction Manager agrees and acknowledges that the limited portion of the Florida Prompt Payment Act, as set forth in Section 218.735(6), Florida Statutes pertaining to “timely payment for purchases of construction services” is incorporated by reference into this Agreement with respect to the Construction Manager’s obligation to pay subcontractors. Consistent with Section 218.735(6), Florida Statutes, when the Construction Manager receives payment for labor, services or materials furnished by any subcontractor or supplier hired by the Construction Manager, the Construction Manager must remit payment due to those subcontractors and suppliers within fifteen (15) days after the Construction Manager’s receipt of payment. The Construction Manager will flow this requirement to its sub-subcontractors such that when a subcontractor receives payment from the Construction Manager for labor, services or materials furnished by sub-subcontractors or suppliers hired by the subcontractor, the subcontractor will remit payment due to those subcontractors and suppliers within fifteen (15) days after the subcontractor’s receipt of payment.
8. Setoff and Recoupment. Payment for goods, work or services to be
performed under this Agreement shall be subject to setoff or recoupment for any present or future claim which Owner may have against Construction Manager in connection with this Agreement, any Work Orders issued under this Agreement or any other agreements existing between the parties.
13
9. Insurance. Construction Manager shall, with respect to each Work Order issued pursuant to this Agreement, provide and maintain, and require all of its subcontractors to do the same, the following types of insurance protecting the interests of Owner and Construction Manager with limits of liability not less than those set forth below or as otherwise may be required by the specifications described in any Work Order, whichever limits are greater:
9.1 Worker's Compensation Insurance. Construction Manager shall maintain
worker's compensation insurance, insuring its liability under the Worker's Compensation and Occupational and Disease Laws of the State of Florida, with limits of liability not less than the minimum limits required by Florida law. The worker's compensation policy provided by Construction Manager must be endorsed with a waiver of subrogation endorsement, waiving Construction Manager's right of subrogation against Owner and any architect or engineer utilized by Owner.
9.2 Comprehensive General Liability Insurance. Comprehensive general liability insurance which shall include coverage on an “occurrence” basis for the hazards of:
9.2.1 Premises-operation;
9.2.2 Explosion, collapse and underground property damage;
9.2.3 Mold;
9.2.4 Elevators and escalators;
9.2.5 Independent contractors;
9.2.6 Products and completed operations, including coverage for
explosion, collapse and underground hazards (with completed operations coverage to remain in force for two (2) years following the date of the acceptance of the Work by Owner);
9.2.7 Contractual liability;
9.2.8 Personal injury liability for all groups of offenses with the exclusion
pertaining to employment removed; and
9.2.9 Incidental malpractice coverage.
14
Such comprehensive general liability insurance must be endorsed with a broad form property damage endorsement (including completed operations). Owner shall be named as an additional named insured on the comprehensive general liability policy. The limits of liability associated with the Construction Manager's general liability policy shall not be less than the following:
$1,000,000.00 each occurrence; $2,000,000.00 aggregate.
Notwithstanding anything contained herein to the contrary, the coverages under the comprehensive general liability policy to be furnished by the Construction Manager must be afforded on a policy form no more restrictive than the last edition of the comprehensive general liability policy filed by the Insurance Service Office, Inc.
9.3 Excess Liability Policy. Construction Manager shall maintain an
umbrella (excess) liability insurance policy in an amount not less than $1,000,000.00 combined single limit bodily injury/property damage, in excess of the comprehensive general liability insurance described above.
9.4 Automobile Liability Insurance. Construction Manager shall maintain automobile liability insurance covering all owned, non-owned and hired vehicles used in connection with the Work to be provided hereunder with a combined minimum limit of $1,000,000.00 single limit for bodily injury and property damage liability each person/each aggregate.
9.5 Fire Insurance. It is Construction Manager's responsibility to carry its own fire insurance on all items, including equipment that will not become an integral part of the project described in any Work Order issued pursuant to this Agreement.
9.6 Builder's Risk Insurance. Construction Manager shall procure builder's
risk insurance covering Construction Manager and Owner at the site from loss or damage caused by or from risk of direct physical damage or loss. Construction Manager's builder's risk policy shall have minimum limits of $1,000,000.00.
15
9.7 Public Construction Bond. In the event the Guaranteed Maximum Price
associated with a Work Order is in excess of Two Hundred Thousand and No/100 Dollars ($200,000.00), Construction Manager shall furnish a public construction bond in an amount equal to one hundred percent (100%) of the Guaranteed Maximum Price associated with any Work Order issued pursuant to this Agreement. The public construction bond to be issued by Construction Manager shall be in a form acceptable to Owner issued by a surety satisfactory to the Owner and shall name the Owner as an obligee. The public construction bond to be provided by Construction Manager shall comply with the provisions of Section 255.05, Florida Statutes. In such an event, the cost of the Public Construction Bond shall be added to the Contract Sum.
9.8 Insurance Certificate. Prior to performing any services with respect to
a Work Order, Construction Manager shall file with Owner a certificate of insurance in a form acceptable to Owner. The certificate of insurance shall reflect Owner as an additional insured on Construction Manager's comprehensive general liability policy, automobile liability policy, worker's compensation policy and excess liability policy. The certificate of insurance furnished by Construction Manager shall contain a provision that the coverages afforded under the policies described thereon will not be cancelled until at least thirty (30) days' prior written notice has been given to Owner.
9.9 Rating Insurance Companies. All insurance companies issuing the policies
provided for herein shall be licensed and approved by the Department of Insurance, State of Florida and shall have a financial rating no lower than II and a policy holder's surplus rating no lower than (A) as listed in the most current edition of A.M. Best TK Rating Guide. Companies with ratings lower than those specified herein shall only be acceptable upon the written consent of Owner.
9.10 Extent of Coverages. The insurance coverages referred to above are
set forth in full in their respective policy forms, and the foregoing descriptions of such policies are not intended to be complete or to alter or amend any provision of the actual policies and should said descriptions conflict with the actual policies of insurance, the provisions of the policies of insurance shall govern.
9.11 Failure to Secure Insurance. If Construction Manager does not provide
16
the insurance coverages required hereunder, Owner may procure such insurance coverages at Construction Manager's expense and deduct the amount paid for said coverages from any sums owed Construction Manager.
9.12 Waiver of Subrogation. Construction Manager's policies shall be endorsed
to provide that the insurers waive their rights of subrogation against Owner and also to provide that the policy provides primary coverage over any other applicable insurance coverages.
10. Safety Standards. Construction Manager agrees to require that all of its
employees, subcontractors and other personnel be required to fully comply with and implement all government laws (OSHA) pertaining to safety standards Construction Manager agrees that any fines, assessments or penalties imposed upon Owner by failure of the Construction Manager, its employees or subcontractors to comply with government standards will be fully charged back and paid for by Construction Manager.
11. Indemnification. In consideration of the first One Hundred and No/100 Dollars ($100.00) to be paid hereunder and to the fullest extent permitted by law, Construction Manager agrees to indemnify, hold harmless, and defend Owner, Owner's agents and their respective agents, servants and employees from and against all claims, costs, expenses or liabilities (including attorneys' fees) attributable to bodily injury, sickness, disease or death or damage to or destruction of property arising out of, or resulting from, the performance of Work by Construction Manager, its subcontractors, their agents, servants or employees but only to the extent caused by the negligent acts or omissions of them. Construction Manager's obligation hereunder shall only be limited to the extent of the monetary limitations set forth herein and shall not be limited by the provisions of any worker's compensation or similar act. Construction Manager's monetary obligation under this indemnification provision is specifically limited to the sum of One Million and No/100 Dollars ($1,000,000.00). The parties hereby agree that the foregoing monetary limitation bears a reasonable commercial relationship to the Agreement. This indemnity provision is intended to comply with Florida laws on indemnity and, specifically, to comply with Section 725.06, Florida Statutes, and is to be interpreted in such a way as to be enforceable.
12. Termination.
12.1 Termination for Cause by Owner.
17
12.1.1 If Construction Manager shall fail to commence any work called
for under a Work Order or fail to diligently prosecute Work called for under a Work Order to completion in a diligent, efficient, timely, workmanlike, skillful, and careful manner and in accordance with the provisions of any specifications and/or plans identified in the Work Order, fail to use an adequate amount or quality of personnel or equipment to complete such Work without undue delay, fail to perform any of its obligations under this Agreement or any Work Orders issued pursuant to this Agreement, or fail to make prompt payments to its subcontractors, materialmen or laborers, then Owner shall have the right, if Construction Manager shall not cure such default after five (5) days' written notice thereof, to (i) terminate this Agreement or, in the alternative, any Work Orders issued pursuant the terms of this Agreement; (ii) take possession of and use of all or any part of Construction Manager's materials, equipment, supplies, or other property of any kind used by Construction Manager in the performance of Work related to any Work Order and to use such property in the completion of said Work; or (iii) complete any Work Order in a manner it deems desirable including engaging the services of other parties therefore. Any such acts by Owner shall not be deemed a waiver of any other right or remedy of Owner. If, after exercising any such remedy, the cost to Owner of the performance of the balance of any Work associated with a Work Order is in excess of that part of the Contract Sum associated with the Work Order which has not heretofore been paid to Construction Manager hereunder, Construction Manager shall be liable for and shall reimburse the Owner for such excess.
