Merit summer 2011 by ABCofMichigan

PUBLICATION OF ASSOCIATED BUILDERS AND CONTRACTORS OF MICHIGAN SUMMER 2011

Governor signs PLA ban PLAs on public construction now illegal in Michigan

Also: Lean construction boosts profits Business tax changes for 2012

“ABC is the only association that is an advocate of free enterprise in the construction industry. They lead the fight for the merit shop at the state, local and national levels of government. ABC is our voice at the capitol.” Dan Kozakiewicz, President, Three Rivers Corporation

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ABC Builds & Protects Your Business ABC Annual Membership Directory and Resource Guide – find suppliers, subcontractors and contractors in every area of the state who support the Merit Shop Construction Industry l Legislative Advocacy – ABC is the only Merit Shop lobbying organization, working tirelessly to uphold the free enterprise system at both the state and national levels. ABC is your voice with our legislators. l Find A Contractor – a powerful search tool for the online member database to allow construction buyers and users to find your company easily l Safety Training Evaluation Process – Improves your company’s safety practices and can lower your workers’ compensation insurance rates. l Networking Events – connects you with contractors and leaders in the field on the local, regional and national levels. l Craft Training – accredited local craft training and apprenticeship programs to make your workers top-notch skilled professionals. l PLAWatchMichigan Web site and PLA Taskforce – working to stop the use of forced union agreements on construction projects. l

ABC Keeps You Informed Michigan Merit – Michigan’s premier magazine for the Merit Shop Construction Industry l Merit Minute – semi-monthly electronic newsletter to keep you on top of new developments in the industry and legislative news that affects your business. l Construction Executive – the national publication for the Merit Shop Construction Industry l State Legislative Conference – meet with your legislators in a casual format to discuss issues of importance to your business. l Construction Economic Update – Stay current on economic news that impacts your business. l Competitive Contractors Summit – provides updated regional and state legal and legislative information to assist you in broadening your scope of business within the state. l Legal Resources – for assistance with legal and labor issues. l Help with Labor Issues – Legal and Legislative resources to resolve your situation. l

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ABC celebrates the passage of the law to end the use of PLAs on Michigan public construction projects, the Fair and Open Competition in Governmental Construction Act.

“The ABC workers’ compensation program is great. The credit I receive more than pays for my ABC dues every year. It’s so worth being an ABC member!”

5 Feature Article “Lean construction” gains value ABC members are employing the principles of “lean construction” to reduce waste and maximize productivity and value.

Renee M. Sandborn, President, Sandborn Construction

10 Business Development

ABC Saves You Money Verizon Wireless – save up to 20% on cell phone plans l Chrysler, GM & Ford – save up to $1000 per vehicle plus other incentives l Super Fleet Fuel Card – save 5¢ per gallon of fuel at Speedway, Marathon & Rich Oil l ABC Self Insured Workers’ Comp Fund – average annual return on premium is 35%! l Bulk Fuel Discount – save 10% off margin for bulk fuel delivery anywhere in the state l FedEx – Save 29% on overnight delivery services l Long Term Care and Long Term Disability Insurance – Available at a discount for ABC Members l Supplemental Unemployment Insurance Plan – complies with Davis-Bacon, while saving you money on Prevailing Wage projects

Michigan eliminates business income tax Beginning Jan. 1, 2012, the Michigan Business Tax will be replaced with a 6 percent corporate income tax for C-corporations. Businesses will now be able to calculate and plan for their tax liability. By Matthew C. Latham, CPA,

Maner Costerisan, PC, tax manager

19 Advertisers Index VOLUME V, ISSUE. 2 Game-changing law for Merit Shop contractors takes effect.

Legislative Update 14

Associated Builders and Contractores of

Michigan www.abcmi.com

ABC’s journey from concept to passage of the new Michigan law prohibiting the use of PLAs is recapped.

