The Contractor's Compass December 2014

THE

ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM

Flawless Execution — The ‘Four Cs’ Affecting Construction Industry

DECEMBER 2014

Industry Trends

Transform Construction Projects with Integrated Energy Solutions Increasing Fuel Efficiency Through Smart Fleet Management Employee Fleet Accidents: Overlooked and Costly 10 Things to Remember When Your Work Is Delayed Legally Speaking: Upcoming Regulations from an HR Perspective

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THE

ASA’s

December 2014

Features EDITORIAL PURPOSE The Contractor’s Compass is the monthly educational journal of the Foundation of the American Subcontractors Association, Inc. (FASA) and part of FASA’s Contractors’ Knowledge Network. The journal is designed to equip construction subcontractors with the ideas, tools and tactics they need to thrive.

Flawless Execution — The ‘Four Cs’ Affecting Construction Industry......................................................................... 8

The views expressed by contributors to The Contractor’s Compass do not necessarily represent the opinions of FASA or the American Subcontractors Association, Inc. (ASA).

Transform Construction Projects with Integrated Energy Solutions............................................................................... 11

by Greg Schoppman

by Mark Drury

EDITORIAL STAFF Editor-in-Chief, Marc Ramsey

Employee Fleet Accidents: Overlooked and Costly................. 12

MISSION FASA was established in 1987 as a 501(c)(3) taxexempt entity to support research, education and public awareness. Through its Contractors’ Knowledge Network, FASA is committed to forging and exploring the critical issues shaping subcontractors and specialty trade contractors in the construction industry. FASA provides subcontractors and specialty trade contractors with the tools, techniques, practices, attitude and confidence they need to thrive and excel in the construction industry.

FASA BOARD OF DIRECTORS Richard Wanner, President Letitia Haley Barker, Secretary-Treasurer Brian Johnson Robert Abney Anne Bigane Wilson, PE, CPC

by Fred Myatt

Increasing Fuel Efficiency Through Smart Fleet Management............................................................................ 14

by Jonathan Durkee

10 Things to Remember When Your Work Is Delayed............. 15

by Donald Gregory, Esq.

Departments

SUBSCRIPTIONS The Contractor’s Compass is a free monthly publication for ASA members and nonmembers. Subscribe online at www.contractorsknowledgedepot.com.

CONTRACTOR COMMUNITY............................................................ 4

ADVERTISING Interested in advertising? Contact Tony Kozak at (716) 844-8174 or advertising@asa-hq.com.

LEGALLY SPEAKING.......................................................................... 16

EDITORIAL SUBMISSIONS Contributing authors are encouraged to submit a brief abstract of their article idea before providing a fulllength feature article. Feature articles should be no longer than 1,500 words and comply with The Associated Press style guidelines. Article submissions become the property of ASA and FASA. The editor reserves the right to edit all accepted editorial submissions for length, style, clarity, spelling and punctuation. Send abstracts and submissions for The Contractor’s Compass to communications@asa-hq.com.

Upcoming Regulations from an HR Perspective Jamie Hasty

Quick Reference

ABOUT ASA ASA is a nonprofit trade association of union and non-union subcontractors and suppliers. Through a nationwide network of local and state ASA associations, members receive information and education on relevant business issues and work together to protect their rights as an integral part of the construction team. For more information about becoming an ASA member, contact ASA at 1004 Duke St., Alexandria, VA 22314-3588, (703) 684-3450, membership@asa-hq.com, or visit the ASA Web site, www.asaonline.com.

ASA/FASA CALENDAR..................................................................... 18 COMING UP....................................................................................... 18

LAYOUT Angela M Roe angelamroe@gmail.com © 2014 Foundation of the American Subcontractors Association, Inc.

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Contractor Community

U.S. Court Grants Rehearing Requested by ASA in Texas CGL Case After ASA and others in the construction industry argued that an appeals court opinion called into question whether subcontractors can depend on their commercial general liability insurance policies for coverage — coverage previously upheld by other courts — a U.S. appeals court on Oct. 29 withdrew its prior opinion, reversed a trial court, and granted a rehearing, saying the contractual liability exclusion does not exclude coverage for property damage arising out of breach of a contractor’s duty to repair.

In the U.S. Court of Appeals for the 5th Circuit’s Opinion on Rehearing in the case of Doug Crownover and Karen Crownover v. Mid-Continent Casualty Company, the court essentially equated it to the same type of liability for breach of the implied warranty of performance of the work in a good and workmanlike manner under Texas law. That liability does not impose extra liability beyond general law.

The opinion amounts to another limitation of attempts to improperly apply the contractual liability exclusion in the construction context.

It includes a discussion of other issues, all of which were resolved in favor of coverage for the insured contractor.

“This case will have big picture significance because it sets out another example of a court beating down the effort to extend the contractual liability exclusion to general breaches of contract,” said Patrick J. Wielinski, an attorney with

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Cokinos, Bosien & Young in Irving, Texas, who prepared an amicus brief for ASA in the case.

In the brief, filed on July 18, ASA, the Texas Building Branch of the Associated General Contractors of America, and the Texas Association of Builders asked the U.S. appeals court for a panel rehearing to decide whether damages for warranty claims due to an “occurrence” are covered under a standard CGL policy or are excluded from coverage by the “contractual liability” exclusion.

Read more about this case on the ASA Web site. ASA’s Subcontractors Legal Defense Fund supports ASA’s critical legal activities in precedentsetting cases to protect the interests of all subcontractors. Contributions may be made to the SLDF via the ASA Web site.

ASA and Surety Industry Associations Update P3 Guide Construction of projects for public use through public-private partnerships continues to increase at all levels of government, including at the state and local levels. Many of the P3 programs authorized by the states, however, provide no payment protections for subcontractors and suppliers on P3 projects, on which mechanic’s liens and the requirement for payment bonds most likely do not apply.