12.1.2 It is recognized that if Construction Manager is adjudged
bankrupt, or makes a general assignment for the benefit of creditors, or if a receiver is appointed for the benefit of creditors, or if a receiver is appointed on account of Construction Manager's insolvency, such an event could impair or frustrate the Construction Manager's performance of this Agreement and any Work Orders issued under the provisions of this Agreement. Accordingly, it is agreed that upon the occurrence of any such event, Owner shall be entitled
18
to request of Construction Manager or its successor in interest adequate assurance of further performance in accordance with the terms and conditions hereof. Failure to comply with such a request within ten (10) days from date of delivery of the request shall entitle Owner to terminate this Agreement. In all events, pending receipt of adequate assurance of performance and actual performance in accordance therewith, Owner shall be entitled to proceed with any Work called for under a Work Order with its own forces or with such other contractors on a time and material or other appropriate basis, the cost of which will be back charged against the amount then or thereafter paid or otherwise due Construction Manager.
12.2 Termination for Cause by Construction Manager. If Owner fails to
perform any of its obligations hereunder, Construction Manager shall have the right to give Owner a written notice thereof, stating the nature of the default complained of. If Owner does not cure such default or commence the curing of such default within five (5) days after receipt of such notice, Construction Manager shall have the right to terminate this Agreement or any Work Order issued pursuant to this Agreement by giving Owner written notice thereof at any time thereafter while such default remains uncured and payment shall only be made to the Construction Manager for reasonable demobilization costs, the fee earned to the date of the termination and all outstanding costs incurred as of the date of termination. Said payment shall be Construction Manager’s sole damages for Owner's breach. Construction Manager shall similarly have the right to terminate upon five 5) days' written notice if any Work to be performed in connection with the Work Order is suspended for a period of sixty (60) days or more from causes not the fault of the Construction Manager.
12.3 Termination for Owner's Convenience. Owner hereby reserves the right to terminate this Agreement and/or any Work Orders issued under the terms of this Agreement without regard to fault or breach upon written notice to Construction Manager, effective immediately, unless otherwise provided in said notice. In the event of such a termination, Owner shall pay as the sole amount due to Construction Manager (i) all sums due for Work performed to date; and (ii) reasonable costs of demobilization. Such sums shall be due and payable on the same conditions as set forth herein for the final payment. Upon receipt of such payment, the parties
19
hereto shall have no further obligations to each other except the Construction Manager's obligation to perform corrective and/or warranty work and to indemnify Owner as provided for in this Agreement. It is understood and agreed that no fee or other compensation or payment shall be due or payable for unperformed Work. Construction Manager agrees that each subcontract and purchase order issued by it will reserve for Construction Manager the same right of termination provided for in this paragraph and that Construction Manager further agrees to require that comparable provisions be included in all lower tier subcontracts and purchaser orders.
13. Time of Completion. 13.1 Time. All time limits stated in Work Orders issued pursuant to this
Agreement are of the essence of this Agreement. By executing Work Orders issued pursuant to this Agreement, Construction Manager confirms that the contract time specified in a Work Order is a reasonable period for performing the Work contemplated therein.
13.2 Substantial Completion. The date of substantial completion shall be deemed the date on which the permitting authority for the project in question issues a final certificate of occupancy.
13.3 Delay Damages. CONSTRUCTION MANAGER SHALL NOT BE
ENTITLED TO RECOVER ANY MONETARY DAMAGES IT MAY SUSTAIN AS A RESULT OF ANY DELAY CAUSED CONSTRUCTION MANAGER BY ANY ACT OF OWNER, ARCHITECT, ANY SEPARATE CONTRACTOR EMPLOYED BY OWNER, OR ANY OTHER CAUSES WHATSOEVER. CONSTRUCTION MANAGER FURTHER AGREES THAT IT WILL ACCEPT IN FULL SATISFACTION FOR SUCH DELAYS ANY EXTENSIONS OF TIME WHICH ARE GRANTED IT BY OWNER.
14. Accuracy, Technical Sufficiency of Services Provided by Construction Manager.
14.1 Notwithstanding anything contained herein to the contrary, it is
understood and agreed between the parties that Owner is not examining any contract documents for accuracy and technical sufficiency, and is not under any obligation to inspect the Project. Furthermore, it is understood and agreed between the parties that neither the review, approval, nor acceptance by Owner of data, surveys, studies, designs,
20
specifications, calculations, plans, drawings, or any other documents furnished hereunder by Construction Manager shall in any way relieve Construction Manager of responsibility for the adequacy, completeness, and accuracy of its Work, and in no event shall Owner's review, approval, acceptance of or payment for such services be construed to operate as a waiver of any of Owner's rights under this Agreement or of any cause of action it may have, arising out of the performance of this Agreement.
14.2 Construction Manager hereby acknowledges that Owner does not make any representations or warranties to Construction Manager by virtue of the information contained in the request - for proposals or any program descriptions contained therein. Construction Manager further acknowledges that it, alone, is responsible for the accuracy, completeness, and technical sufficiency of all Work performed under this Agreement and that the information contained in Owner's request for proposal and program description does not relieve, release, or in any way whatsoever diminish Construction Manager' s ultimate responsibility for the accuracy, completeness and technical sufficiency of the Project and any Work performed hereunder.
15. Legal Terms.
15.1 The terms and provisions of this Agreement and any dispute arising
in connection herewith shall be governed by and construed in accordance with Florida Law. The parties agree that all disputes arising under this Agreement shall be resolved by the courts and not by arbitration. The parties further agree that the venue for any legal action brought in connection with this Agreement shall be in Lee County, Florida. In connection with any litigation arising out of this Agreement, the prevailing party shall be entitled to recover all costs incurred, including reasonable attorneys' fees.
15.2 Prior to the filing of any litigation by Owner or Construction Manager against the other (and, except as described below, as a precondition to any such filing), Owner and Construction Manager shall engage in presuit non-binding mediation. Such mediation may be requested by either party at any time and shall be conducted the same as if such mediation were ordered by Florida Circuit Court (i.e. in accordance with and subject to, all of the laws and rules applicable to court ordered mediation). Such mediation shall be conducted within a reasonable period
21
of time after the same is requested in writing by either party. If the parties are unable to agree upon the selection of a mediator, either party may petition or request that the Circuit Court in Lee County, Florida (or the Mediation Coordinator for the Court of Lee County, Florida) appoint a mediator. A mediator who is so appointed may only be challenged for cause, and not preemptorally. While the request for and the conducting of such a mediation may be a precondition to the filing of a civil action, in the event either party is in jeopardy of losing its right to sue (e.g., the statute of limitations is about to expire), then suit may be filed before a mediation is conducted provided that mediation is requested before, or simultaneously with the filing of such suite, and is conducted before the named defendant in the suit is required to respond to the complaint. If the scheduling of the mediation requires, the plaintiff in the suit shall grant the defendant an appropriate extension of time to respond to the complaint so as to permit the mediation to be conducted before the defendant must so respond. The mediation contemplated hereunder shall be conducted, unless otherwise agreed by the parties, in Lee County, Florida. The parties shall bear the mediator's fee and any filing fees associated with the mediation equally.
16. Non-Exclusive Agreement. Owner may, in its discretion, issue Work Orders to Construction Manager during the contract period contemplated herein. All such Work Orders shall incorporate by reference the documents referred to in paragraph 17 below. Owner shall not, however, be obligated to issue Work Orders to Construction Manager for all Acute Care Projects it undertakes and expressly reserves the right to utilize other construction managers to perform work of a similar nature should it, in its sole discretion, elect to do so.
17. Contract Documents. The “Contract Documents” shall consist of this Agreement, any Work Order issued pursuant to this Agreement, any drawings and specifications referenced in the Work Order and any change orders modifying a Work Order issued pursuant to this Agreement. These documents form the Agreement existing between the parties, and are as fully a part of the Agreement as if attached to this Agreement or repeated herein.
18. Special Provisions.
18.1 The Construction Manager warrants that it has not employed or retained any company or person, other than a bonafide employee working solely for Construction Manager, to solicit or secure this Agreement and that it
22
has not paid any person, company, corporation, individual, or firm, other than a bonafide employee working solely for Construction Manager any fee, commission, percentage, gift, or other consideration contingent upon or resulting from the award or making of this Agreement.
18.2 Public Entity Crime Information Statement. Any person or affiliate who has been placed on the Convicted Vendor List following a conviction for a public entity crime may not submit a bid on a contract to provide any goods or services to a public entity, may not submit a bid on a contract with a public entity, for the construction or repair of a public building, or public work, may not submit bids or leases of real property to a public entity, may not be awarded or perform work as a contractor, supplier, subcontractor, or consultant under a contract with any public entity, and may not transact business with any public entity in excess of the threshold amount provided in Section 287.017, for CATEGORY 2 for a period of thirty-six (36) months from the date of being placed on the Convicted Vendors List.
18.3 The Construction Manager affirmatively represents to Owner that it shall
perform its services under this Agreement in a skillful and competent manner in accordance with good and sound healthcare construction practices.
18.4 Except as otherwise provided in this Agreement, the Construction Manager agrees not to divulge, furnish, or make available to any third parties, firm, or organization, without the Owner’s prior written consent, or unless instant to the proper performance of Construction Manager’s obligations hereunder, or in the course of any judicial or legislative proceedings where such information has been properly subpoenaed, any information concerning services to be rendered by Construction Manager or any of its subcontractors to this Agreement.