PLA legislation: Questions regarding the new law are answered. Spring 2011 3

ASSOCIATED BUILDERS and CONTRACTORS of MICHIGAN 2011 BOARD of DIRECTORS Jim Cripps – Chairman Cripps Fontaine Excavating – Western MI Chapter

New era of open, fair competition begins

David Mollitor Jr. – Vice Chairman Consolidated Electrical – Central MI Chapter Rod Kloha – Past Chairman Circle “K” Service, Inc. – Saginaw Valley Chapter Dave Sheffield – Secretary/Treasurer Onslow-Sheffield, Inc. – Southeastern MI Chapter

“Nobody fights harder for your business than YOU and ABC.”

Chris Beckering Pioneer Construction – Western MI Chapter

Our favorite axiom has taken on more relevance in 2011 as ABC wins some battles to stop discrimination against Merit Shop contractors and ensure their right to work in their own state.

Bill Buyak Capital Steel – Central MI Chapter Erick Forshee TIC, Inc. – Saginaw Valley Chapter Scott Gillespie The Gillespie Co. – Central MI Chapter Rick Jackson Jackson Associates – Southeastern MI Chapter Mike Kelly Wolverine Building Group – Western MI Chapter Bill Molnar Wm. Molnar Roofing Co. – Southeastern MI Chapter Dan Murphy MAG Insulation – Saginaw Valley Chapter Jack VandeGuchte Sobie Company, Inc. – Western MI Chapter Daniel Welch Welch Tile & Marble – Western MI Chapter Michigan Merit Contributors Publisher: Christopher Fisher Managing Editor: Mary Boardway, CAE Communications Coordinator: Kelly Dancsok ABCMI Economist: Don Wilson Publication management: Lezotte Miller Public Relations, Inc. Advertising: Arion Media Printing: Bradford Printing Michigan Merit (ISSN# 1938-9051) is the official publication of Associated Builders and Contractors Inc. of Michigan (ABC of Michigan) and is published quarterly at 230 N. Washington Sq., Suite 202, Lansing, MI 48933, (517) 853-2545. Please direct all inquiries to the previous address. Articles written by outside authors do not necessarily reflect the views of Associated Builders and Contractors Inc. of Michigan. ABC of Michigan reserves the right to reject or edit all material submitted for publication. The appearance of an advertisement in Michigan Merit does not constitute endorsement of the advertiser, its products or services, nor do Michigan Merit or Associated Builders and Contractors Inc. of Michigan guarantee or warrant any claims or offers made by the advertisers. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Michigan Merit, a publication of Associated Builders and Contractors Inc. of Michigan.”

4 Summer 2011

As we entered into Independence Day weekend, the hard work of ABC culminated in a historic legislative victory: final passage of legislation to end governmental PLAs that exclude workers on the basis of labor affiliation. Until passage of the landmark legislation, it had been legal to deny companies and workers the ability to work based not on merit, but on labor affiliation. Over the years, many ABC members and their hardworking employees have been blackballed from working on projects funded by their own tax dollars. Now, those days are over.

The legislation is the most significant reform of its kind.

The new Fair and Open Competition in Governmental Construction Act prohibits costly and discriminatory PLAs for not only state construction, but also local, school, community college and university construction. The legislation is the most significant reform of its kind.

It’s a game-changing win for Merit Shop contractors in Michigan and on behalf of free enterprise, equal opportunity and fiscal accountability. It comes after decades of hard work and commitment by ABC of Michigan, all four Michigan ABC chapters, Gov. Snyder, the Michigan Legislature led by bill sponsors Rep. Joe Haveman and Sen. John Moolenaar and, most important, the countless ABC members who stood up for their freedom. Reason to celebrate, indeed. Yours for the Merit Shop,

Chris Fisher Michigan Merit

The city of Wyoming Clean Water Plant was completed in 2007 using lean construction.

