Extending the Reach 2018 by Construction News

Extending the Reach Small, Minority, Woman, and Veteran-Owned Business Resource Guide September 2018

s r o ns

F.A. NUNNELLY

GENERAL CONTRACTOR

Mark Langford Photography

San Antonio

PRESENTED BY

CONSTRUCTION NEWS

™

The Industry’s Newspaper

Feature Publication Supplement September 2018

A Special Thanks

t seems like only yesterday that we were putting the finishing touches on the 2017 inaugural edition of “Extending the Reach.” Now here we are in mid-August 2018 doing the same for the second annual feature. The response from last year’s rollout was beyond our expectations and it was an easy decision to publish the feature again. Our goals are the same and that is to help Small, Minority, Woman and Veteran-owned (SMWVO) companies with valuable information they can use to help them achieve success in starting or growing their businesses. Running a business today is a daunting task and it takes a special type of person to risk everything to be his or her own boss. Decisions they make can lead to great success or great failure. The construction industry today has become even more challenging than last year. The expanding economy makes things move at a faster, more dynamic pace and the severe shortage of skilled labor is even worse than last year. These challenges will never stop a true entrepreneur. Actually in most cases it even makes them try that much harder to prove the point they can do it. The big plus of course for these folks is where we live. We are in South Texas in the USA where opportunity is everywhere.

Providing good information or telling you where to find it is the aim of Extending the Reach. As with any business, there are many complex issues an owner must juggle. We hope those reading these pages will come away with better knowledge and direction to help them achieve their goals. We are very grateful to all the accomplished people who spent so much time writing these very informative articles. They were written by people with great experience in their fields that wanted to help those on their way up. Most of them started in the same way and they know that sharing some of that hard-earned knowledge will be helpful to someone working hard to reach their goals. Also, a heartfelt thanks to all our sponsors and advertisers who made this project a reality. The construction industry needs new qualified companies in all fields. In the last 10 years, the San Antonio metropolitan area has exploded with growth, and so with growth comes even more ways to become a company owner. Hard work, good knowledge and the business building spirit will bring our new entrepreneurs to the forefront of the industry. We hope to publish this feature yearly to help the next generation of SMWVOs by “Extending The Reach” again. Buddy Doebbler, Publisher

Feature Publication Supplement to San Antonio Construction News – September 2018

CONTENTS 4

Bexar County Making a Mark on Diversity & Inclusion

5 6 7 8 10 12 13 14 15 16 17 18 19

Fostering Small Business Growth and Sustainability

D & I Have Positive Implications for Workforce Development Diversity Programs

Opportunity to Succeed Overcoming Obstacles Frost Tower

Building Compliance in the Construction Industry Legal Agreements

Make Your Presence Known Specialty Certifications SMWVO Owners

Surety 201: Going Beyond the Lunch and Learn Discussions Pros and Cons of Tax Reform The Opportunity is There

September 2018 edition of San Antonio Construction News with additional mailed

distribution in the San Antonio area. San Antonio Construction News is the flagship publication of Construction News, Ltd. Additional copies of this supplement may be purchased for $10.

Publishers................ Buddy & Reesa Doebbler Art Director............................ Reesa Doebbler Managing Editor........................ Carol Wiatrek Production..........................Helen Greenwood Account Manager..................... Dana Calonge Administration.............................. Terri Adams

Contents

xtending the Reach is a supplement to the

Photo credits: Aerial photo of Frost Tower courtesy of White Cloud Drones Cover and other aerial photos of San Antonio skyline by Mark Langford Photography.

Bexar County Making a Mark on Diversity & Inclusion Trailblazers

exar County is working on solutions that offer business owners an equal opportunity to excel towards success in the construction industry. The county invests time bringing information and resources to business owners whether new or established. This is essential to their success, especially as they look to grow.

Renee Watson

Diversity & Inclusion

Mentor Protégé Program The Bexar County’s Mentor Protégé program was established in 2005. The sole purpose of the Mentor Protégé program is to build effective working relationships between leaders of mature established companies and locally owned small businesses so that newer companies can benefit from the wisdom and experience of established firms. 13 firms have completed the program. Eight firms are currently matched thru November 2019. The program recently started with four African-American Business Enterprises (AABE); making up 50 percent of the protégés enrolled in the program. This is a huge milestone for the program setting this kind of precedent. The AABEs leading the way are - Vernon Bryant, owner of BRC Remodeling; Joe Monroe, owner of Consolidated Installation Support; Nehemiah O’Neal owner of O’Neal’s Furniture Assembly; and Alex Pennington, owner of ALP Contracting. “I have very high expectations of how the program will improve my business and standard of living,” says Vernon Bryant. “My expectations are high because of the talented individuals, who have willingly volunteered their time in helping all the protégés prosper in their businesses.” Bringing information and resources to business owners is essential to their success, especially as they look to grow. “Providing the knowledge, skills, and resources for business owners in the construction industry to thrive is essential to a diverse and inclusive workforce,” says Renee Watson, Director of the Bexar County Small Business & Entrepreneurship Department (SBED). The program offers protégés the ability to receive first hand, real world hands on experience from their mentors. “Connecting these diverse business owners to industry veterans through the Mentor-Protégé Program helps them grow and

succeed.” The relationship between the mentor and protégé is a two year commitment where the protégé, two mentors, Associated General Contractors staff, and Watson work together to help develop the protégé firm’s marketing, operations and financial performance. “It’s intriguing for me to be able to get first hand assistance from top tier company professionals that are willing and able to help me become the business owner that I want to be,” says Nehemiah O’Neal. Mentors give their protégés advice and assistance based on their real life business experience, along with one-on-one assistance to help the protégé develop the tools for business capacity. “Our partnership with Bexar County has been fantastic, and has now been a nationally recognized success in helping minority and women-owned construction businesses,” says Doug McMurry, Executive Vice President of AGC San Antonio Chapter. “We look forward to more accomplishments in the future.” Protégés learn they are not alone as part of the program is about receiving guidance. “Being in the mentor protégé program means that I am not working or building my company alone,” says Alex Pennington. The connection between the mentors and protégés will build understanding of the importance of business relationships that can benefit the business community. “Protégés receive knowledge, connections, overall growth and development opportunities that are not only beneficial to them, but the San Antonio community as a whole,” says Bexar County Judge Nelson Wolff.

Feature Publication Supplement to San Antonio Construction News – September 2018

At the 100th Annual AGC of America National Convention in New Orleans, the San Antonio Chapter received the first-ever Chapter Diversity & Inclusion Award, which was created to honor those who promoted diversity and inclusion within the chapter’s leadership, membership, programs and events. The San Antonio chapter’s work with the Black Contractors Association (BCA) and partnership with Bexar County on the “Basics” of Construction Program and the Mentor/Protégé Program were reasons that they were recognized with this honor. The AGC/Bexar County Basics of Construction Training Program is a ten-session educational program designed to assist small business contractors in understanding the basic elements of running a commercial construction business. The sessions inlcuded elements of running a successful construction business, project scheduling, financial management, understanding contracts and more. Once firms complete the Basics Program they are eligible for the Mentor Protégé Program. To date 155 firms have completed the Basics Program. “The Chapter’s commitment to diversity and inclusion began 13 years ago in partnership with Bexar County,” says McMurry. “The team visited Portland, Oregon to learn more about The Stempel Plan, which serves as the foundation for a very successful Mentor/ Protégé Program.” The county’s UTSA (University of Texas at San Antonio) AABE Survey identified a gap in availability and capacity of African American owned businesses in the Alamo Region. From this survey, the AABE Initiative was created in March 2017 to help stimulate local outreach, economic growth, and development. In November 2017, ACCELERATION CONNECTION was held where several African American contractors shared information regarding their most recent projects. This was designed to help build the capacity of AABEs and directly connect with County staff. By assisting with building the capacity of AABEs to work with Bexar County, the county will enhance a robust, diverse pool of businesses and resources to meet the needs of the county residents. “Our economy is strongest when it is inclusive and diverse,” says Wolff, “And our robust SMWBE program works to ensure entrepreneurs and small businesses have the tools and resources they need to succeed.” Submitted by: Small Business & Entrepreneurship Department - Renee Watson, Director Torence White, Contract Compliance Specialist Shantana Robinson, Capacity Building Coordinator rwatson@bexar.org - (210)335-2478

D&I Have Positive Implications for Workforce Development “It’s hard to separate diversity from workforce development. The two really go hand in hand.”