18.5 In the event Construction Manager should be deemed subject to the
disclosure requirements of 42 U.S.C. 1395X(v)(1)(1), or amendments thereto until the expiration of four (4) years following the completion of furnishing services under this Agreement upon written request of Owner, Construction Manager shall make available to the Secretary of the Department of Health and Human Services, or the Controller General, or any duly authorized representatives thereof, a copy of the Agreement and such books, documents and records of Construction Manager that are necessary to certify the nature and extent of any costs incurred by Owner. If Construction Manager carries out any of the duties of this Agreement
23
through a subcontract, having a contract price of $10,000.00 or more over a twelve (12) month period, with an organization that would be a related organization within the meaning of 42 C.F.R. 405.427, or amendments thereto, such subcontract shall contain a clause to the effect that for a period of four (4) years following the completion of the subcontract, the subcontractor, upon the written request of Owner, shall make available to the Secretary, or to the Controller General, or any of their duly authorized representatives, the subcontract, and books, documents and all other records of the subcontractor that are necessary to verify the nature and extent of such costs.
18.6 Construction Manager represents and warrants to Owner and Owner’s affiliates that Construction Manager (and each person or entity providing services or work under this Agreement on behalf of Construction Manager): (i) is not currently excluded, debarred or otherwise ineligible to participate in the Federal health care programs as defined in 42 U.S.A.§1320a-7b(f) (the “Federal Health Care Programs”); (ii) is not convicted of a criminal offense related to the provisions of healthcare items or services but has not yet been excluded, debarred, or otherwise declared ineligible to participate in the Federal Health Care Program; and (iii) is not under investigation or otherwise aware of any circumstances which may result in Construction Manager (or any subcontractor, person or entity providing services on behalf of Construction Manager hereunder)being excluded from participation in the Federal Health Care Programs. This shall be an ongoing representation and warranty during the term of this Agreement and Construction Manager shall immediately notify Owner of any change in the status of the representation and warranty set forth in this section. As a condition precedent to the Construction Manager’s right to progress and other payments under this Agreement, Construction Manager shall submit a statement, in writing, and in such form as approved by the Owner, of the above. Any breach of this section shall give Owner the right to terminate this Agreement immediately for cause, which right shall be in addition to any other rights and remedies available to Owner for such breach under the Agreement or otherwise. Construction Manager agrees to indemnify and hold Owner harmless from any liability incurred by Owner to the extent that Construction Manager’s representation and warranty is not accurate.
18.7 Construction Manager hereby represents and warrants to Owner that neither it nor any of its subcontractors, as of the date of the making of their respective subcontracts, have been excluded from participation in
24
Federal Healthcare Programs or in any Federal procurement or non-procurement program. Construction Manager further represents and warrants that none of its employees, or the employees of subcontractors, have been convicted of a criminal offense related to the provision of healthcare items or services and has not been reinstated in a Federal Healthcare Program after a period of exclusion, suspension, debarment, or ineligibility. Construction Manager acknowledges that Owner maintains an ongoing policy of screening for exclusion from Federal Healthcare Program participation by referencing the List of Excluded Individuals Entities (LEIE), Excluded Parties Listing System (EPLS) and other applicable tools and further acknowledges receiving a copy of that policy. Construction Manager agrees to implement as part of its basic services a similar compliance monitoring program with respect to all individuals and entities it employs or otherwise uses on the Project. The Construction Manager shall provide in each and every one of its subcontracts that the exclusion from participation in Federal Healthcare Programs or in any Federal procurement or non-procurement program is cause for termination of the subcontract. If the Construction Manager discovers, after the making of the subcontract, that a subcontractor has been excluded from participating in Federal Healthcare Programs or in any Federal procurement or non-procurement program, the Construction Manager shall immediately terminate the debarred subcontractor for cause. Construction Manager shall maintain all documentation evidencing compliance with the screening requirements set forth in this paragraph for a minimum period of seven (7) years or longer if required by law. Upon Owner’s request, Construction Manager will promptly make all such information available to Owner for audit, accreditation and investigation purposes.
18.8 Business Ethics. Construction Manager agrees to maintain business ethics meeting the Owner’s business ethics expectations. The Owner’s business ethics expectations are more particularly described in Exhibit “B” attached hereto and incorporated herein by reference.
18.9 The Owner will consider the employment by the Construction Manager of
unauthorized aliens a violation of Section 274A(e) of the Immigration and Naturalization Act. Such violation shall be cause for unilateral cancellation of this Agreement.
18.10 Any and all drawings, specifications, designs, models, photographs,
reports, surveys or other data and documents submitted, provided or
25
created by the Construction Manager in connection with this Agreement are and will remain the property of the Owner, whether the Project for which they are made is completed or not. All documents, data, studies, surveys, drawings, maps, models, photographs and reports prepared by the Construction Manager, whether finished or unfinished, will become the property of the Owner and must be delivered by the Construction Manager to the Owner within seven (7) days of the date that this Agreement is terminated by either party; but not later than the date of the final payment request for this Project. Any compensation due to the Construction Manager will be withheld until all documents are received as provided herein. This applies to all Contract Documents and Construction Documents produced for the Project.
18.11 The Construction Manager shall afford the Owner and its authorized
designees access to the Project site at all times.
18.12
18.13 19. Diversity and Local Participation.
19.1 Non-Discrimination. The Construction Manager shall not discriminate
against employees or subcontractors because of race, color, religion, sex, age, national origin, or ancestry. The Construction Manager shall insure that employees and subcontractors are retained and utilized on the Project without regard to the race, color, religion, sex, age, national origin, or ancestry.
19.2 Disadvantaged Business Enterprise Participation. The Owner encourages
the Construction Manager to use subcontractors who are certified as disadvantaged business enterprises as defined in Section 288.703, Florida Statutes (“DBE”) so as to promote opportunities for disadvantaged business enterprises to participate in the Project. The Construction Manager, when seeking subcontractors for the Project, agrees to use its best efforts to insure the participation of local DBE.
19.3 Local Business Enterprises. The Owner encourages the Construction
Manager to utilize business enterprises based in Lee County, Florida. The Construction Manager, when seeking subcontractors, agrees to use its best efforts to assure the participation of business enterprises based
26
in Lee County, Florida. 20. Miscellaneous.
20.1 No modification, waiver, amendment, discharge or any change of this Agreement or any Work Orders issued pursuant to this Agreement shall be valid unless the same are in writing, signed by the parties against whom the enforcement of such modification, waiver, amendment, charge or change is sought. This Agreement, the Work Orders issued pursuant to this Agreement, any plans and specifications referred to in said Work Orders and any documents attached hereto constitute the entire agreement between the parties relating to the transactions contemplated hereby and all prior or contemporaneous agreements, understandings, representations, and statements, oral or written, are merged herein.
20.2 This Agreement shall be construed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute a single instrument.
20.3 All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular, or plural as the identity of the persons or entity may require.
20.4 If any provision or any portion of any provision of this Agreement or
the application of any provision or portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement, or the application of such provision held invalid, or unenforceable to persons or circumstances other than those to which it has been held invalid or unenforceable, shall not be affected thereby.
20.5 In the event of any dispute as to the precise meaning of any term
contained herein, the rules of contract construction and interpretation that written contracts be construed against the drafter shall not apply.
20.6 All articles, titles, or captions contained in this Agreement are for
convenience only and shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement.
20.7 All notices, demands, or other communications made pursuant to this
Agreement shall be in writing and copies thereof shall be
27
simultaneously directed to the parties listed below. Further, all notices, demands, or communications shall be deemed to have been duly given by mailing, unless otherwise specified, by United States registered or certified mail, return receipt requested, with the proper postage prepaid at the following addresses:
If to Owner: Dave Kistel Vice President Facilities and Support Lee Memorial Health System 636 Del Prado Boulevard Cape Coral, FL 33990
With a copy to: Teri Isacson, Esq. Legal Services and Risk Management Lee Memorial Health System 2776 Cleveland Ave. Fort Myers, FL 33901 If to Construction Manager: ______________________________ ______________________________ ______________________________ Or to such other addresses or to such other persons as any party may designate to the other for purposes set forth above.
20.8 Assignment. This Agreement shall not be assignable to either party.
20.9 Statutory Notice. ANY CLAIMS FOR CONSTRUCTION DEFECTS ARE SUBJECT TO THE NOTICE AND CURE PROVISIONS OF CHAPTER 558, FLORIDA STATUTES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the day and year first above written.
Signed, sealed, and delivered in the presence of:
28
_______________________________ Witness Signature Print Name:_____________________ _______________________________ Witness Signature Print Name:_____________________
Owner: LEE MEMORIAL HEALTH SYSTEM By:___________________________________ Stephen R. Brown, M.D. Chairman of the Board of Directors
_______________________________ Witness Signature Print Name:_____________________ _______________________________ Witness Signature Print Name:_____________________
CONSTRUCTION MANAGER: __________________________________
By:___________________________________ Printed Name: _____________________ Title:______________________________
Lee Memorial Health System Board of Directors Updated 5/16/17
RECOMMENDED FOR BOARD ACTION (Action includes Acceptance, Approval, Adoption, etc)
Keep form to one page, EMAIL to: boardofdirectors@leehealth.org by Noon
Eight (8) days PRIOR to presenting.