“Lean construction” attacks waste and boosts profits A few years ago, leaders at Adabased Erhardt Construction were researching ways to improve their operations and the company’s project delivery to customers when they struck upon an emerging concept: lean construction. Since pilot testing lean principles on a project in fall 2005, Erhardt — a member of Associated Builders and Contractors’ West Michigan Chapter — has applied the system to dozens of jobs, says company President Ben Wickstrom. www.abcmi.com

“It really came from a focus on ways to continuously improve our business,” he says. “We had some good success on that Wickstrom first project.” The company has since gone on to hone its lean approach. “We’ve definitely customized it for our own processes and what works

for us,” Wickstrom says. “But at the core of it” — as with all approaches to lean construction — “is an intense focus on eliminating waste. “It’s helped us reduce project durations, which is a benefit to our clients, ourselves and our subs,” he says. “It’s helped our bottom line on our self-performed work.” Indeed, boosting productivity and efficiency through reliable and predictable workflow is the overarching goal of lean construction, and there is any number of ways Summer 2011 5

to achieve that outcome, says David Shull, a senior architect at Fishbeck, Thompson, Carr & Huber, a Grand Rapids-based engineering and Shull architectural firm that belongs to ABC’s West Michigan Chapter. Shull spoke about lean construction at a recent chapter luncheon. “There’s nothing proprietary about this,” he says. Lean construction can be as simple as focusing on things you wish you didn’t have to do and devising clever solutions to do them better or eliminate them. “I’m of the opinion that it’s not a management program — it’s a problem-solving process,” he says. “As you look through the tasks that you do, are there things that you can avoid or reduce?” Tariq Sami Abdelhamid, an associate professor of lean production/construction at Michigan State University, says the process works best when all stakeholders — owners, designers, builders, maintenance and operations teams and end users — are involved and have a say in the outcome. “It’s really hard to encapsulate all of this into a phrase,” he says. “But really, it’s a set of practices that are aiming to maximize value and minimize waste in the entire process of planning, design, construction and occupancy, so you are really taking everything into account from cradle to grave. “There’s no template to follow,” Abdelhamid says. “The team really tries to follow the spirit of what the process is supposed to achieve and then they develop their own processes.” 6 Summer 2011

Wickstrom agrees that a bigpicture approach is key. “If we can get people thinking projectwide in addition to their work, that’s really where we see results.”

Still not the standard Abdelhamid says only a relatively small percentage of projects in Michigan and nationwide have been built under lean construction principles. With the laudable goal of eliminating waste and increasing value that no member of the industry would argue against, why isn’t lean construction more widely used? Shull has a simple answer: Inertia. “There was a reason we put together the processes we use now, so people are reluctant to let go of them” he says. “Change is hard. The challenge in the construction industry is that people say they don’t know where to start. “But in the end, if it’s truly a lean solution, people will look at you and say, ‘Of course, why would you do it any other way?’ ” Shull says. “When people start to catch on, they say this is really pretty simple.” Shull says retail is one sector that has been quicker than most to adopt lean practices. That’s largely because retail chains typically build a series of similar or identical structures — similar to how a manufacturing production line operates. “You get a better opportunity to test and design repeatability than if you’re doing oneof-a-kind or custom-process alone,” Shull says. Wickstrom agrees that switching to a lean approach requires new ways of thinking. “But it’s not as big a shift as people think it is,” he says. What’s necessary is focusing on what adds value for a client and eliminating

Lean construction can be as simple as focusing on the things you wish you didn’t have to do and devising clever solutions to do them better.

Workers with Erhardt Construction save time using lean principles.

whatever doesn’t, which sometimes requires doing things in new ways, he says. “One of the principles is to empower decision making at all levels. That does not mean anyone gives up control.” Erhardt, for example, has adopted some principles of the Last Planner System, which was developed by the Lean Construction Institute as a method for managing the workflow on a project site and that is now used in planning design phase work. In addition to the master project schedule, on-site managers are allowed to make short-term decisions about workflow — as long as the commitments to the schedule are met or improved, thus eliminating Michigan Merit

work stoppages or delays caused by balky or inefficient handoffs between different trades. Commitments to hand off work are made between trades, and the entire team is held accountable to those commitments. Similarly, any quality issues are immediately addressed on-site as they occur, keeping defects from being passed downstream, Wickstrom says.