ASA, in collaboration with the National Association of Surety Bond Producers and The Surety & Fidelity Association of America, has reviewed the state laws authorizing construction projects to be financed

by P3s and determined which

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programs provide payment protection for construction subcontractors and suppliers through payment bonds. ASA, NASBP and SFAA have published a revised guide, “Public-Private Partnership Laws in the States, Including Surety Bond Requirements” (2014 Edition), to help subcontractors determine whether they have payment protections before they bid on a P3 project.

ASA expects as many as a dozen state legislatures to consider P3 legislation during the 2015 legislative sessions.

Dodge Data & Analytics Economist Robert Murray Tells a ‘Different Story’ for 2015 “The story is a little different this time,” says Dodge Data & Analytics economist Robert Murray. “We’re moving beyond a hesitant, gradual recovery. Things are starting to get better.” Speaking during Dodge Data & Analytics’ 76th annual Outlook Executive Conference on Nov. 6 in Washington, D.C., Murray painted a “pretty good picture for 2015,” noting that the “cyclical upturn is continuing to unfold.” “The construction expansion should become more broad-based in 2015, with support coming from more sectors than was often the case in recent years,” Murray said. “The economic environment going forward carries several positives that will help to further lift total construction starts.

Financing for construction projects is becoming more available, reflecting some easing of bank lending standards, a greater focus on real estate development by the investment

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community, and more construction bond measures getting passed. While federal funding for construction programs is still constrained, states are now picking up some of the slack.

Interest rates for the near term should stay low, and market fundamentals (occupancies and rents) for commercial building and multifamily housing continue to strengthen.”

In the 2015 Dodge Construction Outlook, Murray predicts total U.S. construction starts to rise 5 percent in 2014 to $563.9 billion and climb another 9 percent to $612 billion in 2015. He forecasts nonresidential construction to grow 14 percent in 2014, “helped by additional growth for commercial building and a surge of energy-related manufacturing plants.

What’s different about 2014 is that the institutional structure types are now beginning to contribute to the growth for nonresidential building.”

Highlights by sector include: • Single Family Housing: +4 percent to $165.4 billion (2014) and +15 percent to $189.7 billion (2015).

• Multifamily Housing: +22 percent to $61.9 billion (2014) and +9 percent to $67.2 billion (2015).

• Commercial Buildings: +14 percent to $76.3 billion (2014) and +15 percent to $87.7 billion (2015).

• Institutional Buildings: +4 percent to $95.3 billion (2014) and +9 percent to $103.6 billion (2015).

• Manufacturing Buildings: +57 percent to $29.1 billion (2014) and -16 percent to $24.4 billion (2015).

• Public Works: -9 percent to $113.4 billion (2014) and +5 percent to $118.8 billion (2015).

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• Electric Utilities: -3 percent to

$22.5 billion (2014) and -9 percent to $20.5 billion (2015).

McGraw-Hill Construction is now Dodge Data & Analytics.

ASA Protests Bond Waiver on Texas City Baseball Complex In response to media reports that the City of Kilgore (Texas) was poised to waive the surety bond on a planned baseball complex, ASA sent a letter to members of the City Council and construction officials urging the city “to require the prime contractor to provide a 100 percent payment bond, as required by Texas law.” ASA told the City that “[w]ithout a payment bond, subcontractors and suppliers will encounter a dangerous void in essential payment protections for work performed.”

The severe risk inherent in the absence of reliable payment protection can “only reasonably be expected to increase costs for the overall construction project being undertaken, as subcontractors and suppliers seek to accommodate the increased risk or even completely deter bidding by the most skilled subcontractors and suppliers, whose resources can be directed at projects for which payment protections are available.”

ASA Chief Advocacy Officer E. Colette Nelson noted that Kilgore is a prime example that public entities around the country are increasingly waiving or considering waiving surety

bonds. She emphasized the need for ASA and its chapters to intervene at every level of government considering waiving payment assurances. In addition, she reminded subcontractors on public work to confirm that the prime contractor has provided a payment bond, to obtain a copy of that bond, and to assure that it can comply with the all of the notice and claims procedures.

U.S. Strengthens Subcontractor Payment Assurances On Oct. 16, the Department of Treasury issued a new rule that ASA Chief Advocacy Officer E. Colette Nelson says “will increase the value of payment bonds as a payment assurance to subcontractors and suppliers on federal construction projects.”

Under the new rule, a federal agency may decline to accept a surety bond “for cause,” even if the bond is underwritten by a Treasurycertified surety, as long as it follows certain administrative steps assuring transparency and due process. “For cause” includes but is not limited to “circumstances when a surety has not paid or satisfied an administratively final bond obligation.”

In a March 2011 letter to the Treasury, ASA supported the Department’s proposed rule emphasizing that subcontractors working on federal construction projects “rely on the payment bonds” underwritten by Treasury-certified (continued on page 7)

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Seattle, Washington

Renaissance Seattle Hotel

Contractor Community (continued from page 5)

sureties to assure final payment.

As urged by ASA, the final rule also encourages agencies “to ensure that persons conducting business with the agency are aware that bonds underwritten by the particular certified company will not be accepted.”

The new rule will take effect on Dec. 15.

FASA’s Contingent Payment Clauses in the 50 States Answers Questions About Pay-If-Paid “Pay-if-paid” contract clauses can cause big problems for unpaid construction subcontractors and suppliers. Such clauses specify that a subcontractor or material supplier will not be paid for the work it performed or the supplies or services it provided “if” the general contractor doesn’t receive payment from the project owner.

Pay-if-paid is not enforceable in all circumstances, however, and the Foundation of ASA’s 2014 Edition of Contingent Payment Clauses in the 50 States helps subcontractors and suppliers understand their risk.

Contingent Payment Clauses in the 50 States is available as a downloadable PDF document only to ASA members. (Go to www. asaonline.com, click on LOGIN/ ACCESS MEMBER RESOURCES, and log-in with your email address and password. Then, click on “Advanced Site Search” in the upper right-hand corner of the site and search for “contingent.” The manual will appear under “Members Only and Limited Access Documents.”)