Doug McMurry

uring the national AGC convention in New Orleans this year, the San Antonio Chapter received the first ever award to an AGC chapter for diversity and inclusion. The recognition was especially nice because it happened during the association’s centennial celebration and Renee Watson, director of the Bexar County’s Small Business & Entrepreneurship Department, was there to help accept the award. Like the national community service award the chapter received in 2017, the recognition for diversity and inclusion was the result of dedication and teamwork. The award application leaned heavily on our work with

the Black Contractors Association and our long-time partnership with Bexar County on The Basics and the Mentor/ Protégé Program. The BCA was initiated almost three years ago by Turner Construction and the Alamo City Black Chamber of Commerce. Under the leadership of Henry Boone, it grew to be a viable and productive organization. Today, the BCA is administered by AGC’s Director of Education Dana Marsh and it produces dozens of valuable educational programs and meaningful networking opportunities. Like many AGC member companies, we have a diversity policy. Ours states, “In accordance with our bylaws, the chapter encourages sound business methods tending to raise the standards of construction professionals. To further advance the standards of skill, integrity, and responsibility we embrace the essential values of diversity and inclu-

sion. In doing so, we impart these values in association practices and cultivate a culture of diversity and inclusion within the broader membership.” Our commitment to diversity and inclusion began 13 years ago with a visit to Portland, Oregon to learn more about the Stempel Plan. The plan is a model mentor/protégé program designed to build effective working relationships between leaders of well-established companies and new and emerging contractors. That plan became the foundation for a very successful local mentor/ protégé program. Dozens of chapter leaders have built up the program by serving as devoted mentors. And with the strong support of Watson and Bexar County, the program focuses effectively on small, minority, and women-owned construction businesses. Today, the San Antonio Chapter is the most active of the AGC chapters when it comes to

Amanda Reyna City of SA/ Economic Development Department

he City of San Antonio works hard to encourage a thriving entrepreneurial climate and promote the growth of our local small, minority, and women-owned business (S/M/ WBE) community. To accomplish this task, the City has various programs to help small businesses succeed at all stages of development, whether they are at the ideation, startup, or growth phase. These programs help S/M/WBEs access City contract opportunities, receive free mentoring and consulting, and address access to capital through lending opportunities.

$246 million was paid to 503 S/M/WBEs, representing 49% of the City’s contractural spending on contracts in which the SBEDA program applied.

Access to City Contract Opportunities The Small Business Economic Development Advocacy (SBEDA) program was created to increase and promote the equitable use of S/M/WBEs on City contracts. The program leverages the City’s purchasing power and offers incentives and tools for both S/M/WBE prime contractors and subcontractors. Last year, a total of $246 million was paid to 503 local S/M/WBEs. This figure was the largest spend to date since the

program was established, and represented 49% of the City’s spending on contracts in which the SBEDA Program applied. While the City of San Antonio purchases multiple services and goods in varying industries, the construction industry historically presents the greatest opportunities for S/M/WBEs, as the majority of City contract dollars are spent on streets, drainage, and facilities projects. The chart below represents the continued next page (6)

Feature Publication Supplement to San Antonio Construction News – September 2018

Diversity Programs

City of San Antonio: Fostering Small Business Growth and Sustainability

Diversity & Inclusion

Doug McMurry, Executive Vice President Associated General Contractors, San Antonio Chapter

supporting such a program. The prerequisite for the Mentor/ Protégé program is “The Basics,” a tenweek, 20-hour educational course held at the chapter office since 2005. The classes focus on such topics as estimating, financial management, and understanding contracts. The instructors are always dedicated AGC volunteers. And characteristically, Bexar County reimburses the students for the full tuition if they meet certain requirements. Recognition for accomplishments is nice, but the best part of diversity and inclusion may be the positive implications for workforce development. For decades the most vexing problem the construction industry has faced is the shortage of skilled workers. The problem also applies to filling the salaried positions of estimator, superintendent, and project manager. By embracing minority and women-owned businesses, the industry is extending its reach into the labor market. It’s saying, “You are welcome here.” Diversity and inclusion broaden the appeal to future plumbers, electricians, and carpenters. And these values also show a path forward to young entrepreneurs who may want to start their own construction company.

Diversity Programs

6 continued from Page 5 dollars spent last year by the City within the construction industry to S/M/WBEs.

Free Mentoring and Consulting Services The City’s Business Empowerment Program offers free mentoring for small business owners through a partnership with the Alamo Colleges District. The program aims to grow S/M/WBEs through an educational component and mentoring from experienced and successful firms. Since 2012, graduates of the program have reported $61 million in revenue, a 24 percent increase since entering the program. The first phase of the program features a series of educational courses that include the following as an example: How to Write a Business Plan, Access to Credit, Marketing, Managing your Financials, Sustainable Business Practices, and Legal. The second phase of the program allows participants to be paired with an wexperienced and successful mentor for two years. During this time, mentors and protégés work together on various goals. The program concludes with a graduation ceremony and celebration of the protégé’s growth and success. In addition to the Business Empowerment Program, the City of San Antonio has a partnership with LiftFund to manage Launch SA, which is an accessible entrepreneurial resource center that helps those interested in becoming an entrepreneur identify existing business resource partners and access programming to spur the creation of their small

businesses and enhance their sustainability. Located within the Central Library, Launch SA also hosts various community business resources on site, such as the City’s Small Business Liaison who serves those in need of information regarding permitting, licensing, and regulatory issues.

Access to Capital S/M/WBEs that experience difficulty accessing capital through traditional lending mechanisms have the ability participate in the City’s Loan Interest Buydown Program, pending the availability of funding. In partnership with LiftFund, this City program offers qualified S/M/WBEs 0% interest loans to assist with various business needs such as starting or expanding a business, employment, or for the purchase of property, inventory, and equipment. Annually, this program has assisted 35 to 40 S/M/WBEs receive loans that collectively total between $700,000 and $800,000.

Contact the City of San Antonio to Learn More: Any business owner, either established or in the beginning stages of business can visit www.sanantonio.gov/smallbusiness or contact the Small Business Office at (210) 207-3922 for more information on the City’s various small business programs. We look forward to hearing from you!

Feature Publication Supplement to San Antonio Construction News – September 2018

EXAMPLES INCLUDE: Roads Bridges Fire & Police Stations Libraries

Opportunity to Succeed Interview with John Wright President & Chief Executive Officer Alterman, Inc.

s one of San Antonio’s oldest and largest electrical contractors, the company traces its roots back to 1923. In 1984, Alterman became employee-owned and has a history of helping other companies succeed by mentoring. CN: As a company, has Alterman always been involved in mentoring other people or companies?