Staying on schedule Lean practices also involve such basic solutions as logically arranging materials on a site so that they’re easily accessible to those who need them, or allowing different trades to share equipment when feasible, Abdelhamid says. “You’re really www.abcmi.com

looking for opportunities throughout the process to reduce the cost”. Shull warns against getting bogged down in cost-cutting minutia and losing track of the bigger picture where the true savings are achieved. “I see a lot of people trying to lean up an activity that really doesn’t matter all.” An example: eliminating some duplicate paperwork that results in minimal savings. Much of the real savings comes through more efficient scheduling, Abdelhamid says. “In doing this, the contractor is trying to avoid getting into a situation where workers are waiting for work or work is waiting for workers That’s what the problems of construction have been since the beginning of

time. You don’t want people to be sitting around doing nothing. A lot of times we’ll talk about highway construction and it looks like nothing’s happening. Or you get into a building and find that a lot of studs have been erected but there’s no work going on because of materials not arriving on time. “What lean construction has done is reconsidered the contractual relationship between the contractor and the architect and the owner and also reconsidered the way we organize ourselves on the construction site and even during design,” Abdelhamid says. “The methods we use to get work done, we try as much as we can to deliberately design those, as opposed to just do it ad-hoc or impromptu.” That’s not to say that lean can account for every possible occurrence on a construction site, he says. Some factors, such as poor weather or equipment breakdowns, are largely beyond planners’ control. But the lean approach is much more efficient than the traditional solution, which is to simply throw more labor at a problem, Wickstrom says. Indeed, such practices often mask inefficiencies on a project, Abdelhamid says. For example, a subcontractor may have been behind schedule for a good portion of time on a project, but when crunch time approached, it allotted more resources to the job — including having employees work overtime. “So you finish the job in the four weeks that were given to you, but you have really affected all the other trades in the process,” Abdelhamid says. Over time, such inefficiencies get rolled into contractors’ unit price estimates. Summer 2011 7

“ We are interested in having construction, facility operation and end users become inputs to design, rather than outputs of it.” –Tariq Sami Abdelhamid “So contractors will basically take into account when they’re on a job that this is the typical pattern,” Abdelhamid says. “And that’s fine — until you see a contractor in the same market starting to underbid you and starting to get more work each year. That contractor has begun to figure out ways to be more reliable.”

Subcontractors see savings Wickstrom says validation for Erhardt came a year after it

adopted its lean approach, when a subcontractor told company officials that he earned 2 percent more profit when working on Erhardt projects because of the increased efficiencies. “That’s when we knew this was working,” Wickstrom says, adding that lean has also allowed Erhardt to reduce project duration and increase quality. Indeed, lean projects should hold appeal for subcontractors, Shull says. “As a subcontractor, you know you can show up and do your work and not have to work around others,”

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he says. Subcontractors can also experience less cleanup and fewer steps on lean projects, he says. Lean construction has also resulted in innovative contractual arrangements, Abdelhamid says. For example, a different and ultimately more efficient method could cost a steel contractor $1 more per linear foot but save the mechanical contractor who’s next in line to work on the project $4 per linear foot. A relational contract would allow the parties to share the overall savings — and eliminate waste in the process.