Special thanks to ASA general counsel Kegler, Brown, Hill & Ritter, Columbus, Ohio, for preparing this manual for FASA. Subcontractors and suppliers can learn more about pay-if-paid and

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pay-when-paid clauses with the FASA video-on-demand, “The Big IF in Pay-If-Paid Clauses” (Item #8005), presented by Donald Gregory, Esq., Kegler, Brown, Hill and Ritter. The video-on-demand is $65 for ASA members and $95 for nonmembers.

satisfy the amounts it is owed.”

ASA’s Subcontractors Legal Defense Fund supports ASA’s critical legal activities in precedent-setting cases to protect the interests of all subcontractors. Contributions may be made to the SLDF via the ASA Web site.

California Supreme Court OSHA Requests Protects Subcontractor Payment by De-publishing Information on Chemical Exposure Limits Case On Nov. 12, the California Supreme Court declined to review and, at the same time, de-published a case concerning mechanic’s liens so that it does not set a precedent eroding subcontractor payment protections.

The decision of the Court of Appeal in Golden State Boring & Pipe Jacking, Inc. v. Safeco Insurance Company, et al seemed to suggest that a contractor would be required to serve a Stop Payment Notice when completing its portion of the work and again by completion or acceptance of the project by a public entity.

The California Stop Payment Notice statute is designed to protect payment rights for contractors who have not been paid for labor or materials used to improve real property. In a Sept.

11 letter to the Court, ASA and ASA of California stated, “[T]he Court of Appeal decision has taken any meaningful payment protection from the Stop Payment Notice.” ASA further explained that contractors “typically serve Stop Payment Notices, at the latest, upon completion of their work and often times at the time of failure to receive a progress payment. The reason for this is a Stop Payment Notice is only effective if the public entity is still holding funds dedicated to the project. If a contractor waits until the project is over, as opposed to conclusion of its own work, the contractor runs the risk that the public entity will have no money left to

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The Occupational Safety and Health Administration announced a dialogue on the management of hazardous chemical exposures in the workplace and strategies for updating permissible exposure limits with the publication of a Request for Information on Oct. 10.

OSHA’s PELs, which are regulatory limits on the amount or concentration of a substance in the air, are intended to protect workers against the adverse health effects of exposure to hazardous substances. Ninety-five percent of OSHA’s current PELs, which cover fewer than 500 chemicals, have not been updated since their adoption in 1971. Further, OSHA’s current PELs cover only a small fraction of the tens of thousands of chemicals used in commerce, many of which are suspected of being harmful.

OSHA is seeking public comment regarding current practices and future methods for updating PELs, as well as new strategies for better protecting workers from hazardous chemical exposures.

OSHA’s goal for this public dialogue is to give stakeholders that represent them, a forum to develop innovative, effective approaches to improve the health of workers in the United States. The comment period for the RFI will continue through April 8, 2015.

For more information, visit the OSHA Chemical Management Request for Information Web page.

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Feature Flawless Execution — A Brief Examination of the ‘Four Cs’ Affecting Construction Industry

by Gregg Schoppman

The word that should describe the execution practices of truly great contractors in 2014-15 is “flawless.”

While so many firms focus strictly on growing their backlogs, best-ofclass contractors have examined their efforts on how they manage the work they do have, maximizing productivity — and their bottom line — and in some cases, and have discovered a new world or opportunity. Backlog without proper execution only serves to increase a contractor’s risk profile.

Managers and superintendents that fail to operate with tight controls on projects with already thin margins place their organization in a precarious position. The single greatest change in the behavior of contractors is the renewed focus on efficiency and margin enhancing activities.

The mantra for organizations moving into 2015 should be a resounding “back to basics.”

Execution will define best-of-class contractors by not only the innovative methods of putting work in place, but how they embrace new tools that have a familiar ring to them. When examining the new context with which the economy has presented the industry, specifically from a project delivery bent, contractors are focusing on: • Understanding the competition and their capabilities .

• Understanding their people and their associates’ motivations.

• Tracking and real-time production.

• Utilization of non-traditional business development resources to get work.

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• Using the post-job review and

creating a robust lessons learned library.

• Understanding the impact of cash flow and the customer.

• Effectively managing trade contractors early.

• Developing a quality management plan.

• Using prefabrication and modularization to lower costs.

Developing a fact-based strategy should be predicated on the “Four Cs” — Competition, Climate, Customer, and the Company. Using these four parameters helps firms critically and objectively outline the issues affecting their business. Bestof-class firms manage their business with the Four Cs serving as a virtual dashboard to provide guidance and azimuth correction.

Competition The field of competitors has ballooned but many would argue that the quality of the competition has decreased. With these inflated bid lists, contractors believe they are simply proposing against ignorance and estimating blunders rather than equal matched opponents. “There is no way they can do it for that!”

Estimating war rooms reverberate with these cynical guffaws as another unqualified so-called competitor is awarded a project. However, contractors are taking notice of the competition, regardless of competence, and realizing that they may simply be more efficient than them. With less work to manage, bestof-class contractors are examining how they can truly do the work more

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efficiently. This involves spending more time examining the competition as well as more effectively measuring production and providing subsequent feedback more timely.

Contractors are observing how the competition actually executes rather than licking their bid-day wounds. Field reconnaissance in the industry has become essential to honing the competitive edge.

Investigation is no longer limited to the construction industry. Firms are also examining how other industries operate. For example, Lean and Six Sigma concepts from the manufacturing world are penetrating the industry in an effort to drive out waste. Regardless of the buzzword, firms are realizing the need to more effectively plan and track performance. Interestingly enough, in some cases, contractors that focus on productivity and efficiency have been able to increase their margins to higher levels proportionally to what they were making in the earlier part of the decade.

In addition to understanding more of the production capabilities of the firm, the push for real-time data becomes even more important.

Month-end cost reports are giving way to daily production updates.

Course corrections can be made quicker and more effectively than simply waiting until a history lesson from accounting is generated.

Organizations are finding that there are many behavioral adjustments necessary. For example, accurate recording and timely performance feedback must be done harmoniously and with consistent frequency.