DATE: May 30, 2019 LEGAL SERVICE REVIEW? YES_x_ NO__ SUBJECT: 3 Year Continuing Services Contract for Construction Management for Outpatient Facilities REQUESTOR & TITLE: David Cato – Chief Administrative Officer of Outpatient Services PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY) (justification and/or background for recommendations – internal groups which support the recommendation) On June 23, 2016, Lee Health Board of Directors authorized Lee Health administration to negotiate a Three (3) Year Continuing Services Contract Construction Management for Outpatient Services per Board Policy. The Three (3) Year Continuing Services Contract was subsequently executed. The proposed agreement, attached hereto, is the same form that was approved by this Board in 2016. SPECIFIC PROPOSED MOTIONS: First Motion: to accept the Certification & Selection Committee’s Rankings for the 3-Year Construction Management Continuing Services Contract for Outpatient Facilities as determined on May 16, 2019. Second Motion: to authorize Lee Health administration to Proceed with contract negotiations for a Three (3) Year Continuing Services Contract for Construction Management for Outpatient Facilities, per Board Policy 20.15 D and the Consultants Competitive Negotiation Act, starting with the highest numerically ranked firm, Stevens Construction and, if such negotiations are not successful to authorize the Lee Health Administration to then negotiate with the next ranked firm. Third Motion: Upon successful negotiation in accordance with Board Policy 20.15 D, authorize the President & Chief Executive Officer or Board Chairman to execute a Three (3) Year Continuing Services Contract for Outpatient Facilities, in substantially the same form as the attached draft contract, subject to final legal review. FINANCIAL IMPLICATIONS Budgeted Account _x__ Non-Budgeted ____ (Annual Project Budget and Total Project Budget) The 3-year Continuing Services Contract for Outpatient Facilities will be utilized for projects that are either currently funded or will be funded in the future through capital and contingency funds as approved by Lee Health and the Board of Directors. The continuing services contracts are for individual construction projects not exceeding 2 million dollars. STAFFING & OPERATIONAL IMPLICATIONS None. PURPOSE/REASON FOR RECOMMENDATION Selection of Construction Management Firms for Outpatient Facilities allows Lee Health to move forward on smaller projects without delays, in a cost effective and time efficient manner.
SUMMARY (including alternatives considered, Pros and Cons) The Certification & Selection Committee ranked firms based upon their qualifications for 3-year Continuing Services Contracts for Outpatient Facilities per Board Policy. Stevens Construction was highest ranked firm for Outpatient Facilities. The Board is being asked to approve Lee Health administration to proceed with contract negotiations and execution of the contract pursuant to Board Policy 20.15 D.
1 2 3 4 5 6 7 8
DEANGELIS DIAMOND 92 78 80 63.5 91 82 84 83 653.5
STEVENS CONSTRUCTION 96 85 90 82 97 89 97 94 730
RD JOHNSON CONSTRUCTION 90 87 100 93 85 99 81 92 727
LMHS 3‐YEAR CONSTRUCTION CONTINUING SERVICES AGREEMENT
OUTPATIENT FACILITIES
FIRMSELECTION COMMITTEE MEMBER ID
TOTAL
1
CONTINUING SERVICES AGREEMENT CONSTRUCTION MANAGEMENT SERVICES AT RISK
OUTPATIENT SERVICES
THIS AGREEMENT is made and entered into as of the _____ day of ________________, 2019, by and between Lee Memorial Health System d/b/a Lee Health, a special purpose unit of local government (“Owner”) and ________________________ (“Construction Manager”).
RECITALS:
WHEREAS, Owner is a special unit of local of local government engaged in
the delivery of health care services to the residents of Lee County, Florida; and
WHEREAS, Construction Manager is a construction manager engaged in the delivery of construction management services to the residents of Southwest Florida; and
WHEREAS, in the course of fulfilling its legislative purpose, Owner periodically utilizes construction management services relating to the construction and remodeling of outpatient healthcare projects including, but not limited to, outpatient medical projects requiring Agency for Health Care Administration (“AHCA”) submission, compliance and inspection (referred to as “Outpatient Project”); and
WHEREAS, the Owner and Construction Manager desire to enter into a Continuing Services Agreement for Construction Management Services at Risk relating to Outpatient Projects undertaken by Owner over the next three (3) years in which the construction costs of each-individual Outpatient Project does not exceed Two Million and No/100 Dollars ($2,000,000.00); and
WHEREAS, the specific scope of services to be performed by Construction Manager for each individual Outpatient Project (“Project”) shall be defined in work orders (“Work Order[s]”) which are issued pursuant to the terms of this Agreement. A sample copy of the Work orders to be issued under this Agreement is attached hereto as Exhibit “A”.
OPERATIVE PROVISIONS:
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Owner and Construction
2
Manager, intending to be legally bound, agree as follows: 1. Recitals. The recitals set forth above are true and correct and are incorporated
herein in their entirety.
2. Term. This Agreement shall be for a term of three (3) years. The contract period shall commence on ______________ and shall terminate on ________________.
3. Construction Manager’s Services.
3.1 Scope of Services. The specific scope of services to be performed by the Construction Manager in connection with any Outpatient Project performed under the provisions of this Agreement shall be described in detail in the Work Order issued for the Outpatient Project (“Work”).The form of the Work Order to be used is attached hereto as Exhibit “A”.
3.2 Basic Services. The basic services to be performed by the Construction
Manager in connection with any Work Order issued under the terms of this Agreement shall consist of the following services:
3.2.1 Construction Manager shall provide competent supervision of all
phases of the Work.
3.2.2 Construction Manager shall cause the Work to be performed in accordance with the applicable drawings and specifications and all things indicated thereon or implied therefrom.
3.2.3 Prior to the commencement of any construction under a Work
Order, Construction Manager shall prepare and submit for Owner’s approval a Project Schedule which shall indicate the dates for starting and completion of the various stages of construction.
3.2.4 Construction Manager shall provide scheduling and periodic
updating on a monthly basis in the interest of completing the Work in the most expeditious and economical manner (“Progress Schedules”).
3.2.5 Before performing any Work contemplated in a Work Order,
Construction Manager shall carefully study and compare the
3
various drawings, specifications and other contract documents relevant to the Work, take field measurements of existing conditions related to the Work, observe any conditions at the project and promptly report to the Owner and Architect any errors, omissions or inconsistencies discovered by Construction Manager.
3.2.6 Construction Manager shall supervise and direct the Work, using
the Construction Manager’s best skill and attention
3.2.7 Construction Manager shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work called for under a Work Order.
3.2.8 Construction Manager shall be fully and solely responsible for job
site safety.
3.2.9 Construction Manager shall be responsible for the acts and omissions of Construction Manager’s employees, subcontractors and their agents and employees and any other persons or entities performing portions of the Work for or on behalf of Construction Manager or any of its subcontractors.
3.2.10 Unless otherwise provide in the Work Order, Construction
Manager shall provide and pay for all labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation and other facilities and services necessary for proper execution and completion of the Work whether temporary or permanent and whether or not incorporated or to be incorporated in the Work.
3.2.11 Construction Manager shall enforce strict discipline and good order
among the Construction Manager’s employees and other persons carrying out the Work Order. Construction Manager shall not permit the employment of unfit persons or persons not skilled in tasks assigned to them.
3.2.12 Construction Manager shall deliver, handle, store, and install
materials in accordance with manufacturer’s instructions.
3.2.13 Construction Manager shall review for compliance with the
4
specifications and contract drawings, approve in writing and submit to the Architect shop drawings, product data, samples and similar submittals required by the specifications with reasonable promptness.
3.2.14 Construction Manager shall perform all work in accordance with
approved submittals.
3.2.15 Construction Manager shall confine its operations at the project site to areas permitted by law, ordinances, permits, specifications and construction drawings and shall not unreasonable encumber the project site with materials or equipment.
3.2.16 Construction Manager shall be responsible for cutting, fitting or
patching required to complete the Work or to make its parts fit together properly.
3.2.17 Construction Manager shall provide the Owner and Architect
access to the Work in preparation and progress wherever located.
3.2.18 Construction Manager shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under this Agreement. At the completion of the Work, Construction Manager shall remove from and about the Project waste materials, rubbish and Construction Manager's tools, construction equipment, machinery and surplus material.
4. Change Orders.
4.1 From time to time, Owner may authorize changes in Work Orders
issued pursuant to this Agreement, issue additional instructions, require additional Work, or direct the omission of Work previously ordered; provided, however, that Construction Manager shall not proceed with any change involving an increase or decrease in cost or extension of the substantial completion date without the prior written authorization of Owner in accordance with the procedures set forth herein.
4.2 Owner shall order changes in the Work by giving Construction Manager a written change order request (“Change Order Request”) setting forth in detail the nature of the requested change. Upon receipt of a Change Order Request, Construction Manager shall furnish to Owner a statement
5
setting forth in detail, with a suitable breakdown by trades and work classifications, Construction Manager's estimate of the changes in the Guaranteed Maximum Price attributable to the changes set forth in such Change Order Request and a proposed adjustment to the substantial completion date resulting from such Change Order Request. If Owner approves in writing the estimate of Construction Manager, such Change Order Request and such estimate shall constitute a change in the Guaranteed Maximum Price and the substantial completion date shall be adjusted as set forth in such estimate. The foregoing procedure shall apply to both additive and deductive change orders. Agreement on any change orders shall constitute a final settlement on all items covered therein, subject to performance thereof and payment therefore pursuant to the terms of this Agreement. Construction Manager agrees to perform all change order Work on the basis of reimbursement to it of the cost of the Work plus the overhead and profit percentages specified herein.
4.3 It is understood and agreed that refinement and detailing will be accomplished from time to time with respect to the drawings and specifications set forth in any Work Orders issued pursuant to this Agreement. No adjustment in the Guaranteed Maximum Sum or the substantial completion date set forth in Work Orders shall be made unless such refinement or detailing results in changes in scope, quality, function and/or intent of the drawings and specifications not reasonably inferable or anticipatable by a Construction Manager of Construction Manager's expertise and experience.