Roots in manufacturing Although closely linked to the lean manufacturing techniques pioneered by Japanese automaker Toyota, lean construction is its own discipline, Abdelhamid says. “It really was not taking the Toyota production system or manufacturing or lean-production system and grafting it on to construction,” he says. “There are things that we have borrowed from lean manufacturing and lean production, but it wasn’t, ‘Let’s take this and apply it to construction.’ ” Lean construction traces its roots to two main influences. The first is Lauri Koskela’s investigations into

production in construction while at Stanford University in the early 1990s. “He was trying to understand why there are always issues with time, quality and cost on a project and why firms are unable to deliver on the mantra of on time, on budget and of desired quality and that you have to trade off on these three,” Abdelhamid says. At about the same time, engineers Gregory A. Howell and Glenn Ballard were similarly studying the cause of construction delays, specifically as it arose from trades not being able to meet weekly commitments. In 1997, after hearing a presentation on the Last Planner System by Howell and Ballard, a group of construction and design executives underwrote the creation

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and then try to remove planning and of the Lean Construction Institute to design failures as much as you can. further advance the concept. “It may be an ideal to be able to do “The idea of having solutions to all of those things without a tradeoff the problem of workers waiting for somewhere, but sometimes you work or work waiting for workers is have to compromise. Ideals are like very appealing to any contractor,” stars. You can’t reach them, but they Abdelhamid says. guide us. Lean construction has that Lean construction has been flavor. Ideally, you want everybody to gradually evolving ever since — although in practice it is often applied be satisfied in this whole chain. As only in piecemeal fashion. It became my mentor Greg Howell says, it boils down to three really basic changes: clear that focusing on constructionone is contractual, the other is the site operations is not enough to organizational setup and the third is eliminate waste and increase value, … an operating system for how we so the attention turned further manage construction on-site.” MM upstream in the process. “We are interested in having construction, facility operation and end users become inputs to design, rather offers a new consulting tool: than outputs of it,” Abdelhamid tm says. “But you can also apply A unique approach to significantly enhance lean just to the your construction business’ profitability construction site

Michigan Merit

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Summer 2011 9

Michigan Corporate Income Tax:

A New Beginning for Michigan Business On May 25, 2011, Gov. Rick Snyder signed into law a sweeping change in Michigan’s tax structure, affecting both business and individual taxes. The biggest change for contractors and construction companies is the elimination of the Michigan Business Tax as of January 1, 2012, and the implementation of a 6 percent corporate income tax for C-corporations.

Some similarities exist The new corporate income tax has several similarities to the business income portion of the old MBT. The new flat 6 percent tax rate is similar to the rate some businesses saw under the MBT, however, with the new flat tax businesses will be able to calculate their tax liability easily and plan for it unlike the previous tax plans. Pass-through entities such as S-corps, partnerships and LLCs are exempt from the 6 percent tax, as are sole proprietorships. Small business credits survived the Legislature’s plan to simplify the tax and will work in the same manner as under the MBT. Only C-corporations need to file, but pass-through entities may still be taxed if the C-corporation has ownership in a pass-through. The income from a pass-through will then flow back to the C-corporation and thus be subject to the tax.

10 Summer 2011

Michigan Merit

The single factor sales apportionment remains as well and could be good news for some businesses, especially those that do out-of-state work. Businesses won’t be punished for hiring employees or purchasing equipment in Michigan if they happen to do some work outside of the state. If receipts can be apportioned to the other state, then the corporate income tax will be reduced. The company, however, could be subject to tax in the other state. The income portion of the tax still retains the same add-backs as the MBT. Bonus depreciation and domestic production activities deduction are not allowed under the new corporate tax. Many construction companies are able to use such tax breaks at a federal level. Michigan has chosen not to include the deductions in determining Michigan taxable income. Companies with accounting years that do not end on Dec. 31st will need to file two returns, because the MBT ends on Dec. 31st and the new corporate tax begins Jan. 1, 2012. If the business is a pass-through entity, it will file one short-period return.

www.abcmi.com

By Matthew C. Latham, CPA – Tax Manager, Maner Costerisan, PC

Summer 2011 11

Changes may impact decisions this year Under the new law, there will be no gross receipts tax, so the related deduction for subcontractors will be gone as well. Also, the new law eliminates the compensation credit and investment tax credit. Some taxpayers, however, may elect to be subject to the MBT to retain certain credits, such as a Brownfield development credit. Businesses may want to carefully consider whether to buy new equipment or hire extra contractors or employees. Or they may elect to act before Dec. 31, 2011, to take advantage of tax breaks under the MBT.