Furthermore, firms are learning how

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the feedback is delivered is almost as important as the data itself. Done in constructive manner, superintendents and foremen have been less likely to reject the information than they would if attacked with the data.

Ultimately, firms that become more data driven will reap the benefits of increased firm intelligence.

Company Getting work is no longer relegated to the estimators. Using field assets in the business development effort has become commonplace. Largely begun as an effort to retain key field personnel during widespread reductions in labor expenditures, many firms utilizing field managers as support to estimating have realized additional benefits. For example, by having a superintendent assist in the development of an estimate, firms receive field level intelligence about constructability normally received during a project post mortem. By providing real-time productivity rates and construction tactics, firms not only enhance their ability to successfully complete a project, but also cross train personnel in different organizational roles. While the normally direct costed superintendent becomes an overhead item, the savings long-term is immeasurable.

Another business process that is receiving more attention is the post-job review. Far from being new, project autopsies are now receiving greater emphasis to not only capture lessons learned, but to hopefully improve the quality of production.

Best-of-class firms are finding innovative ways to store and integrate these lessons through intranets and shared drives. The greatest lesson for firms is to remember the importance of this knowledge and remain vigilant and disciplined as backlogs improve. More often than not, this critical process is often the first to be vanquished when times are good.

Lastly, firms are continuing to

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expand their prefabrication efforts wherever possible. For example, countless mechanical, electrical, and plumbing contractors are using the confines of their yard and shop to better control their labor costs as well as the quality. Here is a classic example of how Lean manufacturing can help firms through better material handling and the reduction of inefficiencies in the production process.

Customer As projects become more plentiful with a healthy economy, there still remains the perception that the market is “customer focused.”

Scrutiny on price has become one the greatest determinants.

Management feels victimized by the apparent weakened bargaining power. “Do the work or we will find someone else to do it cheaper.”

Execution best practices not only focus on how to do more with less but also incorporate cash flow management into their process. With a heightened sense of awareness, contractors now incorporate cashflow modeling into their operating procedures. Often victimized by their customer’s inability to pay timely, firms are focusing managers and superintendents on the importance of collections, incorporating escalation procedures and standards to the cadre of management processed already in place.

Regardless of the price curve that exists in the marketplace, customers still expect quality finished products. With reductions in staff across the board, the tendency for quality to fall is high.

High-performing organizations are focusing on quality more through innovative means. Viewing this as a potential differentiator, contractors are developing elaborate quality management programs. Ranging from simple field management tools to complex training regiments,

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contractors — general and trade — are honing their craft to not only improve their efficiency but by creating a company standard that prevents long punch lists, extensive close-out and costly warranty issues.

Climate Executing projects is not limited to firms that simply self-perform work. While pre-screening trade contractors is hardly considered revolutionary, trends have shown greater numbers of contractors utilizing some evaluation practice to not only judge ability but to also determine liquidity and the ability to fulfill payroll obligations. Best-ofclass contractors are spending more time evaluating not just the prices of their constituent trade contractors, but also their ability to manage the work once it is awarded. Once again, with fewer project awards, managers have the ability to scrutinize scopes better, as well as plan more effectively rather than simply use the low number. Some would argue that by not taking the low number the ability to get work is significantly reduced.

Conversely, one must consider the risk inherent with using said number and being 75 percent complete with a drywall contractor that cannot pay its suppliers. The current climate has made mitigating risk very challenging but no less important. Coupled with effective screening, project managers are spending more time planning with critical trade contractors early.

Preconstruction conferences are becoming more like project strategy sessions than simply cursory project reviews on safety and paperwork policies. In essence, the trend is to ensure the trades start and finish strong.

As mentioned, the war for talent remains hot and heavy. Construction still lags as a “desired career” and the apparent free-for-all for managers, superintendents, foremen and skilled tradespeople has begun once again.

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The dollars being thrown around for bodies to fill the organizational chart is ludicrous. Have we learned nothing since the previous boom? Best-ofclass firms have not only remained vigilant to their growth goals, but they have also remained loyal to their people. For instance, attracting people is not enough. Retention through career pathing, training, personnel development, structured incentive compensation, long-term deferred compensation are just pieces of the recipe that the best are using.

If one manager leaves, that is to be expected, as there will always be attrition. However, massive flight is normally not a compensation issue but rather a deeper symptom of a sick organization.

Execution in 2015 While construction productivity has elevated in the minds of firms across the country, the question remains on how to sustain efficiency gains now and for that next inevitable economic storm that is always looming in our business cycles. For instance, it is easier to ensure pre-job planning is done when there is only one project starting in the month. What happens when there are 10 project starts? 20?

The natural inclination is to abandon the process because there is a shortage of time. Consider the fact that so many firms are now focusing on productivity. Now consider the opportunity that was lost due to mismanagement when times were not as bleak. Best-of-class firms are refocusing and reestablishing the foundation now and enacting measures to ensure project execution does not subside as the tempest does.

As a principal with FMI, Tampa, Fla., Schoppman specializes in the areas of productivity and project management. He also leads FMI’s project management consulting practice. Schoppman will present four education modules at SUBExcel 2015 in Seattle. Prior to joining FMI, Schoppman served as a senior project manager for a general contracting firm in central Florida. He has completed complex and sophisticated construction projects in the medical, pharmaceutical, office, heavy civil, industrial, manufacturing, and multifamily markets. He has also worked as a construction manager and managed direct labor. Furthermore, Schoppman has expertise in numerous contract delivery methods as well as knowledge of many geographical markets. He can be reached at (813) 636-1259 or gschoppman@fminet. com.

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Feature Transform Construction Projects with Integrated Energy Solutions

by Mark Drury The time has come for professionals in the construction industry to broaden that meaning of “green” when they hear about “green” building projects.

The tendency is to just first think about energy efficiency, which may be all well and good, but it’s an opportunity to tap into a new revenue stream in construction, while positioning your construction business as an authority and leader of an initiative that’s transforming the construction space.