JW: Yes. I’ve made suggestions to people on things I thought they could do with their companies to help improve their company’s growth. You know, those opportunities just come up and people ask your advice. I’m more than happy to share and help people improve. CN: To qualify to be a protégé in the Bexar County/AGC Mentor Program, I understand there are required steps that must be followed. JW: They have to go through certain steps and classes within the Bexar County first. Then they have to fill out a questionnaire. Mentors get together, along with Bexar County, and we review all these applications. Then we go through an interview process with the ones we think are ready to get into the mentor program. Through that process some make it and some don’t. Then we make the final decisions. CN: Once they get accepted, what can they expect? JW: They are typically small companies who are trying to run a business. I tell our protégés that it’s hard work. We also give them a lot of homework to do. The thing we want to do is identify their strengths and weaknesses because

CN: I guess seeing progress in these protégé companies is different with each one. JW: We meet with them and work with them. When you see the light bulb go off whenever you’re talking about certain things and you get feedback from them, to me that is the most rewarding piece. You know just helping these people when they put that much time and effort into wanting to be successful is good. Their commitment is what makes the process work. CN: When mentoring do you have a step-by-step game plan? JW: Yes and those things are all pieces of the puzzle they have to complete. We have to believe they have been successful with the goals set before they can graduate. CN: The manpower shortage is a big topic now. Is this discussed a lot with your protégés? JW: Most of the companies are smaller but it’s still an issue. What I really talk to them about is building their team. Depending on the size of the company it can be finding those two or three people you can depend on and trust to help you build your business. You can only do so much yourself because running the business is a fulltime job in itself. CN: These company owners are entrepreneurs so that has got to be a challenge in itself.

John Wright, President & Chief Executive Officer You try to get them to focus on the right things CN: Do they try to expand too quickly? JW: Some want to travel and go out of town which can be risky. We talk about risk associated with that and trying to get them to focus on the opportunities here where you can. It’s easier to watch and manage the risk. I try to get people to focus on what they are good at doing and what’s their most profitable piece of their business. That’s where you want to start to grow if that is what you want. CN: Do all of the companies you select finish and graduate in the two years? JW: No, some of them don’t make it through the two years or graduate. They either were not ready for this level of mentoring and learning or they weren’t committed. That becomes obvious fairly soon but I have been very fortunate to have companies that were very committed. CN: Where do you find they struggle the most? JW: We find where they struggle the most is not really understanding what the project or job costs are. They need to know if they were profitable or not but they don’t know how to manage their cost because they aren’t tracking the right things sometimes. So that’s another big piece of it as well. Just really getting them to under-

stand the financial side of things. CN: How does that make you feel when they succeed? JW: I enjoy sharing my experience and helping people be successful whether it’s within our own company or outside the company. Anytime there’s an opportunity to do that, I’m all in. It’s fantastic. CN: What advice would you give others who are considering being a mentor? JW: I’m passionate about it and if you are passionate about anything you should be doing it. If it is something that others are interested in doing, there are opportunities to get involved. It is work and you think about the things they’re doing and try to guide them in the right direction. For anyone wanting to get into mentoring, it’s serious business. Your protégé is relying on you and the team. CN: Final thoughts on being a mentor or the mentoring process. JW: You know, I think the process is great. I would recommend the program to any small company that’s gotten to a point where they have been successful but want to grow and continue to be successful. If you can get into this program as a protégé it’s a great opportunity for people to get a lot of coaching, advice and direction on how to improve and grow their company.

JW: Yes it is and most of the time our biggest job is just reining them in and getting them to focus on the right things, making them think instead of jumping too quickly and to have a strategic plan. Feature Publication Supplement to San Antonio Construction News – September 2018

Mentor - Protégé

JW: To some extent, yes. As a company we want to support our community and the people in the community. Personally I’ve been doing this for almost seven years with the Bexar County/AGC Mentor Program. The program is growing each year and this is my fourth company to mentor. We are getting more protégés so the number of mentors is increasing. As a matter of fact, this year is the largest number of mentor/protégé groups that we’ve had. CN: You have been with Alterman many years. During that time have you helped someone in an unofficial capacity because you thought you could help them?

those are the things we want them to focus on and help them prioritize. We are here to volunteer our time so for me, I want them to commit they are going to take the time and the effort to really work hard to improve their companies. When they do it we’ve seen them grow and improve their operations and, hopefully, they continue to be successful companies.

Overcoming Obstacles

lores recommends and encourages others who want to start their own small, minority, women or veteran-owned companies to visit the city’s Small Business Economic Development Advocacy Program (SBEDA) office. They are very helpful with telling you about bid opportunities on projects that have diversification goals and if your company meets the minimum requirements. They are great about helping and telling you what projects are allocated and what the minimum requirements are. “They help you fill out forms and get your package together. When you get more certifications, it gives more validity to your company that someone has vetted you, especially in the construction industry. You want your company to be vetted based on it’s qualifications and capabilities.”

aime Flores has been in the construction industry doing interior finish-out work for over 30 years. He learned

the trade working by his father’s side. In May 1998, he and his father started CalTex Interiors, specializing in interior finish-out, metal framing, drywall, finishes, acoustical ceilings, tape, float and paint. Cal-Tex also does exterior metal framing. About 10 years ago, Yolanda Flores, vice president of Cal-Tex, applied for the company’s first certification. They are certified through the South Central Texas Regional Certification Agency (SCTRCA). “We have our small business (SBE) and our minority business (MBE)

through SCTRCA,” says Flores. “As a small, minority-owned business, we did not always have all the resources to compete with the bigger companies. In addition, it’s hard to retain our qualified tradesmen because a lot of employees who are qualified,want to work for the bigger companies.” Going through the process to obtain company certifications was not a difficult process for Flores and Cal-Tex Interiors. “I utilized all the resources available to me. I went down to the SCTRCA office, made an appointment with someone who guided me through the process. They told me what I needed and what I should expect. For me, doing it that way was not a hard process at all. They were there to help and guide, and they did.” But still, the company sought additional avenues to help their company grow. As a result of their acquired certifications, Cal-Tex was paired up with Zachry Construction through the City of San Antonio’s Mentor Protégé Program for the construction of the Henry B. Gonzalez downtown project. The twoyear mentorship with Zachry proved to be a great experience for Cal-Tex. “It was most beneficial to our company not only because of the relationship we built with Zachry, but because of the knowledge we attained. I’m not sure what the mentor protégé programs are like, but going through the City’s program was a

wealth of knowledge. Every month the City of San Antonio facilitates a monthly meeting between the mentor and the protégé, which is basically a training session on a different topic to help you grow your business.” One of the biggest benefits from receiving their SBE and MBE certification has been is they are now in the City’s database. When a general contractor needs to meet specified criteria for a project, they are notified. “We get alerted on a lot of projects going out for bid – projects in which general contractors utilize ex-number of SBE, MBE, WBE or VBE contractors to secure the contract.” Going to the boot camp was very, very helpful. Boot Camp is several classes over a couple of months. Each class is a different topic such as preparing proposals, bonding, financials, human resources, reviewing contracts - basically things that are pertinent to any kind of business. This knowledge is necessary in order to want you want to display out there for people to know about your business. You want to come across as a business owner.

WVB-owned enterprises is encouraged. That does not mean set-asides or other guarantees of commerce headed your way. Indeed, there are many privately owned businesses that do not qualify for certification that might see these things as a disadvantage It is important to remember that, especially with regard to construction, certification as minority, woman, or veteran-owned does not necessarily equate to small, as defined by the SBA. It also does not imply ownership of a business by a minority, veteran, or woman. What it means is recognition and expanded opportunities based on your certification to benefit the economic health of our communities.