5. Owner's Responsibilities. For each Project constructed under the terms of
this Agreement, Owner shall provide Construction Manager with the following information: 5.1 Owner shall designate a representative authorized to act on Owner's
behalf with respect to the Project described in the Work Order. Owner or such authorized representative shall render decisions in a timely manner pertaining to issues submitted by Construction Manager in order to avoid unreasonable delay in the orderly and sequential progress of Construction Manager’s services.
5.2 Except for the permits and fees which are the responsibility of Construction Manager, under this Agreement, Owner shall secure and pay for necessary approvals, easements, assessments and charges required for construction, use or occupancy of permanent structures or
6
for permanent changes in existing facilities.
5.3 Owner shall furnish the services of architects, engineers and other professional consultants when such services are reasonably required by the scope of the Project.
5.4 Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and environmental tests, inspections and reports required by law or this Agreement.
6. Contract Price.
6.1 Compensation. In full consideration for the performance of any Work
Orders issued pursuant to this contract, Owner shall pay to Construction Manager the contract sum which shall consist of (1) the Cost of the Work; and (2) a profit and overhead component of ____ percent (__%) of the Cost of the Work (“Contract Sum”). Notwithstanding the foregoing, in no event shall the Contract Sum exceed the guaranteed maximum price established for each Work Order (“Guaranteed Maximum Price”). Owner shall not be obligated to Construction Manager for any sums in excess of the Guaranteed Maximum Price established for each Work Order.
6.2 The Cost of the Work. For purposes of this Agreement the phrase, “Cost of the Work” shall consist of the following items:
6.2.1 wages of hourly workers employed by Construction Manager to
perform any work called for under a Work Order;
6.2.2 cost of all materials, supplies and equipment incorporated or to be incorporated in any Project described in a Work Order issued pursuant to this Agreement, including the cost of transportation and storage thereof.
6.2.3 payments due to subcontractors from the Construction Manager or
made by the Construction Manager to subcontractors for their work performed pursuant to any Work Order issued under this Agreement;
6.2.4 rental charges for all temporary facilities, necessary machinery and
7
equipment, exclusive of hand tools used at the site of any Project described in any Work Order issued pursuant to this Agreement, whether rented from ·Construction Manager or any third party, equipment supplier, including installation, repairs and replacements, dismantling, removal, cost of lubrication, transportation and delivery costs thereof, which are used in the support of a subcontractor or Construction Manager's own forces in the performance of any Work called for under a Work Order issued pursuant to this Agreement, at rental charges consistent with those prevailing in the area. Automobiles and trucks shall only be rented and/or leased with the Owner's prior written consent and approval;
6.2.5 the cost of premiums for all insurance and bonds which
Construction Manager is required to procure by this Agreement for any Projects described in Work Orders issued pursuant to the terms of this Agreement;
6.2.6 sales, use, gross receipts, or similar taxes related to expenses
allowable as part of the Cost of the Work imposed by any governmental authority, and for which Construction Manager is liable;
6.2.7 expenses associated with telephone service, heat, light, power,
water, sanitary facilities, weather protection and elevator services at the Project;
6.2.8 costs for trash and debris control and removal from the Project;
6.2.9 costs incurred due to an emergency affecting the safety of persons
and property at the Project;
6.2.10 costs for watchmen and security services for the Project;
6.2.11 costs for efficient logistical control of the Project, including horizontal and vertical transportation of materials and personnel;
6.2.12 wages and salaries of Construction Manager's supervisory
personnel when stationed at the Project described in a Work Order but only with Owner's written approval and only for that portion of their time devoted to performing the Work described in the Work Order; and
8
6.2.13 any and all permits specifically required for the performance of
any Work described in a Work Order issued pursuant to this Agreement.
6.3 The Cost of the Work shall not include the following: 6.3.1 Any costs or expenses made necessary to correct defective
workmanship or to correct any Work not in conformance with any plans or specifications described in the Work Order or to correct any deficiency or damage caused by the negligent acts of Construction Manager or any other party for whom it is responsible including, but not limited to, its subcontractors and suppliers;
6.3.2 general operating expenses of Construction Manager's principal and branch offices other than the field office located at the Project identified in any Work Order issued pursuant to this Agreement;
6.3.3 any part of Construction Manager's capital expenses, including
interest on Construction Manager' s capital employed for the Project;
6.3.4 overhead and general expenses of any kind except as may be
expressly allowed in paragraph 6.1 of this Agreement;
6.3.5 any cost in excess of the guaranteed maximum price;
6.3.6 minor expenses, such as telegrams, telephone service, data processing costs, courier services, photocopies, reproductions and similar “petty cash” items; and
6.3.7 the cost of hand tools, such as shovels, hammers and the cost of
expendable items, such as bits, brooms, brushes, ropes and hard hats.
7. Payment.
7.1 Progress Payments.
7.1.1 Construction Manager shall submit to the Owner monthly
applications for payment in a form satisfactory to Owner (“Application for Payment”). Each Application for Payment shall
9
contain an itemization of all payments made to subcontractors, material suppliers and all other matters which represent a portion of the Cost of the Work as well as that portion of Construction Manager's overhead and profit attributable to the Cost of the Work reflected in each Application for Payment.
7.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month. No more than one (1) Application for Payment shall be submitted to the Owner during any month.
7.1.3 Owner shall make payment to Construction Manager not later than
thirty (30) days after the Owner receives the Application for Payment.
7.1.4 As an express condition precedent to the making of any progress
payments, Construction Manager shall furnish to Owner the following items:
7.1.4.1 A sworn Application for Payment. In each such Application for Payment, Construction Manager shall certify that it has completed all of the Work to be performed so as to entitle it to the progress payment for which it is applying. Construction Manager shall further certify in its Application for Payment that all such work has been performed in accordance with the applicable building codes and the plans and specifications described in the Work Order and that Construction Manager knows of no deviations or defects relating to the Work performed by it. Furthermore, Construction Manager shall certify in the Application for Payment as follows: “That as of the date of this Application for Payment, all due and payable bills with respect to the Project described in the Work Order to which this Application for Payment relates have been paid to date.”
7.1.4.2 A consent of surety from the surety issuing the Public Construction Bond furnished by Construction Manager in connection with the Work Order;
7.1.4.3 A partial lien waiver for the period of time covered by the Application for Payment complying with the provisions
10
of Section 713.20, Florida Statutes.
7.1.4.4 Such other forms and documents as Owner, in its sole discretion may require in order to assure an effective waiver of construction lien rights and/or bond claims of any nature whatsoever.
7.1.5 Construction Manager agrees that ten percent (10%) of the amount
due under each Application for Payment shall be retained by Owner until final payment is made. The amount of any retainage shall be included in Construction Manager's Application for Payment for the purpose of indicating the value of the Work performed, however, Construction Manager shall not request payment therefore from Owner until such retainage is actually due and payable.
7.2 Final Payment. The provision of the following documents shall constitute an express condition precedent to Owner's obligation to make final payment, including retainage amounts, hereunder:
7.2.1 A sworn final Application for Payment;
7.2.2 A final Contractor's Affidavit attesting to the fact that the Construction Manager has fully completed all Work to be performed under the Work Order and that all individuals, firms, or corporations furnishing material, labor, or services instant to the completion of construction and Work under the Work Order have been paid in full;
7.2.3 A final Contractor's Waiver acknowledging receipt of final payment and providing that said final payment constitutes a full release and discharge by Construction Manager to Owner of all claims and liens of Construction Manager against Owner arising out of, connected with, or resulting from performance of the Work Order.
7.2.4 Notebooks containing all warranties required under the project specifications and plans described in the Work Order as well as all warranties relating to equipment supplied by Construction Manager; and
7.2.5 A clean set of “As Built Documents”.
11
7.3 The payment of any Application for Payment by Owner, including the final application, does not constitute approval of or acceptance of that part of the Work to which such payment relates nor does it relieve Construction Manager of any of its obligations hereunder nor shall such payment constitute a waiver of any claims which Owner may then have or thereafter discover.
7.4 Notwithstanding any provisions hereof to the contrary, Owner shall not be
obligated to make payment to Construction Manager hereunder if any one (1) or more of the following conditions exist:
7.4.1 Construction Manager is in default of any of its obligations hereunder;
7.4.2 Any part of such payment is attributable to Work which is defective or not performed in accordance with the requirements of this Agreement; provided, however, such payment shall be made as to the part thereof attributable to the Work which is performed in accordance with such requirements and is not defective;
7.4.3 Construction Manager has failed to make payments promptly to Construction Manager's subcontractors or for material or labor used in the Work for which Owner has made payment to Construction Manager;
7.5 If Owner, in good faith, determines that the portion of the Guaranteed
Maximum Price then remaining unpaid will not be sufficient to properly complete the Work contemplated in the Work Order, whereupon no additional payments will be due Construction Manager hereunder unless and until Construction Manager, at its sole cost, performs a sufficient portion of the Work so that the portion of the Guaranteed Maximum Price then remaining unpaid is determined by the Owner to be sufficient to complete the Work; or if Owner, in good faith, determines that Construction Manager has not or will not with prompt acceleration of the Work, meet the substantial completion date specified in the Work Order.
7.6 In the event-of-a bona fide dispute by Owner-of any sums for which
payment has been requested, no interest shall be due on such disputed sums until such dispute is resolved, provided that all undisputed sums shall have been paid in due course.