In an age of increasing energy costs coupled with greater awareness of the need to conserve energy resources, more and more building contractors are eager to do the right thing when it comes to identifying and remedying energy inefficiencies in commercial projects. But what if, by taking a holistic approach to building design and construction, construction executives could transform traditional construction projects into more cost-effective energy-efficiency projects that improve the bottom line? It’s a big new market opportunity that is not to be missed.

The integrated energy solution approach is a process that can tap unprecedented energy efficiency and savings from old and new buildings alike because it takes a holistic approach that examines all aspects of building design, mechanical systems and controls (including HVAC, lighting and security).

It is the opposite of the traditional piecemeal or “silo” method of providing engineering, construction, controls and maintenance/service. Instead, the integrated energy solutions approach is geared to a unified suite of services.

Much like the conductor of a symphony orchestra, the integrated system ensures that all “instruments” in the building’s mechanical and electrical systems are working harmoniously.

By taking this holistic view of energy management and efficiency, integrated energy solutions can make the entire process more efficient and effective in:

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• Providing new energy and water

efficient buildings, which offer the appeal of higher rents, lower vacancy rates and greater tenant satisfaction.

• Transforming existing “brown” buildings, where there are immediate opportunities to upgrade mechanical systems for a demonstrated return on investment.

If a building has not been properly maintained and serviced, an integrated energy solutions system can deliver an immediate costsaving impact. In addition, with an integrated system in place, building management will have the capability to integrate individual system controls into a full-fledged building automation system, as well as establish a planned systems maintenance program.

Ultimately, integration is the key to integrated energy solutions operational success. This requires a carefully thought out engineering process that avoids a fragmented or piecemeal approach. Also, system designers should avoid proprietary systems and instead choose open protocol devices that have the capacity to read systems and controls produced by a multitude of manufacturers. All system components must be able to communicate instantly on an electronic “handshake” arrangement.

Interoperability Is Key Integrated energy solutions can play a critical role at each step in a building development project: in the design phase; in the negotiation phase; at the beginning of construction; at the midway point to coordinate the systemic development of controls; or at completion to ensure interoperability and develop a planned maintenance program. Interoperability, in fact, is a key element of an effective integrated energy solutions implementation — making sure different systems and

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devices are able to communicate effectively across different software protocols and languages. Even in today’s most advanced buildings that are equipped with digital HVAC and lighting controls, these systems may not be integrated so that a building owner or property manager has a single dashboard to see where energy usage is highest or where performance of individual components may be lagging.

An integrated system, though, provides both a wide-angle operational view of all components from 35,000 feet while at the same time allowing facility managers to drill down and see the individual “blades of grass.”

Customizing Your Energy Solution To realize the full measure of energy and cost efficiency each energy solutions project should be custom programmed and individually tailored to each facility.

One of the critical features of an integrated system is the capability to record building analytics and trends, from which baseline performance levels can be established. Once those baselines are in place, acceptable variances can be established and alarm features engaged so that system managers will be able to monitor the system at-a-glance to see bumps or drops in energy usage.

A state-of-the art IES system integrates individual building system communications to provide a userfriendly control interface customized for each facility. This dashboard should include floor plan layouts with temperature overlays that detect warm

or cold spots in the building, enabling us to coordinate the setting of equipment operating constraints and utilize occupancy zones to maximize performance. (continued on page 18)

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Feature Employee Fleet Accidents: One of the Most Overlooked and Costly Risks on Construction Sites

by Fred Myatt General contractors’ and subcontractors’ constant exposure to the most dangerous hazards — from erecting structures dozens of stories up in the air to building bridges over large bodies of water — force worker safety to be top of mind.

However, when it comes to daily tasks that seem more routine than dangerous — like driving motor vehicles — worker safety and liability can be unintentionally overlooked. In fact, fleet and motor vehicle accidents are one of the most frequent and costly hazards on or near construction projects,

IN THIS ARTICLE . . . �

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Fleet and motor vehicle accidents are one of most frequent and costly hazards.

Basic day-to-day driving can put employees and the company’s bottom line at higher risk.

Both workers’ compensation and automobile liability coverages may be invoked.

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according to Zurich claims data. But the construction industry is not alone: 40 percent of employee fatalities on the job across all industries were due to vehicle accidents — more than any other single cause, according to 2013 Bureau of Labor Statistics data.

Further, the injury costs associated with employee vehicle crashes are generally three times the cost of other workplace accidents, which can add to the overall costs of a project, according to a 2012 study from the National Council on Compensation Insurance Inc., called “The Role of Traffic Accidents in Workers’ Compensation — An Update.”

So, while a contractor may manage the risks surrounding the likelihood of a more severe incident, it’s actually the day-to-day basic driving of a pickup truck or small van that can put employees and the bottom line at higher risk.

Rules Governing Employee Driving Both federal and state laws govern commercial vehicle use. The Federal Motor Carrier Safety Administration regulates commercial motor vehicles that cross state borders. In addition, most states have a Department of Transportation that establishes transportation rules within that jurisdiction.

FMCSA and DOTs have similar rules, such as limiting the number of hours that

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a commercial driver can operate a vehicle or requiring biennial medical examinations by a Commercial Driver Medical Examiner, among other safety measures.

And while contractors are often aware of the rules, they are sometimes unaware the rules apply to them or their business. Some contractors mistakenly think that only articulated or dump trucks are CMVs. However, merely adding a small trailer to a light duty pickup truck can suddenly make a contractor’s drivers subject to many of the same rules as professional truck drivers.

For example, if a construction worker hops behind the wheel of a crew-cab pickup with a loaded trailer after finishing a 14-hour construction shift, he or she might be on the wrong side of the law for violating the allowable amount of hours that can be worked when driving a CMV. Not only is the driver subject to a citation and fine, but the contractor may be, too.

A contractor faces a double whammy when it comes to a motor vehicle accident as both workers’ compensation and automobile liability coverages can be invoked.

For example, an employee injured on the job in a vehicle — regardless of the location of the collision — may be covered by workers’ compensation, while any other party to the accident may be covered by the contractor’s automobile liability coverage.