12 Summer 2011

Under the new corporate tax... double taxation ends.

Business losses represent another major change in terms of tax impact. Under the MBT, businesses were allowed to carry forward a portion of their losses from 2006 and 2007. Under the new corporate tax, businesses will only be able to deduct from the business income tax base any losses occurring after Dec. 31, 2011. Any MBT loss carry forwards will not be available under the new corporate tax structure. Businesses may want to use the losses in 2011 to obtain the tax benefit that will be lost after this year.

Plan now for 2012 tax changes Individual taxes also impacted

Changing structure may offer tax savings As businesses transition into the new tax climate, business structure should be a key focus. C-corporations are subject to the tax directly and pass-through entities are not, unless the income flows into a C-corporation. Changing from a C-corporation to an S-corp, if eligible, may be a great tax-saving strategy, however, business owners need to be aware of potential pitfalls that could occur. For example, if a company has accumulated significant earnings, there could be some tax issues to discuss with a tax adviser and attempt to minimize the tax impact. As it stands now, pass-through entities or sole proprietorships stand to make up quite a bit of ground under the new tax law. Under the MBT structure, businesses pay the MBT as well as the Michigan income tax on personal returns as the income passes-through. Under the new corporate tax, the double taxation ends, as the income will only affect the personal income tax return at a 4.35 percent rate for 2012 instead of a 6 percent corporate for C-corporations. Michigan Merit

While the business tax changes took center stage in the legislative debate, individual taxes changed quite a bit as well, especially for those approaching retirement. Individuals need to be aware of the changes to the pension laws as well as changes to the level of income that is exempt. In addition, there is now a withholding requirement on

pension and annuity payments and credit changes as well. Over the next few months, business owners should review their operations and consider potential state tax and individual liabilities. Talking to a tax adviser now will help businesses be prepared at the beginning of 2012.MM Matthew C. Latham, CPA Maner Costerisan, PC 517-323-7500

To ensure compliance with Treasury Department regulations, we inform you that any tax advice that may be contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any taxrelated matters addressed herein.

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Law signals new era of accountability Overflow crowds in Senate and House hearing rooms, parades of union supporters testifying, ABC members turning out in force to make their case to legislators across the state. Such are the images of the successful campaign to end project labor agreements in Michigan, which culminated in the signing of the Fair and Open Competition in Governmental Construction Act on July 19, 2011. Although the most intensive work to pass the law prohibiting Project Labor Agreements happened in less

than 12 months, ABC of Michigan has been battling the issue for decades, as more than 75 percent of Michigan construction contractors and Sen. Moolenar workers were effectively being shut out of many publicly funded construction projects because they were not unionized. ABC took the campaign to a new level in 2010 by creating a task force and hiring a public relations firm to focus on the PLA issue. The campaign went into high gear toward the end of 2010 when bill language was drafted and ABC of Michigan President Chris Fisher lined up

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“ The end to anti-competitive picking of winners and losers means the beginning of a new era of accountability on construction projects paid for by public tax dollars.”

–Chris Fisher Passage of fair and open competition legislation is part of a national trend. Merit shop workers in California gather to protest PLAs.

key sponsors and orchestrated an extensive lobbying effort with House and Senate lawmakers and the governor’s office. “The leadership of Sen. John Moolenar (R-Midland) and Rep. Joe Haveman (R-Holland) played a key role in our success,” says Fisher. “They understood the issue and were able to communicate its negative effects to their fellow legislators, especially the fact that PLAs drive up taxpayer costs. We gained support for the bill among Republican lawmakers early on.” Bills were introduced in the House and Senate in February, and

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Michigan’s Fair and Open Competition in Governmental Construction Act

contractors showed up in force on March 1 to testify before the House Commerce Committee.

