System and method of assessing and rating vendor risk and pricing of technology delivery insurance

• US 6,871,181 B2
• Filed: 06/05/2003
• Issued: 03/22/2005
• Est. Priority Date: 08/24/2000
• Status: Expired due to Fees

• Current Assignee: Namita Kansal
• Original Assignee: Namita Kansal
• Inventors: Kansal, Namita
• Primary Examiner(s): Smith, Jeffrey A.
• Assistant Examiner(s): FADOK, MARK A
• Application Number:
  US10/454,707
• Publication Number:
  US 20030182213A1
• Time in Patent Office: 656 Days
• Field of Search: 705/37, 705/4, 705/400, 705/26
• US Class Current: 705/4
• CPC Class Codes: G06F 16/13 File access structures, e.g. distributed indices arrangements of input from, or output to, record carriers G06F3/06
• CPC Class Codes: G06Q 10/0639 Performance analysis of employees; Performance analysis of enterprise or organisation operations
• CPC Class Codes: G06Q 30/0283 Price estimation or determination
• CPC Class Codes: G06Q 30/04 Billing or invoicing
• CPC Class Codes: G06Q 30/0607 Regulated
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A method and system for providing a standardization and commoditizing the process of technology contracts and creating method for assessing, scoring, ranking and rating technology vendors for the purpose of comparing vendor bids on a project and for structuring and pricing insurance/surety contracts. Intrinsic and two-way vendor ratings are established for each of the vendors in a particular project. This two-way rating is used to provide a risk adjustment to the nominal bid of each of the vendors. The two-way rating is also utilized to structure and calculate an insurance premium based upon the probability that the vendor would fail/default on the delivery of a technology project.

Claims

1. A method for determining an insurance premium paid to an insurer from a customer for a technology contract utilizing a computer platform, comprising the steps of:

obtaining a price/time bid from a plurality of vendors for the performance of the contract;

calculating on the computer platform an intrinsic rating P(k) for each of the vendors based upon the strength and performance of each of the vendors;

calculating of the computer platform a component Q(x, k) for each vendor which quantifies the ability/suitability of a vendor to deliver on a “

specific”

component of said technology contract or a Request For Proposal (RFP) based on the vendor'"'"'s past performance;

calculating on the computer platform a component Q(x) which is the summation of the Q(x, k) and P(k);

determining on the computer platform an extrinsic two-way rating Vendor Rating (VR) of each of the plurality of vendors using the equation;

Two-way VR=[Q(x, k)×

P(k)]/Q(x)

determining on the computer platform a default probability value P₁ for each of the vendors;

determining on the computer platform a first net exposure E_i for said insurer;

determining a discount rate R; and

calculating on the computer platform a premium paid to said insurer for each of the vendors utilizing the equation;

Premium Amount=(1−

Two-way VR)*Σ

P_i*E_i/(1+R)^t(i).

2. The method in accordance with claim 1, further including the steps of:

partitioning the technology contract into independent modules/phases;

obtaining said price/time bid from each of the vendors for said independent modules/phases of the contract; and

determining a second net exposure based upon the completion of each of said independent modules/phases.

3. The method in accordance with claim 2, further including the step of negotiating a default trigger value for the contract.

4. The method in accordance with claim 1, further including the step of altering each of said intrinsic ratings based upon customer preference resulting in a modified intrinsic rating.

5. A system for determining an insurance premium paid to an insurer from a customer for a technology contract, utilizing a computer platform comprising:

means for obtaining price/time bids from a plurality of vendors for the performance of the contract;

means for calculating an intrinsic rating P(k) for each of the vendors based upon the strength and performance of each of the vendors on a computer platform;

means for calculating a component Q(x, k) for each vendor which quantifies the ability/suitability of a vendor to deliver on a “

specific”

component of said technology contract or a Request For Proposal (RET) based on the vendor'"'"'s past performance on said computer platform;

means for calculating a component Q(x) which is the summation of the Q(x, k) and P(k) on said computer platform;

means for determining on said computer platform an extrinsic two-way rating Vendor Rating (VR) of each of the plurality of vendors using the equation;

Two-way VR=[Q(x, k)×

P(k)]/Q(x)

means for determining on said computer platform a default probability P_i for each of the vendors;

means for determining on said computer platform the net exposure E_i for an insurer; and

means for calculating on said computer platform a premium paid to the insurer for each of the vendors utilizing the equation;

Premium Amount=(1−

Two-way VR)*Σ

P_i*E_i/(1+R)^t(i).