What did I just say? Well, to put it another way, the encouragement of opportunities for these certified businesses provides for an increased level of competition which then results in improvement in the performance of the market to the benefit of the consumers. More players means a better game. A lot or of SMWVB outreach from the larger consumers in our community involves very basic business topics like how to write a business plan or maybe an advanced class on Quickbooks. In the future, I am hoping to work with Construction News on exploring what opportunities are currently out there that fit into this category, to identify possible outreach efforts that would be of benefit, and how to get the word out regarding the benefits to the consumer of engagement with these businesses. Some of the frustrations that have been shared with me include the bundling of small tasks and projects into large contracts which effectively shuts out small to medium sized companies. Compartmentalization of large projects rarely happens because there is little perceived economic benefit to the consumer. However, in my experience, it can and does happen, though admittedly not often. However, and this is a big however, when it does happen, it may be a case of being in the right place at the right time, and more often than not, it is the certification that may make the difference in your successful selection for participation in a project. Back to the original topic of dis-

cussion – what do you do now? Those certifications while beneficial won’t guarantee you anything. It falls on you as the business owner to get out there and make yourself known - expand your presence in the industry. In a world where social media is so prevalent, nothing comes close to taking the place of first hand recognition. That means you go to the events and participate in the mixers, the skeet shoots, the golf tournaments and everything else in between. You join an industry association or maybe even more than one. And then you get involved by serving on a committee or even as a member of a board of directors. If you are smart, you’ll even attend events or fundraisers for associations of which you aren’t a member. And when you’ve met the right people and been introduced as an active member of the community others can help you achieve your mandated SMWVBE goals. Edward Pape owns and operates The Vaquero Group LLC, which performs commercial construction and consulting services. He has a BBA from UTSA with a concentration in Building and Development and an MA from St. Mary’s University in International Relations and Economics. Edward has performed on many large and recognizable projects in San Antonio including the Hurricane Katrina Relief Effort and the Mirasol Homes Program for SAHA, and for the State of Texas when he acted as Construction Program Manager for Hurricanes Ike and Dolly Recovery Program. He is currently serving as the Vice President of the Hispanic Contractor’s Association.

Yolanda Flores, Vice President Cal-Tex Interiors

ongratulations. You are in business. Perhaps nothing is more satisfying than taking that plunge and putting your name on that line. By now, you have probably incorporated in one form or another. You’ve opened your bank accounts, registered with the State, maybe landed a few contracts and hired some people. If you are like many would-be entrepreneurs, you might have inked that first deal and then went on and filled in all the gaps. Hopefully, if you qualify, you may have even taken the time to recognize the importance of certifying the ownership of your company to reflect your status as a small, minority, woman, veteran, or otherwise recognized business, and here in San Antonio, that probably means certification by the SCTRCA. A lot of hard work, a certain amount of stress, and a level of preliminary capital investment, but it was all worth it because now the sun is up, the lights are on, and you are in business. Congratulations as I said before. Now what do you do?

lot has been written and discussed about the benefits of certification for qualified businesses, but understanding what those advantages really mean and how to best utilize them, is the important part of this equation. Participation in SM-

Feature Publication Supplement to San Antonio Construction News – September 2018

Cal-Tex is DBE, 8(a), HubZone, HUB, ESBE, HABE, MBE & SBE Certified. They are members of the Hispanic Contractors Association (HCA) and the Associated Builders and Contractors (ABC)

never planned on being in construction. It was simply taking advantage of what life had to offer and deciding to take that path. The thing I love most about the construction industry is the challenge that it presents and the sense of accomplishment when a project is complete and the customer is satisfied with the outcome.

Obtaining Government Contracts Betty and Charles wanted to focus a portion of their business on government contracts. Prior to getting on the list of qualified contractors, you have to perform a “capabilities briefing” — You address an audience of contracting officers and civil engineers on your experience and why they should use you. One of the requirements is experience in government contract jobs. Well, that’s a “catch-22.” “Figuring out a way to get experience to get the work can be hard,” Betty says. “You have to find someone willing to work with you, a larger company to get the contracts. Then you joint venture the project as a subcontractor to get the experience. “Finally, a contracting officer approached me. He found me on the list of companies registered to perform government jobs. Our first job was an airfield that needed repair at Ft. Hood. We performed the job and finished ahead of schedule.” Six months later came another job, an airfield in Corpus Christi. More and more job opportunities came, and the rest is history. -rd

Obtaining Certifications Each certification has a different criteria. Obtaining numerous certifications takes a lot of time and per-

Veteran Betty Drennan, Co-Owner, ACE CO. severance. It’s a learning process and a lot of paperwork. In the end, it is worthwhile to obtain multiple certifications as it opens the door to a multitude of businesses who require specific certifications and who might need your services.

amily atmospheres definitely have influences on one’s life, shaping individuals and directing career paths. For Priscilla Contreras, nothing could be closer to the truth.

ontreras grew up in a construction home. Her father owned his own company and she saw first hand the pride he felt knowing he was part of creating something great and she felt it too. “I developed a passion for entrepreneurship at a young age. I attribute my fearless tenacity to my father and my passion from my mother.” It was these traits that steered her into construction. After working for a company that was certified by the SBA as an 8(a) Alaskan Native Corporation (ANC) and receiving millions of dollars in sole-source Government contracts, Contreras was motivated to do the same. In the fall of 2012, Contreras, at the age of 26, became the proud owner of The CCGroup LLC, a minority woman-owned small business subcontractor specializing in metal framing, gypsum assemblies, acoustical solutions, and paint. “I grew up seeing many things built from the ground up. As a child, it was inspiring to see people working together tirelessly to build something that would benefit our city. I enjoy it more now

Priscilla Contreras, Owner/President and Jonathan Contreras The CC Group

knowing my company’s name is behind it. Seeing everyone with their own skill set pushing to complete a project still fascinates me. Understanding there wasn’t many women in this industry challenged and intrigued me to get into construction. Recognizing that if I could acquire specific certifications, I too could benefit from the same advantages as my previous employer. Those certifications are what motivated me to open my company.” The CC Group LLC is certified with the South Central Texas Regional Certification Agency (SCTRCA) and the State of Texas holding several certifications – WBE, HABE, MBE, SBE, ESBE as well as the Historically Underutilized Business

Advice Reach out to UTSA and utilize their free training and networking outreach events. (1) UTSA SBA Minority Development Enterprise Center (2) UTSA Procurement Technical Assistance Center. They will help you through the certification process, guide and coach you in setting up your business. Certifications ACE CO has the following certifications: SCTRCA Certified State HUB, SBA 8(a) DIBE, ESBE, HABE, MBE, SBE, VBE, WBE