Dan Acciavatti, chief financial officer for Pamar Enterprises Inc. of Clinton Township, called PLAs a “non-starter” for most contractors Having the appropriate tools for the job because they cause them to pay twice. Renee Sandborn, president of Sandborn Construction testified that “labor-based discrimination needs to end.” In testimony before the Senate’s Committee also applies to running your business on Reforms, Restructuring Accounting and Audit • Tax • IT Consulting • Succession Planning • Business Valuations • Cost Reduction Programs • Cost Segregation Studies • Retirement Plan and Reinventing, Consulting • Fraud Prevention Evaluations • Profit Improvement • Strategic Planning, Michael Marks, Development & Evaluation • Bonding/Surety Assistance • Entity Selections vice president of construction for E.T. MacKenzie Company, based in Grand Ledge, outlined clearly www.ahpplc.com how his company Auburn Hills • Bay City • Grand Rapids • Greater Lansing • Midland • Saginaw had been cut out

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What does Michigan’s Open Competition in Governmental Construction Act prohibit? Any term that requires, prohibits, encourages or discourages bidders, contractors or subcontractors from entering into or adhering to agreements with a collective bargaining organization relating to a public construction project or other related construction projects; or any term that discriminates against bidders, contractors or subcontractors based on their union affiliation. Are government–mandated PLAs, CUB Agreements, Harmony Agreements, etc. prohibited? Yes. Any union-only Project Labor Agreement (PLA), Construction Unity Board (CUB) continued on page 17

Summer 2011 15

PLA Act Q&A ABC of Michigan members witnessed the bill signing. From left: Renee Sandborn, Sandborn Construction; Jim Cripps, Cripps Fontaine Excavating; Rodney Kloha, Circle K Services Inc.; Bill Molnar, Wm. Molnar Roofing Co.; Gov. Rick Snyder; Chris Fisher, ABC of Michigan; Sen. John Moolenaar; Amy Moolenaar; Michael Marks, E.T. MacKenzie Co.

of business even when it was the only local company with the required experience. All told, ABC members across the state also fought hard in meetings with their lawmakers, attending a grassroots lobbying day at the State Capitol and sending more than 1,000 emails and letters to elected officials. “The grassroots effort of ABC members was one of the most impressive of any association in the state,” said ABC of Michigan grassroots and communications coordinator Kelly Dancsok.

Agreement, Harmony Agreement, Community Workforce Agreement or construction agreement that requires an agreement with a labor organization is strictly prohibited. Moreover, any term that can discriminate on the basis of labor affiliation (including contract terms that are unique to the unionized construction sector) are illegal. When does the law take effect? The law took effect on July 19, 2011, following the governor’s signature. “It made a huge difference.” The Senate committee approved its bill (SB 165) on March 9. The House committee approved HB 4287 on a 12-to-7 vote on March 15 as scores of observers, protestors and ABC members looked on.

Throughout the effort, ABC stayed focused on its key messages in all media and legislative communication, hitting the economic impact on taxpayers and the discrimination against the majority of workers the hardest.

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Michigan Merit

“In today’s economy, the state cannot afford to pay for what amounts to special interest kickbacks to favored political groups,” Fisher stressed in repeated media interviews. “The end to anticompetitive picking of winners and losers by public entities means the beginning of a new era of fiscal accountability on construction projects paid for by public tax dollars.” The House’s 62-to-47 vote on June 29 in favor of the bill followed the state Senate’s passage on June 16. The bill was given immediate effect pending Gov. Snyder’s signature. On July 19, at 3:47 p.m., ABC of Michigan was on hand with Gov. Rick Snyder as he signed into law the Fair and Open Competition in Governmental Construction Act. “This legislation is important Gov. Snyder because it gives everyone equal opportunity to compete for jobs,” Snyder said. “Governments need to make decisions based on competitive bidding and value for taxpayer money.” “Taxpayers deserve the accountability that results from open, www.abcmi.com