12
7.7 Owner reserves the right to issue joint checks to Construction Manager and its subcontractors or materialmen, or, to make payments to Construction Manager's subcontractors or materialmen, if, in Owner's sole judgment, it is necessary to do so in order to ensure payment to the aforesaid parties. The amount of said joint or direct checks shall be deducted from the Contract Sum.
7.8 The acceptance of final payment shall constitute a waiver of all claims
by Construction Manager except those previously made in writing 'and identified by the Construction Manager as unsettled at the time of the final Application for Payment.
7.9 Florida Prompt Payment Act. Notwithstanding anything contained herein
to the contrary, the Construction Manager agrees and acknowledges that the limited portion of the Florida Prompt Payment Act, as set forth in Section 218.735(6), Florida Statutes pertaining to “timely payment for purchases of construction services” is incorporated by reference into this Agreement with respect to the Construction Manager’s obligation to pay subcontractors. Consistent with Section 218.735(6), Florida Statutes, when the Construction Manager receives payment for labor, services or materials furnished by any subcontractor or supplier hired by the Construction Manager, the Construction Manager must remit payment due to those subcontractors and suppliers within fifteen (15) days after the Construction Manager’s receipt of payment. The Construction Manager will flow this requirement to its sub-subcontractors such that when a subcontractor receives payment from the Construction Manager for labor, services or materials furnished by sub-subcontractors or suppliers hired by the subcontractor, the subcontractor will remit payment due to those subcontractors and suppliers within fifteen (15) days after the subcontractor’s receipt of payment.
8. Setoff and Recoupment. Payment for goods, work or services to be
performed under this Agreement shall be subject to setoff or recoupment for any present or future claim which Owner may have against Construction Manager in connection with this Agreement, any Work Orders issued under this Agreement or any other agreements existing between the parties.
9. Insurance. Construction Manager shall, with respect to each Work Order issued pursuant to this Agreement, provide and maintain, and require all of
13
its subcontractors to do the same, the following types of insurance protecting the interests of Owner and Construction Manager with limits of liability not less than those set forth below or as otherwise may be required by the specifications described in any Work Order, whichever limits are greater:
9.1 Worker's Compensation Insurance. Construction Manager shall maintain
worker's compensation insurance, insuring its liability under the Worker's Compensation and Occupational and Disease Laws of the State of Florida, with limits of liability not less than the minimum limits required by Florida law. The worker's compensation policy provided by Construction Manager must be endorsed with a waiver of subrogation endorsement, waiving Construction Manager's right of subrogation against Owner and any architect or engineer utilized by Owner.
9.2 Comprehensive General Liability Insurance. Comprehensive general liability insurance which shall include coverage on an “occurrence” basis for the hazards of:
9.2.1 Premises-operation;
9.2.2 Explosion, collapse and underground property damage;
9.2.3 Mold;
9.2.4 Elevators and escalators;
9.2.5 Independent contractors;
9.2.6 Products and completed operations, including coverage for
explosion, collapse and underground hazards (with completed operations coverage to remain in force for two (2) years following the date of the acceptance of the Work by Owner);
9.2.7 Contractual liability;
9.2.8 Personal injury liability for all groups of offenses with the exclusion
pertaining to employment removed; and
9.2.9 Incidental malpractice coverage.
Such comprehensive general liability insurance must be endorsed with
14
a broad form property damage endorsement (including completed operations). Owner shall be named as an additional named insured on the comprehensive general liability policy. The limits of liability associated with the Construction Manager's general liability policy shall not be less than the following:
$1,000,000.00 each occurrence; $2,000,000.00 aggregate.
Notwithstanding anything contained herein to the contrary, the coverages under the comprehensive general liability policy to be furnished by the Construction Manager must be afforded on a policy form no more restrictive than the last edition of the comprehensive general liability policy filed by the Insurance Service Office, Inc.
9.3 Excess Liability Policy. Construction Manager shall maintain an
umbrella (excess) liability insurance policy in an amount not less than $1,000,000.00 combined single limit bodily injury/property damage, in excess of the comprehensive general liability insurance described above.
9.4 Automobile Liability Insurance. Construction Manager shall maintain automobile liability insurance covering all owned, non-owned and hired vehicles used in connection with the Work to be provided hereunder with a combined minimum limit of $1,000,000.00 single limit for bodily injury and property damage liability each person/each aggregate.
9.5 Fire Insurance. It is Construction Manager's responsibility to carry its own fire insurance on all items, including equipment that will not become an integral part of the project described in any Work Order issued pursuant to this Agreement.
9.6 Builder's Risk Insurance. Construction Manager shall procure builder's
risk insurance covering Construction Manager and Owner at the site from loss or damage caused by or from risk of direct physical damage or loss. Construction Manager's builder's risk policy shall have minimum limits of $1,000,000.00.
9.7 Public Construction Bond. In the event the Guaranteed Maximum Price
15
associated with a Work Order is in excess of Two Hundred Thousand and No/100 Dollars ($200,000.00), Construction Manager shall furnish a public construction bond in an amount equal to one hundred percent (100% ) of the Guaranteed Maximum Price associated with any Work Order issued pursuant to this Agreement. The public construction bond to be issued by Construction Manager shall be in a form acceptable to Owner issued by a surety satisfactory to the Owner and shall name the Owner as an obligee. The public construction bond to be provided by Construction Manager shall comply with the provisions of Section 255.05, Florida Statutes. In such an event, the cost of the Public Construction Bond shall be added to the Contract Sum.
9.8 Insurance Certificate. Prior to performing any services with respect to
a Work Order, Construction Manager shall file with Owner a certificate of insurance in a form acceptable to Owner. The certificate of insurance shall reflect Owner as an additional insured on Construction Manager's comprehensive general liability policy, automobile liability policy, worker's compensation policy and excess liability policy. The certificate of insurance furnished by Construction Manager shall contain a provision that the coverages afforded under the policies described thereon will not be cancelled until at least thirty (30) days' prior written notice has been given to Owner.
9.9 Rating Insurance Companies. All insurance companies issuing the policies
provided for herein shall be licensed and approved by the Department of Insurance, State of Florida and shall have a financial rating no lower than II and a policy holder's surplus rating no lower than (A) as listed in the most current edition of A.M. Best TK Rating Guide. Companies with ratings lower than those specified herein shall only be acceptable upon the written consent of Owner.
9.10 Extent of Coverages. The insurance coverages referred to above are
set forth in full in their respective policy forms, and the foregoing descriptions of such policies are not intended to be complete or to alter or amend any provision of the actual policies and should said descriptions conflict with the actual policies of insurance, the provisions of the policies of insurance shall govern.
9.11 Failure to Secure Insurance. If Construction Manager does not provide
the insurance coverages required hereunder, Owner may procure such insurance coverages at Construction Manager's expense and deduct
16
the amount paid for said coverages from any sums owed Construction Manager.
9.12 Waiver of Subrogation. Construction Manager's policies shall be endorsed
to provide that the insurers waive their rights of subrogation against Owner and also to provide that the policy provides primary coverage over any other applicable insurance coverages.
10. Safety Standards. Construction Manager agrees to require that all of its
employees, subcontractors and other personnel be required to fully comply with and implement all government laws (OSHA) pertaining to safety standards Construction Manager agrees that any fines, assessments or penalties imposed upon Owner by failure of the Construction Manager, its employees or subcontractors to comply with government standards will be fully charged back and paid for by Construction Manager.
11. Indemnification. In consideration of the first One Hundred and No/100 Dollars ($100.00) to be paid hereunder and to the fullest extent permitted by law, Construction Manager agrees to indemnify, hold harmless, and defend Owner, Owner's agents and their respective agents, servants and employees from and against all claims, costs, expenses or liabilities (including attorneys' fees) attributable to bodily injury, sickness, disease or death or damage to or destruction of property arising out of, or resulting from, the performance of Work by Construction Manager, its subcontractors, their agents, servants or employees but only to the extent caused by the negligent acts or omissions of them. Construction Manager's obligation hereunder shall only be limited to the extent of the monetary limitations set forth herein and shall not be limited by the provisions of any worker's compensation or similar act. Construction Manager's monetary obligation under this indemnification provision is specifically limited to the sum of One Million and No/100 Dollars ($1,000,000.00). The parties hereby agree that the foregoing monetary limitation bears a reasonable commercial relationship to the Agreement. This indemnity provision is intended to comply with Florida laws on indemnity and, specifically, to comply with Section 725.06, Florida Statutes, and is to be interpreted in such a way as to be enforceable.
12. Termination.
12.1 Termination for Cause by Owner. 12.1.1 If Construction Manager shall fail to commence any work called
17
for under a Work Order or fail to diligently prosecute Work called for under a Work Order to completion in a diligent, efficient, timely, workmanlike, skillful, and careful manner and in accordance with the provisions of any specifications and/or plans identified in the Work Order, fail to use an adequate amount or quality of personnel or equipment to complete such Work without undue delay, fail to perform any of its obligations under this Agreement or any Work Orders issued pursuant to this Agreement, or fail to make prompt payments to its subcontractors, materialmen or laborers, then Owner shall have the right, if Construction Manager shall not cure such default after five (5) days' written notice thereof, to (i) terminate this Agreement or, in the alternative, any Work Orders issued pursuant the terms of this Agreement; (ii) take possession of and use of all or any part of Construction Manager's materials, equipment, supplies, or other property of any kind used by Construction Manager in the performance of Work related to any Work Order and to use such property in the completion of said Work; or (iii) complete any Work Order in a manner it deems desirable including engaging the services of other parties therefore. Any such acts by Owner shall not be deemed a waiver of any other right or remedy of Owner. If, after exercising any such remedy, the cost to Owner of the performance of the balance of any Work associated with a Work Order is in excess of that part of the Contract Sum associated with the Work Order which has not heretofore been paid to Construction Manager hereunder, Construction Manager shall be liable for and shall reimburse the Owner for such excess.