6. The system in accordance with claim 5, further including a means for partitioning the technology contract into independent modules/phases and receiving price/time bids from each of the vendors for each of said modules/phases and further including a means for determining the net exposure based upon the completion of each of said modules/phases.

7. The system in accordance with claim 5, wherein said means for determining said two-way rating for each vendor uses data relating to the intrinsic rating of each of the vendors based upon the general performance of the vendors as well as the specific past performance related to the vendors exposure in the particular technology.

8. The system in accordance with claim 7, wherein said means for determining two-way rating for each vendor includes a normalized distribution for the past performance for the particular technology of the contract for all of the vendors, said rating for each vendor being an extrinsic two-way rating.

9. A system for providing insurance protecting a customer against the default of a vendor performing on a technology contract utilizing a computer platform, the system including an insurance company and a guarantor, the guarantor providing a shadow bid to be used to determine a net exposure to the insurance company comprising:

an administrator means partitioning the contract into a plurality of independent phases/modules, said administrator means receiving price/time bids from a plurality of vendors for each of said independent phases/modules, said administrator additionally receiving information from the plurality of vendors regarding their general past performances as well as specific past performances relating to the specific type of technology of the contract, said administrator means calculating using said computer platform an intrinsic rating (IR) based upon the general performance of each of the vendors as well as a two-way rating (VR) based upon the specific type of technology of the contract;

means for calculating an intrinsic rating P(k) for each of the vendors based upon the strength and performance of each of the vendors;

means for calculating on said computer platform a component O(x, k) for each vendor which quantifies the ability/suitability of a vendor to deliver on a “

specific”

component of said technology contract or a Request For Proposal (RFP) based on the vendor'"'"'s past performance;

means for calculating on said computer platform a component O(x) which is the summation of the O(x, k) and P(k); and

means for determining an extrinsic two-way rating Vendor Rating (VR) of each of the plurality of vendors using the equation;

Two-way VR=[Q(x, k)×

P(k)]/Q(x)

wherein a premium is determined for each of the vendors using said computer platform based upon said intrinsic rating and said two-way rating to be paid by the customer to said insurance company protecting the customer from default of the performance of the contract by a selected vendor means for calculating said premium utilizing the equation;

Premium Amount=(1−

Two-way VR)*Σ

P_i*E_i/(1+R)^t(i).

10. The system in accordance with claim 9, wherein said administrator means determines said premium.

11. A system for providing insurance protecting a domestic customer against the default of a foreign vendor performing on a technology contract utilizing a computer platform, comprising:

an administrator means partitioning the contract into a plurality of independent phases/modules, said administrator receiving price/time bids from a plurality of foreign vendors, for each of said independent phases/modules, said administrator means receiving information from the plurality of foreign vendors regarding their general past performance as well as specific past performances relating to the specific type of technology of the contract, said administrator means calculating utilizing said computer platform an intrinsic CIR) rating based upon the general performance of each of the vendors as well as a two-way rating (VR) based upon the specific type of technology of the contract;

means for calculating an intrinsic rating P(k) for each of the vendors based upon the strength and performance of each of the vendors;

means for calculating on said computer platform a component O(x, k) for each vendor which quantifies the ability/suitability of a vendor to deliver on a “

specific”

component of said technology contract or a Request For Proposal (RFP) based on the vendor'"'"'s past performance;

means for calculating on said computer platform a component O(x) which is the summation of the O(x, k) and P(k); and

means for determining an extrinsic two-way rating Vendor Rating (VR) of each of the plurality of vendors using the equation;

Two-way VR=[Q(x, k)×

P(k)]/Q(x)

wherein a premium is determined for each of the foreign vendors using said computer platform based upon said intrinsic rating and said two-way rating to be paid by the customer to said domestic insurance company protecting the customer from default of the performance of the contract by a selected foreign vendor, and further wherein a portion of risk of non-performance of the contract will be borne by said overseas insurance company utilizing the equation;

Premium Amount=(1−

Two-way VR)*Σ

P_i*E_i/(1+R)^t(i).

12. The system in accordance with claim 11, further including an overseas rating agency for assessing the capability of the selected foreign vendor for performing the contract in a timely manner.

13. The system in accordance with claim 12, wherein said administrator means determines said premium.