Separately, plaintiffs can also be awarded punitive damages against the contractor for negligent hiring, negligent entrustment or lack of adequate safety policies. Punitive damages are often not covered by

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insurance, which can add financial burden to the contractor’s company and project costs.

Managing Employee Driving Behavior Employees can get distracted, careless or just plain tired when driving a company-owned vehicle.

These behaviors can impact both the safety of the employee and the nearby public, as well as the profitability of the project or the contractor’s financial stability in the event of an accident or injuries.

This ongoing, daily exposure to fleet accidents brings a new level of complexity to contractor safety and risk management programs. It requires an integrated approach to developing a fleet safety program that addresses driver knowledge and behavior with the various types of company vehicles.

The first step in developing a fleet safety program is to analyze company claims data to identify clear and specific loss trends. Accurate identification of loss trends to determine frequency and severity is one key factor in helping manage and control these loss costs. Such claims analyses must include both workers’ compensation injuries and auto accidents to provide a full picture of the loss costs for the contractor.

The second step and primary focus of a fleet safety program should be on the drivers themselves: Who is driving the vehicle? Do they have the right qualifications? Was a background check performed on them? Are they unknowingly falling under CMV regulations?

Exposures for drivers can be proactively and effectively managed through a technology-based fleet

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safety program, one that provides online driver assessments and training with management reporting and supervision. A robust fleet management program should include these online tools: • Assessment of drivers’ attitudes, behaviors and knowledge, in order to benchmark their driving competence and to identify highrisk drivers who might require additional training.

• A training program that ensures that all drivers have a basic knowledge of defensive driving and reinforces the importance of driver attitude, behavior and hazard recognition skills for safer driving.

• Training records for risk managers to monitor the progress toward creating a safety culture to reduce accidents.

• Thirdly, the vehicle itself should be part of a safety program.

The use of telematics in vehicles tracks driver behavior as well as placement on the road. Telematics can give your company the powerful data it needs to help minimize fleet accidents. Among other benefits, telematics in a fleet safety program can help: • Optimize vehicle journey planning and deployment.

• Improve the contractor’s ability to manage driver behavior and safety on the road by identifying and addressing risky behaviors.

• Improve employees’ driving skills and knowledge.

Heavy vehicle usage will always play a role on construction sites.

This means that auto exposures for contractors are a chronic risk to manage. But with the right claims data analysis, online assessment and

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training, and in-vehicle telematics, an effective and efficient fleet safety program can be created that will help protect your employees, drivers, the public and ultimately, your bottom line.

Fred Myatt is the Commercial Auto Segment Director for Zurich Risk Engineering, Schaumburg, Ill. He can be reached at (919) 280-5085 or Frederick.myatt@zurichna.com.

The information in this publication was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute legal advice and accordingly, you should consult with your own attorneys when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances.

The subject matter of this publication is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy.

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13

Feature Increasing Fuel Efficiency Through Smart Fleet Management

by Jonathan Durkee

In fleetdriven industries like construction, it is crucial to control costs associated with crews and vehicles in the field. Fuel spend is a leading factor impacting a contractor’s bottom line, and costs can add up quickly, regardless of fleet size.

It’s no surprise that wasted fuel is one of the most common issues for contractors — and it can be difficult to control if businesses don’t have proper tools in place.

To combat this financial strain, many business owners are turning to fleet management solutions, which provide a full picture of vehicle and driver activity in near-real time, around the clock. These solutions give contractors the tools and data support to better manage their fleets, increase productivity and efficiency of remote workforces, enhance customer service and ensure driver safety, among other benefits.

With better fleet management, business owners can also identify cost-saving opportunities to run a stronger, smarter mobile workforce.

This means cutting down on driving time and recognizing behavior that wastes fuel.

Streamlined Routing One of the simplest ways to minimize fuel usage is to reduce time spent on the road through more efficient routing to job sites and streamlined crew dispatching.

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With a fleet management system, it is possible for contractors to gain a full view of vehicle activity in near-real time, enabling them to clearly and quickly identify and correct inefficient routing or to dispatch the nearest crew to a job site. This reduction in road-time can significantly impact fuel costs. In Fleetmatics’ recent FleetBeat report, a data-driven industry benchmark report, Fleetmatics found that, of those it surveyed, businesses using fleet management systems realized an average savings of $34 per vehicle per month on fuel costs, due to reduced driving time alone.

The savings jumped to $45 per month per vehicle when taking into account factors like reduced idling.

Reduced Idling While it’s easy to see how time on the road impacts fuel costs, many businesses may not realize just how much fuel excessive idling can cost. According to the Ford Motor Company, every hour a vehicle is left idling equates to 25 miles of driving.

So, those few minutes a crew leaves its truck running at each job site can add up quickly to put a big dent in the gas tank, and a business’ fuel spend, without enhancing crew productivity.

Fortunately, excessive idling is easy to correct. Fleet management systems enable business owners to monitor for this issue, identify excessive idlers and notify them to turn off the engine.

According to the FleetBeat report, after installing a fleet management system, light contractors surveyed decreased idling by an average of 23 percent. This represents a decrease

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from 55 idling minutes per vehicle per day to 42 minutes per vehicle per day.

Eliminating Fuel-Wasting Behavior How crews drive fleet vehicles also significantly impacts fuel efficiency. Factors like harsh braking and excessive speeding can reduce efficiency and lead to increased fuel costs. Fleet management technology allows business owners to better track this fuel wasting behavior, correct it, and alert fleet managers or business owners via text message when unsafe behavior is recorded. Driver-centric metrics can also paint a picture of this behavior, even if drivers use different vehicles throughout the course of a week.

By optimizing vehicles with fleet management systems, contractors gain the insight needed to ensure they get the most out of company vehicles and drivers, while squeezing the most out of their fuel spend. This produces significant savings that often pay for the systems themselves in short order, and helps position contracting businesses for sustained growth.