12.1.2 It is recognized that if Construction Manager is adjudged
bankrupt, or makes a general assignment for the benefit of creditors, or if a receiver is appointed for the benefit of creditors, or if a receiver is appointed on account of Construction Manager's insolvency, such an event could impair or frustrate the Construction Manager's performance of this Agreement and any Work Orders issued under the provisions of this Agreement. Accordingly, it is agreed that upon the occurrence of any such event, Owner shall be entitled to request of Construction Manager or its successor in interest adequate assurance of further performance in
18
accordance with the terms and conditions hereof. Failure to comply with such a request within ten (10) days from date of delivery of the request shall entitle Owner to terminate this Agreement. In all events, pending receipt of adequate assurance of performance and actual performance in accordance therewith, Owner shall be entitled to proceed with any Work called for under a Work Order with its own forces or with such other contractors on a time and material or other appropriate basis, the cost of which will be back charged against the amount then or thereafter paid or otherwise due Construction Manager.
12.2 Termination for Cause by Construction Manager. If Owner fails to
perform any of its obligations hereunder, Construction Manager shall have the right to give Owner a written notice thereof, stating the nature of the default complained of. If Owner does not cure such default or commence the curing of such default within five (5) days after receipt of such notice, Construction Manager shall have the right to terminate this Agreement or any Work Order issued pursuant to this Agreement by giving Owner written notice thereof at any time thereafter while such default remains uncured and payment shall only be made to the Construction Manager for reasonable demobilization costs, the fee earned to the date of the termination and all outstanding costs incurred as of the date of termination. Said payment shall be Construction Manager’s sole damages for Owner's breach. Construction Manager shall similarly have the right to terminate upon five 5) days' written notice if any Work to be performed in connection with the Work Order is suspended for a period of sixty (60) days or more from causes not the fault of the Construction Manager.
12.3 Termination for Owner's Convenience. Owner hereby reserves the right to terminate this Agreement and/or any Work Orders issued under the terms of this Agreement without regard to fault or breach upon written notice to Construction Manager, effective immediately, unless otherwise provided in said notice. In the event of such a termination, Owner shall pay as the sole amount due to Construction Manager (i) all sums due for Work performed to date; and (ii) reasonable costs of demobilization. Such sums shall be due and payable on the same conditions as set forth herein for the final payment. Upon receipt of such payment, the parties hereto shall have no further obligations to each other except the Construction Manager's obligation to perform corrective and/or warranty
19
work and to indemnify Owner as provided for in this Agreement. It is understood and agreed that no fee or other compensation or payment shall be due or payable for unperformed Work. Construction Manager agrees that each subcontract and purchase order issued by it will reserve for Construction Manager the same right of termination provided for in this paragraph and that Construction Manager further agrees to require that comparable provisions be included in all lower tier subcontracts and purchaser orders.
13. Time of Completion. 13.1 Time. All time limits stated in Work Orders issued pursuant to this
Agreement are of the essence of this Agreement. By executing Work Orders issued pursuant to this Agreement, Construction Manager confirms that the contract time specified in a Work Order is a reasonable period for performing the Work contemplated therein.
13.2 Substantial Completion. The date of substantial completion shall be deemed the date on which the permitting authority for the project in question issues a final certificate of occupancy.
13.3 Delay Damages. CONSTRUCTION MANAGER SHALL NOT BE
ENTITLED TO RECOVER ANY MONETARY DAMAGES IT MAY SUSTAIN AS A RESULT OF ANY DELAY CAUSED CONSTRUCTION MANAGER BY ANY ACT OF OWNER, ARCHITECT, ANY SEPARATE CONTRACTOR EMPLOYED BY OWNER, OR ANY OTHER CAUSES WHATSOEVER. CONSTRUCTION MANAGER FURTHER AGREES THAT IT WILL ACCEPT IN FULL SATISFACTION FOR SUCH DELAYS ANY EXTENSIONS OF TIME WHICH ARE GRANTED IT BY OWNER.
14. Accuracy, Technical Sufficiency of Services Provided by Construction Manager.
14.1 Notwithstanding anything contained herein to the contrary, it is
understood and agreed between the parties that Owner is not examining any contract documents for accuracy and technical sufficiency, and is not under any obligation to inspect the Project. Furthermore, it is understood and agreed between the parties that neither the review, approval, nor acceptance by Owner of data, surveys, studies, designs, specifications, calculations, plans, drawings, or any other documents furnished hereunder by Construction Manager shall in any way relieve
20
Construction Manager of responsibility for the adequacy, completeness, and accuracy of its Work, and in no event shall Owner's review, approval, acceptance of or payment for such services be construed to operate as a waiver of any of Owner's rights under this Agreement or of any cause of action it may have, arising out of the performance of this Agreement.
14.2 Construction Manager hereby acknowledges that Owner does not make any representations or warranties to Construction Manager by virtue of the information contained in the request - for proposals or any program descriptions contained therein. Construction Manager further acknowledges that it, alone, is responsible for the accuracy, completeness, and technical sufficiency of all Work performed under this Agreement and that the information contained in Owner's request for proposal and program description does not relieve, release, or in any way whatsoever diminish Construction Manager' s ultimate responsibility for the accuracy, completeness and technical sufficiency of the Project and any Work performed hereunder.
15. Legal Terms.
15.1 The terms and provisions of this Agreement and any dispute arising
in connection herewith shall be governed by and construed in accordance with Florida Law. The parties agree that all disputes arising under this Agreement shall be resolved by the courts and not by arbitration. The parties further agree that the venue for any legal action brought in connection with this Agreement shall be in Lee County, Florida. In connection with any litigation arising out of this Agreement, the prevailing party shall be entitled to recover all costs incurred, including reasonable attorneys' fees.
15.2 Prior to the filing of any litigation by Owner or Construction Manager against the other (and, except as described below, as a precondition to any such filing), Owner and Construction Manager shall engage in presuit non-binding mediation. Such mediation may be requested by either party at any time and shall be conducted the same as if such mediation were ordered by Florida Circuit Court (i.e. in accordance with and subject to, all of the laws and rules applicable to court ordered mediation). Such mediation shall be conducted within a reasonable period of time after the same is requested in writing by either party. If the parties are unable to agree upon the selection of a mediator, either party
21
may petition or request that the Circuit Court in Lee County, Florida (or the Mediation Coordinator for the Court of Lee County, Florida) appoint a mediator. A mediator who is so appointed may only be challenged for cause, and not preemptorally. While the request for and the conducting of such a mediation may be a precondition to the filing of a civil action, in the event either party is in jeopardy of losing its right to sue (e.g., the statute of limitations is about to expire), then suit may be filed before a mediation is conducted provided that mediation is requested before, or simultaneously with the filing of such suite, and is conducted before the named defendant in the suit is required to respond to the complaint. If the scheduling of the mediation requires, the plaintiff in the suit shall grant the defendant an appropriate extension of time to respond to the complaint so as to permit the mediation to be conducted before the defendant must so respond. The mediation contemplated hereunder shall be conducted, unless otherwise agreed by the parties, in Lee County, Florida. The parties shall bear the mediator's fee and any filing fees associated with the mediation equally.
16. Non-Exclusive Agreement. Owner may, in its discretion, issue Work Orders to Construction Manager during the contract period contemplated herein. All such Work Orders shall incorporate by reference the documents referred to in paragraph 17 below. Owner shall not, however, be obligated to issue Work Orders to Construction Manager for all Outpatient Projects it undertakes and expressly reserves the right to utilize other construction managers to perform work of a similar nature should it, in its sole discretion, elect to do so.
17. Contract Documents. The “Contract Documents” shall consist of this Agreement, any Work Order issued pursuant to this Agreement, any drawings and specifications referenced in the Work Order and any change orders modifying a Work Order issued pursuant to this Agreement. These documents form the Agreement existing between the parties, and are as fully a part of the Agreement as if attached to this Agreement or repeated herein.
18. Special Provisions.
18.1 The Construction Manager warrants that it has not employed or retained any company or person, other than a bonafide employee working solely for Construction Manager, to solicit or secure this Agreement and that it has not paid any person, company, corporation, individual, or firm, other than a bonafide employee working solely for Construction Manager any
22
fee, commission, percentage, gift, or other consideration contingent upon or resulting from the award or making of this Agreement.
18.2 Public Entity Crime Information Statement. Any person or affiliate who has been placed on the Convicted Vendor List following a conviction for a public entity crime may not submit a bid on a contract to provide any goods or services to a public entity, may not submit a bid on a contract with a public entity, for the construction or repair of a public building, or public work, may not submit bids or leases of real property to a public entity, may not be awarded or perform work as a contractor, supplier, subcontractor, or consultant under a contract with any public entity, and may not transact business with any public entity in excess of the threshold amount provided in Section 287.017, for CATEGORY 2 for a period of thirty-six (36) months from the date of being placed on the Convicted Vendors List.
18.3 The Construction Manager affirmatively represents to Owner that it shall
perform its services under this Agreement in a skillful and competent manner in accordance with good and sound healthcare construction practices.