Does the law affect PLAs already in progress? No. It only affects contracts executed after July 19, 2011. President Obama signed an executive order in 2009 authorizing the use of federal PLAs. Is a PLA permissible if federal dollars fund a state or local project? No. President Obama’s Executive Order simply authorizes PLAs, but does not require PLAs. A PLA would only be permissible and mandatory if it is required by the federal government. Absent a federal requirement that mandates the use of a PLA, it is illegal to require one on a state or local government project. Does the law do more than ban governmental union-only PLAs, Construction Unity Board (CUB) Agreements, Harmony Agreements, etc.? Yes. Any discriminatory term unique to the unionized construction sector is strictly prohibited in contracts. The law prohibits any contract term that “discriminates against bidders, contractors, or subcontractors based on the status as a party or nonparty to or the willingness

or refusal to enter into, an agreement with a collective bargaining organization relating to the construction project or other related construction projects.” Does the new law affect state or local prevailing wage mandates? The law says that it shall not interfere with state prevailing wage mandates, but it does not address local prevailing wage ordinances. May a construction firm enter into an agreement with a labor organization on a voluntary basis? Yes. The new law simply prohibits governments from mandating labor agreements. Voluntary agreements are still permitted, but may no longer be required by governmental entities. Does the new law only affect state governmental or state-funded construction? No. The law prohibits forced (nonvoluntary) union agreements at all levels of state and local governmental construction, regardless of whether state local or federal tax dollars are attached to a construction project. The law explicitly affects the state of Michigan, as well as any county, city, township, village, school district, intermediate school district, college or university that receives funding from state or other governmental agency. May a construction manager, general contractor or other contracting entity require a PLA, CUB Agreement, Harmony Agreement, etc. for a publicly owned construction project? No. The law states that a construction manager or other continued on page 18

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PLA Act Q&A continued from page 17

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competitive bidding,” explains ABC of Michigan President Chris Fisher. “Legislators and Gov. Snyder recognize that the public expects the most responsible use of their tax dollars. We applaud them for their leadership in supporting equal opportunity for all contractors and workers, and for demanding fiscal accountability on behalf of all taxpayers.” PLAs have been on the rise for county, university and other public construction projects. The act has already forced officials to remove a PLA requirement from bid specifications on an

upcoming construction project of the Clio Service Station in central Michigan, with other local governments also beginning to change their contracting policies. ABC of Michigan is now reaching out to public construction users and contractors throughout the state to help educate and inform stakeholders on the aptly named Fair and Open Competition in Governmental Construction Act. Michigan became the seventh state to ban PLAs on governmentfunded construction projects in 2011 and the 11th state to do so in history. MM

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contracting entity acting on behalf of a governmental unit shall not place any of the terms prohibited in the act into bid specifications, project agreements or other controlling documents relating to a project. The act also applies to any other discriminatory term that reflects labor affiliation.

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If adherence to a labor agreement or a labor organization is neither prohibited nor required, can it still be encouraged under law? No. The law also says that such actions or requirements shall not be either “encouraged or discouraged.” May a governmental entity base the awarding of a grant, abatement, tax credit or incentive for a construction project on the stipulation that a labor agreement be attached to that project? No. The law prohibits such requirements or discrimination based upon labor status or based upon the willingness or refusal to enter into an agreement with a labor organization. Moreover, a labor agreement may not be encouraged by a governmental entity in awarding a grant, abatement or tax credit. What types of governmental construction are covered by the act? All types of state and local governmental construction are covered by the new law including, but not limited to, “any actual physical improvement to real property owned, or leased, directly or through a building authority, by a governmental unit, including, but not limited to, roads, bridges, runways, rails, or a building or structure along with the building’s or structure’s grounds, approaches, services and appurtenances.” MM Michigan Merit

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