Jonathan Durkee is vice president of product management for Fleetmatics, a leading global provider of fleet management solutions for small- and medium-sized businesses.

Prior to his current role, Durkee served as VP of sales and product management for enterprise GPS fleet management software company SageQuest, which was acquired by Fleetmatics in 2010. To learn more, visit www.fleetmatics.com.

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Feature 10 Things to Remember When Your Work Is Delayed

by Donald Gregory, Esq.

As the construction industry slowly recovers momentum and sales increase, there are increasing reports of labor shortages that are adversely affecting production and schedule. Many later finishing trades complain that their work is being delayed, compressed and/or accelerated as a result. As anyone familiar with construction knows, “time is money.” Losses incurred as a result by blameless “follow on” trades toward the end of a delayed job must be absorbed or passed on to those responsible.

Those delayed by predecessor impacts are advised to keep these Top 10 suggestions in mind to protect their right to additional time and/or money: 1. Do not sign a “no damage for delay” contract clause.

Many contracts contain “no damage for delay” clauses, which state that one’s sole remedy in the event of a delay is a time extension.

While there are legal exceptions in most jurisdictions, and some states like Ohio make such clauses unenforceable, it is best to avoid them in the first place.

2. Do provide timely notice of your claim.

Every contract requires timely notice of change orders and claims, and many provide that a failure to do so means that an otherwise legitimate claim is waived. Provide written notice — early and often.

3. Do provide timely documentation of your claim.

Many contracts provide that once a claim is initially made, it must be documented (and sometimes certified) within a certain number of

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days after first notice. A failure to do so might undermine the claim.

4. Do request a time extension.

Sometimes contractors do not request a time extension because they know that it will not be granted.

But a time extension should always be requested in the event of project delay. A failure to do so might undermine your request for additional money due to acceleration.

5. Do not sign off on a flawed schedule.

Sometimes owners refuse to pay draws until contractors sign unworkable schedules to which they do not agree. But regardless of the pressure applied, contractors should not “sign off” on unworkable schedules. At a minimum, reserve your rights and make a notation that your signature on the schedule is not your approval of it, or a waiver of your damages.

6. Do not sign an overly broad lien waiver.

Many lien waivers are now lengthy and waive more than lien rights for a particular draw. Some purport to waive all rights to additional compensation in the form of change orders or claims on the project. Do not waive rights for work which is still being debated or disputed.

7. Do not sign an overly broad change order.

A proper change order will purport only to waive all costs associated with that discrete “change in the work” that is the subject of the change order.

However, some change orders try to waive all direct and indirect damages associated with “the project” through a particular date. Be careful not to sign a change order with overly broad form release language.

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8. Do try to accurately track your costs.

All requests for additional time and money will be criticized (by those being asked to pay) as being inadequately documented. But the better you contemporaneously document and track your costs, the more you can minimize the criticism of your damages calculations, particularly with respect to labor inefficiencies.

9. Do argue waiver if the contract has not been strictly followed.

Many provisions of thick construction contracts are disregarded as a practical matter by the parties during the complex construction process. Contractors that may not have done everything perfectly may be relieved of harsh results by arguing that an onerous clause was waived by an owner who also failed to comply with the contract.

10. Do know your deadlines for taking legal action.

Almost all claims will expire if timely action is not taken in accordance with the contract and any applicable statute of limitations.

Do not let project inertia or prolonged settlement discussions or negotiations delay legal action until it is too late.

If you remember these Top 10 dos and don’ts, the next time you are adversely impacted by schedule delays, you will be in a much better position to protect your interests.

Donald Gregory, Esq., is a director and chair of the construction practice area for Kegler, Brown, Hill & Ritter, Columbus, Ohio, ASA’s legal counsel.

Gregory can be reached at (614) 4625400 or dgregory@keglerbrown.com.

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15

Legally Speaking What to Look for in Upcoming Regulations from an HR Perspective

by Jamie Hasty With the mid-term elections behind us and 2014 winding down, there are several issues that we expect to impact human resources in 2015 and beyond.

Although each new year is always met with some uncertainty, change is inevitable and we must prepare as best we can to stay ahead of it. Some key topics to keep an eye out for in 2015 include:

EEOC Focus In 2014 we continued to see a strong focus on disability issues by the EEOC. Nearly 34 percent of all EEOC filings for 2014 were based on disabilityrelated claims. Additionally, the EEOC continued its battle against employers over the legality of using credit and criminal background checks to make hiring and employment decisions.

SESCO Management Consulting fully expects both of these trends to continue well into 2015 and beyond.

It remains critical that employers utilize an interactive process when making employment determinations related to an employee’s disability. All too often employers simply believe that when an employee has exhausted all of their FMLA entitlement that termination is warranted. The EEOC has been very clear in its guidance that an extension of approved leave can be a reasonable accommodation when the facts of the situation dictate.

The “ban-the-box” initiative continues and recently the District of Columbia, Illinois, and New Jersey joined 66 cities and counties and 11 states to pass “ban-the-box” laws, preventing employers from asking about prior criminal history on job applications. Ban-the-box refers to the check box on employment applications asking whether the candidate has ever

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been convicted of a crime. Ban-the-box laws require hiring managers to put off asking about a candidate’s criminal history until after an interview has been conducted or a provisional job offer has been extended. Employers in areas where ban-the-box has been passed should audit their employment applications to ensure that they are in compliance with this piece of growing legislation.

Same-sex Marriage On Oct. 6, 2014, the U.S. Supreme Court denied review of five cases seeking the freedom for same sex marriage, which left the earlier decisions in three federal circuit courts effective immediately. The states of Virginia, Indiana, Oklahoma, Wisconsin, and Utah began issuing marriage licenses for same sex couples almost immediately. The addition of these five states now brings the total to 24 states and the District of Columbia that recognize same-sex marriage. There are six additional states that fall within the same federal courts jurisdiction, which will likely follow suit. Those states include North Carolina and South Carolina, West Virginia, Wyoming, Kansas, and Colorado. As employers it is prudent to begin preparations to deal with potential employee changes to ensure compliance with the recent and forthcoming rulings. The following are points to consider when evaluating your current employment practices: • Coordinate with your benefit plan providers and third party administrators to make any required adjustments to summary plan descriptions and other benefit plan documents.