(HUB) certification. “Each one of my certifications have been a huge contributing factor to the success of my business. Local, State and Federal agencies seek to purchase goods and services with certified businesses in the area and, fortunately, these programs have increased my opportunities to contract with many local GCs.” Shortly after acquiring her certifications, Contreras contacted the Business Empowerment Program through the City of San Antonio. The program was created to support small, minority and woman-owned business by providing access to people and organizations that are ready to help. In 2014, Turner Construction interviewed Contreras and agreed to provide the guidance and tools necessary to improve and support The CCGroup’s small business needs. Participating in a two-year Mentor Protégé Program was extremely beneficial to growth of The CCGroup LLC. Throughout this two-year partnership, The CCGroup LLC further increased the knowledge, skills and capabilities necessary to build the capacity to successfully contribute to the strength and vigor of South Texas. “By taking advantage of this program, we were able to enhance our capabilities by receiving guidance on business planning and projections, business development, safety, cost estimating, marketing, human resources, and much more. They have individuals with 20–plus years of experience, so I took advantage. I strategically selected specific departments. I set up times to

sit with each manager of those departments, asked many questions and explained to them my company’s growing pains. Everyone was so helpful and willingly provided solutions and concepts they were utilizing to lighten their workload. That was so beneficial to me.” With the efforts of the Mentor Protégé Program along with the acquired certifications, The CCGroup LLC got further opportunities. “There weren’t many women, minority-owned businesses, but I knew there were a lot of local and state projects that required those actual certifications. By utilizing these certifications, I was able to procure small projects in the beginning. Then eventually, the GCs saw our capabilities and started inviting us to bid larger projects. Later, by attending industry events at different associations, I began establishing more relationships. Today, we can now be selective and work with many of the local highly respected GCs in San Antonio.” For Contreras, the biggest challenge that she faced as a woman-owned business owner was proving that women could be a part of the construction industry. “Many, even within my close circle, told me I was crazy; and I get it. Certain cultures, as well as backgrounds find it hard to accept women in the construction industry, yet that fueled me. Now, with my husband recently joining the team and our large industrious workforce, I can say I’m not only crazy but crazy about this industry.”

Feature Publication Supplement to San Antonio Construction News – September 2018

Overcoming Obstacles

etty Drennan grew up in San Antonio. She later joined the Air Force and was assigned to the Mission Support Group, Services Squadron. This is where she met her husband, Charles. Throughout her life she always enjoyed building and mechanical projects. After leaving the Air Force, due to a medical discharge, she recognized the opportunities the construction industry offered for financial independence. She decided to use her skills and apply them to her interests. In 1995, Betty and Charles established ACE CO. in San Antonio. They specialize in asphalt paving, parking lot striping, grounds maintenance and concrete. The business was built from scratch - not a lot of funds - so it was built over time. Establishing the experience was necessary in order to obtain the certifications. “When you’re a woman, you have to prove you are knowledgeable in the business and really working in that business,” said Betty.

he downtown skyline San Antonian’s have become accustomed to is about to undergo a dramatic facelift. With its 23-story soaring presence, the new Frost Tower will become the iconic symbol of San Antonio’s future economic growth and prosperity. In February 2017, Clark Construction Group – Texas LP (Clark) broke ground on this 460,000sf vertical gem. In June, the Clark team celebrated “topping-out” and today the project nears completion ahead of schedule and under budget. Clark is a 112-year-old privately held general contracting company with $5B in annual revenue. They have been continuously active in the Texas construction market for over thirty years. Locally, Clark has built some of San Antonio’s most complex projects including; Brooke Army Medical Center (BAMC), the first Convention Center Expansion, the San Antonio Military Medical Center (SAMMC), and the San Antonio Airport Terminal B Expansion. Heading up the San Antonio region for Clark is native-son John Warren. A 1996 graduate of Texas A&M and former Marine officer, Warren has returned to his hometown to lead Clark Construction in San Antonio and throughout Texas. Warren has been with Clark for the past 14 years and has a long-term vision for Clark in his hometown. Additionally, Pete Forster, Clark former Chairman and CEO until 2013 was raised in Harlingen, TX and is also an Aggie class of 1963. Not something often said, but Warren speaks with great pride about knowing former Chairman Forster who instilled the values we appreciate as Texans into the national corporate culture at Clark. Warren has put together an elite team of some of Clark’s most experienced employees from across the country. All have extensive experience working on large complex projects. And all are Texans who are excited to be back home and part of this prestigious project. “This is the best team I’ve ever worked with”, says Warren. “They’re all very talented, but more importantly they recognize the value each subcontractor brings to the team – and they treat each member with the highest level of respect. We have developed a better model on how to get it done while enjoying the work experience.” Interestingly, internationally renowned architectural firm, Pelli Clarke Pelli, designed the Frost Tower. One of Pelli’s key principals, William “Bill” Butler, is also a native San Antonian and led the design effort. Notably, Fred Clarke also a principal is from El Campo, TX. From the very beginning, outreach to the local construction community was a high priority. Clark wanted the tower to be built by locals. “There is a certain amount of pride and ownership that we wanted to achieve – which can best come from the

Feature Publication Supplement to San Antonio Construction News – September 2018

11 hands of local tradesmen and locally owned companies. It was not about who was the cheapest – it was about who could provide the greatest value. That being said, we have more than 90 percent local participation on Frost Tower project. Although not mandated, Clark achieved over 25 percent small and minority-owned business participation. “We are very proud to have achieved this percentage.” At Clark diversity is not a requirement – it is part of core corporate philosophy and culture. In addition to their excellent subcontractors, Warren attributes the successful progression of the project to a great owner, partners Weston Urban and KDC - led by President Randy Smith and Vice President Chad Jackson. Additionally, the tremendous support from the City of San Antonio and CPS Energy, who equally shared the same pride for this building, were incredible partners that have been critical in overall project success. As a result, construction of the Frost Tower is ahead of schedule with a completion date in early 2019. Early turnover of space for tenant finish-out is expected to be two months ahead of the projected date. The Clark team is determined to make Frost Tower a successful project, not just for Weston Urban, KDC and Frost, but for our subcontractors and for the city as a whole. Frost Tower is not the end for this Clark team. They are currently working with a local developer on another iconic high rise that will again change the San Antonio skyline. “It took me 20 years to get back to my hometown. I’m here to stay and I look forward to seeing Clark continue to shape our future skyline. We nailed the formula, great owner, City support and quality local subcontractors. Thank you San Antonio!”

Feature Publication Supplement to San Antonio Construction News – September 2018

Contracting Tips

Building Compliance in the Construction Industry

Bryan Jarrett

mployers in the construction industry deserve to build their businesses on a level playing field, and employees deserve to receive the wages they’ve earned. The U.S. Department of Labor’s Wage and Hour Division (WHD) strives to achieve both outcomes through educating employers and fully and fairly enforcing the law. WHD has long recognized that the majority of employers want to comply with the law. That’s why we provide employers in the construction

industry with compliance assistance information, tools, and other resources. For example, earlier this year, we launched the Payroll Audit Independent Determination (PAID) program, which helps employers identify and correct noncompliant practices so employees can receive 100 percent of their back wages — faster. Our goal is to answer employers’ questions and proactively help them avoid violations. We commonly answer questions such as: • When do I have to pay overtime? • Who is exempt? • Can I pay employees on a piece-rate basis? WHD constantly seeks opportunities to reach the regulated community and expand our compliance assistance efforts. In 2017 alone, we conducted more than 1,300 educational outreach seminars, conferences, speeches, symposiums, panel discussions, and presentations geared toward companies. Each year, we also host multiple seminars teaching employers about the legal requirements for wages in government-funded construction contracts. Rigorous enforcement is also key to boosting compliance with federal labor laws. U.S. Secretary of Labor Alexander Acosta, a former prosecutor,