18.4 Except as otherwise provided in this Agreement, the Construction Manager agrees not to divulge, furnish, or make available to any third parties, firm, or organization, without the Owner’s prior written consent, or unless instant to the proper performance of Construction Manager’s obligations hereunder, or in the course of any judicial or legislative proceedings where such information has been properly subpoenaed, any information concerning services to be rendered by Construction Manager or any of its subcontractors to this Agreement.
18.5 In the event Construction Manager should be deemed subject to the
disclosure requirements of 42 U.S.C. 1395X(v)(1)(1), or amendments thereto until the expiration of four (4) years following the completion of furnishing services under this Agreement upon written request of Owner, Construction Manager shall make available to the Secretary of the Department of Health and Human Services, or the Controller General, or any duly authorized representatives thereof, a copy of the Agreement and such books, documents and records of Construction Manager that are necessary to certify the nature and extent of any costs incurred by Owner. If Construction Manager carries out any of the duties of this Agreement through a subcontract, having a contract price of $10,000.00 or more over a twelve (12) month period, with an organization that would be a related
23
organization within the meaning of 42 C.F.R. 405.427, or amendments thereto, such subcontract shall contain a clause to the effect that for a period of four (4) years following the completion of the subcontract, the subcontractor, upon the written request of Owner, shall make available to the Secretary, or to the Controller General, or any of their duly authorized representatives, the subcontract, and books, documents and all other records of the subcontractor that are necessary to verify the nature and extent of such costs.
18.6 Construction Manager represents and warrants to Owner and Owner’s affiliates that Construction Manager (and each person or entity providing services or work under this Agreement on behalf of Construction Manager): (i) is not currently excluded, debarred or otherwise ineligible to participate in the Federal health care programs as defined in 42 U.S.A.§1320a-7b(f) (the “Federal Health Care Programs”); (ii) is not convicted of a criminal offense related to the provisions of healthcare items or services but has not yet been excluded, debarred, or otherwise declared ineligible to participate in the Federal Health Care Program; and (iii) is not under investigation or otherwise aware of any circumstances which may result in Construction Manager (or any subcontractor, person or entity providing services on behalf of Construction Manager hereunder)being excluded from participation in the Federal Health Care Programs. This shall be an ongoing representation and warranty during the term of this Agreement and Construction Manager shall immediately notify Owner of any change in the status of the representation and warranty set forth in this section. As a condition precedent to the Construction Manager’s right to progress and other payments under this Agreement, Construction Manager shall submit a statement, in writing, and in such form as approved by the Owner, of the above. Any breach of this section shall give Owner the right to terminate this Agreement immediately for cause, which right shall be in addition to any other rights and remedies available to Owner for such breach under the Agreement or otherwise. Construction Manager agrees to indemnify and hold Owner harmless from any liability incurred by Owner to the extent that Construction Manager’s representation and warranty is not accurate.
18.7 Construction Manager hereby represents and warrants to Owner that neither it nor any of its subcontractors, as of the date of the making of their respective subcontracts, have been excluded from participation in Federal Healthcare Programs or in any Federal procurement or non-procurement program. Construction Manager further represents and
24
warrants that none of its employees, or the employees of subcontractors, have been convicted of a criminal offense related to the provision of healthcare items or services and has not been reinstated in a Federal Healthcare Program after a period of exclusion, suspension, debarment, or ineligibility. Construction Manager acknowledges that Owner maintains an ongoing policy of screening for exclusion from Federal Healthcare Program participation by referencing the List of Excluded Individuals Entities (LEIE), Excluded Parties Listing System (EPLS) and other applicable tools and further acknowledges receiving a copy of that policy. Construction Manager agrees to implement as part of its basic services a similar compliance monitoring program with respect to all individuals and entities it employs or otherwise uses on the Project. The Construction Manager shall provide in each and every one of its subcontracts that the exclusion from participation in Federal Healthcare Programs or in any Federal procurement or non-procurement program is cause for termination of the subcontract. If the Construction Manager discovers, after the making of the subcontract, that a subcontractor has been excluded from participating in Federal Healthcare Programs or in any Federal procurement or non-procurement program, the Construction Manager shall immediately terminate the debarred subcontractor for cause. Construction Manager shall maintain all documentation evidencing compliance with the screening requirements set forth in this paragraph for a minimum period of seven (7) years or longer if required by law. Upon Owner’s request, Construction Manager will promptly make all such information available to Owner for audit, accreditation and investigation purposes.
18.8 Business Ethics. Construction Manager agrees to maintain business ethics meeting the Owner’s business ethics expectations. The Owner’s business ethics expectations are more particularly described in Exhibit “B” attached hereto and incorporated herein by reference.
18.9 The Owner will consider the employment by the Construction Manager of
unauthorized aliens a violation of Section 274A(e) of the Immigration and Naturalization Act. Such violation shall be cause for unilateral cancellation of this Agreement.
18.10 Any and all drawings, specifications, designs, models, photographs,
reports, surveys or other data and documents submitted, provided or created by the Construction Manager in connection with this Agreement are and will remain the property of the Owner, whether the Project for
25
which they are made is completed or not. All documents, data, studies, surveys, drawings, maps, models, photographs and reports prepared by the Construction Manager, whether finished or unfinished, will become the property of the Owner and must be delivered by the Construction Manager to the Owner within seven (7) days of the date that this Agreement is terminated by either party; but not later than the date of the final payment request for this Project. Any compensation due to the Construction Manager will be withheld until all documents are received as provided herein. This applies to all Contract Documents and Construction Documents produced for the Project.
18.11 The Construction Manager shall afford the Owner and its authorized
designees access to the Project site at all times.
18.12
19. Diversity and Local Participation.
19.1 Non-Discrimination. The Construction Manager shall not discriminate
against employees or subcontractors because of race, color, religion, sex, age, national origin, or ancestry. The Construction Manager shall insure that employees and subcontractors are retained and utilized on the Project without regard to the race, color, religion, sex, age, national origin, or ancestry.
19.2 Disadvantaged Business Enterprise Participation. The Owner encourages
the Construction Manager to use subcontractors who are certified as disadvantaged business enterprises as defined in Section 288.703, Florida Statutes (“DBE”) so as to promote opportunities for disadvantaged business enterprises to participate in the Project. The Construction Manager, when seeking subcontractors for the Project, agrees to use its best efforts to insure the participation of local DBE.
19.3 Local Business Enterprises. The Owner encourages the Construction
Manager to utilize business enterprises based in Lee County, Florida. The Construction Manager, when seeking subcontractors, agrees to use its best efforts to assure the participation of business enterprises based in Lee County, Florida.
20. Miscellaneous.
26
20.1 No modification, waiver, amendment, discharge or any change of this
Agreement or any Work Orders issued pursuant to this Agreement shall be valid unless the same are in writing, signed by the parties against whom the enforcement of such modification, waiver, amendment, charge or change is sought. This Agreement, the Work Orders issued pursuant to this Agreement, any plans and specifications referred to in said Work Orders and any documents attached hereto constitute the entire agreement between the parties relating to the transactions contemplated hereby and all prior or contemporaneous agreements, understandings, representations, and statements, oral or written, are merged herein.
20.2 This Agreement shall be construed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute a single instrument.
20.3 All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular, or plural as the identity of the persons or entity may require.
20.4 If any provision or any portion of any provision of this Agreement or
the application of any provision or portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement, or the application of such provision held invalid, or unenforceable to persons or circumstances other than those to which it has been held invalid or unenforceable, shall not be affected thereby.
20.5 In the event of any dispute as to the precise meaning of any term
contained herein, the rules of contract construction and interpretation that written contracts be construed against the drafter shall not apply.
20.6 All articles, titles, or captions contained in this Agreement are for
convenience only and shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement.
20.7 All notices, demands, or other communications made pursuant to this
Agreement shall be in writing and copies thereof shall be simultaneously directed to the parties listed below. Further, all notices, demands, or communications shall be deemed to have been duly given by mailing, unless otherwise specified, by United States registered or
27
certified mail, return receipt requested, with the proper postage prepaid at the following addresses:
If to Owner: David Cato Chief Administrative Officer, Outpatient Services Medical Plaza One 9800 S. HealthPark Dr., Suite 200 Fort Myers, FL 33908 With a copy to: Teri Isacson, Esq. Legal Services and Risk Management Lee Memorial Health System 2776 Cleveland Ave. Fort Myers, FL 33901 If to Construction Manager: ______________________________ ______________________________ ______________________________ Or to such other addresses or to such other persons as any party may designate to the other for purposes set forth above.
20.8 Assignment. This Agreement shall not be assignable to either party.
20.9 Statutory Notice. ANY CLAIMS FOR CONSTRUCTION DEFECTS ARE SUBJECT TO THE NOTICE AND CURE PROVISIONS OF CHAPTER 558, FLORIDA STATUTES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the day and year first above written.
Signed, sealed, and delivered in the presence of:
28
_______________________________ Witness Signature Print Name:_____________________ _______________________________ Witness Signature Print Name:_____________________
Owner: LEE MEMORIAL HEALTH SYSTEM By:___________________________________ Stephen R. Brown, M.D. Chairman of the Board of Directors
_______________________________ Witness Signature Print Name:_____________________ _______________________________ Witness Signature Print Name:_____________________
CONSTRUCTION MANAGER: __________________________________
By:___________________________________ Printed Name:
______________________ Title:______________________________
top related