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• Evaluate all existing plan

documents and the way in which they define terms such as spouse and domestic partner.

• Apply the same employment and benefit policies currently in effect for opposite-sex couples to samesex couples.

Affordable Care Act Beginning in 2015, those employers with 100 or more full-time or full-time equivalent employees who do not offer affordable health insurance that provides minimum value to their fulltime employees (and dependents) may be required to pay an assessment if at least one of their full-time employees is certified to receive a premium tax credit in the individual Health Insurance Marketplace. Under these rules, a full-time employee is one who is employed an average of at least 30 hours per week. For employers with 50 to 99 full-time/full-time equivalent employees, these rules will not apply until 2016, provided that employers of this size meet certain certification requirements. Also beginning in 2015, the Affordable Care Act provides for information reporting by employers with 50 or more full-time or full-time equivalent employees regarding the health coverage they offer to their full-time employees (known as Section 6056 rules). New information reporting by issuers, self-insuring employers, and other parties that provide health coverage also take effect in 2015 (Section 6055 rules). The first of these reports must be filed in first quarter 2016. The draft version of the forms to be utilized for both the 6056 and 6055 filings were released in August 2014, and we expect the final versions of the forms to be released by mid-year

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2015. Clearly 2015 will be difficult for many large employers attempting to navigate the new challenges of the ACA waters. Employers should work closely with their brokers, plan providers, and third-party administrators to ensure compliance with this very difficult and continually evolving law.

FLSA: Wage and Hour Proposed Rules Most prominent among the Wage and Hour’s planned regulatory activities is revising the Fair Labor Standards Act rules defining the exemptions for executive, administrative, professional, outside sales, and computer employees.

The division anticipated issuing the proposed rules changes to the FLSA in mid-November 2014. All indicators now point toward the proposed rules being published by the end of the first quarter 2015. The likely changes and their corresponding effective dates are difficult to predict, but we expect the

minimum salary threshold level for a white-collar exemption to increase from the current $455 per week level.

Some experts have indicated that it could be raised to a level well north of $800 per week. The DOL also might be considering adopting a standard similar to California’s requirement that an exempt employee be primarily engaged in exempt duties at least 50 percent of their work time.

Assuming the proposed rule changes are released in 2015, it would still be some time before any final changes are enacted. Here’s a timeline of what would still have to happen after the DOL issues the proposed changes: • a public comment period would have to be held, which would typically last at least 30 days; • the DOL would have to take time to consider the public comments; and • a final draft of the regulations would need to be written and approved by the Office of Management and Budget’s Office

New On-Demand Videos from FASA When it comes to managing your business, the Foundation of ASA is your partner in education. View and listen to FASA’s on-demand videos at an individual workstation or in a conference room for group training.

Your order includes access to the on-demand video any time, and as many times as you’d like!

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of Information and Regulatory Affairs, which could take up to 120 days once the final draft is issued but typically takes about two months.

Even if things happen quickly, it’s unlikely the new regulations would be in place before 2016. When the feds last tinkered with the FLSA overtime rules, it took nearly two years for the changes to take effect, which happened in 2004.

SESCO will continue to monitor developments in all areas of Human Resources Management for 2015, and keep ASA members informed.

Jamie Hasty is a vice president with SESCO Management Consultants, Bristol, Tenn., and Richmond, Va. ASA members receive complimentary human resources services provided

by SESCO Management Consultants, including free telephone and email consulting. Hasty can be reached at (423) 764-4127 or Jaimie@sescomgt. com.

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ASA/FASA Calendar December 2014

March 2015

12 - Deadline for Applications for 2014 Excellence in Ethics Awards

26-29 - SUBExcel 2015 in Seattle, WA

January 2015

April 2015

13 - Webinar: Negotiating Retainage

14 - Webinar: Non-Negotiators’ Strategies for Negotiating Outstanding Results

Coming Up . . .

10 - Webinar: Mechanic’s Liens: Protect and Collect Contact information for all ASA and FASA events/programs: www.asaonline.com education@asa-hq.com

(continued from page 11)

Scalability is another IES advantage. When communal access is provided via LAN, WAN or Internet connections, an IES system can operate a single floor in a building, an entire building or even a series of buildings.

IES - The Bottom Line As we move forward in the energy-challenged commercial building industry, contractors and owners of constructionrelated businesses need to become part of the “green” dialogue with building owners. By getting up to speed on the key design elements of Integrated Energy Solutions, construction executives can position themselves to provide answers to the questions more and more owners are asking about how to make their buildings more energy efficient.

Armed with Integrated Energy Solutions, contractors and owners can move out of the traditional mindset of budgeting for a construction project into a new “green” mindset of budgeting for building energy efficiency. Not only is IES the right thing to do, but in the long run it’s the more economical way to go.

Mark Drury is the vice president of Business Development at Shapiro & Duncan, Inc., the “Mechanical Solutions Provider of Choice” for complex commercial, government and institutional design-build projects throughout the Washington, D.C., metro area.

A third-generation family business based in Rockville, Md., Shapiro & Duncan continues a 38-year track record of dependability and innovation that has consistently enabled the company to deliver high value and efficient mechanical infrastructure to its customers.

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Theme: Getting Paid • Tips for Suspending Work for Non-Payment without Getting Fired • Reducing Credit Risk and Default Receivables Through Management of Lien & Bond Claim Compliance

Integrated Energy Solutions

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THE

February 2015

in the January 2015 Issue of ASA’s

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• Getting Paid and Ensuring Cash Remains King • What Subcontractors Need to Know About ‘Pay-WhenPaid’ and ‘Pay-If-Paid’ Clauses • Legally Speaking: Contingent Payment Clauses — Enforceable? Negotiable?

Worth the Risk?

Look for your issue in January.

Past Issues: Access online at www.contractors knowledgedepot.com

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