Vision Statement “Increasing economic prosperity by creating opportunities and eliminating barriers” South Central Texas Regional Certification Agency 3201 Cherry Ridge St., Building C, Suite #319 San Antonio, TX 78230

www.sctrca.org Feature Publication Supplement to San Antonio Construction News – September 2018

tors found that Kyco Services LLC paid is clear in his message to employers— employees a piece rate, without regard we are committed to full and fair ento the number of hours they actually forcement of the law. worked, and without paying overtime Our investigators complete thouwhen they worked more than 40 hours sands of investigations per year, not in a week. Company records, however, only responding to complaints but falsely showed that employees received also proactively identifying industries hourly rates near the minimum wage, where data and evidence indicate overtime, and additional bonuses each there are violations. pay period. The employer generated When our investigators find vithese records to create the appearance olations, we rigorously pursue corthat it paid overtime when it rective action. was really calculating rates We use the “Simply because a retroactively to arrive at enforcement pay practce may amounts that matched the tools available piece rates. to both remedy appear common in a It is critical for emthe violations particular industry ployers to understand their and to deter and responsibilifuture violadoes not mean that it obligations ties under the law. Violations tions—including litigation, complies with the law.” harm both employees and law-abiding businesses. Simthe assessment ply because a pay practice of civil monetary penalties, and the may appear common in a particular assessment of liquidated damages. industry does not mean that it complies In 2017, our investigations sewith the law. cured more than $270 million in back Employers can call WHD’s toll-free wages for more than 240,000 workhelpline at 1-866-4US-WAGE (1-866ers. In the construction industry alone, 487-9243) to ask questions, anonyWHD secured nearly $50 million mously, and learn more about their in back wages for more than 26,000 obligations under the FLSA. Informaworkers. tion about our PAID program can be In a recent WHD investigation, viewed at www.dol.gov/WHD/PAID. for example, a Utah employer was orAdditional compliance information is dered to pay $650,000 in back wages, also available at www.dol.gov/WHD/. damages, and penalties for willfully Bryan Jarrett is the Acting Adminisviolating the overtime and recordtrator of the U.S. Department of Labor’s keeping requirements of the Fair LaWage and Hour Division. bor Standards Act (FLSA). Investiga-

Four Common Construction Law Misconceptions

hroughout two decades of law practice, I have heard a number of recurring legal misconceptions from clients. Four of the more common construction law misconceptions include the following: West W. Winter, Attorney The Winter Law Firm, PLLC San Antonio, TX reason for non-payment, a pre-lien notice serves many valuable purposes. Chief among these is trapping funds in the hands of the project’s owner. This is critical because an owner’s liability to a lien claimant is limited on commercial projects to the statutory retainage and any funds which the owner should have retained upon receipt of a proper prelien notice. Furthermore, general contractors and owners are typically sophisticated parties who understand the

I filed my lien, I just have to wait to get paid While it is essential to timely and properly perfect your mechanic’s and materialman’s lien or payment bond claim, there are also strict statutory deadlines within which you must actually file suit to foreclose or enforce your lien or bond claim. Failing to file suit within these prescribed deadlines will likely result in the loss or extinguishment of your lien or payment bond rights. Suit must be brought to foreclose a lien within the limitations periods mandated by Section 53.158 of the Texas Property Code (typically one or two years, depending on the type of project) or the lien will be extinguished. A suit on a payment bond on a state public project may not be brought by a payment bond beneficiary after the first anniversary of the date notice for a claim is mailed under Chapter 2253 of the Texas Government Code. I missed the lien deadlines, I have no rights Even if you miss statutory lien deadlines, there are many avenues of potential recovery for nonpayment. In a sham situation described by Section 53.026 of the Texas Property Code, you may still have lien rights, and if you contract directly with the project’s owner, you may have constitutional lien rights which ex-

ist independently of any notice or recording requirements. In the absence of lien rights, you likely have available causes of action for nonpayment which, depending on the specific circumstances involved, may include breach of contract, quantum meruit, suit on sworn account, Prompt Pay Act claims pursuant to Chapter 28 of the Texas Property Code, and Texas construction trust fund claims as codified in Chapter 162 of the Texas Property Code. Many of these claims also provide for the recovery of attorney’s fees and expenses. I have Insurance, so I am covered CGL insurance policies are loaded with exclusions and exceptions which often come into play in construction cases. In construction defect cases, policy exclusions such as the “your work” exclusion will often operate to deny you the very defense and/or coverage which you thought you were getting. These exclusions have frequently been the basis for denial of defense and coverage by insurance carriers and as a result, the subject of much litigation in recent years. Work with your attorneys and insurance agents to understand your coverages and the impact of applicable exclusions. If you are denied a defense and/or coverage, don’t give up as there may be viable arguments which can be asserted on your behalf in this evolving area of the law to obtain a defense and/or coverage.

Feature Publication Supplement to San Antonio Construction News – September 2018

Legal Agrements

Sending a lien notice will harm the working relationship When payment has not been received, subcontractors are sometimes reluctant to send proper pre-lien notices because of a perception that doing so will irreparably damage their relationship with the upstream parties. It is only natural to fear upsetting the apple cart. However, as the mechanic’s and materialman’s lien is one of the most powerful weapons for ensuring payment, failing to properly and timely send statutorily required lien notices will have adverse consequences. Whatever the

importance of securing one’s right to payment.

Make Your Presence Known “Having these certifications has been extremely beneficial, but even if you have them, it does not mean you are going to get the work.”

vette Robinson started Robinson General Contractors (RGC) with husband, Kurt, in 2010. A small general contractor, RGC does everything from maintenance to remodels to ground up construction. Wanting their business to be successful, she went to the Small Business Development Center (SBDC) where they gave her all the tools they needed to start their company and learned how to get their new business incorporated. Through the process, she hired an attorney to help develop shareholder agreements, bylaws and everything that goes with starting a company. RGC is a complete SWMBE, holding small, minority, woman-owned; state of Texas HUB, DBE, SBA 8a, WOSB and economically disadvantaged WOSB certifications. “Having these certifications has been extremely beneficial, but even if you have them, it does not mean you are going to get the work. It was a stepping stone to getting our foot in the door and being able to bid on some of these projects that needed woman-owned, minority-owned or HUB participation. Many public projects are on a point system. Our great work made all these repeat customers, says Yvette. “They (SWMBE certifications) have gotten our foot in the door in several places that we might not have been had we not had these certifications,” adds Kurt. According to the Robinsons, “Asking which certification is the most beneficial is like asking which child is your favorite. Each certification has its own special quality. It just depends on what you are going after.” When the company first started, it was just Yvette and Kurt. But as the

company grew their business, they hired temporary labor until they were able to hire full-time personnel. Today the company has 12 full-time employees and is in the process of purchasing a building that will allow them to grow more. “We are big enough to get any job done, but small enough to give it the personal attention it needs which is a rarity in this industry. That’s what we try to project to everyone and strive to give that to every single one of our customers,” adds Kurt. Both Yvette and Kurt agree you have to get out there and make your presence known. If you want to start your own company, “Stay positive and stay true to yourself and everything is going to fall into place. Don’t give up. Once you get that first job, everything starts falling into place. It’s up to you to keep it going. And remember, just because you get a certification, doesn’t mean you got that job. Once you get on that bidders’ list, that’s your moment to shine and say, ‘I can do this at this price and this is why.’ Your work speaks a lot for itself,” says Yvette. “Get out there and meet people,” adds Kurt. “Join as many organizations as possible. The Hispanic Contractors Association (HCAdeSA) and the San Antonio Hispanic Chamber of Commerce have been great avenues for us. You never know, that next contact could be the contract that breaks you into the big time!”

O W

Compass Rose Academy project completed July 31, 2017 Feature Publication Supplement to San Antonio Construction News – September 2018

Yvette and Kurt Robinson

15 “The mission of SCTRCA is to improve opportunities for our vendors through education and connect them with our Member Entities, Corporate Sponsors and Resource Partners, says Charles Johnson, Executive Director. With the benefits of certifications, good things can happen. SCTRCA is a bridge to opportunity.”

Charles Johnson Executive Director

• The City of San Antonio • Bexar County • Alamo Colleges District

• Brooks • Edwards Aquifer Authority • Port San Antonio • San Antonio Housing Authority • San Antonio I.S.D. • San Antonio River Authority • San Antonio Water Systems • University Health Systems • VIA Metropolitan • San Antonio International Airport

The SCTRCA offers a SMWVBE (local) program under which vendors who meet eligibility requirements are certified as Small Business Enterprise (SBE), Minority Business Enterprise (MBE),

SCTRCA maintains a database of over 2800 active certified vendors. The certification applications for both programs as well as additional information can be found on our website – www.sctrca. org. The mission of SCTRCA is to improve opportunities for our vendors through education and connecting them with our Member Entities, Corporate Sponsors and Resource Partners.

Feature Publication Supplement to San Antonio Construction News – September 2018

Specialty Certifications

he South Central Texas Regional Certification Agency (SCTRCA) is a 501c(3) non-profit corporation that represents public entities in the South Texas area. SCTRCA along with their Member Entities, Corporate Sponsors and Resource Partners share a

common goal of helping small business owners succeed. The entities we represent are committed to enhancing the participation of Disadvantaged, Small, Minority, Woman and Veteran-Owned Businesses in contracting and purchasing activities. At the SCTRCA, we seek to connect the small business owner to economic opportunities through the power of certification. The SCTRCA is responsible for the certification process for our member entities, which include:

Woman Business Enterprise (WBE) and/ or Veteran Business Enterprise (VBE). A vendor can be certified with multiple certifications as long as the eligibility requirements for each certification are met. The SCTRCA also offers a federal program that consists of the Disadvantaged Business Enterprise (DBE) and Airport Concessionaire Disadvantaged Business Enterprise (ACDBE) certifications. The ACDBE and DBE are reviewed and processed according to the Texas Unified Certification Program (TUCP). The TUCP follows Federal regulations, 49 CFR, Part 26 and Part 23.

SMWVO Owners

GD Interior Construction – HABE, SBE, MBE, VBE L-R: Matriarch-Manuela Perez, Patriarch-Jose H. Perez, Grandson Oscar J. Garcia, Daughter/Owner-Estela Garcia-Perez, Daughter/Owner-Adela P. Gonzales, Son/Owner Esteban Perez

Pro Landscape Solutions LLC ESBE, SBE, VBE, WBE L-R: Fernando and Alaina Keller, Owners

A-Ram Plumbing Trish and Albert Ramirez, Owners

GARREN Construction – DBE, ESBE, HABE, MBE, SBE, WBE, HUB and FEDERAL8(a) Elizabeth Yetman Chavez, Owner

Maximum Demolition, MBE Lee Ramos, Co-Owner

A & B Automatic Doors of Texas WBE, HUB, Bryce and Amy Ronek, Owners

Feature Publication Supplement to San Antonio Construction News – September 2018

Surety 201: Going Beyond the Lunch and Learn Discussions

Drew Addison, Risk Advisor

Understanding the Associated Risks When a contractor makes a decision that will impact their company and the type of work they will be bidding, it is pertinent to understand the associated risks. The requirements to qualify for surety bonding can be daunting, but they are in place for a multitude of reasons. The main reason is to assure the contractor performing the work not only has the experience and processes in place to perform the work successfully, but also the financial ability to support a “worst case scenario” default on the project. Surety Bonds are NOT insurance, meaning they do not protect you as the contractor if a project default occurs. They are designed to protect the project owner in the event the “worst case scenario” happens. At the start of every bonding program placement, the surety company will require all principals of the Contracting Company to sign a General Indemnity Agreement, which is a document outlining the surety/client relationship. The major risk the contractor must understand is that this document lays out the compensation requirements for damages or loss in regards to surety default, and that this is a contractual agreement that the contractor agrees to pay for any potential losses or damages that may arise. One way to think about it is this: Texas has homestead exemption, meaning your home is safe from default along with your retirement savings. However, anything else that can be liquidated is on the table to pay back to the surety in case of a loss. Certain factors of your financial health and company presentation are

Know Your Economic Influences Just like any business, surety bonding experiences ups and downs in the economic marketplace, which is usually described as tightening and loosening in the underwriting of programs. This concept is another important aspect of establishing a surety line: know your business and know your market. Each surety has unique “appetites” for the kind of work scopes they prefer and size of companies they find more appealing to work with. As the economy shifts, so do the appetites of underwriters. If you’ve tried to get bonding in the past and were met with difficulty, then there might have been outside economic influences that could have made it more difficult at the time.

Your Surety Agent is Your Ally One of the main duties of your surety agent is to understand what surety company is the best fit to help fulfill your immediate needs and establish the relationships essential to growing your program. Because there are many contractors eager to get into the bonded side of work, programs such as the Small Business Administration (SBA) Surety Bond Guarantee support businesses that are owned and controlled by socially or economically disadvantaged individuals, veterans, or service disabled veterans. There is additional support for certified HUBZone and 8(a) companies. Most surety companies also offer “Quick Application” options that are based on experience and personal credit scores of the owner(s) to assist in starting a surety relationship. Programs such as these can be very beneficial, however, they are capacity-limiting and more costly than a standard program. All of these options are available through IBTX, and you can be assured that our consultative approach is designed to present you with the most appropriate path to early success. What Are the Next Steps? It is important to find a surety agent that is not only knowledgeable, but has the drive, desire, and ability to keep your goals a priority. The first steps you can do on your own are to begin gathering the required information that will be requested from the start. This includes: • The last three (3) year-end corporate financial statements (preferably prepared by a CPA as a CPA prepared statement will be a requirement moving forward. Typically a Review is the min-

imum required). • Owner or Owners’ latest personal financial statements • Owners’ and key employee resumes • Letter from bank concerning experience and line of credit, if any. • Current work in progress schedule • If the latest year-end financial statement is more than six months old, then provide a current in-house balance sheet and P&L • Brochures, reference letters or other items that you think would be helpful in our evaluating your company for bond purposes. • Valid Certificate of Insurance Compiling this information and beginning the analytical process with your agent well in advance of a bonding need, is also very important. Waiting until you are notified that you will need to supply a payment and performance bond or bid bond to begin “looking”, will only increase the probability of failure to secure a bond in time. Establishing a Surety Program can be quite a daunting process, but if it is managed correctly with the right support and approach, it will be the best decision you make to take your business to the next level. Founded in 1946, IBTX is one of the largest independent insurance and surety brokerage firms across the Southwest. Over the decades, our firm has been on the forefront in adapting to market trends by developing and incorporating tools designed to facilitate the overall success of our clients. Let us know how we can serve you.

Feature Publication Supplement to San Antonio Construction News – September 2018

Insurance

t this point, you may have attended at least one “Surety Bonding 101” seminar or read articles about surety bonds and the qualifications required for a program. Much of the information shared tends to be broad explanations about what, and who, is covered when bonds are required. What is typically not discussed are the factors of business financials that are analyzed by the surety companies, as well as the risks associated when approaching bonded work.

used to underwrite a reasonable bonding capacity (single project and overall aggregate limits) so there will be a means to settle in the event of a default. At IBTX, we have developed a pre-underwriting program that allows us to analyze and grade your company’s financial health that mirrors many surety underwriting platforms. These tools allow us to get a preliminary understanding of what to expect from the underwriters prior to submitting any business and personal information, as well as to begin our consultative relationship that will continue throughout our time working for you. Our approach includes continually monitoring the status of your current needs and abilities, and assisting in helping you grow into the company you want to be. The analytical applications we use allow us to help visualize your company’s immediate abilities from a high level so that we can work together to position you for greater opportunities that fall in line with your goals.

Pros and Cons of Tax Reform: A Unique Guide for Contractors Dustin R. Michalak, CPA, CVA, Managing Shareholder Ridout, Barrett & Co., P.C.

What type of entity structure should I select for my small business in the new tax environment? Should I change how my company is taxed? What other tax reform changes will financially benefit or harm my business?

Accounting

y now, most everyone has heard the pros and cons debated repeatedly regarding the Tax Cuts and Jobs Act which was passed late last year. The act was intended to spur economic growth and job creation through reduction of the tax burden. However, there are still questions for small businesses, especially contractors, to consider. Are you still wondering how the decrease in tax rates will impact you in your business? The decrease in tax rates for both

businesses and individuals is the most significant and most publicized change of the tax reform act. The focus for this article will stay within the business changes. For C-Corporations in tax years beginning after December 31, 2017, a flat tax rate of 21% will be applied to taxable income. This is a significant change from the 2017 highest earning rate of 35%. Though this makes C-Corporation an attractive entity tax selection, there is still the burden of double taxation upon dividends to the

corporation’s shareholders. The typical dividend rate will range from 15% to 23.8% depending on the shareholder’s individual earnings. Here is a simplified example:

A C-Corporation with taxable in come of $1,000 would pay $210 in taxes. If the corporation pays a dividend to a high-income sharholder of the remaining $790, the shareholder will pay an additional $188 in taxes. Effectively paying $398 ($210 + $188) in taxes at a rate of $39.8%.

For pass-through entities, things get a bit more complicated. What type of businesses qualify as pass-through entities? These are Partnerships, S Corporations, LLCs taxed as partnerships, and sole proprietorships. Under the new law, beginning in 2018, pass-through entities may qualify for a deduction up to 20% of qualified domestic business income subject to certain limitations based on taxable income. The limitations are phased in for taxpayers with taxable income of $315,000 for married filing jointly (“MFJ”) and $157,500 for all other filers. Qualified business income (“QBI”) is defined in section 199A(c) as ordinary income less ordinary deductions from a qualified trade or business. Qualified business income does not include capital gains and losses, dividend, or interest income. Any potential deduction is taken at the taxpayer level. Here is a simplified example for a taxpayer who is under the phase out:

Feature Publication Supplement to San Antonio Construction News – September 2018

A high-income taxpayer with $1,000 of qualifying business income would get a deduction of $200. The remaining $800 of income would be taxed at 37% (highest individual rate). The taxpayer would owe $296. $296. Thus, the taxpayer would have an effective rate of 29.6%

The calculation of the pass-through

deduction for taxpayers above the taxable income threshold is more complicated. The W-2 limitations are phased in over the next $100,000 of taxable income if MFJ and $50,000 for all other tax filers. Once taxable income reaches $415,000 for MFJ and $207,500 for all other taxpayers, the W-2 limitations apply in full. The deduction is limited to the greater of the following: (a) 50% of the W-2 wages paid by the business, or (b) 25% of the W-2 wages paid by the business, plus 2.5% of the unadjusted basis of all tangible depreciable property of the business. What type of entity should my business be and how should the earnings be taxed? Unfortunately, for contractors, there is not a clear cut answer on this one. It will all depend on the business as well as the owner’s investment objectives, bonding requirements and other considerations. This question will need to be answered on a case by case basis. Another win in tax reform for contractors is depreciation and more specifically, Section 179 expense and Bonus Depreciation. The depreciation changes in the new law can add huge tax savings, especially for contractors with extensive equipment and capital expenditure requirements. For tax years beginning after December 31, 2017, taxpayers may expense up to $1 million under Section 179, and the phase out threshold amount is increased to $2.5 million. These amounts will be indexed for inflation in tax years beginning after 2018. In regards to bonus depreciation, for qualified property placed in service between September 27, 2017, and January 1, 2023, taxpayers are allowed a 100% bonus depreciation deduction on both new and used property. While many changes with the recent tax reform are beneficial to small businesses, there are a few deductions that were not renewed or were modified which will have negative tax consequences for contactors. The new tax law disallows all deductions for entertainment, amusement or recreation, with the exception of a 50% deduction of food and beverage expenses associated with operating a trade or business. This also encompasses employer expenses associated with providing food and beverages to employees through eating at a facility meeting. Another significant change for contractors is the repeal of the domestic production activity deductions. Tax reform includes other changes that effect contractors such as, accounting for long-term contracts, reporting under the cash method, and deductibility of interest expenses among others. If you are a contractor, we highly recommend you work with a CPA well-versed in the construction industry. A professional with knowledge of construction and the inner workings of the industry will be able to appropriately guide you through significant decisions impacting you and your contracting business for years to come.

The Opportunity is There

Mark Jones, Regional Vice President Structure Tone Southwest Establishing a relationship with a general contractor, especially for a young company, must be done properly. We asked Mr. Jones to give his thoughts and important issues. high work ethic. If you give us a person who has a work ethic, we can train them to do anything. Without “want to” there is not a lot we can do with them. That is going to be their biggest challenge. Financials a key - In the eyes of a lot of subcontractors they are not under financed because they can make payroll for two or three months. That is just not enough. You have to be able to bankroll your company for about a year in order to enter into the market. The way the construction industry is set up is subcontractors financing the projects. That’s just the way the system is. Key personnel - Many times we will sit down during the original or subsequent meeting with a sub and ask for their organizational chart. This is a big town but we all know each other– so when we see names we recognize as good guys that can open doors for a company. We all want to work with people that we know and trust and it goes on down to the foreman level. Emphasis on Safety - I love talking about safety because it really tells the story of our industry. We have evolved

at a very rapid pace over the last 10 years. It wasn’t that long ago when safety was an afterthought. We looked at it like this is something that would kill my production. Now what we have found is our building gets built faster, our production goes up and our profits go up. So getting the new or minority sub to understand that is a paradigm shift. It’s going to make them money and they need to look at safety as an asset. Advice for startups - The first thing I ask when I am approached by someone who wants to start a construction company is what trade they want to be involved in and why. Secondly, my question is, “Do you have a secure labor force.?” I am not worried about subs going out of business because they don’t have enough work.Too much work is what puts them out of business. Fire in the belly – To start a new business you must have that fire where your can’t live without it, where you are willing to put in 18 hours a day, seven days a week for the first three or four years to make it happen. No one is going to make it happen but you.

Network. I believe your network is equal to your net worth. Before they start a company they need to understand that they need to know people. No one is going to give them anything, so those relationships mean everything. We have a saying here, “We don’t build jobs or projects, we build relationships.” It’s so important. Also, don’t be afraid to help somebody. As small as you think you are even just jumping into the business there is still someone smaller than you who needs a hand. The more people you help in this world the more people are going to help you.

Feature Publication Supplement to San Antonio Construction News – September 2018

Do’s and Dont’s

The Basics - There are various ways we reach out to the under utilized subcontractor community. A lot of it comes through American Subcontractors Association (ASA) or other events. If they let us know they want to bid us, we will sit down with them to get a feel for their company and give them a prequalification package. We want to see their financials, safety and references. If they don’t have any of the three, we will help them. We will explain this is what you need to do. This is what we are looking for. Also a lot of startup companies don’t understand safety, how important it is to us and how important it is to them and their success. We have found the stronger your safety program the more productive your company will be. We usually see more companies that have been in business more than five years. But in this market, I can see lots of people entering since there is a lot of construction out there. The problem they are going to face and what we are all facing is the shortage of skilled labor. And I will boil that down even further. One thing I see is our minority contractors having trouble finding enough labor who have a really

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